FORM 10-K

                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

                 For the fiscal year ended December 31, 1999
                         Commission File Number 0-21717


                            CASCO INTERNATIONAL, INC.
           (Exact Name of Registrant as specified in its charter)

            Delaware                                        56-0526145
-------------------------------                         -----------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                          Identification No.)


             4205 East Dixon Boulevard, Shelby, North Carolina 28150
               (Address of principal executive offices)(Zip Code)


Registrant's  telephone  number,  including area code (704) 482-9591  Securities
registered  pursuant to Section  12(b) of the Act:  None  Securities  registered
pursuant to Section 12(g) of the Act:


                          Common Stock, $0.01 par value
                                  (Title of Class)


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

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

The aggregate  market value of the voting shares held by  non-affiliates  of the
Registrant  as of March 27, 2000 was  $9,138,900  (computed  by reference to the
average bid and asked prices of such shares on such date).

Number  of  Common  Shares,  each  with  $0.01  par  value,  of  the  Registrant
outstanding as of date: March 27, 2000: 1,783,200 Common Shares.



<PAGE>


                                     PART I


ITEM 1.  BUSINESS.

GENERAL


        CASCO  INTERNATIONAL,  INC.,  (the  "Company")  was  formed  as a  North
Carolina  corporation in 1950. Pages,  Inc., a Delaware  Corporation  ("Pages"),
acquired  all of the  issued  and  outstanding  common  stock of the  Company in
February,  1990. In November,  1996, the Company  reincorporated in the State of
Delaware by merging  into Clyde A. Short  Incorporated,  a Delaware  corporation
which was the surviving corporation in the merger and which, in conjunction with
the merger,  changed  its name to CA Short  Company.  Effective  at the close of
business on December 31, 1996,  Pages  distributed  all of the Company's  common
stock $.01 par value ("common stock") to its shareholders.  In 1997, the Company
changed its name from CA Short  Company to CASCO  INTERNATIONAL,  INC.,  but the
Company does  business  under the CA Short  Company  name.  From January 1, 1997
until May 30, 1997 the common stock was traded on the OTC  Bulletin  Board under
the symbol "CASC". On June 2, 1997, the common stock began trading on The Nasdaq
SmallCap market under the same symbol.  The Company's  common stock and warrants
are traded on The Nasdaq  SmallCap  Market under the symbols "CASC" and "CASCW".
In  1997,  the  Company  changed  its  name  from  CA  Short  Company  to  CASCO
INTERNATIONAL,  INC.,  but the Company does business  under the CA Short Company
name.

         The Company designs, administers, and fulfills innovative and effective
associate recognition programs.  Programs offered by the Company include safety,
service  recognition,  and a host of other programs that feature merchandise and
jewelry in a full color  catalog.  The  Company  is in the  business  of helping
clients maximize the efforts of their most valuable resource - their people.

         The Company  partners with clients to determine  realistic  performance
goals and establish an appropriate budget. Then, the Company and client select a
program that meets the client's unique needs. The Company is, to the best of its
knowledge, the only company in the recognition industry that has no product bias
with regard to the type of items  incorporated  in the  client's  program.  This
distinctive  competitive  advantage  allows the Company to build custom programs
with flexibility and allows the client to choose items their  associates'  truly
value.  Upon  approval,  the Company  publishes  and  distributes  all materials
(including  appealing,  full color catalogs and brochures)  necessary to execute
the program.  As the client's  associates become eligible to receive awards, the
Company processes their requests.  In most cases, the items are shipped directly
to the  associates  from the  Company's  distribution  center in  Shelby,  North
Carolina. The Company then invoices the client as the items are shipped.


THE BUSINESS

         The  Company's  programs  fall  into  two  broad  categories;   service
recognition and safety incentive and  recognition.  The programs include safety,
sales incentive, quality control, production,  service recognition,  attendance,
birthday,  and corporate holiday gift programs.  The common objective of all the
Company's  programs  is to satisfy a  client's  specific  needs.  Changes in the
premium   incentive   industry  have  permitted  the  Company  to  redefine  its
strategies,  focus on specific  product lines, and exploit certain niches within
its market. The Company's adjustments include the installment of a total quality
management  program,  the  development  of  a  strategic  marketing  group,  the
implementation of an aggressive cash management program,  and the development of
new core  capabilities  necessary to promote growth.  The Company  believes that
with intense marketing and the employment of a skilled, well-managed field sales
organization,  the Company will be able to increase the brand recognition of its
products and increase its penetration into specific markets.
<PAGE>

MERCHANDISE SELECTION AND BROCHURES

         The Company's  programs  feature brand name  merchandise  from industry
leading  manufacturers  such as  Sony,  RCA,  Waterford,  Bulova,  Minolta,  and
Bushnell.  The items in a client's  program are  separated  into  various  price
levels,  thus  allowing the client to select price levels that fit their budget.
Featured in full color brochures, items are presented by award level.

         The Company partners with clients to design and produce  brochures that
reflect the  client's  corporate  identity.  These  brochures  are  designed and
produced  in-house by the Company's  creative services  department.  The Company
also produces a catalog of pre-selected  merchandise,  arranged in various price
levels, from which clients may build programs.

SERVICE RECOGNITION PROGRAMS

         In the past,  there was a deeply ingrained  corporate  standard stating
"longevity-equals-seniority" -- the idea that the longer you work for a company,
the more  seniority you earn.  For decades,  service  recognition  programs were
designed to reinforce this paradigm.

         Today, as companies re-engineer and reorganize they realize that it has
never been more  important to recognize  their  associates for their loyalty and
hard work. The standard has changed to "individual performance-equals-longevity"
-- the better an  associate  performs,  the more  valuable he or she is to their
company.  With this in mind, the entire  recognition  industry is changing,  and
different  types of programs are required to redefine  recognition.  As more and
more companies  outsource the handling of recognition  programs,  the Company is
strategically  positioning  itself  as  the  leader  for  the  complete  design,
administration,   and  fulfillment  of  innovative  and  effective   recognition
programs.  The Company's primary goal as it partners with its clients to develop
their own custom program is to increase "Recognitional Impact(TM)" --- the level
of  satisfaction  each  client  experiences  with their  program.  Recognitional
Impact(TM)  establishes a  performance  index that allows the Company to measure
the added value it provides existing clients, as well as prospective clients.

