SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]      ANNUAL  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
         ACT OF 1934 (Fee required)

         For the fiscal year ended December 31, 1999

[ ]      TRANSITION  REPORT  UNDER SECTION  13  OR 15(d) OF  THE SECURITIES  AND
         EXCHANGE ACT OF 1934 (No Fee Required)

         For the transition period from ______ to _______.

Commission File Number 000-21627

                 Safe Alternatives Corporation of America, Inc.
             ------------------------------------------------------
                 (Name of small business issuer in its charter)

           Florida                                          06-1413994
-------------------------------                  -------------------------------
(State or other jurisdiction of                         (I.R.S. Employer
 Incorporation or organization)                          Identification No.)

                 440 Main Street, Ridgefield, Connecticut 06877
             ------------------------------------------------------
                (Current Principal Executive Offices) (Zip Code)

Issuer's Telephone Number: (203) 438-4918

Securities registered under Section 12(b) of the Exchange Act: None

Securities  registered  under Section  12(g) of the Exchange Act:  Common Stock,
$.0001 par value.
                                      Name of each exchange on which registered:
                                                         NASD OTC Bulletin Board

Page 1 of 36 Pages. Exhibits are indexed on page 32.

                       (Cover page continued on next page)




                                       1
<PAGE>

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

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

State issuer's revenues for its most recent fiscal year.  $130,205

State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock sold,  or the average bid
and asked prices of such stock,  as of a specified  date within the past 60 days
(see  definition of affiliate in Rule 12b-2 of the Exchange Act): As of December
31, 1999, the aggregate  market value of the  13,003,779  shares of Common Stock
held by non-affiliates of the Registrant was about $1,300.38.

As of December 31, 1999, there were 30,330,960 shares of Common Stock issued and
outstanding.


                   DOCUMENTS INCORPORATED BY REFERENCE: None.

Transitional Small Business Disclosure Format (check one):  Yes    No X







                                       2
<PAGE>

               CAUTION: FORWARD-LOOKING STATEMENTS AND INFORMATION

     This  Form  10-KSB   contains   certain   forward-looking   statements  and
information  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended,
which are  intended  to be  covered by the safe  harbors  created  thereby.  The
forward-looking statements and related information are based upon the beliefs of
the Company or management at the time covered by this report.  When used in this
document, the words "anticipate",  "believe",  "estimate",  "expect",  "should",
"could", and "intend" and similar expressions,  as they relate to the Company or
its management, are intended to identify forward-looking  statements.  Investors
are cautioned that all forward-looking  statements and information involve known
and unknown risks,  uncertainties,  assumptions,  and other factors that reflect
the  view of the  Company's  management  regarding  future  events.  The  actual
results,  performance or achievements of the Company may be materially different
from the  views  expressed  or  implied  by the  forward-looking  statements  or
information should one or more of these risks or uncertainties  materialize,  or
should underlying assumptions prove incorrect. In each instance, forward-looking
information should be considered in light of this, and should not be regarded as
a representation by the Company or any other person that the objectives,  plans,
statements or information will be achieved.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS:

Business Development:
--------------------

     Safe  Alternatives   Corporation  of  America,  Inc.  (the  "Company")  was
organized  in 1976,  under  the name  Knight  Airlines,  Inc.,  to engage in the
commuter  airline  business.  In October 1978, the Company engaged in an initial
public  offering of its Common Stock in Florida,  pursuant to an exemption  from
registration under Regulation A promulgated under the Securities Act of 1933, as
amended (the  "Securities  Act"). To the Company's best knowledge,  there was no
market for trading of the Common  Stock  until the  Company's  Common  Stock was
included for trading on the NASD's Electronic  Bulletin Board in March 1997. The
Company  operated as a commuter  airline from its inception  through April 1983,
when it ceased  operations  and all of the  assets of the  Company  were sold to
satisfy all outstanding  indebtedness.  From April 1983, through September 1995,
the Company  was  dormant.  In May 1994,  the name of the Company was changed to
Portsmouth Corporation.

     On September 15, 1995, pursuant to the terms of an Asset Purchase Agreement
and Plan of Reorganization dated as of August 21, 1995 (the "Agreement") between
Safe  Alternatives   Corporation  of  America,   Inc.,  a  Delaware  corporation
("SAC-Delaware")  and the  Company,  the Company  purchased  the  business  (the
"Business"),  including,  without limitation, all of the assets of SAC-Delaware,
and assumed all of the liabilities of SAC-Delaware (the  "Reorganization"),  and
commenced operations. Prior to the Reorganization, the Company had no meaningful
operations.  On March 4, 1996, the Company changed its name to Safe Alternatives
Corporation of America, Inc. (a Florida corporation).


                                       3
<PAGE>

     In connection with the  Reorganization,  SAC-Delaware  was liquidated,  and
SAC-Delaware  distributed  to each  stockholder  0.2736  shares of the Company's
Common Stock for each share of SAC-Delaware that was owned. Consequently, all of
the share and per-share figures included herein reflect the Reorganization.  The
Agreement provided for the Company's purchase of all of SAC-Delaware's assets in
consideration   for,   among  other  things,   (i)  the  assumption  of  all  of
SAC-Delaware's  liabilities,  (ii) the issuance and delivery to  SAC-Delaware of
8,000,000 shares of the Common Stock, representing approximately 94% of the then
issued and outstanding shares of Common Stock as of the date of the Closing; and
(iii) a six percent royalty (the "Royalty") on the gross revenues of the Company
attributable to the assets acquired by the Company  pursuant to the terms of the
Agreement, payable on a pro rata basis to the stockholders of SAC-Delaware.  The
Royalty is payable on a  quarterly  basis  during the sixty  months  immediately
following the closing of the  Reorganization,  and the  cumulative  total of all
Royalty  payments is limited to a maximum of  $8,500,000.  The Royalty  does not
apply to any revenues  generated by the sale of the  Company's  paint  stripping
product, AmeriStrip(TM), or its NaturalCool(TM) product, which technologies were
acquired after the  Reorganization.  The Company does not anticipate  paying any
royalties as described above because the Company's current and anticipated sales
efforts are focused on products not subject to the Royalty.

     In January 1997, the Board  authorized an agreement with M & A Acquisitions
whereby M & A Acquisitions would receive a finder's fee of 3% of gross sales for
the Company  acquiring the  worldwide  manufacturing  and marketing  rights from
Natural  Cool,  Inc. The Company  acquired  Natural  Cool,  Inc. in its entirety
during the first half of 1998.

     On July 15, 1998,  the Company  entered in to an agreement for the purchase
of the assets of Norfield Corporation, a Connecticut corporation with offices in
Danbury, Connecticut ("Purchase Agreement").  Norfield Corporation had filed for
Chapter 11 Bankruptcy  Protection in June 1996,  and the Purchase  Agreement was
subject to the approval of the Bankruptcy Court, which was received on September
14,  1998.  On  September  18,  1998,  in order to obtain  financing  to acquire
Norfield's  assets,  the Company assigned the Norfield Purchase Agreement to the
Norfield  Investor  Group (which  consisted of Nicky Hunt and Sean McNamara) and
agreed to issue options to purchase  1,000,000  shares of the  Company's  Common
Stock at a price of ten cents ($.10) per share  exercisable for a period of five
(5) years from September 18, 1998. The Norfield Investor Group agreed to pay all
amounts due under the Norfield Purchase Agreement at Closing,  including the sum
of $235,000 and the Company received a license and lease  ("Norfield  Lease") of
all the assets so acquired by the Norfield Investor Group. Pursuant to the terms
of the Norfield Lease,  the Company was to have made a payment of  approximately
$250,000 in December 1998.  Because the Company was unable to make that payment,
the Norfield  Corporation declared a default on the Norfield Lease and exercised
its  security  interest  in the Lease held by the  Company and all of the assets
that were  subject to the Lease were  returned  to  Norfield  Corporation  as of
December  31,  1998.  The Company did not receive any revenue or pay any sums of
money as a result of this transaction.


                                       4
<PAGE>

     By 1999, the business  operations were conducted from Derby,  Vermont,  and
the Company was in the process of reducing overhead.

Principal Products and Their Markets:
------------------------------------

     The Company's products are primarily in the following areas:

          1.   AmeriStrip(TM) - Paint Stripping Chemicals  (world-wide license).
AmeriStrip is currently  being marketed and sold in limited  sample  quantities.
The  Company's  paint  stripping  product is used to remove  lead-based  paints,
latex, alkyd,  varnish,  polyurethane,  and epoxy resin coatings from structural
metal, cement, fiberglass, wood, mica and plaster. The Company's paint stripping
product is applied using an airless spray gun, paint brush or spatula.  For most
applications,  the Company believes, based on its research and in-house testing,
that the stripper will remove substantially all of the paint,  exposing the bare
surface  within a 24-hour  period.  The  Company's  line of paint  strippers  is
biodegradable,  water washable,  non-caustic,  and ethylene  chloride-free.  See
"Technologies".

          2.   Water-Based  Foams for Insulation  Material  (continental  United
States license). The foam product was in the final stages of development and the
Company was evaluating the appropriate  mechanism for application of the product
onto its  intended  surface.  During 1998,  the Company  engaged in some limited
testing  of this  product  with  Underwriter's  Laboratories,  but was unable to
continue  to  commercialize  this  product  during  1998  because  it lacked the
financial resources.

          3.   NaturalCool(TM)   Systems  -  Ambient  Air  Exchanger  (worldwide
marketing  and  manufacturing  rights).  The  NaturalCool  system is a patented,
energy-saving   air  circulation   system,   designed  to  supplement   existing
refrigeration  systems for  commercial  refrigeration  units such as walk-in and
reach-in  coolers.  The systems operate by taking in relatively cold ambient air
from outside,  filtering the air to remove  particulates,  and  introducing  the
cooler air into an operating  cooler,  and  exhausting  mild air from within the
cooler  back  out to the  outdoors.  Each  system  consists  of a  modular  unit
fabricated of non-corrosive  stainless steel,  operates totally independently of
the cooler's existing compressor,  operates without Freon or other environmental
pollutants,   meets  all  applicable  electrical  codes,  and  has  received  UL
(Underwriters' Laboratories) approval.

     The marks, NaturalCool(TM) and AmeriStrip(TM),  are trademarks owned by the
Company.



                                       5
<PAGE>

Marketing, Sales and Methods of Distribution:
--------------------------------------------

     Marketing  Agreement.  In 1996 and  1997,  the  Company  believed  that its
marketing resources would most effectively be deployed by contracting an outside
vendor to market its products. Consequently, as of November 1, 1996, the Company
replaced all of its in-house sales force,  consisting of five salesmen and three
representatives,  with an outside  vendor,  SSC. SSC  represented to the Company
that it had experience  selling similar products on a national basis. SSC was to
develop sales in governmental markets and in the private sector.

     The Company entered into two agreements with SSC Marketing, Inc. ("SSC"): a
consulting agreement (the "Consulting  Agreement") dated as of November 1, 1996,
and a customer service agreement (the "Service  Agreement") dated as of December
15,  1996.  Under  these  contracts,  SSC was to  provide  comprehensive  sales,
marketing,  billing,  and  information  services to the Company for a fee. SSC's
efforts,  however,  produced  aggregate sales of less than $100 through December
31, 1997, and the Company terminated the SSC agreements as of March 15, 1998. On
May 29, 1998, SSC filed an action against the Company.  The Company responded to
this suit and brought  counterclaims against SSC. The action was settled. It was
dismissed in September  1999, and  subsequently  the Company  delivered  500,000
shares of its restricted Common Stock to SSC's designee pursuant to the terms of
the settlement. See "Item 3-Legal Proceedings."

     The Company no longer  out-sources  its sales and marketing  functions.  In
April 1998,  the Company hired Mr. Robert Berger to lead its sales and marketing
efforts and an additional salesperson to assist in such functions. There were no
significant  sales or marketing  activities  during 1998 or 1999. Mr. Berger and
the additional salesperson resigned in December 1998.

     During  1999 and 2000,  the  sales and  marketing  were  generally  handled
through direct sales from the Company's offices in Derby,  Vermont.  The Company
established  a small network of  independent  distributorships  with  commission
sales persons to sell the NaturalCool product. The Company continued to sell the
Ameristrip product over internet.

     Paint Stripping Chemicals - AmeriStrip.  AmeriStrip was the Company's first
product  to be  offered  in the  marketplace.  The  product  has  been  sold  to
contractors  for the New York  City  Housing  Authority,  to the New  York  Port
Authority, to Sherwin Williams retail stores, and to contractors working for the
school  construction  authority  in New York City to remove  lead paint from the
City's  public  schools,  as well as to other  customers.  The  Company's  sales
efforts to place its paint stripping  product with contractors using the product
to de-lead New York City public  schools  accounted for more than  seventy-three
percent (73%) of the Company's 1998 revenues and fifty-four percent (54%) of its
1999 revenues.


                                       6
<PAGE>

     Although the Company placed advertisements in several magazines,  including
magazines intended for commercial contractors and the do-it-yourself market, and
offered  its  products  for sale  over the  Internet  (www.AmeriStrip.com),  the
Company believes that its sales efforts were severely  curtailed by insufficient
working capital.

     NaturalCool.  The  Company's  in-house  sales  staff  targeted  a number of
industries for the NaturalCool  products,  initially  focusing  primarily on the
convenience  store market.  Other  potential  purchasers  include liquor stores,
grocery  chains,   florists  and  the  walk-in  cooler  industry.   The  Company
established relationships with refrigeration distributors and suppliers (but did
not enter into any formal distribution agreements) and with restaurant equipment
suppliers.  In some cases,  the  suppliers  purchase  units from the Company and
install  them in a new or renovated  restaurant  facility.  In these cases,  the
Company does not incur the installation  expenses associated with sales directly
to the end-user.

     The Company also marketed these products directly to the end-user customers
through  advertising and trade  association  membership  marketing.  The Company
began using utility  company  rebate  programs as a means of  generating  sales.
Under these programs, certain utility companies offer rebates to their customers
for installing  energy-saving  equipment.  Even where the utilities do not offer
rebates, some utility companies will recommend  energy-saving equipment to their
customers.  The Company is also offering the NaturalCool  products for sale over
the Internet at www.naturalcool.com.

     Foams.  The Company was unable to fund any sales or  marketing  efforts for
its foam products in 1999 due to its financial position.

     Other  Technologies.  During  1998,  the Company  stopped the  research and
development of other technologies due to its financial  condition.  For the same
reason,  management  stopped seeking the acquisition of other  technologies  for
commercial exploitation.

Competitive Position:
--------------------

     There are many other  companies that offer similar or competitive  products
to the products  offered by the  Company.  The  industries  in which the Company
markets and sells its  products are  characterized  by  substantial  and intense
competition.  Almost  all of  the  companies  offering  similar  or  competitive
products,   both  domestic  and  foreign,  are  substantially  larger  and  have
substantially greater resources,  distribution  capabilities and experience than
the  Company.  It is also  likely  that there will be other  competitors  in the
future.  The  following  is a list of  certain of the  companies  with which the
Company competes:  (1) Paint Stripping  Chemicals - Peel-A-Way Corp.,  Minnesota
Mining and  Manufacturing,  and Back to Nature; (2) NaturalCool - Cool Breeze as
well as several localized companies.


                                       7
<PAGE>

     The  Company's  objective is to develop  environmentally-friendly  products
which would  compete with the existing  paint  stripping,  foams and ambient air
exchange technologies available that are produced by competitors of the Company.
The  Company  cannot  provide  any  assurances  that the  Company  will  develop
competitive  products,  that a market for such products  (assuming that they are
developed) will develop,  that the Company will be able to develop  marketing or
distribution  channels,  or that competitors  having greater financial and other
resources  will not, or have not,  devoted  those  resources to the research and
development  of new or existing  products  which will compete with the Company's
products. There can be no assurance that the Company will be able to effectively
compete against any competitor.

     During 1998, the Company did not possess the financial resources to operate
its business, continue research and development or market its products. In 1997,
the Company was seeking  additional capital from a variety of potential sources.
Since that time, the Company has relied for working capital upon the proceeds of
loans  from  shareholders  and upon  the  proceeds  of a  private  placement  of
convertible  notes  consummated  in April  1998.  See "Item 5. Market For Common
Equity  And  Related   Stockholder   Matters  -  Recent  Sales  Of  Unregistered
Securities."

Sources and Availability of Raw Materials and Principal Suppliers:
-----------------------------------------------------------------

     NaturalCool.  All of the raw materials for manufacturing these products are
off-the-shelf and readily available to the Company from numerous suppliers.  The
Company does not anticipate any difficulty obtaining raw materials in quantities
and at  prices  acceptable  to the  Company.  The  units  are  assembled  at the
Company's Newport, Vermont facility.

     Paint  Stripping.  The  Company  uses  its own  formulation  for its  paint
stripper. The Company purchases the raw materials used in the formulation from a
number of suppliers.  The Company believes that there will be no shortage of raw
materials.  The Company uses  contract  blenders to blend the  formulation.  The
Company  believes  that there  exist  sufficient  contract  blenders  capable of
handling the Company's requirements.

     Foam. By the end of 1998,  the Company had  determined  not to market or to
sell the foam products.

Dependence on Major Customers:
-----------------------------

     As of the end of 1999, the Company had no major customers.

Intellectual Properties:
-----------------------

     Technologies/Licenses.

            NaturalCool:  In February 1997, the Company sublicensed the right to
market,  on a worldwide basis, the NaturalCool  system products from Mr. Clement
Royer,  who had  previously  received a license  to market  such  products  from
Natural Cool,  Inc., a Vermont  corporation.  Natural Cool,  Inc. holds a master
license from the inventors to market and manufacture the NaturalCool products on
a worldwide  basis.  In May 1998,  following  the Company's  termination  of Mr.
Royer, the Company obtained a license to market and manufacture products covered
by the NaturalCool patent directly from the inventors and holders of the patent.
Subsequent  to Mr.  Royer's  termination  and  prior to May  1998,  the  license
required  the  Company  to pay a  royalty  of $200 per  unit,  as each  unit was
manufactured,  and the Company was obligated to  manufacture  at least 500 units
per year. A payment of $20,000 was made to the licensor to initiate the license.
In May 1998, the Company purchased the NaturalCool  name,  inventory and related
assets,  and entered  into a new  license,  which  expires in May 2008,  for the
technology  directly  with the  inventors.  Under the new license the Company is
obligated to pay a royalty of $100 for each NaturalCool unit sold,  subject to a
minimum annual payment of $30,000, to be applied against royalties.  The minimum
royalty of  $30,000  for the period  May 1998  through  April 30,  1999 has been
prepaid by the Company.  The Company did not pay any additional royalties during
1999.


                                       8
<PAGE>

            Foams. The Company entered into a license agreement,  dated December
9, 1992,  with Richard B. Kennedy (Mr.  Kennedy has since  deceased and his wife
has   succeeded  in   interest),   Richard  J.  Fricke  and  Patrick  J.  Crehan
(collectively,  "Licensor"),  whereby the Licensor  granted the Company:  (i) an
exclusive  right  to  exploit  within  the  continental  United  States  certain
inventions,  technology,  know-how and patent rights  relating to fire retardant
urethane foam with reduced smoke toxicity,  and improvements thereto,  excluding
those  applications  which are utilized in the packaging  foam industry and (ii)
the joint patent rights to manufacture, use, sell and sublicense the technology.
Mr.  Fricke  has  renounced  any and all of his  interest  in the  license.  The
licensed  foam  technologies  are  protected by a patent,  which patent is valid
through  December 4, 1999.  Although  the Company was in the final stages of its
research  and  development  in  1998  with  respect  to the  foam  products,  it
determined  not to complete the research and  development or to pursue the sales
and marketing of the foam products because of the Company's financial condition.

     Mrs.  Kathleen  Kennedy is the  successor-in-interest  to the estate of Mr.
Richard B.  Kennedy.  Each of the Kennedy  licenses has  substantially  the same
terms and conditions and each is valid until April 17, 2050,  unless the Company
fails to pay a royalty of four percent (4%) of the gross sales  derived from the
exploitation of the respective  technology,  with certain  limitations for sales
derived from  inter-company  transfers or transactions  with  subsidiaries.  The
Company  also  agreed  to pay all  maintenance  fees  and fees  for  filing  and
prosecuting patent applications  pending at the time the licenses were executed.
All rights under the licenses are freely assignable by the Company. The licenses
were amended on August 23, 1993 to collectively  provide for a required  minimum
monthly  payment of $5,000,  in the aggregate,  and a required weekly payment of
$1,200 to Mrs. Kathleen Kennedy during her lifetime in lieu of progressive sales
minimums due beginning in 1993. The royalty payments described above nonetheless
survive. Failure to pay the minimum weekly and/or monthly payments may result in
the Company's loss of the exclusivity of such licenses. Failure to pay royalties
due under any license may result in the  termination of the  exclusivity of such
license.  Currently,  the Company is out of compliance  with the minimum payment
provisions  and has a  non-exclusive  license.  Mrs.  Kennedy  brought an action
against the  Company to obtain the  minimum  payments  under the  licenses.  The
action was  arbitrated  during  1999.  The Company lost the  exclusivity  of the
license in the  arbitration,  but was not  required  to pay any sums of money to
Mrs. Kennedy. See "Item 3. Legal Proceedings."


                                       9
<PAGE>

            Paint  Stripping:  Because  the  Company  developed  its  own  paint
stripping  products,  the Company does not intend to avail itself of the certain
supply agreement with Samax Enterprises, Inc

     Technologies/Proprietary Rights. Most of the Company's technologies involve
trade secrets that are considered proprietary to the respective licensors of the
Technologies.   The  Company  takes  all  reasonable  measures  to  protect  the
Technologies,  including the timely update of patent related  innovations to the
respective  processes.  Certain of the technologies  are unpatented  proprietary
technologies and in certain cases, because (i) the Company's financial resources
are insufficient to adequately  protect and/or prosecute such patents,  and (ii)
the Company believes that information  which may become available to competitors
during the patent process could put the Company's  products at competitive risk,
neither the inventor nor the Company believes that seeking patent  protection is
prudent. The Company does not currently manufacture its paint stripping product.
In the case of the paint stripping  product,  the Company contracts with private
blenders to manufacture it. In the case of NaturalCool, the Company manufactures
the units at its Newport, Vermont facility. The Company intends to contract with
outside  manufacturers  to manufacture any additional  products derived from the
technologies, as they are brought to market. Although the Company has identified
certain   companies  that  it  would  consider   engaging  for  the  purpose  of
manufacturing some of the Company's  intended products,  no such agreements have
been executed.

            Paint  Stripping   Chemicals  -  AmeriStrip.   Because  the  Company
developed its own paint stripping compound, the Company does not intend to avail
itself of that certain supply agreement with Samaz Enterprises, Inc.

     The Company's  paint stripping  products are  proprietary in nature.  These
products  are not  patented,  but are  covered  by  trade  secrets.  It has been
determined by the Company and the manufacturer that it is preferable not to seek
patent protection,  but rather to protect this technology through trade secrets.
In 1999, the majority of the Company's sales of this product were to contractors
in the lead abatement  field.  The Company believes that the sales effort of the
Company has been severely limited by the  insufficient  working capital position
of the Company.

            Irradiation  Technology.  Many  years  ago,  the  Company  developed
irradiation technology on a theoretical basis for the treatment of medical waste
that is proprietary in nature. The Company has not completed the development and
has not marketed this technology.



                                       10
<PAGE>

Government Regulation:
---------------------

     The manufacture and sale of paint stripping  chemicals,  carbohydrate  foam
and ambient air exchanger equipment are subject, to varying degrees, to federal,
state and local regulation. The predominance of the regulatory burden however is
imposed upon the manufacturer,  such as the inventor/supplier,  of the Company's
paint  stripping  product  and not the  Company.  The  Company  must comply with
federal labeling  requirements for the Company's paint stripping product,  which
require a description of the various  chemicals  included in the product and the
hazards attendant to the use thereof.  The foam, for construction  purposes,  is
regulated by state and local building codes. Failure to properly comply with all
regulations  applicable  to the Company's  products  could result in the Company
incurring  substantial costs to comply or cease the manufacture of the offending
products and the possible imposition of civil and criminal penalties.

Research and Development:
------------------------

     During the years ended December 31, 1999 and 1998, the Company spent $0 and
$21,000,  respectively, in connection with its research and development efforts.
The Company did not  complete  its research  and  development  on any  potential
products, other than the paint stripping product, derived from the technologies,
and therefore,  there can be no assurances that such potential  products will be
developed or that they will perform as intended.  Although  management  believed
that they would be able to develop a fire retardant foam insulation product, the
Company  lacked the funds to continue the research or development of that or any
other product. The Company's efforts to develop and market a fire retardant foam
insulation product were discontinued in 1998.

     All of the Company's research and development efforts were conducted at the
Company's  laboratory  facility  in  Brookfield,   Connecticut.   See  "Item  2.
Properties."  In February  1998,  the Company  closed its  research  facility in
Brookfield, Connecticut. The closing of the facility may have a material adverse
effect on the Company's  ability to perform research and development on products
other than the paint stripper or NaturalCool.

Employees:
---------

     As of December 31, 1999, the Company had four (4) paid employees, including
one (1) Officer. As of such date, the Company did not have any consultants. None
of the  Company's  employees is  represented  by a labor  organization,  and the
Company considers its relationship with employees to be satisfactory.

Reports Filed with the SEC:
--------------------------

     The Company is  attempting  to file its Forms  10-KSB for fiscal years 1998
through  2000.  The 10-KSB for 1998 was filed with the  Securities  and Exchange
Commission on November 27, 2001. The public may read and copy these materials at
the SEC'S  Public  Reference  Room at 450 Fifth Street  N.W.,  Washington,  D.C.
20549.  The  public  may  obtain  information  on the  operation  of the  Public
Reference Room by call the SEC at 1-800-SEC-0330.  The SEC maintains an internet
site  that  contains  reports,  proxy  and  information  statements,  and  other
information regarding issues at http://www.sec.gov.


                                       11
<PAGE>

ITEM 2.  PROPERTIES:

Principal Plants:
----------------

     The Company does not own any real property.

     In September 1998, the Company  allowed the Ridgefield  Lease to expire and
moved its corporate offices to 440 Main Street,  Ridgefield,  Connecticut 06877,
which is Mr. Fricke's law office.  Mr. Fricke has provided space to the Company,
without charge, since September 1998.

     As of January 1,  1999,  the  Company  leased,  on a month to month  basis,
approximately  12,000 square feet of space at P.O. Box 625, Derby Road, Newport,
Vermont 05855 at $4,000 per month. By December 31, 1999, the Company had reduced
the space to 3,530 square feet at $1,275 per month.

     The Company  believes  its  facilities  are  suitable  and adequate for its
existing  operations  and those  reasonably  expected in the next twelve months.
With the exception of the NaturalCool  units, which are manufactured in Newport,
Vermont,  and the fulfillment of Internet sales and samples which is carried out
in Newport, Vermont, the Company's facilities are not suitable for manufacturing
and  distributing  products in significant  quantities.  Therefore,  the Company
intends to rely on outside manufacturers to manufacture its products as they are
developed and marketed.  The Company  currently does not possess the capacity to
manufacture  any of its products in anything  more than sample  quantities  in a
laboratory facility. Although the Company has identified certain companies which
it  would  consider  engaging  for  the  purpose  of  manufacturing  some of the
Company's  intended  products,  no such  agreements have been entered into as of
this date.  The AmeriStrip  product is being  manufactured  on a  batch-by-batch
basis.

ITEM 3.  LEGAL PROCEEDINGS:

     On May  29,  1998,  SSC  Marketing,  Inc.  ("SSC")  filed  an  action  (SSC
Marketing,  Inc. v. Safe  Alternatives)  against the Company in federal court in
the  Southern  District  of New York.  By  agreement,  the suit was moved to the
District of  Connecticut  (D. Conn.  File No. 3:  98cv1312  JBA).  The complaint
contained four counts, each requesting a judgment for $180,880 plus interest and
attorney's fees. The suit alleged breach of contract,  misrepresentation  by the
Company,  unjust  enrichment,  and quantum meruit.  The Company responded to the
complaint and brought  various  counterclaims  against SSC. This action  settled
and, in  September  1999,  was  dismissed.  The Company  subsequently  delivered
500,000 shares of its restricted  Common Stock to SSC's designee pursuant to the
settlement agreement.


                                       12
<PAGE>

     An adversary  proceeding  was brought  against the Company in July 1997, in
U.S. Bankruptcy Court for the District of Connecticut,  by Richard Coan, Trustee
for the Bankruptcy Estate of Samuel E. Bernstein (U.S.  Bankruptcy Court,  Dist.
Conn.  Adversary  Proceedings  File No.  97-5078).  The suit seeks a judgment to
recover accrued but unpaid wages totaling approximately $100,000 for 1995, which
the Company  contends that Mr.  Bernstein  had waived his right to receive.  The
Trustee  seeks to avoid the waiver  under the  Bankruptcy  Code and  recover the
value of the waiver.  The Company is defending itself in the matter,  and cannot
predict  the  outcome  of the matter or whether a  settlement  will be  reached.
However,  the Company  believes that if the Trustee is successful in obtaining a
judgment  against  the  Company,  it should not be required to pay more than the
total debt owed to the debtor's creditors,  plus related fees, which the Company
believes to be approximately $26,000. The Company's financial statements for the
year ending  December 31, 1997 and 1998 include a provision  for loss of $26,000
to reflect this matter. Judgment against the Company and in favor of the Trustee
was entered in this matter on or about April 5, 2000 in the amount of  $140,000.
On or about  October  23,  2001,  the  Bankruptcy  court  approved a  settlement
agreement whereby a Satisfaction of Judgment will be entered in this matter upon
the  Trustee's  receipt  of $10,000  to be paid on behalf of the  Company.  This
agreement  terminates  if not  completed on or before  January 15, 2002,  unless
extended in writing.