SAFETY AWARENESS/INCENTIVE AND RECOGNITION PROGRAMS

     Accidents in the workplace  injure  thousands of workers each year and cost
billions of dollars in worker's  compensation  premiums,  health care costs, and
lost  productivity.  The Company  designs,  implements  and  administers  safety
programs to reduce the direct and indirect  costs  associated  with accidents or
lack of safety  awareness.  Coupled with worker  safety  training and work place
safety initiatives,  safety incentive and recognition programs have proven to be
an essential  contributor to overall safety awareness.  By increasing  awareness
and recognizing those in the workplace who have safe work habits, the successful
clients can achieve huge returns on their  incentive  investments.  Because each
client has its own unique  set of safety  concerns,  the  Company  designs  each
safety awareness and recognition program to meet the specific needs and goals of
the client. A typical safety program would grant an award for each recipient who
met the client's  specific  goal.  As a  consequence  of the present  regulatory
environment,  clients are placing increasing  emphasis on safety and the Company
has received a number of client  testimonials  regarding  the  efficiency of the
safety programs it has designed.  The Company's market share of this industry is
minimal.
<PAGE>

OTHER PROGRAMS

         The Company  utilizes its  reputation in both  outstanding  merchandise
selection and the timely delivery of such merchandise to design,  administer and
fulfill  numerous  types of customer  specific  programs for its clients.  These
ancillary programs include attendance,  holiday,  birthday, sales incentive, and
generic  points  programs  that add  incremental  revenue  without  diluting the
Company's  focus  on its  core  business.  In  developing  close  ties  with the
Company's  clients  many  opportunities  for  these  types  of  programs  become
apparent.  The Company intends to continue to work in these ancillary markets as
long as its client's needs demand its services.

FULFILLMENT

         The Company is researching the establishment of an internet fulfillment
subsidiary,  that will provide  back-end  support,  information  services,  full
service  packaging  and  product  fulfillment  to  internet  retailers,   direct
marketing firms and other companies  focused on selling and delivering  directly
to the consumer.

CLIENTS

         The Company's  client list  represents a wide  spectrum of  performance
driven  organizations  throughout the United States. The Company's cross section
of industry  representation  minimizes cyclical downturns traditionally found in
industry  specific  business models.  The client list includes  DuPont,  Pfizer,
Huntington National Bank and Intel.

GROWTH STRATEGY

         The Company has divided the  country  into  specific  territories.  The
territories  were defined by existing  accounts and target prospects within each
area. Each territory is serviced by a full-time,  Company- employed  recognition
consultant.  Within each  territory area the Company has segmented the potential
clients into specific  prospect  groups based on size and type of program.  Each
prospect  group will be marketed in the method  proven most likely to engage the
client. All recognition consultants receive intense training and are measured on
a number of criteria  including  sales  performance  and territory  market share
penetration. The Company continues to work markets on a proactive, well planned,
systematic  basis.  The  Company  intends to  augment  internal  growth  through
value-added   acquisitions   and  strategic   alliances   designed  to  increase
penetration in key market areas.

SALES AND MARKETING

         In  1997,  the  Company  redefined  the way in  which  it  markets  its
services.  It made a transition from independent sales reps to full-time company
associates. Further, the Company clearly defined and identified target prospects
in strategic markets across the country. In addition to prospecting  activities,
the  marketing  and sales  group  developed  an  aggressive  account  initiative
involving account retention.  This change in the Company's philosophy was needed
due to a  significant  change in its mission:  "To have the best  trained,  most
responsive,  performance based sales force in America." The Company realized the
existing  sales  force would never be able to take the Company to the next level
of performance. The Company has identified major markets and replaced 90% of its
independent  sales staff with employed  full-time sales people.  The Company has
prepared for any short term  ramifications  by developing a fully staffed inside
sales group to assist in regulating the change to an employed field sales group,
and will utilize independent field representatives in special situations.


<PAGE>


COMPETITION

         The recognition industry includes two completely different markets that
must be sold  and  managed  individually.  The  service  recognition  market  is
approaching a billion dollar industry with three major competitors: O.C. Tanner,
Jostens,  and The Robbins  Company which have combined annual sales of $400-$500
million.  All three of these competitors are strong companies with large jewelry
manufacturing  facilities.  The safety recognition industry is estimated to be a
billion-dollar  industry.  The industry is  fragmented  and there is no dominant
player in this  industry.  The  Company  is not aware of any  competitor  in the
safety  industry  possessing  the same core  competencies  as the  Company.  The
Company  competes  on the basis of program  design,  customer  service,  product
quality, full program administration and flexibility.


EMPLOYEES

        As of  February  28,  2000 the  Company  employed a total of 127 regular
employees. The number of seasonal employees fluctuated during 1999 from a low of
5 to a high of 60 in the  months of  November,  December  and  January  when the
Company  generates  approximately  thirty percent of its revenues and all of its
profits.  As a result,  the Company's  working capital  requirements are highest
during November and December. None of the Company's employees are represented by
a labor union. The Company  considers its relationship  with its employees to be
excellent. As of February 18, 1999, the Company's health care plan covered 95 of
its employees.


ITEM 2.   PROPERTIES.


                                                                         Owned
     Location                           Use                 Size         Leased
----------------------             ------------------   --------------   ------
Shelby, North Carolina ........... Warehouse & Office   134,000 sq. ft.   Owned
Charlotte, North Carolina ........ Office               10,000 sq. ft.    Leased
Kings Mountain, North Carolina ... Warehouse Outlet     4,000 sq. ft.     Leased

         These facilities are located in appropriately  designed buildings which
are kept in good repair.  All of the properties owned by the Company are pledged
to various lenders.



ITEM 3.      LEGAL PROCEEDINGS.


        The Company is not involved in any material  pending legal  proceedings,
other than ordinary, routine litigation incidental to its business.


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

         None.


<PAGE>


                                     PART II


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


         The Company's  common stock and warrants  trade on the Nasdaq  SmallCap
market under the symbols "CASC" and "CASCW". The following table sets forth, for
the  periods  indicated,  the high and the low sale  prices  for  shares  of the
Company's common stock and warrants.

<TABLE>
<CAPTION>

Calendar Year
Ended December                Trade Price
                         1999             1998
                    -------------    -------------
                     High    Low     High     Low
<S>                 <C>      <C>      <C>     <C>

Fourth Quarter

     CASC ....       3.500    1.625    1.625    1.594
     CASCW ...       0.688    0.281     .406     .406
Third Quarter

     CASC ....       4.500    1.750    1.594    1.594
     CASCW ...       1.094    0.406     .188     .188
Second Quarter

     CASC ....       2.125    0.813    2.500    2.375
     CASCW ...       0.500    0.188     .438     .438
First Quarter

     CASC ....       1.750    0.875    4.063    4.063
     CASCW ...       0.438    0.250     .688     .688

</TABLE>

         As of March 27,  2000,  the  Company had  approximately  551 holders of
record of its Common Stock.

         The Company has not  declared or paid any cash  dividends on the Common
Stock since it was acquired by Pages, Inc. in 1990. The Company anticipates that
for the  foreseeable  future it will  retain  earnings  in order to finance  the
expansion and development of its business, and no cash dividends will be paid on
its Common Stock.  The Loan  Agreement  between the Company and Branch Banking &
Trust (the "Loan  Agreement")  does not allow the Company to pay cash  dividends
which  total in excess of  $100,000  on its Common  Stock and only then when the
Company is not in default under the Loan Agreement.