     Ms. Kathleen Kennedy,  the licensor under certain technology  licenses with
the Company, brought an arbitration action in 1999 against the Company, claiming
past due minimum royalty payments of approximately $145,000. The arbitrator held
that although the Company did not owe any money or damages to Ms.  Kennedy,  the
licenses  were now  non-exclusive  because of the  Company's  failure to pay the
licensing fees.

     The Company  commenced  an action  against Mr.  Clement  Royer,  the former
President of the Company's  Natural Cool Division,  in November 1997,  which was
settled in June 1998. The complaint sought the return of corporate records, test
data and the like, as well as  compensatory  damages and  attorney's  fees.  The
terms of the settlement  involved Mr. Royer's returning all corporate  documents
and disclaiming any rights to the NaturalCool product.

     Other than as set forth herein,  there are no legal actions pending against
the  Company  nor to the  knowledge  of the  Company  are any  such  proceedings
contemplated.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year ending December 31, 1999.






                                       13
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:

Market Price of Common Stock:
----------------------------

     There has not been an active market for the Company's securities.  On March
6, 1997,  the Company's  Common Stock was accepted for trading on the Electronic
Bulletin  Board of the NASD under the symbol  SACA.  The Common  Stock traded in
very  limited  volumes,  and the  Company has not been able to obtain any quoted
prices for the stock prior to June 24, 1997.  The limited  market has caused the
securities to be subject to significant price fluctuations.

     The range of high and low bid and asked quotations for the Company's Common
Stock for fiscal years 1998 and 1999 are not  available to the Company as of the
date of filing this report due to the Company's lack of funds.  After reasonable
inquiry,  the  Company  was not able to find  the  requested  information  at an
economically feasible cost.

     A range of high and low  quotations  for the  Company's  Common  Stock  for
fiscal years 1998 and 1999 are listed below.  The  information was obtained from
the NASDAQ web site (www.nasdaq.com).  The prices reported may not be indicative
of the value of the Common Stock or the existence of an active  trading  market.
The Company does not know whether these quotations reflect  inter-dealer  prices
without  retail  mark-up,  markdown or  commissions.  These  quotations  may not
represent actual transactions.

                                      1998                         1999

                               Low           High           Low           High

     First Quarter            $0.063        $0.200         $0.031        $0.090
     Second Quarter           $0.130        $0.390         $0.021        $0.060
     Third Quarter            $0.150        $0.560         $0.021        $0.080
     Fourth Quarter           $0.031        $0.280         $0.011        $0.030

Holders:
-------

     The Company had  approximately  1,557 holders of record of its Common Stock
as of December 31, 1999.



                                       14
<PAGE>

Dividend Policy:
---------------

     It is the policy of the Board of Directors to retain earnings,  if any, for
use in the maintenance and expansion of the Company's business.  The Company has
not declared any cash dividends to the holders of its capital stock and does not
anticipate declaring or paying dividends in the foreseeable future.

Recent Sales of Unregistered Securities:
---------------------------------------

     Since the  Reorganization,  through  December 31, 1997,  the Company issued
923,726 shares of restricted Common Stock to approximately 202 individuals,  for
the aggregate consideration of approximately  $1,650,000.  The Company believes,
based upon representation letters provided to it from such investors,  that such
issuances were made to approximately 135 "accredited  investors" as such term is
defined under Rule 501 of Regulation D promulgated  under the Securities Act and
to approximately 67 non-accredited  investors.  The Company made such sales with
the intention of relying upon the  exemption  afforded by Rule 506 of Regulation
D;  however,  the  Company  has  never  filed a Form D with the  Securities  and
Exchange Commission,  nor has the Company complied with filing requirements,  if
any, of the states in which sales were made. In certain  instances,  the Company
paid  what it  believed  to be  finder's  fees  to  individuals  who  introduced
investors to the Company.

     During 1997 and the first half of 1998, Messrs.  Sean McNamara,  Nicky Hunt
and  Richard  Hill  (hereinafter   "the  Investor   Group"),   who  are  current
shareholders  and who were  Directors  of the Company for part of 1997 and 1998,
advanced working capital loans and committed to make loans to the Company in the
aggregate  amount of  approximately  $1.0  million.  During the first quarter of
1998,  in  consideration  for,  among  other  things,  not  demanding  immediate
repayment of the loans,  the Company and the  Investor  Group agreed to exchange
all of such  outstanding  indebtedness  for a convertible  promissory  note (the
"Investor Note"),  2,000,000 shares of the Company's Common Stock with piggyback
registrations  rights (but which may not be traded until the $1,300,000  note is
converted)  and stock options.  The Investor Note is in the aggregate  principal
amount of $1.3 million, and accrues interest at a rate of 8% per annum beginning
January 1, 1998.  The Board  authorized  the issuance of warrants in  connection
with the  Investor  Note  that are  exercisable  for a period  of five  years to
acquire  1,500,000 shares of Common Stock at $.25 per share and 1,500,000 shares
of Common Stock at $.50 per share.  In connection  with the Investor  Note,  the
Company  also issued  options to acquire  Common  Stock as  follows:  options to
purchase 2.6 million shares at an exercise price of $.01 per share, 1.95 million
shares at an exercise  price of $.25 per share,  and 1.95  million  shares at an
exercise  price of $.50,  all of which may be exercised at any time between June
30, 1999 and June 30, 2003,  the  expiration  date of the options.  The Investor
Note is repayable as follows:  $433,333 in principal amount, plus interest,  was
due and  payable on or before  September  9, 1998;  an  additional  $433,333  in
principal amount,  plus interest,  was due on or before January 9, 1999; and any
unpaid principal balance, plus interest,  was due on or before March 9, 1999. In
addition to any other  remedies  they may have if the Company  fails to make the
principal  payment on the  shareholder  loans on September 9, 1998,  the Company
will be obligated to issue to the lender options to acquire an additional 75,000
shares of Common Stock,  exercisable  at a price of $.01 per share,  for each 30
days that the principal payments are in default. The Company did not make any of
the payments required under these Investor Notes and is in default.


                                       15
<PAGE>

     On May 29, 1999,  in exchange  for the issuance of 1,000,000  shares of the
Company's  restricted  Common Stock,  Nicky Hunt released the Company from:  (1)
paying any sums due to him,  including  amounts  due to him under the  foregoing
$1.3 million Note; (2) issuing any additional  stock then due or becoming due to
him; and (3) any and all rights he had,  including any right under any option or
warrant, to receive any additional Common Stock from the Company that arose as a
result of his association with the Company.  Messrs.  McNamara and Hill released
the same  obligations  in October 2001 in exchange for the issuance of 4,000,000
shares of the Company's restricted Common Stock.

     On September 9, 1997, the Board of Directors authorized the issuance of the
following restricted stock and options in consideration of various loans:

PERSON                            SHARES                OPTIONS
------                            ------                -------

Michael Mareneck                  87,500                 87,500
Basil Borque                      25,000                 25,000
Sean McNamara                    142,000                143,000
Nicky Hunt                        50,000                 50,000
Richard Hill                      12,500                 12,500
John McNamara                     25,000                 25,000
Michael Mareneck                  12,500                 12,500

These options were  exercisable at a price of $.25 per share until  September 9,
2002, but were cancelled as a result of the foregoing $1.3 million transaction.

     In March and April,  1998, the Company issued its 6% Convertible Notes (the
"Notes") in the aggregate  principal  amount of $726,500 in a private  placement
under Rule 505 of Regulation D. Interest on the Notes is payable  semi-annually.
The principal amount of the Notes, together with unpaid interest thereon, is due
and  payable,  if not  earlier  converted,  on  March 3,  1999.  The  Notes  are
convertible  into shares of Common Stock at the option of the holder at any time
following  the  earlier  of (i) 90  days  after  the  filing  of a  registration
statement  with the SEC covering the shares to be received  upon  conversion  or
(ii)  the date the SEC  declares  such  registration  statement  effective.  The
conversion  price per share is the lesser of (i) 70% of the average  closing bid
price  per  share  of  Common  Stock  for the  five  trading  days  prior to the
conversion date or (ii) $0.25. Upon conversion,  any accrued and unpaid interest
is waived by the holder. The Company has the option to repurchase the Notes from
the holder prior to  registration  of the underlying  shares at a premium of 10%
over the purchase  price of the Notes.  The Company  agreed to file with the SEC
not later than June 3, 1998, and use its best efforts to have declared effective
not later than July 3, 1998, a registration statement registering for resale the
shares that would be issued upon  conversion of the Notes.  The Company has made
no payments on these notes;  has not repurchased  these Notes, and is in default
with regard to its registration obligation.


                                       16
<PAGE>

     In November  2001,  one of the holders of the foregoing  Convertible  Notes
released all obligations to it under or as a result of the Convertible  Notes in
exchange for the issuance of 4,00,000 shares of the Company's  restricted Common
Stock.

     As compensation to the placement agent, Alexander,  Wescott & Co, Inc., the
Company paid cash fees of 10% of the gross proceeds from the Investor  Notes. In
addition,  the  Company  paid a 3%  nonaccountable  expense  reimbursement,  and
certain other  out-of-pocket  expenses of the agent.  The Company also issued to
the agent  Warrants  exercisable  for  284,600  shares of  Common  Stock,  at an
exercise  price of $.30 per share,  expiring  June 28, 2003.  As of December 31,
1999, none of these Warrants had been exercised.

     In lieu of cash  payments  for their  service  as  members  of the Board of
Directors  and  committee  members,  The Company  agreed to issue  stock  and/or
options to the members of the Board of Directors. In 1997, the Company agreed to
issue to each of Messrs.  Sean  McNamara  and  Richard  Hill  200,000  shares of
restricted  Common Stock for their services.  On January 16, 1998 and in lieu of
monetary  compensation,  the Board of Directors authorized:  (1) the issuance of
stock options to the members of the Management Committee (Messrs. McNamara, Hunt
and Hill) to purchase 100,000 shares of the companies restricted Common Stock at
a price of $.01 per share and  exercisable  for a period of five years;  (2) the
issuance  of  stock  options  to the  members  of the  Management  Committee  to
purchase,  at $.01 per share,  $2,500  worth of stock (with the number of shares
being  determined by the last per share sales price of the month) for each month
and  exercisable  for a period  of five  years;  and (3) the  issuance  of stock
options to each member of the Board of Directors (Messrs.  McNamara,  Hunt, Hill
and Fricke) to  purchase,  at $.01 per share,  $500.00  worth of stock (with the
number of shares  being  determined  by the last per  share  sales  price of the
month) for each Board meeting and  exercisable  for a period of five years.  The
Company's obligation to issue these options was released by Mr. Hunt in May 1999
and by Messrs. McNamara and Hill in October 2001.

     On June 1, 1998,  Nicky Hunt was  granted  options to purchase up to 40,000
shares of the Company's restricted Common Stock at a price of $.01 per share for
doing the due  diligence  in  connection  with  Norfield  Corporation.  Mr. Hunt
released the Company's obligation to issue these options in May 1999.

     During  1998,  the Company  issued its  restricted  Common Stock to pay for
services to the Company,  as follows:  Sam Armato,  Jr., 50,000 shares;  Chester
Greenwood,  50,000 shares;  Kenneth  Hodgdon,  10,000  shares;  and Neil Rogers,
100,000  shares.   In  addition,   the  Company   authorized  the  following  as
compensation  and incentive pay:  100,000  shares of restricted  Common Stock to
Robert Berger  (authorized but not issued until 1999);  and (2) 25,000 shares of
restricted  Common Stock  (authorized but not issued until 1999) plus options to
purchase 234,000 shares of restricted Common Stock exercisable for a period of 5
years at a price of $.01 per share to Robert  Percheski.  In 1999,  the  Company
issued 50,000 shares of its restricted Common Stock to Scott Purvis for services
he rendered to the Company.


                                       17
<PAGE>

     Certain  actual  and  threatened  litigation  was  settled  in  1998 by the
issuance  of the  Company's  Common  Stock,  as follows:  500,000  shares to SSC
Marketing, Inc. and 110,000 shares to Melvin Kanan.

     On December  21,  1998,  the Board  granted  options to purchase  2,500,000
shares of the  Company's  Common Stock to Mr.  Fricke and 500,000  shares to Ms.
Yrizarry (Mr.  Fricke's  former  spouse) at an exercise price of $.01 per share,
exercisable  until December 21, 2008 for remaining and serving as a Director and
Officer of the Company, together with the attendant liability, after the rest of
the  Board  and  management  had  resigned.  In 1999,  the  Company  substituted
2,500,000  shares and 500,000  shares of its Common  Stock to Mr.  Frick and Ms.
Yrizarry, respectively, in place of these options.

     In lieu of cash payment for serving as a member of the Board of  Directors,
the Board authorized,  but did not issue,  options to purchase 400 shares of the
Company's restricted Common Stock for each meeting attended.  These options were
exercisable  for a period of five (5) years from the date of the  meeting at the
price of $.001 per share.  All three (3) members of the Company's Board attended
each of the  fifteen  (15)  meetings  that were held  during 1999 for options to
purchase a total of 18,000 shares of the Company's restricted Common Stock.

     In lieu of  receiving  cash  payments for his services as an Officer of the
Company,  in  exchange  for salary  arrearages,  and in exchange  for rent,  the
Company issued 10,000,000 shares of its restricted Common Stock to Mr. Fricke in
1999.

     During 1999,  Dominick Parisi  purchased  2,400,000 shares of the Company's
restricted  Common Stock for a purchase  price of $72,000 for the benefit of the
Dominick G. Parisi Trust.

     No  filings  have  been  made with the SEC with  respect  to the  foregoing
transactions.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:

General:
-------

     Since the  Reorganization,  management  of the Company has  concentrated  a
significant  portion of its efforts on the  marketing  and sale of the Company's
paint stripping product and NaturalCool products.  Efforts to develop and market
the Company's foam products were terminated in 1998 due to the lack of financial
resources. The Company does not intend to engage in any research and development
in 2000 due to its  financial  condition.  During  1999 the  Company  eliminated
virtually all of its corporate  overhead and focused  exclusively  on AmeriStrip
and  NaturalCool  products  in the hope of  producing  a positive  cash flow and
revenue.

                                       18
<PAGE>

     During  1999,  the Company  concentrated  its sales and  marketing  through
direct  sales  from  the  Company's  offices  in  Derby,  Vermont.  The  Company
established  a small network of  independent  distributorships  with  commission
sales persons to sell the NaturalCool product. The Company continued to sell the
Ameristrip product directly to its former customers and over the internet.

     The Company  has had losses  from  operations  since its  inception.  It is
likely that the Company  will  continue  to have losses from  operations  in the
near-term  future  because  it is still in the  early  stages of  marketing  its
initial products and because the Company lacks financial resources.  There is no
assurance  that the Company will have profit from  operations  at any time after
1999.

     The report of the Company's  independent auditor contains a paragraph as to
the Company's ability to continue as a going concern. Among the factors cited by
the  auditors  as  raising  substantial  doubt as to the  Company's  ability  to
continue  as a  going  concern  are:  (i) the  Company  has  incurred  recurring
operating losses;  and, (ii) the Company has a working capital  deficiency.  See
Note 3 to the Financial Statements included herein.

     The Company does not anticipate any significant costs relating to upgrading
or reprogramming of its software for the year 2000.

Results of Operations for the Fiscal Years Ended December 31, 1999 and 1998:

     Sales;  Gross Margins;  Net Losses.  For the fiscal year ended December 31,
1999, sales decreased to $130,205 from $270,230 in the prior year, a decrease of
$140,025  due to the  reduction  in  marketing  efforts of the  Company's  paint
stripping product line and lower sales of the Company's NaturalCool product from
1998.

     The Company's  gross margin on sales  increased from (0%) in 1998 to 69% in
1999. The Company expects that, if it is successful in increasing its sales, its
gross margins in the future will be maintained at the current level.

     For the year ended  December 31, 1999,  the Company  reported a net loss of
$(268,944),  or $(.012) per share,  as compared  with  $(879,681) or $(.067) per
share in the prior year, a decreased loss of $610,736, or 100%, due primarily to
a reduction in activity  which  reduced costs such as purchases of materials and
payroll.  The Company will continue to incur net losses as sales of its products
have not  materialized  at  levels  sufficient  to cover the  Company's  cost of
marketing  and  selling,   which  has  included  substantial  non-cash  expenses
associated with  compensating  marketing and selling  personnel in shares of the
Company's  Common Stock. The decline in the net loss per share in 1999 from 1998
is due to a larger  number of shares  outstanding  during  1999  along  with the
reduction in loss. Without the extraordinary  item, the Company's 1997 operating
loss was approximately $105,000 smaller than its 1996 operating loss.


                                       19
<PAGE>

     Selling,  General and Administrative  Expenses. For the year ended December
31, 1999, the Company incurred selling,  general and administrative  expenses of
$233,507,  as compared to $826,433  in the prior  year.  This  reduction  is due
primarily  to the fact  that the  Company  has  reduced  costs  to  reflect  its
reduction in sales.

     During the fourth  quarter of 1997 and the first half of 1998,  the Company
and third  parties have taken a number of actions which are and will continue to
have the result of  significantly  reducing the Company's  selling,  general and
administrative  expenses.  These  include:  (1)  termination  of  the  Company's
agreements with SSC, pursuant to which the Company paid  approximately  $203,000
between  November 1, 1996 and December 31, 1997, which savings will be offset in
part by selling expenses associated with the temporary increase in the Company's
in-house sales staff;  (2)  resignation  and  termination  of certain  officers,
employees  and  consultants  who had been  compensated  in 1998  and  1997  with
substantial  amounts of Common Stock; and (3) closing the Company's  Brookfield,
Connecticut laboratory facility.

     Research and  Development.  For the year ended December 31, 1999,  research
and  development  expenses  decreased from the prior year,  declining to $0 from
$20,903.  The research  and  development  of the  Company's  product  lines were
terminated  in 1998  due to the  Company's  financial  condition.  The  research
facility in Brookfield,  Connecticut was also closed in 1998.  Calculations with
respect to the percentage of research and development expenses relative to sales
are not meaningful.

     Balance Sheets:
     --------------

     At December 31, 1999, the Company had current  assets of $35,090,  compared
to $74,438 at December 31, 1998.  The decrease in current  assets was  primarily
attributable to a decrease in accounts  receivable for $67,219 to $33,624 due to
reduced sales and  collection of old  receivables in 1999. At December 31, 1999,
the Company had cash of $1,466, compared to cash of $7,219 on December 31, 1998,
reflecting the slow pace of sales of the Company's products to date.

     Accounts  payable  and other  accrued  expenses  increased  to  $333,996 at
December 31, 1999, from $213,830 at December 31, 1998,  primarily as a result of
accrued  Shareholder  loan  and  Convertible  Note  interest  in the  amount  of
$122,902.

     Stockholders'  loans were $926,900 and  $1,300,000 at December 31, 1999 and
1998,  respectfully.  On January 1, 1998,  the  Company and the  Investor  Group
agreed to exchange  all of the  current  outstanding  balance of  $896,000  plus
accrued interest,  for a convertible promissory note of $1,300,000 and 2,000,000
shares of  restricted  Common Stock with  registration  rights.  On May 29, 1999
Nicholas Hunt agreed to exchange,  for one million  shares of restricted  Common
Stock, his portion of the $1.3M liability,  or $373,100. See "Item 5. Market for
Common  Equity and Related  Stockholder  Matters--Recent  sales of  Unregistered
Securities."  The  Company  has not made any  payments  on these Notes and is in
default.  As of December  31, 1999,  the Company had not  identified a source of
repayment of any of these obligations.


                                       20
<PAGE>

     As of  December  31,  1999,  the  Company  had an  accumulated  deficit  of
$(17,269,459), which includes the net loss for fiscal year 1999 of $(268,944).

Liquidity and Capital Resources:
-------------------------------

     The  Company  has  never  generated  sufficient  revenues  to  finance  its
operations and has been able to remain in business solely as a result of raising
capital.  At December  31, 1999,  the Company had current  assets of $35,090 and
current liabilities of $1,987,396.  The Company's ability to continue as a going
concern in the near term is dependent upon obtaining additional financing. As of
December 31, 1999,  the Company did not have the financial  resources to operate
its business,  continue  research and  development  or market its products.  The
Company has been financing its operations through loans from shareholders, which
aggregated approximately $926,900 as of December 31, 1999 and $1,300,000 in 1998
and from  approximately  $726,500 in net  proceeds  from a private  placement of
convertible  notes  completed  in April,  1998.  See "Item 5.  Market For Common
Equity  And  Related   Stockholder   Matters  -  Recent  Sales  Of  Unregistered
Securities."  By the end of 1998,  those  investors who had previously  provided
capital for the Company  were  unwilling  to advance  any further  funds.  As of
year-end  1998,  the  Company  had not  identified  any  prospects  for  raising
additional  capital.  By the end of 1999,  the Company had  basically  moved its
scaled down operations to Vermont.

     The Company has entered into agreements with the respective licensors under
the licenses  with respect to the various  technologies  under which the Company
has undertaken substantial ongoing financial commitments. The Company was unable
to obtain  additional  financing,  and the Company is currently in default under
such agreements. See "Item 1. The Company - Licenses."

     The Company estimated that it would require  approximately  $1.1 million in
financing in order to continue  operations for fiscal 1998 and the first half of
fiscal 1999. Much of that financing was provided through additional  shareholder
loans,  accruing  interest at 8%, and convertible notes issued in April 1998, in
the aggregate principal amount of $726,500. See "Item 5. Market or Common Equity
And Related Stockholder Matters - Recent Sales Of Unregistered  Securities." The
shareholders  who were providing funds to the Company do not have any commitment
to  continue  lending  money,  and the  Company  has been  forced to scale  back
operations.  The Company  agreed to repay  $433,333 in  principal  amount of the
shareholder  loans on or before  September 9, 1998;  an  additional  $433,333 in
principal  amount on or before  January 9, 1999;  and an additional  $433,333 in
principal  amount  on or  before  March 9,  1999.  The  principal  amount of the
Convertible Notes,  together with unpaid interest thereon,  was due and payable,
if not  earlier  converted,  on  March 3,  1999.  The  Company  has not made any
payments on these Notes and is in default.  As of December 31, 1999, the Company
had not identified a source of repayment of any of these obligations.



                                       21
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS:

     The  audited  financial  statements  of the Company as of and for the years
ending December 31, 1999 and 1998 are included beginning at Page F-1 below.

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

     As more fully set forth in Note 3 to the Financial Statements, the auditors
have stated that the Company's  recurring  operating  losses and working capital
deficiencies  for fiscal years 1999 and 1998 raise  substantial  doubt about its
ability  to  continue  as  a  going  concern.  The  Company  agrees  with  those
statements.

                                    PART III

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

     The Company's Officers and Directors during 1999 are as follows:

NAME                    AGE     POSITION
----                    ---     --------

Richard Fricke          55      President, Chief Executive Officer, and Director

James Hastings          35      Secretary and Director

Dominick G. Parisi      70      Director

     Mr. Richard J. Fricke has served as President and Chief Executive  Officer,
except for a short period as set forth below, of the Company since January 1998.
He is also a Director of the Company.  He has been a practicing general practice
attorney in the State of Connecticut  since 1970 and was admitted to the bar the
same year.  From  1970-73,  he worked  with the law firm of Gregory & Adams,  in
Wilton,  Connecticut.  From 1973 to 1990,  he was a  partner  in the Law Firm of
Crehan & Fricke,  in  Ridgefield,  Connecticut.  Mr. Fricke filed for protection
under Chapter 7 of the federal  bankruptcy  laws in 1996. In addition to private
practice,  Mr. Fricke was Town Counsel for the town of Ridgefield,  Connecticut.
From 1973-81,  he served as Director of Village Bank & Trust Company and for the
Ridgefield  Community Center and the Ridgefield  Montessori  School.  Mr. Fricke
received his undergraduate  and law degrees from Cornell  University in 1967 and
1970,  respectively.  Mr. Fricke's biographies can be found in Marquis Who's Who
in America, Who's Who in the World, Who's Who in Business and Finance, and Who's
Who in the East.


                                       22
<PAGE>

     Mr.  James  Hastings  is a graduate of Fordham  University  and the Western
Language England College School of Law. Mr. Hastings specializes in business and
entrepreneurial  law, including business formation,  trademark,  copyright,  and
internet  law.  Mr.  Hastings is  currently  an  associate  with the law firm of
Hastings  and Allan,  Ridgefield,  Connecticut.  Prior to joining  Hastings  and
Allan,  Mr. Hastings  practiced  intellectual  property law in New York City and
Washington, D.C.

     Mr.  Dominick  Parisi  is a  self-employed  consultant  regarding  business
management,  development  and  training.  He has an MBA from the  University  of
Chicago, Chicago,  Illinois and a Ph.D. from Northwestern University,  Evanston,
Illinois.  He is  Professor  Emeritus  and past  Chairman of the  Department  of
Management, DePaul University,  Chicago, Illinois. Mr. Parisi serves as a member
of the Board of Directors of First Frontier  Holdings,  Inc., SOBRO GROUP,  Inc.
and San Diego Downtown Residents (Non-profit).

     Mr. Hastings and Mr. Parisi were appointed to the Board on January 18, 1999
with their terms to expire on December 31, 2001. On January 18, 1999,  the Board
accepted the resignation of Penny Yrizarry as interim  Secretary and Director of
the Company.

     Officers  are  elected  by and  serve  at the  discretion  of the  Board of
Directors.

     There are no family relationships among the members of the Board.

Board Committees: The Board had no Committees during 1999.
----------------

ITEM 10. EXECUTIVE COMPENSATION:

Director Compensation:
---------------------

     Although  the  Members of the Board of  Directors  did not receive any cash
fees for the  service on the  Board,  they are  entitled  to be  reimbursed  for
expenses incurred in attending Board meetings.  In 1999, the Company  authorized
the issuance of four hundred  (400) shares of the  Company's  restricted  Common
Stock to each member of the Board for each  meeting  attended.  Under this plan,
each  Director  is entitled to the  issuance  of 6,000  shares of the  Company's
Common  Stock.  On December  21,  1998,  the Board  granted  options to purchase
2,500,000  shares of the Company's Common Stock to Mr. Fricke and 500,000 shares
to Ms.  Yrizarry (Mr.  Fricke's  former spouse) at an exercise price of $.01 per
share,  exercisable  until  December  21,  2008 for  remaining  and serving as a
Director  and Officer of the Company,  together  with the  attendant  liability,
after the rest of the Board and  management  had resigned.  In 1999, the Company
substituted 2,500,000 shares and 500,000 shares of its Common Stock to Mr. Frick
and Ms. Yrizarry, respectively, in place of these options.


                                       23
<PAGE>
<TABLE>
<CAPTION>

Compliance With Section 16(A) Of The Exchange Act:
-------------------------------------------------

     Based  solely  upon a review of Forms 3, 4 and 5, and  amendments  thereto,
furnished to the Company with respect to fiscal year 1999, the Company  believes
that (1) Mr. James Hastings and Mr. Dominick Parisi each failed to file a Form 3
upon becoming  Directors of the Company in January 1999;  and (2) Mr. Richard J.
Fricke  failed to file timely an initial  report on Form 3 statement  of initial
ownership of shares of the Company's  Common  Stock,  and has failed to file any
Forms 4 or a Form 5  reporting  the  acquisition  from the  Company of shares of
Common Stock.

     The  Company  did not receive any Form 3, 4 or 5 from any of its present or
former Officers or Directors  during 1999.  Thus, the Company believes that: (1)
Messrs.  Hill, Hunt, McNamara,  Fricke,  Parisi, and Ms. Yrizarry each failed to
file a Form 4 or Form 5 reporting  transactions  involving  the  acquisition  of
shares of the  Company's  Common  Stock;  and (2) Messrs.  Percheski  and Berger
failed  to file a Form 4 or  Form 5  reporting  one  transaction  involving  the
acquisition of shares of the Company's Common Stock.

Officer Compensation:
--------------------

     The following table sets forth compensation received by the Company's Chief
Executive  Officer and the four remaining  most highly paid  Executive  Officers
(except  where such  compensation  does not exceed  $100,000  per annum) for the
three fiscal years ended December 31, 1998.