         In June,  1999,  the  Company  granted  to R. L. Renck & Co.,  Inc.,  a
warrant  to  purchase  30,000  shares of  Company  common  stock in  return  for
consulting  services,  10,000  shares  of  which  vested  immediately  with  the
remainder  vesting at the rate of 2,500 shares per month.  The warrant  exercise
price is $2.75 per share.  The  warrant  expires on May 27,  2004.  The  Company
claimed an exemption from registration under Securities Act Section 4(2) for the
grant  of the  warrant,  which  was  granted  to a  company  with  sophisticated
principals who were knowledgeable  about the Company and were not in need of the
protection afforded by registration.



<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.
(In thousands, except per share data)
<TABLE>
<CAPTION>

            Year          Year           Year          Year           Year
              Ended         Ended          Ended         Ended         Ended
            December      December       December      December       December
               31,           31,            31,           31,           31,
          ----------------------------------------------------------------------
              1999          1998           1997          1996           1995
          ----------------------------------------------------------------------
<S>          <C>             <C>           <C>            <C>           <C>

STATEMENT OF OPERATIONS DATA:
Revenues ..$  24,199    $    21,718    $    19,333    $    21,959    $    22,620
Cost and
expenses .    23,549         22,102         20,007         22,542         23,296
          -----------    -----------    -----------    -----------    ----------

Income (loss) before
  income taxes
  and cumulative
  effect of change
  in accounting
  principle      650           (384)          (674)         (583)          (676)
  taxes         (293)           146            256           195            249
          -----------    -----------    -----------    -----------    ----------

Income (loss) before extraordinary gain and
  cumulative effect of change in
  accounting
  principle      357           (238)          (418)         (388)          (427)
Cumulative effect of change in
  accounting
  principle *     --             --             --           597             --
Extraordinary gain on retirement
  of debt         --            930             --            --             --
          -----------    -----------    -----------    -----------    ----------

Net income
  (loss)    $    357     $      692     $     (418)    $     209      $    (427)
          ===========    ===========    ===========    ===========    ==========


PRO FORMA PER SHARE DATA:
Income (loss) before cumulative effect
  of change in accounting
  principle $   0.20     $    (0.13)    $    (0.34)    $   (0.39)     $   (0.43)
Cumulative effect of change in
  accounting
  principle       --             --             --          0.59             --
Extraordinary gain on
  retirement
  of debt         --           0.52             --            --             --
          -----------    -----------    -----------    -----------    ----------

Income (loss) per
  common
  share   $     0.20     $     0.39     $    (0.34)     $    0.20     $   (0.43)
          ===========    ===========    ===========    ===========    ==========

Weighted average common and
  common equivalent
  shares    1,783,200     1,783,200      1,225,447      1,003,431     1,003,431
          ===========    ===========    ===========    ===========    ==========

     *The  Company  changed  its method of  accounting  for the  recognition  of
revenues relating to advanced deposits.  Effective with the change, revenues are
recognized over the course of the programs based on the Company's historical and
expected redemption percentages. The effect of the accounting change in 1996 was
to  increase  income  before  income  taxes and  cumulative  effect of change in
accounting principle by $209,190.

BALANCE SHEET DATA:
Working
  capital  $    4,787    $   4,606      $   7,202       $  5,025       $   3,774

Total assets   17,344       18,843         16,148         18,249          19,512

Long-term debt  2,190........2,413.         4,900          4,125           4,125

Stockholders'
equity          6,237        5,880          5,188          3,328           3,119
</TABLE>


<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION  AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS


         The  following  discussion  should  be read  in  conjunction  with  the
Selected  Financial  Data  and the  Financial  Statements  and  Notes  contained
elsewhere herein.  The Company's results of operations have been, and in certain
cases are expected to continue to be, affected by certain general factors.

CAUTIONARY STATEMENT

        Statements  included in this  Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations,  in other sections of this Annual
Report,  and in future  filings by the Company with the  Securities and Exchange
Commission, in the Company's press releases and in oral statements made with the
approval of an authorized  executive officer which are not historical or current
facts including,  without  limitation,  the Company's  ability to increase brand
recognition,  its  ability to  effectively  and  efficiently  offer  fulfillment
services to internet  companies,  its ability to grow  through  acquisition  and
strategic  alliances and through expanding its current market share and entering
new markets,  the adequacy of the company's  cash  resources to fund its current
operations,   the   decreased   effect  of   seasonality   on  the  Company  are
"forward-looking  statements" made pursuant to the safe harbor provisions of the
Private  Securities  Litigation  Reform  Act of 1995 and are  subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from historical  results and those presently  anticipated or projected.  Readers
are  cautioned  not  to  place  undue  reliance  on  any  such   forward-looking
statements,  which  speak  only as of the date  made.  The  following  important
factors,  among  others,  in some cases have  affected  and in the future  could
affect  the  Company's  actual  results  and could  cause the  Company's  actual
financial   performance  to  differ   materially  from  that  expressed  in  any
forward-looking  statement:  (i) the competitive conditions that currently exist
in the Company's  industry,  which could adversely  impact sales and erode gross
margins;  (ii) many of the Company's  competitors are  significantly  larger and
better capitalized than the Company; (iii) the Company's loan agreement contains
a number of  significant  covenants  that restrict the ability of the Company to
engage in certain  activities,  including  the payment of dividends and requires
that the  Company  maintain  specified  financial  ratios,  including  a minimum
capital base, and minimum pretax profits from operations; and (iv) the inability
to carry out marketing and sales plans would have a materially adverse impact on
the  Company's  profitability.  The  foregoing  list should not be  construed as
exhaustive and the Company disclaims any obligations  subsequently to revise any
forward-looking  statements to reflect events or circumstances after the date of
such  statements or to reflect the occurrence of  anticipated  or  unanticipated
events.


<PAGE>


RESULTS OF OPERATIONS

         The table  below sets  forth  certain  financial  data  expressed  as a
percentage of revenues (Percentage may not total 100% due to rounding):
<TABLE>
<CAPTION>

                                                Percentage of Revenues


                                            Twelve       Twelve        Twelve
                                            Months       Months        Months
                                            Ended        Ended          Ended
                                         December 31,  December 31, December 31,
                                             1999         1998           1997
                                         ---------------------------------------
<S>                                       <C>           <C>            <C>

Total revenue ..........................     100.0%      100.0%        100.0%
Cost of goods sold .....................      55.0%       58.6%         59.1%
                                              -----       -----         -----


Gross profit ...........................      45.0%       41.4%         40.9%
Selling, general, and administrative ...      37.8%       38.6%         40.1%
Interest ...............................       1.5%        1.6%          2.4%
Depreciation and amortization ..........       3.0%        2.4%          1.9%
Loss on Sale of Building ...............        --         0.7%           --
                                              -----       -----         -----
                                              -----       -----         -----

Income (loss) from continuing operations
before income taxes ....................       2.7%       (1.7%)        (3.5%)
                                              =====       =====         =====
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998.


        Revenues  for the  year  ended  December  31,  1999  approximated  $24.2
million,  compared to $21.7 million in revenues for the year ended  December 31,
1998,  an increase  of 11.4% or  approximately  $2.5  million.  The  increase is
attributable  to  strong  retention  of  existing  customers  coupled  with  new
customers  in the new markets  with  employed  recognition  consultants  and the
acquisitions made by the Company in 1998.

        Cost of goods sold for the year ended  December  31,  1999  approximated
$13.3 million, compared to approximately $12.7 million of cost of goods sold for
the year ended December 31, 1998, an increase of 4.7% or approximately $601,000.
The increase in cost of goods sold was attributable to the increase in revenues.
As a percentage  of revenues,  cost of goods sold  decreased to 55% in 1999 from
58.6%  in  1998.  The  3.6%  decrease  in cost of  goods  sold  was  principally
attributable  to a change in product  mix, an improved  purchasing  strategy and
systems, as well as the increased sales in new programs.

        Selling, general, and administrative expense for the year ended December
31,  1999  approximated  $9.1  million  for the year ended  December  31,  1999,
compared to approximately  $8.4 million for the year ended December 31, 1998, an
increase of 9.1% or approximately $759,000. The increase in selling, general and
administrative  expenses  was due to  increased  sales and the  expansion of the
employee based sales force.  As a percentage of revenues,  selling,  general and
administrative  decreased to 37.8% in 1999 from 38.6% in 1998. The 0.8% decrease
as a percentage of revenues was principally  attributable  to benefits  obtained
from aggressive cost containment  policies and efficiencies  gained from the new
computer processing system.


<PAGE>


         Interest expense was approximately $372,000 for the year ended December
31, 1999, compared to $336,000 for the year ended December 31, 1998, an increase
of 10.9% or approximately $36,000. The increase was attributable to the interest
on the Company's  line of credit which was used to finance the  acquisitions  in
1998. The average  outstanding debt by month in 1999  approximated  $4.7 million
compared to $3.4 million for 1998.  Additionally,  the average interest rate for
1999 approximated 7.94% compared to approximately 8.91% for 1998 on the debt.

        Depreciation and amortization expense was approximately $722,100 for the
year ended  December 31, 1999,  compared to $520,000 for the year ended December
31,  1998,  an  increase of 38.9% or  approximately  $202,100.  The  increase in
depreciation  and  amortization  expense  was  principally  attributable  to the
depreciation  of newly  acquired  assets in 1997 and 1998. The increase was also
attributable to the amortization of the goodwill on the acquisitions made by the
Company in 1998.

        Income tax provision was $293,000 for the year ended  December 31, 1999,
compared to an income tax benefit of $145,500  for the year ended  December  31,
1998. The provisions for income tax were calculated through the use of estimated
income tax rates based upon the income (loss) before income taxes.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997.

        Revenues  for the  year  ended  December  31,  1998  approximated  $21.7
million,  compared to $19.3 million in revenues for the year ended  December 31,
1997,  an increase  of 12.4% or  approximately  $2.4  million.  The  increase is
attributable  to  strong  retention  of  existing  customers  coupled  with  new
customers  in the new markets  with  employed  recognition  consultants  and the
acquisitions made by the Company in 1998.

        Cost of goods sold for the year ended  December  31,  1998  approximated
$12.7 million, compared to approximately $11.4 million of cost of goods sold for
the year ended  December 31, 1997,  an increase of 11.4% or  approximately  $1.3
million.  The increase in cost of goods sold was attributable to the increase in
revenues. As a percentage of revenues,  cost of goods sold decreased to 58.6% in
1998  from  59.1%  in  1997.  The  0.50%  decrease  in cost of  goods  sold  was
principally attributable to a change in product mix.

        Selling, general, and administrative expense for the year ended December
31,  1998  approximated  $8.4  million  for the year ended  December  31,  1998,
compared to approximately  $7.8 million for the year ended December 31, 1997, an
increase of 7.9% or approximately $600,000. The increase in selling, general and
administrative  expenses  was due to  increased  sales and the  expansion of the
employee based sales force.  As a percentage of revenues,  selling,  general and
administrative  decreased to 38.6% in 1998 from 40.1% in 1997. The 1.5% decrease
as a percentage of revenues was principally  attributable  to benefits  obtained
from aggressive cost containment policies.

         Interest expense was approximately $336,000 for the year ended December
31, 1998,  compared to $469,000 for the year ended December 31, 1997, a decrease
of 28% or approximately  $133,000. The average outstanding debt by month in 1998
approximated  $3.4  million  compared  to $1.1  million  for 1997.  The  average
outstanding  balance  on the  subordinated  debenture  by  month  in 1998 was $0
compared to $5 million in 1997. Additionally, the average interest rate for 1998
approximated  8.91%  compared to  approximately  9.42% for 1997 on the debt. The
interest rate on the subordinated  debenture for 1998 and 1997  approximated 7%.
The decrease in interest was mainly attributable to the interest paid in 1997 on
a subordinated debenture given to Pages, Inc. when the Company was spun off.
<PAGE>

-------------------
        Depreciation and amortization expense was approximately $520,000 for the
year ended  December 31, 1998,  compared to $359,000 for the year ended December
31,  1997,  an  increase of 44.9% or  approximately  $161,000.  The  increase in
depreciation  and  amortization  expense  was  principally  attributable  to the
depreciation  of newly  acquired  assets in 1997 and 1998. The increase was also
attributable to the amortization of the goodwill on the acquisitions made by the
Company in 1998.

        Income tax benefit was  $145,500  for the year ended  December 31, 1998,
compared to $256,000 for the year ended  December 31, 1997.  The  provisions for
income tax benefit were calculated through the use of estimated income tax rates
based upon the loss before taxes.


LIQUIDITY AND CAPITAL RESOURCES

        The Company's primary sources of liquidity have been cash generated from
operating  activities and amounts  available  under its existing credit facility
and proceeds  from the public  offering of units  consisting of common stock and
warrants  during the third quarter of 1997. The Company's  primary uses of funds
consist of financing inventory, receivables and acquisitions.

        Net working capital increased to $4,787,000 as of December 31, 1999 from
net working  capital of  $4,606,000  as of December 31,  1998.  The increase was
primarily  attributed  to the  Company's  ability to pay down the line of credit
during 1999.

        The  Company has adopted a growth  strategy  which will be  accomplished
through increased  efforts of the Company's  existing highly trained sales force
in order to expand current market share and enter into new markets.

        The Company anticipates that operating cash flows during the next twelve
months,  coupled with its ability to borrow under the credit facility will cover
operating  expenditures and meet the short-term debt obligations.  The Company's
credit facility is due and payable in full on July 30, 2000. Although the lender
has not issued a commitment to do so, the Company's relationship with its lender
is  favorable  and the  Company  anticipates  that the credit  facility  will be
renewed when due.

        Current  assets  decreased  approximately  $1,243,000  due  mostly  from
decreases  in accounts  receivable  ($629,000),  inventory  ($552,000),  prepaid
expenses ($28,000) and in cash ($101,000).  The decrease in accounts  receivable
is due to the increased emphasis on collections and a new strategy of contacting
delinquent  accounts the Company  implemented in August of 1999. The decrease in
inventory  is due to an improved  purchasing  strategy  coupled with an improved
processing and inventory ordering system. The decrease in cash is due to closing
of the cash  accounts  associated  with the  acquisitions.  Current  liabilities
decreased approximately  $1,424,000 due mostly from decreases in short-term debt
obligations ($1,382,000) and accounts payable and accrued liabilities ($326,000)
offset by an increase  of accrued  taxes  payable  ($355,000).  The  decrease in
short-term  debt  obligations was due to the pay down of the line of credit from
the excess cash generated from operations.  The decrease in accounts payable was
due to the decreased inventory purchases.