                           SUMMARY COMPENSATION TABLE

                             Long Term Compensation

                             Annual Compensation              Awards                     Payouts
                             -------------------              ------                     -------

--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
                                                                    Securities
Name and               Salary           Other Annual    Restricted  Underlying
Principal              (Note    Bonus   Compensation    Stock       Options/SARs   LTIP      All Other
Position        Year   1)       $       (Notes 2,4,6)   Award(s) $  (Notes 4, 6)   Payouts   Compensation
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
<S>             <C>    <C>      <C>     <C>             <C>         <C>            <C>       <C>
Richard J.      1999   $34,615             $1,000.60    10,006,000        6,000
Fricke
President &
CEO (from
1/98 until
9/98 & 12/98
to date)
Secretary
(until 1/98)
& Director
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
                1998   $58,846               $280.45                  2,504,500              $9,118
                                                                                             (Notes 3, 5)
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
                1997   $18,000           $438,374.00
                       (Notes
                       1-6)
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------


                                       24
<PAGE>

--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
James           1999   $0                        .60                      6,000
Hastings,
Secretary &
Director
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
                1998   N/A
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
                1997   N/A
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
Dominick        1999   $0                        .60                      6,000
Parisi,
Director
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
                1998   N/A
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------
                1997   N/A
--------------- ------ -------- ------- --------------- ----------- -------------- --------- --------------

</TABLE>

          1.   Mr.  Fricke and Mr.  Stephen J.  Thompson  (a former  Officer and
Director)  had  employment   contracts  entitling  them  to  an  aggregate  cash
compensation  of $725,000  through 1997. In 1997 Stephen J. Thompson and Richard
F.  Fricke  each  received  $18,000 in cash  compensation.  Both have waived his
rights with respect to salary  arrearages.  In 1998, Mr. Frick received $58,846,
and in 1999 he received  $34,615.  Mr.  Fricke is currently  serving  without an
employment contract.

          2.   In addition to their base  salaries,  the Company  established  a
Medical and Dental Reimbursement Plan for each of Stephen J. Thompson (until his
resignation in 1998) and Richard J. Fricke providing for  reimbursement of up to
$10,000 of medical and dental expenses annually  incurred by such Officers.  The
Company has not received any requests for reimbursements under this Plan.

          3.   In 1997,  the  Company  paid  $14,093  for the  health  insurance
premiums  for Stephen J.  Thompson (a former  executive  Officer) and Richard J.
Fricke,  in the  aggregate.  In 1999 and 1998, the Company paid $0 and $1023 for
the health insurance  premiums for Mr. Fricke.  In 1997, the Company paid $3,471
for the life  insurance  premiums  for  Stephen J.  Thompson a former  Executive
Officer) and Richard J. Fricke, in the aggregate.  In 1999 and 1998, the Company
paid $0 and $4,570 for the life insurance premiums for Mr. Fricke.

          4.   Other  Compensation for Mr. Fricke includes for 1999:  10,000,000
shares of  restricted  Common  Stock  valued at $.0001  per share or $1,000  and
currently  exercisable  options  to  purchase  6,000  shares  of  the  Company's
restricted  Common  Stock at $.0001 per share or $.60,  said option to expire in
2004. In 1998, Mr. Fricke  received  300,000  shares of restricted  Common Stock
valued  at $.0001  per share or $30.00  and  currently  exercisable  options  to
purchase  2,500,000  shares of  restricted  Common Stock at $.01 per share until
December 21, 2008,  valued at $.0001 per share or $250.00.  In 1999, the Company
converted these options into 2,500,000 shares of the Company's restricted Common
Stock.  In 1997,  Messrs.  Fricke and Stephen  Thompson (a former  Officer) each
received  250,000 shares of Common Stock valued at $1.125 per share,  and 93,040
shares valued at $1.50 per share.


                                       25
<PAGE>

          5.   Mr. Fricke received  office space and  secretarial  services from
the Company  through August 1998 to support his  independent  law practice.  The
value of such  services is estimated to be  approximately  $3,525,  based on Mr.
Fricke  spending less than 5% of his time on his  independent law practice prior
to  September  1998.  Thereafter,  Mr.  Fricke  moved his law office to 440 Main
Street,  Ridgefield,  Connecticut  and has been  providing  a  location  for the
Company, without charge, since that date.

          6.   In 1999,  the  Company  authorized  the  issuance  of  options to
purchase four hundred (400) shares of the Company's  restricted  Common Stock to
each  member of the Board for each  meeting  attended  at a price of $.0001  per
share  exercisable  for a period  of five  years  from  the date of the  meeting
attended.  Under this plan, each Director  received and option to purchase 6,000
shares of the Company's restricted Common Stock in 1999.

Employment Agreements:
---------------------

     The  Company  does  not  have  any   employment   agreements,   termination
agreements,   change-in-control   agreements   or  change  in   responsibilities
agreements with any of its employees.

Limitation Of Liability And Indemnification Matters:
---------------------------------------------------

     The Company's By-Laws provide for the  indemnification,  to the full extent
allowed by Florida law, of its directors, officers, employees and agents who are
or were a party, or are threatened to be made a party to any threatened, pending
or completed  legal action,  suit or proceeding by reason of the fact that he or
she is or was serving a director,  officer,  employee or agent of the Company or
is or was serving in such capacity at another  entity at the Company's  request.
The extent,  amount and eligibility for such indemnification are determined by a
majority vote of a quorum of disinterested directors, or by a majority vote of a
quorum of disinterested shareholders.

     Section 607.0850 of the Florida Business Corporation Act empowers a Florida
corporation to indemnify any person who is a party to any proceeding (other than
an  action by or in the  right of such  corporation)  by reason of the fact that
such  person  is  or  was  a  director,  officer,  employee  or  agent  of  such
corporation,  or is or was  serving  at the  request  of such  corporation  as a
director,  officer,  employee  or agent of another  corporation  or  enterprise,
provided that he acted in good faith and in a manner he  reasonably  believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal  action or  proceeding,  had no reasonable  cause to believe his
conduct was unlawful.  A Florida  corporation  may indemnify any person who is a
party to any  proceeding  by or in the right of the  corporation  under the same
conditions,  except  that  no  indemnification  is  permitted  without  judicial
approval if the officer or director is adjudged to be liable in the  proceeding.
Where an officer, director,  employee or agent of a corporation is successful on
the merits or  otherwise  in the defense of any action  referred  to above,  the
corporation  must  indemnify  him against  the  expenses  which he actually  and
reasonably incurred in connection therewith.


                                       26
<PAGE>
<TABLE>
<CAPTION>

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors,  officers and controlling  persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the  Commission  such  indemnification  is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.

     The Company is not aware of any claims,  whether possible or asserted,  for
indemnification.

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

     The following  table shows,  as of December 31, 1999,  the shares of Common
Stock  beneficially  owned by all of the persons who served as the  Directors or
Officers  of the  Company  during  1998 as well  as the  principal  shareholders
(greater  than 5%) of the  Company  individually  and, as to the  Directors  and
Officers,  as a group.  The address of each person or entity,  unless  otherwise
noted, is c/o Safe Alternatives  Corporation of America,  Inc., 440 Main Street,
Ridgefield, Connecticut.

     The  number  of  shares  beneficially  owned by each  person  or  entity is
determined  under  rules of the  Securities  and  Exchange  Commission,  and the
information is not necessarily  indicative of beneficial ownership for any other
purpose. Under such rules,  beneficial ownership includes any shares as to which
the person has the sole or shared voting power or investment  power and also any
shares  which the person  has the right to  acquire as of a date  within 60 days
after the relevant date through the exercise of any stock option or other right.

---------------------------- ---------------------------- ------------------ -------------
                                                                             Percent
Beneficial Owner and                                      Number of Shares   of
Address                      Position                     Owned              Class (%)
---------------------------- ---------------------------- ------------------ -------------
---------------------------- ---------------------------- ------------------ -------------
<S>                          <C>                          <C>                <C>
Sean F. McNamara             Secretary (from 1/98 to             4,956,511      14.22
35 Spring Hose Lane          12/98),  Director and        (Notes 1, 2 & 3)
Basking Ridge NJ 07920       Member of the Management
                             Committee (until 12/98)
---------------------------- ---------------------------- ------------------ -------------
---------------------------- ---------------------------- ------------------ -------------
Richard J. Fricke            President & CEO (from 1/98         15,258,761      50.03
25 Buckingham Ridge Road     to 9/98 & during 12/98),        (Notes 4 & 5)
Wilton CT 06897              Secretary (until 1/98) &
                             Director
---------------------------- ---------------------------- ------------------ -------------

                                       27
<PAGE>

---------------------------- ---------------------------- ------------------ -------------
Dominick G. Parisi           Director                            2,406,000       7.93
701 Kettner Blvd #75                                              (Note 5)
San Diego CA
---------------------------- ---------------------------- ------------------ -------------
---------------------------- ---------------------------- ------------------ -------------
James Hastings               Director, Secretary                     6,000   Less than 1
440 Main Street                                                   (Note 5)
Ridgefield CT 06877
---------------------------- ---------------------------- ------------------ -------------
---------------------------- ---------------------------- ------------------ -------------
All Directors and Officers                                      17,670,761      58.21
as a Group
---------------------------- ---------------------------- ------------------ -------------

</TABLE>

          1.   Includes  options  which the  Company  has agreed to issue to the
Investor  Group in relation  to the $1.3  million  note held by such group.  The
beneficial owners of such options,  all of which have an expiration date of June
30, 2003 includes:  (a) Mr. McNamara to acquire options on 1,002,000 shares with
an exercise  price of $.01,  765,000  shares with an exercise price of $.25, and
765,000  shares  with an  exercise  price of $.50;  and (b) Mr.  Hill to acquire
options on 130,000 shares with an exercise price of $.01,  97,000 shares with an
exercise  price of $.25,  and 97,000 shares with an exercise  price of $.50. Mr.
Hunt had options to acquire  460,000 shares of the Company's  restricted  Common
Stock with an  exercise  price of $.01,  options to acquire  345,000  restricted
shares with an exercise price of $.25, and options to acquire 345,000 restricted
shares with an exercise price of $.50. In May 1999,  however,  Mr. Hunt released
the  Company's  obligation  to issue these  options.  Messrs.  McNamara and Hill
released the Company's obligation to issue these options in October 2001.

          2.   Includes  currently   exercisable  options  to  purchase  801,925
restricted shares of the Company's restricted Common Stock that became due under
the terms of the $1.3 million  Investor Note upon the  Company's  failure to pay
principal and interest when due, as follows: Mr. McNamara 710,546 shares and Mr.
Hill  91,379  shares.  This also  includes  a total of  1,426,000  shares of the
Company's  restricted  Common Stock that was authorized (but not issued) as part
of the  consideration  for the  exchange  of the former $1 million  note for the
Investor  Note.  This  stock has  piggyback  registration  rights but may not be
traded until the Investor Note is converted.  The  distribution of this stock is
as follows:  Mr. McNamara  1,264,000  shares and Mr. Hill 162,000  shares.  With
respect  to the  foregoing,  in May 1999,  Mr.  Hunt  released  his right to the
issuance of options to purchase 64,575 shares of the Company's restricted Common
Stock  and  his  right  to the  issuance  of  574,000  shares  of the  Company's
restricted Common Stock.

          3.   Includes 300,000  restricted shares of the Company's Common Stock
that Mr.  McNamara  received  as  compensation  for  serving as an  Officer  and
Director and as a Member of the Management  Committee during 1997 and 1998. Also
includes  options to purchase 25,125 shares of the Company's  restricted  Common
Stock as  compensation  for  serving as an Officer,  Director  and member of the
Management Committee during 1998. Mr. McNamara released the Company's obligation
to issue these options in October 2001.


                                       28
<PAGE>

          4.   Includes (a) 300,000  shares of the Company's  restricted  Common
Stock as  compensation  for his services as an Officer and Director during 1998;
(b) currently exercisable options to purchase 2,500,000 restricted shares of the
Company's Common Stock at an exercise price of $.01 per share, exercisable until
December  21, 2008,  for his  continued  service,  together  with the  liability
exposure attendant thereto,  as an Officer and Director of the Company after the
remainder of the Company's  Officers and Directors resigned in December 1998. In
1999,  the Company  converted  the award of these  options  into an award of the
Company's  restricted  Common Stock; (c) options to purchase 4,500 shares of the
Company's  restricted Common Stock as compensation for serving as an Officer and
Director of the Company  during  1998;  and (d) 2,954  shares owned by The Ridge
Group. Although the following are included in the total, Mr. Fricke specifically
disclaims any ownership in the following  shares:  (a) 82,080 shares held by the
Fricke Family Trust; (b) 637,300 shares held by Mr. Fricke's former spouses; (c)
82,080  shares held by his father;  (d) 15,303  shares that he holds as Trustee;
and (e) 82,020 held by his grown children.

          5.   In 1999, the Company  authorized the issuance options to purchase
four hundred (400) shares of the Company's restricted Common Stock at $.0001 per
share for a period of five (5) years from the date of the meeting to each member
of the Board for each  meeting  attended.  Under this  plan,  each  Director  is
entitled  to  currently  exercisable  options to  purchase  6,000  shares of the
Company's restricted Common Stock in 1999.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

     During  1997 and the first  half of 1998,  the  Investor  Group,  including
current  shareholders  and persons who were Directors of the Company for part of
1997 and 1998, advanced working capital loans and committed to make loans to the
Company in the aggregate amount of approximately $1.0 million.  During the first
quarter of 1998,  in  consideration  for,  among  other  things,  not  demanding
immediate  repayment of the loans,  the Company and the Investor Group agreed to
exchange all of such outstanding  indebtedness for a convertible promissory note
(the  "Investor  Note"),  2,000,000  shares of the  Company's  Common Stock with
piggyback registrations rights (but which may not be traded until the $1,300,000
note is  converted)  and stock  options.  The Investor  Note is in the aggregate
principal amount of $1.3 million, and accrues interest at a rate of 8% per annum
beginning  January 1, 1998.  The Board  authorized  the  issuance of warrants in
connection  with the  Investor  Note that are  exercisable  for a period of five
years to  acquire  1,500,000  shares  of  Common  Stock at $.25  per  share  and
1,500,000  shares of Common  Stock at $.50 per  share.  In  connection  with the
Investor  Note,  the Company  also  issued  options to acquire  Common  Stock as
follows: options to purchase 2.6 million shares at an exercise price of $.01 per
share,  1.95  million  shares at an exercise  price of $.25 per share,  and 1.95
million  shares at an exercise  price of $.50,  all of which may be exercised at
any time  between June 30, 1999 and June 30, 2003,  the  expiration  date of the
options.  The  Investor  Note is  repayable  as follows:  $433,333 in  principal
amount,  plus interest,  was due and payable on or before  September 9, 1998; an
additional  $433,333 in principal  amount,  plus interest,  was due on or before
January 9, 1999; and any unpaid principal balance, plus interest,  was due on or
before  March 9, 1999.  In addition to any other  remedies  they may have if the
Company  fails  to make  the  principal  payment  on the  shareholder  loans  on
September 9, 1998,  the Company will be obligated to issue to the lender options
to acquire an additional  75,000 shares of Common Stock,  exercisable at a price
of $.01 per share, for each 30 days that the principal  payments are in default.