        Cash decreased  approximately $101,000. Net cash provided from operating
activities was approximately  $1,934,000.  Net cash used in investing activities
was  approximately  $429,000  due to payments for  purchases of the  information
systems.  Net cash used by financing  activities was  approximately  $1,605,000,
which was due to the pay downs on the line of credit.
<PAGE>

        On July 30, 1998 the Company  entered  into an  agreement  with Awards &
Gifts,  Inc.  and  Richard  W.  Terlau,  Jr.,  providing  for  the  purchase  of
substantially  all  assets  and  certain  liabilities  of  Awards & Gifts by the
Company.  Under the terms of the Asset Purchase  Agreement,  the assets included
Awards & Gifts customer list,  machinery and  equipment,  inventories,  Awards &
Gifts intellectual property assets, prepaid expenses, and a real property lease.
The purchase price for the assets was $1.5 million with certain adjustments made
for pro-rated  items,  with $1.3 million paid in cash and a $200,000  promissory
note. The note is secured by an  Irrevocable  Standby Letter of Credit issued by
Branch  Banking & Trust  Company.  The purchase  price under the Asset  Purchase
Agreement was determined by arm's length negotiations  between the parties based
on the market value of the assets  purchased and sold. The goodwill  acquired in
this  transaction  will be amortized over fifteen years using the  straight-line
method. The acquisition was financed with proceeds from the Company's  revolving
credit facility with Branch Banking & Trust Company.

        On October 1, 1998 the Company  entered into an agreement  with American
Awards & Gifts,  Inc.  and Frank G. and Judith J.  McGinnis,  providing  for the
purchase of substantially all assets and certain  liabilities of American Awards
& Gifts, Inc. by the Company.  Under the terms of the Asset Purchase  Agreement,
the  assets  included  American  Awards & Gifts  customer  list,  machinery  and
equipment,  tools and  dies,  inventories,  intellectual  property  assets,  and
general intangibles, the liabilities included the assumption of certain accounts
payable.  The purchase  price for the assets was $255,177  with $100,000 in cash
and a $155,177  promissory  note.  The purchase  price under the Asset  Purchase
Agreement was determined by arm's length negotiations  between the parties based
on the market value of the assets  purchased and sold. The goodwill  acquired in
this  transaction  will be amortized over fifteen years using the  straight-line
method.

        Effective at the close of business on December 31, 1996, a tax free spin
off of the Company's  common stock from its parent,  Pages,  was completed  (the
"Distribution"). In the Distribution, for every ten shares of Pages common stock
outstanding on the record date, one and one-half shares of the Company's  common
stock was  distributed  to Pages'  stockholders.  The Company  entered into a $5
million,   7%  subordinated   debenture  with  Pages   simultaneously  with  the
Distribution in satisfaction of amounts due to Pages by the Company.  The excess
of the  amount  due  to  Pages  as of  the  Distribution  over  the  $5  million
subordinated debenture was recorded as paid in capital.  Principal payments will
be $100,000  per year for the first four years,  and a final  payment due at the
end of the fifth year for the remaining principal balance. Interest is at 7% per
annum,  payable  quarterly.  Based  on  the  consummation  of  the  Distribution
effective  January 1, 1997,  the  amounts  due to Pages  previously  recorded as
current have been reclassified to long term, thus  significantly  increasing the
Company's net working capital, as described earlier in this section. The Company
discharged  the debenture in full in January 1998 for $3.5 million.  The Company
realized an  extraordinary  gain on  retirement  of debt of $1.5 million on this
transaction.

        The Company does not anticipate any material  expenditures  for property
and  equipment  during the next twelve  months,  out of the  ordinary  course of
business.  Although the Company will  require  additional  capital to expand its
fulfillment  operations,  management  believes that present  resources will meet
anticipated requirements for its current operations.

     The Company is aware of no trends or demands,  commitments or uncertainties
that will result in, or that management believes are reasonably likely to result
in, the  Company's  liquidity  increasing or decreasing in any material way. The
Company  is aware of no legal or other  contingencies,  the  effect of which are
believed by management to be reasonably likely to have a material adverse effect
on the Company's financial statements.
<PAGE>

         A potential  problem existed for all companies that relied on computers
as the year 2000  approached.  The "Year 2000" problem is the result of the past
practice  in the  computer  industry  of using two  digits  rather  than four to
identify the  applicable  year. The Company  addressed its Year 2000  compliance
needs by implementing a new Enterprise  Resource Planning (ERP) application on a
new IBM AS/400  platform.  The  Company  experienced  no  internal  problems  or
problems with third parties in regards to the "Year 2000"  problem.  The Company
spent  approximately  $45,000  on  external  consultants  to  ensure  Year  2000
compliance.

SEASONALITY

        The Company's business is highly seasonal, with approximately 30% of its
revenues and most of its profits  recorded in the months of November,  December,
and January. As a result, the Company's working capital requirements are highest
during  November and December when the  combination of receivables and inventory
are at peak levels.  The Company typically  experiences losses in its second and
third quarters.

         As the results from the Company's growth strategy develop,  the effects
of seasonality should be diminished.  The business segments on which the Company
has chosen to focus offer  steadier  revenue flows,  as well as more  consistent
requirements for working capital.

INFLATION

        Although the Company cannot  determine the precise effects of inflation,
inflation has an influence on the cost of the  Company's  products and services,
supplies, salaries, and benefits. The Company attempts to minimize or offset the
effects of inflation through increased sales volumes and sales prices,  improved
productivity,  alternative  sourcing of products and supplies,  and reduction of
other costs.  The Company  generally has been able to offset the impact of price
increases  from  suppliers by increases in the selling  prices of the  Company's
products and services.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The  Company is exposed to the impact of  interest  rate  changes on its
debt  obligations.  The Company is not exposed to foreign currency exchange rate
risk or investment risk.

        The Company's exposure to market rate risk for changes in interest rates
relates  primarily to the Company's  short-term  debt obligation line of credit.
The interest  rate on this line of credit is prime plus 1/2  percent.  The prime
interest  rate at December 31, 1999 was 8.5 percent  compared to 7.75 percent at
December 31, 1998.  The  Company's  line of credit is renewable  and  negotiable
yearly.  The fluctuation of the interest rate may increase  interest  expense if
the  prime  interest  rate  increases   before  the  line  of  credit  could  be
renegotiated to a fixed rate loan.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

            See Index to Financial Statements and Financial Statement schedule.

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.
         None.