                                       29
<PAGE>

The Company did not make any of the payments required under these Investor Notes
and is  currently in default.  On May 29, 1999,  in exchange for the issuance of
1,000,000 shares of the Company's  restricted Common Stock,  Nicky Hunt released
the Company from: (1) paying any sums due to him,  including  amounts due to him
under the foregoing $1.3 million Note; (2) issuing any additional stock then due
or becoming due to him; and (3) any and all rights he had,  including  any right
under any option or warrant,  to receive any  additional  Common  Stock from the
Company  that arose as a result of his  association  with the  Company.  Messrs.
McNamara and Hill released the same  obligations in October 2001 in exchange for
the issuance of 4,000,000 shares of the Company's restricted Common Stock.

     On September 9, 1997, the Board of Directors authorized the issuance of the
following restricted stock and options in consideration of various loans:

PERSON                            SHARES                OPTIONS
------                            ------                -------

Michael Mareneck                   87,500                87,500
Basil Borque                       25,000                25,000
Sean McNamara                     142,000               143,000
Nicky Hunt                         50,000                50,000
Richard Hill                       12,500                12,500
John McNamara                      25,000                25,000
Michael Mareneck                   12,500                12,500

These options were  exercisable  until  September 9, 2002 at a price of $.25 per
share but were cancelled as a result of the foregoing $1.3MM loan.

     In lieu of cash  payments  for their  service  as  members  of the Board of
Directors  and committee  members,  The Company has agreed to issue stock and/or
options to the members of the Board of Directors. In 1997, the Company agreed to
issue to each of Messrs.  Sean  McNamara  and  Richard  Hill  200,000  shares of
restricted  Common Stock for their services.  On January 16, 1998 and in lieu of
monetary  compensation,  the Board of Directors authorized:  (1) the issuance of
stock options to the members of the Management Committee (Messrs. McNamara, Hunt
and Hill) to purchase 100,000 shares of the companies restricted Common Stock at
a price of $.01 per share and  exercisable  for a period of five years;  (2) the
issuance  of  stock  options  to the  members  of the  Management  Committee  to
purchase,  at $.01 per share,  $2,500  worth of stock (with the number of shares
being  determined by the last per share sales price of the month) for each month
and  exercisable  for a period  of five  years;  and (3) the  issuance  of stock
options to each member of the Board of Directors (Messrs.  McNamara,  Hunt, Hill
and Fricke) to  purchase,  at $.01 per share,  $500.00  worth of stock (with the
number of shares  being  determined  by the last per  share  sales  price of the
month) for each Board meeting and  exercisable  for a period of five years.  The
Company's obligation to issue these options was released by Mr. Hunt in May 1999
and by Messrs. McNamara and Hill in October 2001.


                                       30
<PAGE>

     On June 1, 1998,  Nicky Hunt was  granted  options to purchase up to 40,000
shares of the Company's restricted Common Stock at a price of $.01 per share for
doing the due  diligence  in  connection  with  Norfield  Corporation.  Mr. Hunt
released the Company's obligation to issue these options in May 1999.

     On May 29, 1999,  in exchange  for the issuance of 1,000,000  shares of the
Company's  restricted  Common Stock,  Nicky Hunt released the Company from:  (1)
paying any sums due to him,  including  amounts  due to him under the  foregoing
$1.3 million Note; (2) issuing any additional  stock then due or becoming due to
him; and (3) any and all rights he had,  including any right under any option or
warrant, to receive any additional Common Stock from the Company that arose as a
result of his association with the Company.  Messrs.  McNamara and Hill released
the same  obligations  in October 2001 in exchange for the issuance of 4,000,000
shares of the Company's restricted Common Stock.

     During  1998,  the Company  issued its  restricted  Common Stock to pay for
services to the Company,  as follows:  Sam Armato,  Jr., 50,000 shares;  Chester
Greenwood,  50,000 shares;  Kenneth  Hodgdon,  10,000  shares;  and Neil Rogers,
100,000  shares.  In  addition,  the  Company  authorized  (issued  in 1999) the
following as compensation and incentive pay: 100,000 shares of restricted Common
Stock to Robert  Berger;  and (2) 25,000 shares of restricted  Common Stock plus
options to purchase 234,000 shares of restricted  Common Stock exercisable for a
period of 5 years at a price of $.01 per share to Robert Percheski.  In 1999 the
Company issued 50,000 shares of its restricted  Common Stock to Scott Purvis for
services he rendered to the Company.

     On December  21,  1998,  the Board  granted  options to purchase  2,500,000
shares of the  Company's  Common Stock to Mr.  Fricke and 500,000  shares to Ms.
Yrizarry (Mr.  Fricke's  former  spouse) at an exercise price of $.01 per share,
exercisable  until December 21, 2008 for remaining and serving as a Director and
Officer of the Company, together with the attendant liability, after the rest of
the  Board  and  management  had  resigned.  In 1999,  the  Company  substituted
2,500,000  shares and 500,000  shares of its Common  Stock to Mr.  Frick and Ms.
Yrizarry, respectively, in place of these options.

     In lieu of cash payment for serving as a member of the Board of  Directors,
the Board authorized,  but did not issue,  options to purchase 400 shares of the
Company's restricted Common Stock for each meeting attended.  These options were
exercisable  for a period of five (5) years from the date of the  meeting at the
price of $.001 per share.  All three (3) members of the Company's Board attended
each of the  fifteen  (15)  meeting  that were held  during  1999 for options to
purchase a total of 18,000 shares of the Company's restricted Common Stock.


                                       31
<PAGE>

     In lieu of  receiving  cash  payments for his services as an Officer of the
Company,  in  exchange  for salary  arrearages,  and in exchange  for rent,  the
Company issued 10,000,000 shares of its restricted Common Stock to Mr. Fricke in
1999.

     During 1999,  Dominick Parisi  purchased  2,400,000 shares of the Company's
restricted  Common Stock for a purchase  price of $72,000 for the benefit of the
Dominick G. Parisi Trust.

     In July,  1998, the Investor Group  commenced  legal action against certain
former  officers,  employees and consultants of the Company,  including  Messrs.
Stephen Thompson,  Robert Thompson,  Clement Royer and Paul Grillo.  The action,
initiated in Superior  Court for the Judicial  District of  Stamford/Norwalk  at
Stamford,  sought compensatory damages of not less than $685,000,  attachment on
the defendants' property to secure a judgment, and punitive damages. Pursuant to
Connecticut  procedures,  the matter first seeks a  pre-judgment  attachment  of
defendants' property. The causes of action stated in the complaint are fraud and
violation  of state  securities  law.  This action  settled in 1998 with Messrs.
Stephen Thompson, Robert Thompson, Clement Royer, and Paul Grillo delivering the
majority of their stock  holdings in the Company to Messrs.  McNamara,  Hunt and
Hill. The Company was not a party to this action.

     Mr.  Fricke  is one of the  licensors  under the foam  technology  license;
however,  he  renounced  his  interest  in the  license  in 1998.  See  "Item 1.
Description of Business - Licenses."

     The Ridge Group, a Connecticut  general partnership in which Mr. Fricke and
Stephen J. Thompson - a former Director,  President and Chief Executive  Officer
of the Company,  and a beneficial owner of approximately 10% of the Common Stock
- - each owned a 50% equity  interest,  has  loaned  the  Company  approximately
$384,000 in demand obligations at no interest. In addition, Stephen Thompson has
in his individual  capacity loaned the Company an additional  $108,100 in demand
obligations  at no interest.  These loans have been forgiven and Mr.  Thompson's
interest in the Ridge Group has been terminated.

     Mrs. Kathleen Kennedy, a shareholder of the Company,  is licensor under the
technology licenses for the Company's foam, coatings and sealants, and recycling
solvents technologies.

     The Company  believes that the terms of the  transactions  discussed herein
are at least as favorable  to the Company as those which the Company  could have
negotiated with unaffiliated parties.


                                       32
<PAGE>

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

(a)  Exhibits.  The following  exhibits are filed  herewith or  incorporated  by
     reference herein.

            Exhibit
             No.        Description


            3.1*        Certificate of Incorporation of the Company

            3.2*        By-Laws of the Company

            4*          Copy of  specimen  certificate  representing  shares  of
                        Common Stock, $.0001 par value per share, of the Company

            10.1*       Asset  Purchase  Agreement  and  Plan of  Reorganization
                        between the Company and SAC  Delaware  dated  August 21,
                        1995

            10.2*       Lease Agreement  between  Nicholas R. Dinapoli,  Jr., as
                        Trustee  for  Brookfield  Commerce  and the  Company for
                        property  located at 27  Governors  Street,  Ridgefield,
                        Connecticut, dated February 22, 1993

            10.3*       Lease Agreement between Nicholas R. Dinapoli, as trustee
                        for  Brookfield  Commerce,  and the Company for property
                        located at 91 Commerce Drive,  Brookfield,  Connecticut,
                        dated February 22, 1993

            10.4*       Supply  Agreement for paint stripping  products  between
                        Samax Enterprises, Inc. and the Company dated January 5,
                        1996

            10.5*       License Agreement for coatings and sealants Technologies
                        between  Richard B.  Kennedy and the Company as licensee
                        dated December 9, 1992

            10.6*       License  Agreement  for packaging  applications  of foam
                        Technologies  between  Richard  B.  Kennedy,  Patrick J.
                        Crehan  and  Richard  J.  Fricke  as  licensors  and the
                        Company as licensee dated December 9, 1992

            10.7*       License  Agreement for fire  retardant  applications  of
                        foam Technologies between Richard B. Kennedy, Patrick J.
                        Crehan  and  Richard  J.  Fricke  as  licensors  and the
                        Company as licensee dated December 9, 1992


                                       33
<PAGE>

            10.8*       Amendment  to  Technology  License  Agreements  of  foam
                        Technologies  between  Richard  B.  Kennedy,  Patrick J.
                        Crehan  and  Richard  J.  Fricke  as  licensors  and the
                        Company as licensee dated August 23, 1993

            10.9*       Employment Agreement between the Company and Mr. Stephen
                        J. Thompson dated August 13, 1991, as amended

            10.10*      Employment Agreement between the Company and Mr. Richard
                        J. Fricke dated August 13, 1991, as amended

            10.11*      Employment  Agreement between the Company and Mr. Robert
                        F. Thompson dated January 31, 1996

            10.12*      Consulting Agreement between SSC Marketing,  Inc and the
                        Company dated as of November 1, 1996

            10.13*      Customer Service  Agreement  between SSC Marketing,  Inc
                        and the Company dated as of November 1, 1996

            10.14**     License  Agreement  between  Clement  H.  Royer  and the
                        Company  dated as of  February  19,  1997,  relating  to
                        NaturalCool technology

            10.15**     Chase-Royer  Commercial  Transaction  among  Rudolph  L.
                        Chase,  Natural  Cool,  Ltd.,  Natural Cool,  Inc.,  and
                        Clement H. Royer, dated as of March 1, 1997, relating to
                        conveyance of rights to NaturalCool technology

            10.16**     Financial  Accord  among  Rudolph L.  Chase,  Raymond C.
                        Chase, and Clement H. Royer,  dated as of March 1, 1997,
                        relating to royalties on NaturalCool Technology

            10.17**     Agreement  between  Natural Cool,  Inc., and the Company
                        dated as of May 6,  1998,  relating  to  acquisition  of
                        assets of Natural Cool, Inc.

            10.18**     License  Agreement  between  Rudolph  Chase and  Raymond
                        Chase, and the Company dated as of May 6, 1998, relating
                        to licensing of NaturalCool patent rights

            10.19**     Promissory Note of Natural Cool, Inc., guaranteed by the
                        Company,   dated  as  of  May  6,  1998,   relating   to
                        acquisition of assets of Natural Cool, Inc.


                                       34
<PAGE>

            10.20**     Bill of Sale of Rudolph Chase and Raymond  Chase,  dated
                        as of May 6, 1998,  relating to sale of stock of Natural
                        Cool, Inc. to the Company

            10.21**     Bill of Sale of Natural  Cool,  Inc,  dated as of May 6,
                        1998,  relating to sale of assets of Natural Cool,  Inc.
                        to the Company

* Incorporated by reference from the Registrant's Registration Statement on Form
10-KSB filed December 31, 1996.

**  Incorporated  by reference  from the  Company's  Form 10-KSB for fiscal year
ended December 31, 1997 and filed as of September 3, 1998.


(b)  Reports on Form 8-K.

            The  following  Form 8-Ks were filed  during  the fiscal  year ended
December 31, 1999: NONE.

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.

                                TABLE OF CONTENTS


Report of Independent Auditors -
  Green, Holman, Frenia and Company, LLP                              F-1

Balance Sheets,
December 31, 1999 and 1998                                            F-2

Statements of Operations,
For the Years Ended December 31, 1999 and 1998                        F-3

Statements of Changes in Stockholders' Deficit,                       F-4
  For the Years Ended December 31, 1999 and 1998

Statements of Cash Flows,                                             F-5
  For the Years Ended December 31, 1999 and 1998

Notes to Financial Statements                                         F-6 - F-14






                                       35
<PAGE>

                                   SIGNATURES

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

                                  SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.


Date:  12/28/01                      By:     /s/ Richard J. Fricke

                                             Richard J. Fricke
                                             President & Chief Executive Officer



     In accordance  with the  Securities  Exchange Act of 1934,  this Report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.

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


     /s/ Richard J. Fricke         President, Chief Executive     12/28/2001
     Richard J. Fricke             Officer and Director



     /s/ James Hastings            Secretary and                  12/28/2001
     James Hastings                Director



     /s/ Dominick Parisi           Director                       12/27/2001
     Dominick Parisi






                                       36
<PAGE>


                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                    FINANCIAL STATEMENTS FOR THE YEARS ENDED
                           DECEMBER 31, 1999 AND 1998


<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                                TABLE OF CONTENTS



Independent Auditors' Report                                          F-1

Balance Sheets,
December 31, 1999 and 1998                                            F-2

Statements of Operations,
For the Years Ended December 31, 1999 and 1998                        F-3

Statements of Changes in Stockholders' Deficit,                       F-4
For the Years Ended December 31, 1999 and 1998

Statements of Cash Flows,                                             F-5
For the Years Ended December 31, 1999 and 1998

Notes to Financial Statements                                      F-6 - F-14


<PAGE>

                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
Safe Alternatives Corporation of America, Inc.

We have audited the accompanying balance sheets of Safe Alternatives Corporation
of America,  Inc. as of December 31, 1999 and 1998 and the related statements of
operations,  changes in stockholders'  deficit and cash flows for the years 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 Safe Alternatives  Corporation
of  America,  Inc.  as of  December  31,  1999 and 1998 and the  results  of its
operations,  stockholders'  deficit and cash flows for the years then ended,  in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As more fully described in Note 3, the
Company  has  incurred  recurring  operating  losses  and has a working  capital
deficiency. These conditions raise substantial doubt about the Company's ability
to continue as a going  concern.  The  financial  statements  do not include any
adjustments  to reflect the possible  future effects on the  recoverability  and
classification of assets or the amounts and  classifications of liabilities that
may result from the outcome of this uncertainty.




                                 GREEN, HOLMAN, FRENIA AND COMPANY, L.L.P.
                                 Certified Public Accountants

                                 /s/ Green, Holman, Frenia and Company, L.L.P


Woodbridge, New Jersey
November 18, 2001

                                      F-1
<PAGE>
<TABLE>
<CAPTION>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                                 BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998


                                                                   1999            1998
                                                              ------------    ------------
<S>                                                           <C>             <C>
                                     ASSETS

Current Assets:
  Cash                                                        $      1,466    $      7,219
  Accounts receivable                                               33,624          67,219
                                                              ------------    ------------

  Total current assets                                              35,090          74,438
                                                              ------------    ------------


Property and Equipment, Net                                         39,278          46,860
                                                              ------------    ------------


Loan acquisition costs                                             273,649         383,799
                                                              ------------    ------------


                                                              $    348,017    $    505,097
                                                              ============    ============


                      LIABILITIES AND STOCKHOLDERS' DEFICIT


Current Liabilities:
  Accounts payable and other accrued expenses                 $    333,996    $    213,830
  Current maturities of stockholders' loans                        926,900       1,300,000
  Convertible debentures                                           726,500         726,500
                                                              ------------    ------------

  Total current liabilities                                      1,987,396       2,240,330
                                                              ------------    ------------

Other Liabilities:
  Loss contingency                                                  26,000          26,000
                                                              ------------    ------------

  Total other liabilities                                           26,000          26,000
                                                              ------------    ------------


Stockholder's Deficit:
  Common stock, $.0001 par value,
   200,000,000 shares authorized;
   issued(including shares in treasury)
   30,330,960 shares in 1999 and                                    73,247           1,247
   13,695,960 in 1998
  Additional paid-in capital                                    15,528,674      15,235,876
  Accumulated deficit                                          (17,269,459)    (17,000,515)
  Subscriptions issuable                                             2,160           2,160
                                                              ------------    ------------

                                                                (1,665,378)     (1,761,232)

  Treasury stock                                                        (1)             (1)
                                                              ------------    ------------

  Total stockholders' deficit                                   (1,665,379)     (1,761,233)
                                                              ------------    ------------


                                                              $    348,017    $    505,097
                                                              ============    ============

</TABLE>

See auditors' report and notes to financial statements.
                                       F-2
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


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

Sales                                         $    130,205    $    270,230

Cost of Goods Sold                                  40,862         358,432
                                              ------------    ------------

Gross Profit (Loss)                                 89,343         (88,202)
                                              ------------    ------------

Operating Costs:
  Selling, general and administrative              233,507         794,810
  Research and development                            --            20,903
  Depreciation and amortization                      7,582         121,231
                                              ------------    ------------

  Total operating costs                            241,089         936,944
                                              ------------    ------------

Loss from Operations                              (151,746)     (1,025,146)
                                              ------------    ------------

Other Income and Expenses:
  Convertible note fees                               --          (112,300)
  Interest expense                                (117,198)       (104,000)
  Forgiveness of shareholder loan                     --           361,765
                                              ------------    ------------

  Total other income and expenses                 (117,198)        145,465
                                              ------------    ------------


Net Loss                                      $   (268,944)   $   (879,681)
                                              ============    ============

Net Loss per Common Share                     $      (.012)   $      (.067)
                                              ============    ============

Average Number of Common Shares                 22,013,460      13,058,480
                                              ============    ============









See auditors' report and notes to financial statements.
                                       F-3
<PAGE>
<TABLE>
<CAPTION>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998





                      Common Stock           Additional                                        Treasury Stock
              ---------------------------      Paid-in      Accumulated   Subscription   ---------------------------
                 Shares         Amount         Capital        Deficit       Issuable        Shares         Amount          Total
              ------------   ------------   ------------   ------------   ------------   ------------   ------------   ------------
<S>           <C>            <C>            <C>            <C>            <C>            <C>            <C>            <C>
Balance at
12/31/98        13,695,960   $      1,247   $ 15,227,876   $(17,000,515)  $      2,160        (11,682)  $         (1)  $ (1,761,233)

Proceeds
from Paid-
In Capital                                       292,798                                                                    292,798

Issuance of
common
shares          18,422,536         72,000                                                                                    72,000

Redemption
of common
shares          (1,787,536)             0                                                                                         0

Net Loss                                                       (268,944)                                                   (268,944)
              ------------   ------------   ------------   ------------   ------------   ------------   ------------   ------------

Balance at
12/31/99        30,330,960   $     73,247   $ 15,520,674   $(17,269,459)  $      2,160        (11,682)  $         (1)  $ (1,665,379)
              ============   ============   ============   ============   ============   ============   ============   ============

</TABLE>








See auditors' report and notes to financial statements.
                                       F-4
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998



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

Cash Flows from Operating Activities:

Net Loss                                          $(268,944)   $(879,681)

Adjustments to reconcile net loss to
 net cash used in operating activities:
  Depreciation and amortization                       7,582      121,231


  Changes in assets and liabilities:
   Accounts receivable                               33,595      (36,032)
   Inventories                                         --        159,473
   Deposits and other noncurrent assets                --         72,713
   Accounts payable and accrued expenses            150,014      129,262
                                                  ---------    ---------

Net Cash Used in Operating Activities               (77,753)    (433,043)
                                                  ---------    ---------

Cash Flows from Investments Activities:
  Additions to fixed assets                            --        (50,764)
                                                  ---------    ---------

Net Cash Used in Investing Activities                  --        (50,764)
                                                  ---------    ---------

Net Cash Flows from Financing Activities:
  Principal payments on long-term debt                 --       (255,765)
  Proceeds from issuance of convertible
   notes                                               --        726,500
  Proceeds from paid-in capital                        --          8,000
  Net proceeds from issuance of common
   stock and subscriptions                           72,000         --
                                                  ---------    ---------

Net Cash Provided by Financing Activities            72,000      478,735
                                                  ---------    ---------

Net Decrease in Cash                                 (5,753)      (5,063)

Cash, Beginning of Year                               7,219       12,282
                                                  ---------    ---------

Cash, End of Year                                 $   1,466    $   7,219
                                                  =========    =========






See auditors' report and notes to financial statements.
                                       F-5
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


1.       Reorganization and Basis of Presentation
-------------------------------------------------

On September 15, 1995,  the  stockholders  of Safe  Alternatives  Corporation of
America,  Inc.,  a Delaware  corporation,  ("SAC  Delaware")  approved  an Asset
Purchase Agreement and Plan of Reorganization (the "Reorganization") whereby the
assets of SAC  Delaware  were sold to Safe  Alternatives  of  America,  Inc.,  a
Florida  corporation  then operating under the name Portsmouth  Corporation (the
"Company"),  in exchange for 8,000,000 shares of the Common Stock of the Company
and  the   assumption  of  SAC   Delaware's   liabilities.   Subsequent  to  the
Reorganization,  SAC Delaware was liquidated.  Pursuant to such liquidation, SAC
Delaware  distributed to each stockholder  0.2736 shares of the Company's Common
Stock  for  each  share  of SAC  Delaware  that was  owned.  As a result  of the
Reorganization,  the  stockholders of SAC Delaware  controlled 94% of the issued
and outstanding Common Stock of the Company and,  therefore,  the Reorganization
has been accounted for as the  acquisition  of the Company by SAC Delaware.  The
financial  statements  presented,  therefore,  include the historical  financial
statements  of  SAC  Delaware  prior  to  the   Reorganization.   Prior  to  the
Reorganization,  the Company had been an inactive  public entity with no assets,
liabilities,  or net worth.  The costs of this  transaction have been charged to
expense.

The issuance of 8,000,000  shares of the  Company's  Common Stock in  connection
with the Reorganization has been treated as a reverse stock split and the shares
of  issued  and   outstanding   Common  Stock  of  the  Company   prior  to  the
Reorganization have been restated for all periods presented.

Subsequent  to  the  Reorganization,  the  Company  changed  its  name  to  Safe
Alternatives Corporation of America, Inc.

Operations
----------

The Company has secured  exclusive  manufacturing,  marketing,  and distribution
rights  to  certain   patented,   patent   pending  and   application-in-process
technologies.  Such technologies are associated with paint stripping  chemicals,
water-based foams, and an ambient air exchanger.

2.       Summary of Significant Accounting Policies
---------------------------------------------------

Method of Accounting
--------------------

The financial  statements  are prepared  using the accrual basis of  accounting.
Generally accepted  accounting  principles  requires  management,  under certain
circumstances,  to make  estimates  and  assumptions  that  affect  the  amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ from those estimates.

Allowance for Doubtful Accounts
-------------------------------

The Company considers trade receivables to be fully collectible; accordingly, no
allowance for doubtful accounts is required.

Inventories
-----------

As of the December 31, 1999 year-end,  the Company  elected to write-off 100% of
inventory, and charge to cost of goods sold.




                                       F-6
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


2.       Summary of Significant Accounting Policies (continued)
---------------------------------------------------------------

Property, Plant and Equipment
-----------------------------

Property,  plant and equipment are recorded at cost. Depreciation is provided on
a  straight-line  basis over estimated  useful lives of the  respective  assets.
Leasehold  improvements  are  depreciated  over the shorter of the lease term or
economic life of the related improvement. Maintenance and repairs are charged to
expense as incurred; major renewals and betterments are capitalized.  When items
of  property,  plant and  equipment  are sold or retired,  the related  cost and
accumulated  depreciation  are removed from the accounts and any gain or loss is
included in the results of operations.
Organization Costs

Organization costs are amortized over 60 months using the straight-line  method.
Amortization  expense  was $0 for the years  ended  December  31, 1999 and 1998,
respectively.

Earnings Per Share
------------------

The following data show the amounts used in computing earnings per share.



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


  Loss used in basic EPS                        $   (268,944)   $ (4,436,589)
                                                ============    ============
  Weighted average number of common
    shares used in basic EPS                      22,013,460      13,058,480
                                                ============    ============

  Net loss per common share                     $      (.012)   $      (.067)
                                                ============    ============


3.       Property and Equipment
-------------------------------

As of  December  31,  1999 and 1998  property  and  equipment  consisted  of the
following:

                                                       1999         1998
                                                     ---------    ---------
         Equipment                                   $  29,288    $  63,989
         Furniture & Fixtures                           10,008       10,114
         Leasehold Improvements                         11,468       11,468
                                                     ---------    ---------
                                                        50,764       85,571
         Less: Accumulated depreciation                 11,486       38,711
                                                     ---------    ---------

         Property and Equipment - Net                $  39,278    $  46,860
                                                     =========    =========

Depreciation  expense was $7,582 and $121,231  for the years ended  December 31,
1999 and 1998, respectively.

4.       Going Concern
----------------------

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles, which contemplates continuation of the
Company  as a  going  concern.  However,  the  Company  has  incurred  recurring
operating losses and has a working capital deficiency.  At December 31, 1999 and
1998,  current  liabilities  exceed current assets by $1,952,306 and $2,165,892,
and total  liabilities  exceed total assets by $1,665,379 and $1,761,232.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern.


                                       F-7
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


4.       Going Concern (continued)
----------------------------------

In view of these  matters,  realization  of a major portion of the assets in the
accompanying  balance  sheet  is  dependent  upon  continued  operations  of the
Company,  which  in turn is  dependent  upon the  Company's  ability  to  obtain
sufficient financing, and the success of its future operations. Management plans
to finance its  operations  with a combination  of sales of common stock and, in
the longer term, borrowings and revenues from product sales. Management believes
these  actions  provide the  opportunity  for the Company to continue as a going
concern.

5.       Leases
---------------

The  Company  rents its office  space  under a  non-cancelable  operating  lease
agreement, which expired on September 30, 1998. In addition, the Company is also
leasing a laboratory and testing facility under a non-cancelable operating lease
expiring on February 28, 1998.

As of  January  1,  1999,  the  Company  leased,  on a  month  to  month  basis,
approximately  12,000  square  feet of space at  Newport,  Vermont at $4,000 per
month.  By December 31, 1999,  the Company had reduced the space to 3,530 square
feet at $1,275 per month.

Rent  expense was $22,670 and $77,328 for the years ended  December 31, 1999 and
1998, respectively.

6.       Stockholders' Deficit
------------------------------

Treasury Stock
--------------

Treasury stock  represents  11,682 shares (recorded at cost) being held in trust
(by Richard J. Fricke, an officer of the Company) to be used for future issuance
to employees,  investors,  and other potential  funding sources.  As the Company
directly  benefits from the sales of the shares in the trust,  these shares have
been recorded as treasury stock.

Shares Issued as Compensation and Commission
--------------------------------------------

During 1999 and 1998,  respectively,  175,000 and 620,000 fully vested shares of
the Company's common stock were issued to outside consultants. The fair value of
shares awarded,  based upon the value of Common Stock sold during those periods,
were $0 for 1999 and 1998,  respectively,  and has been recorded as compensation
expense.

In addition,  during 1999 and 1998,  respectively,  32,500,000 and 600,000 fully
vested  shares of the  Company's  Common  Stock were  issued to  officers of the
Company. The fair value of shares awarded,  based upon the value of Common Stock
sold during these periods, were $0 for 1999 and 1998, respectively.

7.       Income Taxes
---------------------

The Company has available  unused  operating loss  carryforwards at December 31,
1999 of  approximately  $9,068,625 for federal purposes and $9,039,625 for state
purposes that may be applied against future taxable income for federal and state
liability,  respectively.  Cumulative  net operating  loss  carryforwards  as of
December  31,  1998 as reported on the  Company's  federal and state  income tax
returns approximated $8,799,681 and $8,770,681.

The tax benefit of the cumulative  carryforwards  as of December 31, 1999 & 1998
is  approximately  $3,083,000  and  $2,991,000  for  federal  and  approximately
$814,000 and $790,000 for state, offset in full by a valuation allowance.



                                       F-8
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


8.       License Agreements
---------------------------

The Company maintains four significant exclusive licensing agreements. Each such
license  has  substantially  the  same  terms  and  conditions.  Each  licensing
agreement  is valid until  April 17,  2050,  unless the  Company  fails to pay a
royalty of four percent of the gross sales derived from the  exploitation of the
respective   technology,   with  certain  limitations  for  sales  derived  from
inter-company transfers or transactions with subsidiaries.  The Company has also
agreed to pay all maintenance  fees and fees for filing and  prosecuting  patent
applications  pending at the time the licenses were  executed.  All rights under
the licenses are freely assignable by the Company.  The licenses were amended on
August 23, 1993 to collectively  provide for a required  minimum monthly payment
of $5,000,  in the  aggregate.  In addition,  a weekly payment of $1,200 to Mrs.
Kathleen  Kennedy during her lifetime is required in lieu of  progressive  sales
minimums due  beginning in 1993.  The four percent  royalty  payments  described
above, however, would nonetheless survive.