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
--
        The  following  table  sets forth  certain  information  concerning  the
directors and executive officers of the Company:


                                                                    Director or
                                                                     Executive
        Name                 Age              Position             Officer Since
        ----                 ---              --------             -------------
S. Robert Davis (1)           61         Chairman of the Board            1990
Charles R. Davis (1)          38         President and Director           1990
Jeffrey A. Ross               32         Chief Financial Officer
                                         and Secretary                    1996
David J. Richards             47         Director                         1997
Michael P. Beauchamp          53         Director                         1997
Randall J. Asmo               35         Director                         1999
Rodney L. Taylor              44         Director                         1999

(1)      S. Robert Davis is the father of Charles R. Davis.

Executive  officers are elected by the Board of Directors  and serve until their
successors are duly elected and qualify, subject to earlier removal by the Board
of Directors.  Directors are elected at the annual  meeting of  shareholders  to
serve for one year and until their  respective  successors  are duly elected and
qualify, or until their earlier resignation,  removal from office, or death. The
remaining  directors  may fill any  vacancy  in the  Board of  Directors  for an
unexpired term.


<PAGE>


BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS


        S.  ROBERT  DAVIS is the  Chairman of the Board and  President  of Media
Source,  Inc.,  a Company  with a class of  securities  registered  pursuant  to
Section 12 of the Securities Exchange Act of 1934 ("Media Source"). Prior to his
election to the Board of  Directors of Media  Source,  he served as Assistant to
the  President of Media Source from January  1988, to March 1990, on a part-time
basis.  Additionally,  during the past five years Mr. Davis has operated several
private  businesses  involving  the  developing,  sale,  and/or  leasing of real
estate.

     CHARLES R. DAVIS was elected  President of the Company in  September  1992.
Additionally,  during the past five years Mr. Davis has operated several private
businesses  involving  the  developing,  sale and/or  leasing of real estate but
devotes substantially all of his business time to the Company.

     JEFFREY A. ROSS is a certified public accountant.  He joined the Company as
its controller in June 1993. Mr. Ross was employed as an accountant by Hausser +
Taylor,  LLP a large public  accounting and consulting firm from September 1989,
until June 1993.

     DAVID J. RICHARDS was the President and a director of NetMed, Inc. for over
five  years.  NetMed  is not a  parent,  subsidiary  or other  affiliate  of the
Company.  NetMed is a company with a class of securities  registered pursuant to
Section 12 of the Securities Exchange Act of 1934.

     MICHAEL P.  BEAUCHAMP  has been the President of  Beauvestco,  a management
consulting firm, since 1989.  Beauvestco is not a parent,  subsidiary,  or other
affiliate of the Company.

     RANDALL J. ASMO was elected  Director on February  19,  1999.  He currently
serves as Executive Vice President, Secretary and Director of Media Source, Inc.
Since 1992,  Mr. Asmo has served as Vice  President  of Media  Source,  Inc. and
Director since 1997.  Prior to that, he served as Assistant to the President for
two years.  Additionally,  since 1987,  Mr. Asmo has served as Vice President of
Mid-States  Development  Corp., a  privately-held  real estate  development  and
leasing  company,   as  Vice  President  of  American  Home  Building  Corp.,  a
privately-held  real estate  development  company,  and as an officer of several
other small business enterprises.

     RODNEY L. TAYLOR was elected  Director on February 19,  1999.  He currently
serves as General Manager of Family Ford Lincoln Mercury in Columbus, Ohio. From
1994  to  1997  Mr.  Taylor  was  General  Sales  Manager  at  Bobb   Chevrolet.
Additionally,  Mr. Taylor also owned an automotive and equipment leasing company
based out of Columbus, OH.

SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section  16(a) of the  Securities  Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's  officers and directors,  and persons who
own  more  than ten  percent  of a  registered  class  of the  Company's  equity
securities,  to file  reports of  ownership  and changes in  ownership of equity
securities of the Company with the Securities and Exchange  Commission  ("SEC").
Officers,  directors,  and greater than ten percent shareholders are required by
SEC  regulations  to furnish the Company with copies of all Section 16 (a) forms
they file.

        Based  solely  upon a review  of such  forms  furnished  to the  Company
pursuant to Rule16a-3 under the Exchange Act, the Company believes that all such
forms  required to be filed  pursuant to Section 16 (a) of the Exchange Act were
timely filed,  as necessary,  by the  officers,  directors and security  holders
required to file the same.
<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION.

DIRECTOR COMPENSATION

        Each  director  who is not an officer of the  Company  receives a fee of
$500 for attendance at each Board meeting,  a fee of $250 for attendance at each
telephonic Board meeting,  and a fee of $250 for attendance at each meeting of a
Board committee of which he is a member.  Directors who are also officers of the
Company receive no additional compensation for their services as directors.  The
Company has adopted Non-Employee  Director Stock Option Plan, which provides for
the grant, at the discretion of the Company's Board of Directors,  of options to
purchase  up to 40,000  shares of  Company  common  stock upon such terms as are
determined  by the Board in its  discretion.  In June 1997,  options to purchase
10,800  shares  of common  stock at a  purchase  price of $4.17  per share  were
granted under the Director Option Plan.

         In June 1997 and January  1998  options to  purchase  10,800 and 30,000
shares of common stock,  respectively  at a purchase price of $4.17 and $2.8125,
respectively were granted under the Non-Employee  Director Stock Option Plan. In
September 1999 options to purchase  180,000 shares of common stock at a purchase
price of $1.75.

EXECUTIVE COMPENSATION

         The  following  table shows,  for the fiscal  years ended  December 31,
1999,  1998,  and 1997 the cash  compensation  paid by the  Company,  as well as
certain other  compensation paid for those years to the Company's  President and
Chief Executive Officer.  No other executive officers serving as such during and
at the end of the  Company's  last fiscal  year had total  salary and bonus that
exceeded  $100,000.  None of the Company's  executive  officers have  employment
agreements with the Company.

<TABLE>
<CAPTION>

                           Summary Compensation Table

                                                                    Long-Term
                             Annual Compensation                   Compensation
                          -------------------------                -------------
                                                                    Securities
     Name and                                         Other Annual  Underlying
 Principal Position       Year    Salary     Bonus    Compensation  Options (1)
 ------------------       ----    ------     -----    ------------  ------------
<S>                      <C>       <C>        <C>        <C>         <C>

Charles R. Davis ......   1999   $250,000   $      0   $      0       200,000
President and .........   1998   $178,325   $      0   $      0        50,000
Chief Executive Officer   1997   $155,000   $ 25,000   $      0        37,800(2)
</TABLE>

(1)  Stock options previously granted to the named Executive Officers,  by their
     terms,  automatically  adjust to reflect certain changes in the outstanding
     Common Shares of the Company, including stock dividends.

(2)  On July 17,  1997,  the Company  agreed to grant to Mr.  Davis  performance
     options to purchase 200,000 shares of Company common stock, 50,000 of which
     will be granted if the Company has pre-tax  earnings of at least $1 million
     in any fiscal  year,  75,000 of which will be  granted if the  Company  has
     pre-tax earnings of at least $1.5 million in any fiscal year, and 75,000 of
     which will be granted if the Company  has  pre-tax  earnings of at least $2
     million in any fiscal year,  in each case as long as Mr. Davis was employed
     by the Company at the end of the applicable  fiscal year.  The  performance
     options are exercisable at the market price of the common stock at the date
     of grant,  which will be the date the Company  files its Form 10-K with its
     audited financial  statements showing that the required earnings plateau is
     satisfied. No performance options were granted in 1999.
<PAGE>
<TABLE>
<CAPTION>

                   Stock Option Grants in Last Fiscal Year

                            Individual Grants
                 -----------------------------------------
                                                             Potential Realized
                                                              Value At Assumed
                                                           Annual Rates of Stock
                  Number of   % of Total                      Price Appreciation
                 Underlying Options Granted Exercise                for Option
                   Options     to Employees  Price   Expiration       Term (1)
   Name            Granted       in 1999    per Share  Date        5%       10%
   ----            -------       -------   ---------   ----        --       ---
<S>                 <C>          <C>        <C>        <C>         <C>      <C>

Charles R. Davis   200,000(2)     33.3%    $1.75     05/27/04   96,699   213,679

</TABLE>

(1)  These  assumed  appreciation  rates are not derived from the  historical or
     projected  prices of the Company's Common Stock or results of operations or
     financial  condition  and they  should  not be  viewed as a  prediction  of
     possible prices of value for the Company's Common Stock in the future.

(2)  The stock  options were granted under the  Company's  1999  Employee  Stock
     Option Plan, and are exercisable commencing May 27, 1999.
<TABLE>
<CAPTION>

             Aggregated Options/SAR Exercises with Last Fiscal Year
                     And Fiscal Year End Options/SAR Values

                                Number of Shares        Value of Unexercised
           Shares            Underlying Unexercised         In-the-Money
        on Acquired  Value      Options at FY-End         Options at FY-End
    Name  Exercised Realized Exercisable Unexercisable Exercisable Unexercisable
    ----  --------- -------- ----------- ------------- ----------- -------------
<S>         <C>       <C>      <C>         <C>           <C>          <C>

Charles R.
 Davis     None        N/A     287,800        0          $62,000          N/A
</TABLE>
<PAGE>


STOCK OPTION PLANS

         The Company has adopted a 1996 Incentive  Stock Option Plan, a 1997 and
a 1999 Employee Stock Option Plan (the "Plans") which provide for the grant,  at
the  discretion of the Board of  Directors,  of options to purchase up to 85,000
and 150,000 and 600,000 shares,  respectively,  of Common Stock to key employees
of the Company.  Under the 1999 Plans it is intended that options  granted under
the Plans  qualify as incentive  stock options under Section 422 of the Internal
Revenue Code of 1986, as amended.  The selection of  participants,  allotment of
shares, determination of exercise price and other considerations relating to the
grant of options under the Plans is determined by the Board of Directors, at its
discretion.  Options  granted under the Plans are exercisable for a period of up
to ten years after the date of grant at an exercise price which is not less than
the fair market  value of the shares on the date of grant,  except that the term
of an incentive  stock option granted under the Incentive Plans to a shareholder
owning more than 10% of the outstanding shares may not exceed five years and its
exercise  price may not be less than 110% of the fair market value of the shares
on the date of grant.  In January,  1997, the Company  granted options under the
1996  Incentive  Plan to purchase  31,860  shares of Common  Stock at a purchase
price of $3.7037  per share,  on two  different  occasions  in March  1997,  the
Company  granted  options under the 1997 Employee Plan to purchase 40,000 shares
of Common  Stock at a  purchase  price of $3.50  per  share and 5,000  shares of
Common Stock at a purchase  price of $3.7037 per share.  In December  1997,  the
Company  granted  options under the Incentive Plan to purchase  13,000 shares of
Common  Stock at a  purchase  price of  $3.0625  per  share.  On four  different
occasions in 1998 the Company  granted  options under the 1997  Incentive  Stock
Option Plan. In January 1998, the Company  granted 70,000 shares of Common Stock
at a purchase price of $2.875 per share.  On March 3, 1998, the Company  granted
options to purchase 40,000 shares of Common Stock at a purchase price of $2.8125
per share.  On March 10, 1998,  the Company  granted  options to purchase  3,000
shares of common stock at a purchase price of $3.00 per share. On April 1, 1998,
the  Company  granted  options to  purchase  6,000  shares of Common  Stock at a
purchase price of $3.50 per share.  On one occasion in 1998 the Company  granted
options  under the 1998  Incentive  Stock Option Plan.  In October,  the Company
granted  options to purchase 5,000 shares of Common Stock at a purchase price of
$1.00 per share. In May 1999, the Company  granted  options to purchase  396,500
shares of Common  Stock at a  purchase  price of $1.75 per share  under the 1999
Incentive  plan and options to purchase  15,000 shares of Common Stock under the
1997 Incentive plan at a purchase price of $1.75 per share. In October 1999, the
Company granted options to purchase 10,000 shares of Common Stock under the 1999
Incentive  plan at a purchase  price of $2.3800  per  share.  Options  currently
outstanding  under  the  1996  Incentive  Plan  are not  exercisable  until  the
expiration of one year after the date of grant.  Options  currently  outstanding
under the 1997 and 1999  Incentive Plan are  exercisable  based on the following
schedule.

                                              Cumulative Percentage of Aggregate
                                               Number of Shares of Stock Covered

Exercise Period                              by an Option Which May be Exercised
---------------                              -----------------------------------
Beginning on the one year anniversary date
from date of grant                                           33%*

Beginning on the seond anniversary date
from date of grant.                                          33%*

Beginning on the third anniversary date
from date of grant                                           33%*

        *less,  in the case of each exercise  period,  the number of Shares,  if
any, previously purchased under the Option.

        Options  currently  outstanding  under the 1999  Incentive  Plan are not
exercisable until the expiration of six months after the date of grant.
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

     The  Company's  committees  are its  Compensation  Committee  and its Audit
Committee. During 1999, the Compensation Committee consisted of S. Robert Davis,
David J. Richards, and Michael P. Beauchamp.  Neither Mr. Davis, Mr. Richards or
Mr.  Beauchamp  serves as an employee of the  Company.  During  1999,  the Audit
Committee consisted of David J. Richards,  Randall J. Asmo and Rodney L. Taylor.
Neither  Mr.  Richards,  Mr.  Asmo or Mr.  Taylor  serves as an  employee of the
Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         None

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

         Under the Rules of the Securities and Exchange Commission,  the Company
is required to provide certain information  concerning  compensation provided to
the Company's Chief Executive Officer and its executive officers. The disclosure
requirements for the executive officers include the use of tables in a report of
the committee  responsible  for  compensation  decisions for the named executive
officers,  explaining  the  rationale  and  considerations  that  lead to  those
compensation  decisions.  Therefore,  the Compensation Committee of the Board of
Directors  has  prepared  the  following  report  for  inclusion  in this  Proxy
Statement.