Failure to pay the minimum  weekly  and/or  monthly  payments  may result in the
Company's loss of the exclusivity of such licenses. Failure to pay royalties due
under any  license  may result in the  termination  of the  exclusivity  of such
license.

Currently,  the Company is out of compliance with the minimum payment provisions
and has a  non-exclusive  license.  Mrs.  Kennedy  brought an action against the
Company  to obtain  the  minimum  payments  under the  licenses.  The action was
arbitrated  during 1999. The Company lost the  exclusivity of the license in the
arbitration, but was not required to pay any sums of money to Mrs. Kennedy. (See
"Note 11").

During 1997, the Company modified the payment terms of the licensing agreements,
thus causing the agreements to become non-exclusive.

9.       Related Party Transactions
-----------------------------------

Stockholders' Loans
-------------------

During 1997 and the first half of 1998, the Investor  Group,  including  current
shareholders  and persons who were directors of the Company for part of 1997 and
1998,  advanced working capital loans and committed to make loans to the Company
in the aggregate amount of approximately $1.0 million.  During the first quarter
of 1998,  in  consideration  for,  among other things,  not demanding  immediate
repayment of the loans,  the Company and the  Investor  Group agreed to exchange
all of such  outstanding  indebtedness  for a convertible  promissory  note (the
"Investor Note"),  2,000,000 shares of the Company's common stock with piggyback
registrations  rights (but which may not be traded until the $1,300,000  note is
converted)  and stock options.  The Investor Note is in the aggregate  principal
amount of $1.3 million, and accrues interest at a rate of 8% per annum beginning
January 1, 1998.


On May 29, 1999,  Nicky Hunt  elected to surrender  his portion of this note and
his  share  of  the  2,000,000  restricted  shares  in  exchange  for  1,000,000
restricted  common  shares.  As a result,  the $1.3  million note was reduced to
$926,900 as of December 31,  1999.  The Company did not make any of the payments
required under these remaining Investor Notes and is in default.




                                       F-9
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


9.       Related Party Transactions (continued)
-----------------------------------------------


Stockholders' loans at December 31, 1999 and 1998, consisted of the following:

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

Unsecured notes to five  stockholders,  bearing
interest at 8%. One-third of the outstanding
balance is due September 1998,  including  interest
The remaining balance is due January 1999, including
interest                                                  926,900    1,300,000
                                                       ----------   ----------

Total                                                     926,900    1,300,000

Less current maturities                                   926,900    1,300,000
                                                       ----------   ----------

Long-term debt, net of current maturities              $        0   $        0
                                                       ==========   ==========

Aggregate maturities required on stockholders' loans at December 31, 1999 are as
follows:

                   Year                                  Amount
                   ----                                  ------

                   2000                                $  926,900
                   2001                                         -
                   2002                                         -
                   Thereafter                                   -
                                                       ----------

                   Total                               $  926,900
                                                       ==========


Officers' Compensation
----------------------

The officers of the Company had employment contracts entitling them to aggregate
cash  compensation  of $725,000 plus  incentive  bonuses  through 1997.  Amounts
actually  paid to the officers in 1999 and 1998  amounted to $34,615 and $58,846
in each of the years,  respectively.  Each of the officers has waived his rights
with respect to salary  arrearages.  No bonuses have been paid out in any of the
years.

Licensing Agreement
-------------------

An officer of the  Company  has an  interest  in one of the  licenses  discussed
above.  For the years  ended  December  31,  1999 and 1998,  there  have been no
payments to such officer under the aforementioned agreements.






                                      F-10
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


10.      Marketing Agreement
----------------------------

The Company has entered into two  agreements  with SSC - a consulting  agreement
(the "Consulting Agreement") dated as of November 1, 1996 and a customer service
agreement  (the "Service  Agreement")  dated as of December 15, 1996.  Under the
terms  of  the  Consulting  Agreement,  SSC  will  provide  the  Company  with a
comprehensive sales and marketing program for the Company's products,  including
hiring  sales  representatives,  developing  sales  contacts,  marketing  plans,
advertising  campaigns,  customer  service  programs,  and sales  accounting and
reporting  systems.  The Company will pay SSC a flat fee of $8,000 per month, an
additional  fee of $4,000 for each sales  manager  engaged by SSC to service the
Company's account, with a minimum of three such sales managers to be so engaged,
plus approved expenses of SSC and its sales managers.  In addition, in the event
SAC's  annual  revenues  exceed  $2,600,000,  the  Company  shall pay each sales
manager  a 2%  commission  on  gross  revenues  generated  in  their  respective
territories.  In the event the Company's annual revenues exceed $2,800,000,  the
Company shall pay SSC a 5.5% commission on the Company's  gross  revenues,  with
the  $8,000  monthly  payments  to be  credited  against  the  payment  of  such
commissions.  Under the terms of the  Service  Agreement,  SSC will  provide the
Company  with order  entry,  billing,  order  tracking,  sales  forecasting  and
planning,  and  information  processing  services.  The Company  will pay SSC an
additional $5,000 per month for such services, provided that, if at any time the
volume of SAC's  business  exceeds  SSC's  ability to  adequately  perform  such
services,  the parties shall agree upon an increased  fee. A failure to so agree
will result in termination of the Service Agreement.

In December 1997, the Company terminated this agreement for cause. Subsequently,
SSC  Marketing  filed a lawsuit  for  alleged  breach of  contract.  The Company
believes the suit is completely  without merit and intends to vigorously  defend
its position.

11.      Contingencies
----------------------

On May 29, 1998, SSC  Marketing,  Inc.  ("SSC") filed an action (SSC  Marketing,
Inc. v. Safe Alternatives)  against the Company in federal court in the Southern
District  of New  York.  By  agreement,  the suit was moved to the  District  of
Connecticut  (D. Conn.  File No. 3: 98cv1312 JBA). The complaint  contained four
counts,  each  requesting a judgment for $180,880 plus  interest and  attorney's
fees.  Plaintiff  alleged in its complaint that the Company  breached a contract
and made  misrepresentations.  The Company brought various counterclaims against
SSC.  This action  settled and, in  September  1999 was  dismissed.  The Company
subsequently  delivered  500,000 shares of its restricted  common stock to SSC's
designee pursuant to the settlement agreement in exchange for a general release.






                                      F-11
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


11.      Contingencies (continued)
----------------------------------

To the best of the Company's present  knowledge,  Mr. Melvin Kanan threatened to
bring an action against Mr. Stephen Thompson and/or the Company alleging,  among
other  things,  securities  fraud  violations.  The  Company  believes  that Mr.
Thompson settled this litigation in 1998 by causing the Company to issue 110,000
shares of the Company's common stock to Mr. Kanan.

The Company  commenced an action against Mr. Clement Royer, the former president
of the Company's  Natural Cool Division,  in November 1997, which was settled in
June 1998. The complaint sought the return of corporate  records,  test data and
the like, as well as compensatory  damages and attorney's fees. The terms of the
settlement   involved  Mr.  Royer's   returning  all  corporate   documents  and
disclaiming any rights to the NaturalCool product.

An adversary  proceeding  was brought  against the Company in July 1997, in U.S.
Bankruptcy Court for the District of Connecticut,  by Richard Coan,  Trustee for
the Bankruptcy Estate of Samuel E. Bernstein (U.S. Bankruptcy Court, Dist. Conn.
Adversary  Proceedings  File No  97-5078).  The suit seeks a judgment to recover
accrued but unpaid wages  totaling  approximately  $100,000 for 1995,  which the
Company contends that Mr. Bernstein had waived his right to receive. The Trustee
seeks to avoid the waiver under the Bankruptcy Code and recover the value of the
waiver.  The Company is defending  itself in the matter,  and cannot predict the
outcome of the matter or whether a  settlement  will be  reached.  However,  the
Company  believes  that if the  Trustee is  successful  in  obtaining a judgment
against the  Company,  it should not be required to pay more than the total debt
owed to the debtor's creditors, plus related fees, which the Company believes to
be approximately $26,000. The Company's financial statements for the year ending
December  31, 1999 and 1998  include a provision  for loss of $26,000 to reflect
this matter.

Ms. Kathleen Kennedy,  the licensor under certain  technology  licenses with the
Company,  brought an  arbitration  action in 1999 against the Company,  claiming
past due minimum royalty payments of approximately $145,000. The arbitrator held
that although the Company did not owe any money or damages to Ms.  Kennedy,  the
licenses  were now  non-exclusive  because of the  Company's  failure to pay the
licensing fees.

At March 31, 1998, a contingent  liability for payroll taxes attributable to the
issuance of stock as compensation  exists.  The amount of this liability has not
yet been determined as it is subject to certain valuation issues surrounding the
issuance of stock.

12.      Acquisition
--------------------

On May 5, 1998,  the  Company  purchased  the assets of Natural  Cool,  Inc.  in
exchange for the Company's assumption of approximately  $152,700 of the seller's
debts.  The purchased assets consist of inventory,  fixed assets,  and all other
tangible and intangible property.






                                      F-12
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


13.      6% Convertible Note
----------------------------

On March 10, 1998 the Company  entered into an Agency  Agreement  with Alexander
Wescott & Co., Inc. ("AWC") for the offer and sale of 6% Convertible Notes, with
maximum gross proceeds not to exceed $1,000,000.  The notes bear interest at the
rate of six percent (6%) per annum,  payable  semi-annually in arrears,  in cash
or, at the Company's option, in shares of Common Stock of the Company. The notes
mature on the earlier of (i) the first anniversary of the initial closing of the
proposed offer (April 10, 1999), and (ii) a sale of all or substantially  all of
the Company's  assets or a merger,  acquisition  or  consolidation  in which the
Company is not the  surviving  corporation.  The notes rank  senior to all other
indebtedness of the Company now or hereafter  existing,  other than indebtedness
to banks, in terms of priority and security,  and may not be prepaid without the
holder's  consent.  The  principal  amount of each Note shall be converted  into
shares of Common Stock,  at the option of the holder,  commencing on the earlier
of (a) ninety(90) days following the filing of the  Registration  Statement with
the Securities and Exchange  Commission and (b) the date the Commission declares
the Registration Statement effective.

The  conversion  price per share shall  equal the lower of (i)  seventy  percent
(70%) of the average  closing bid price per share of Common  Stock on the NASDAQ
for the five trading days  immediately  preceding  the  conversion  date or (ii)
twenty-five cents ($.25).

AWC  is  to  receive  a  commission  of  10%  plus  3%  non-accountable  expense
reimbursement on the gross proceeds raised. In addition, AWC was issued warrants
exercisable  for 400,000 shares of Common Stock at an exercise price of $.30 per
share expiring June 28, 2003.

In March and April,  1998,  the  Company  issued its 6%  Convertible  Notes (the
"Notes") in the aggregate  principal  amount of $726,500 in a private  placement
under Rule 505 of Regulation D. Interest on the Notes is payable  semi-annually.
The principal amount of the Notes, together with unpaid interest thereon, is due
and payable, if not earlier converted, on March 3, 1999.

As of December 31, 1998 $726,500 of such notes had been  subscribed to, with the
proceeds held in escrow pending closing to occur in April.  The Company has made
no payments on these notes;  has not repurchased  these Notes, and is in default
with regard to its registration obligation.

As of December 31, 1998 and 1999 none of these warrants have been exercised.

14.      Restricted Stock Sales
-------------------------------

During 1998, the Company issued its restricted  common stock to pay for services
to the Company, as follows:  Sam Armato, Jr., 50,000 shares;  Chester Greenwood,
50,000 shares; Kenneth Hodgdon,  10,000 shares; David Lyons, 100,000 shares; and
Neal Rogers,  100,000 shares. In addition,  the Company authorized the following
restricted common stock shares as compensation and incentive pay: 100,000 shares
of to Robert Berger;  and 25,000 shares plus options to purchase  234,000 shares
of  restricted  common stock  exercisable  for a period of 5 years at a price of
$.01 per share to Robert  Percheski.  The Company also  authorized the following
restricted  common  stock  shares  for  services  as  members  of the  Board  of
Directors: 300,000 shares to Sean McNamara; and 300,000 shares to Rick Fricke.

During 1999, the Company issued its restricted  common stock to pay for services
to the Company, as follows:  Rob Berger;  100,000 shares;  Scott Purvis,  50,000
shares; Robert Percheski, 25,000 shares. In addition, the Company authorized the
following restricted common stock shares for services as members of the Board of
Directors:  500,000 shares to Penny Fricke;  and 12,500,000 shares to the Fricke
Family Trust,  Rick Fricke,  Trustee;  and  18,500,000  shares to Rick Fricke as
President and member of the Board of Directors.


                                      F-13
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


15.      Intangible Asset
-------------------------

During  the  first  quarter  of 1998 the  company  and the  "Investor  Group" in
consideration for not demanding  immediate payment agreed to exchange all of the
outstanding  balance due plus  accrued  interest  of $916,201  for a new Note at
$1,300,000 plus two (2) million shares of restricted  common stock.  The Company
recognized a non-cash  transaction  of $383,799 that  represents  the intangible
cost required  increase the original note to its current  balance of $1,300,000.
This amount has been  capitalized as an intangible  asset.  However,  due to the
election of Nicky Hunt to exchange his portion of the $1.3 million Investor Note
for restricted common shares (see Note 9), this intangible cost was also reduced
for  his  pro-rata  share  of the  Note.  As a  result  of this  adjustment  the
intangible cost was $273,649 and $383,799, as of December 31, 1999 and 1998


16.      Cash Flow Information
------------------------------

The Company  considers all short-term  investments with an original  maturity of
three months or less to be cash equivalents.

Cash paid for interest  and income  taxes for the years ended  December 31, 1999
and 1998 were zero.

Non-Cash Transaction
--------------------

On May 29,1999 a  shareholder  exchanged  his pro-rata  portion of the "Investor
Note" (Note 9) for 1,000,000  shares of restricted  common shares.  As a result,
the net liability  forgiven by the  shareholder  was  reclassified as additional
paid-in- capital of $292,798.


17.      Subsequent Events
--------------------------

In 2001 the Company entered into a settlement agreement with the Trustee for the
Bankruptcy  Estate of Samuel L.  Beinstein  whereby the Company  will  receive a
Satisfaction of Judgement in exchange for $10,000.  This settlement was approved
by the  Bankruptcy  Court and is expected to be completed  in or before  January
2002.

Also, in 1999 as per the board minutes,  the Company issued 13,000,000 shares of
common stock to an officer, who is the sole active officer.

In October 2001 the Company issued 4,000,000  shares of restricted  common stock
to the remaining shareholders in the Investor Group. These shares were issued in
consideration of a waiver by the members of the Investor Group of all money owed
to them and the waiver of all rights to or under any stock, options, warrants or
other rights to additional stock in the Company.

In  November  2001,  a holder of a  Convertible  Note agreed to waive all claims
under that Note in exchange for  4,000,000  shares of the  Company's  restricted
common stock.





                                      F-14