         The  Compensation  Committee  has designed its  executive  compensation
policies to provide  incentives  to its  executives to focus on both current and
long-term Company goals, with an overriding  emphasis on the ultimate  objective
of enhancing  stockholder  value.  The  Compensation  Committee  has followed an
executive compensation program,  comprised of cash and equity-based  incentives,
which recognizes  individual  achievement and encourages  executive  loyalty and
initiative.  The  Compensation  Committee  considers  equity  ownership to be an
important  factor  in  providing  executives  with a closer  orientation  to the
Company and its shareholders. Accordingly, the Compensation Committee encourages
equity  ownership  by its  executives  through  the grant of options to purchase
Common Stock.

         The   Compensation   Committee   believes  that  providing   attractive
compensation  opportunities is necessary to assist the Company in attracting and
retaining competent and experienced executives.  Base salaries for the Company's
executives  are  established  on  a  case-by-case   basis  by  the  Compensation
Committee,  based upon current  market  practices and the  executive's  level of
responsibility, prior experience, breadth of knowledge, and salary requirements.
The  base  salaries  of  executive   officers  are  reviewed   annually  by  the
Compensation  Committee.  Adjustments  to such  base  salaries  have  been  made
considering:  (a) historical  compensation  levels; (b) the overall  competitive
environment  for  executives;  and (c) the level of  compensation  necessary  to
attract and retain  executive  talent.  Stock  options  have  historically  been
awarded upon hiring, promotion, or based upon merit considerations. As the value
of a stock  option is  directly  related  to the market  price of the  Company's
Common Stock, the Compensation  Committee believes the grant of stock options to
executives encourages executives to take a view toward the long-term performance
of the Company.  Other benefits  offered to executives are generally the same as
those offered to the Company's other employees.

         The  Compensation  Committee  utilizes the  policies and  consideration
enumerated above with respect to compensation decisions regarding the President,
Charles R.  Davis.  Mr.  Davis'  1999 base salary was  determined  primarily  by
reference to historical compensation, scope of responsibility, and the Company's
desire  to  retain  his  services.   The  Compensation  Committee  believes  its
compensation  policies with respect to the Company's  executive officers promote
the interests of the Company and its shareholders  through current motivation of
the  executive  officers  coupled  with an emphasis on the  Company's  long-term
success.

                                                        Compensation Committee:
                                                            S. Robert Davis
                                                            David J. Richards
                                                            Michael P. Beauchamp
                                                            Rodney L. Taylor

<PAGE>


Price Performance Graph


        The following  graph  represents a comparison of the  cumulative  total
shareholder return on the Common Stock, assuming dividend reinvestment, with The
NASDAQ Composite Index and The NASDAQ  Industrial Index. This graph assumes that
$100 was  invested  on January  15,  1997,  the first day of  trading  after the
effective date of the spin-off of the Company from Pages,  Inc. The Company paid
an 8 percent  stock  dividend on August 1, 1997,  which was included in the 1997
total  shareholder  return.  The  stock  price  performance  shown  below is not
necessarily indicative of future performance.
<TABLE>
<CAPTION>

                 1/15/97   6/30/97 12/31/97 6/30/98 12/31/98  6/30/99 12/31/99

<S>                <C>      <C>      <C>      <C>      <C>      <C>      <C>
CASCO ............   100   149.000  90.000   80.000   52.000   63.000   68.000
Nasdaq Composite .   100   108.000 117.691  142.000  164.393  201.000  305.000
Nasdaq Industrials   100   103.000 106.731  117.000  113.986  143.000  196.000

</TABLE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND


                  MANAGEMENT.


        The following table sets forth, to the best of the Company's  knowledge,
certain  information  with respect to the beneficial  ownership of shares of the
Company's  common stock owned  beneficially by (i) each person who  beneficially
owns more than 5% of the  outstanding  Common  Stock,  (ii) each director of the
Company,  (iii) and President of the Company (the only executive officers of the
Company  whose cash and  non-cash  compensation  for  services  rendered  to the
Company for the year ended  December 31, 1999,  exceeded  $100,000) and (iv) all
directors and executive officers of the Company as a group:



                                   Amount and Nature of               Percent of
Name and Address                 Beneficial Ownership (1)              Class (2)
----------------                 ------------------------              ---------
S. Robert Davis                         370,754 (3)                       15.9%
15350 Amberly Drive
Suite 2014
Tampa, Florida 33647

Charles R. Davis                        412,066 (4)                       17.7%
All directors  and  executive
 officers as a group (7 persons)      1,055,059 (5)                       45.3%


1)       Represents sole voting and investment power unless otherwise indicated.
---
2)        Based on 1,783,200  shares of Company  common stock  outstanding as of
          December 31, 1999, plus, as to each person listed, that portion of the
          547,780 unissued shares of Company common stock subject to outstanding
          options which may be exercised by such person within the next 60 days;
          and as to all directors and  executive  officers as a group,  unissued
          shares of common  stock as to which the members of such group have the
          right to  acquire  beneficial  ownership  upon the  exercise  of stock
          options within the next 60 days.

3)        Includes  4,066 shares owned by Mr.  Davis' wife as to which Mr. Davis
          disclaims beneficial ownership and includes 110,000 unissued shares of
          Company  Common  Stock as to which Mr.  Davis has the right to acquire
          beneficial  ownership  upon the exercise of stock  options  within the
          next 60 days.

4)        Includes 10,000 shares owned by Mr. Davis' wife and 2,411 shares owned
          by Mr.  Davis'  children as to which Mr.  Davis  disclaims  beneficial
          ownership and includes 287,800 unissued shares of Company common stock
          as to which Mr.  Davis has the right to acquire  beneficial  ownership
          upon the exercise of stock options within the next 60 days.

5)        The  number  of  shares  of  Common  Stock  beneficially  owned by all
          directors and executive officers as a group includes all the shares of
          Common Stock listed above including  113,500 unissued shares of Common
          Stock as to which the Company's four  non-employee  directors have the
          right to  acquire  beneficial  ownership  upon the  exercise  of stock
          options  within the next 60 days,  28,209 shares of Common Stock owned
          by Mr.  Richards,  a director of the Company,  11,080 shares of Common
          Stock owned by Mr.  Beauchamp,  a director of the  Company,  and 2,095
          shares of Common Stock owned by Jeffrey A. Ross, an executive  officer
          of the Company and includes  36,480  unissued shares of Company Common
          Stock  as to  which  Mr.  Ross has the  right  to  acquire  beneficial
          ownership upon the exercise of stock options within the next 60 days.
<PAGE>


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

           None


                                     PART IV


ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  1.   Financial Statements:

            See Index to Financial Statements and Financial Statement Schedule.

       2.   Financial Statement Schedule:

            See Index to Financial Statements and Financial Statement Schedule.

        3.   Exhibits:


         Exhibit                                                       Method
         Number            Description                               of filing

           1               Underwriting Agreement                        1

           2               Agreement and Plan of Merger                  1

           3 (i) .1        Certificate of Incorporation                  1


           3 (i) .2        Certificate of Amendment to
                           Certificate of Incorporation                  1

           3 (ii)          Bylaws                                        1

           4.1             Form of Stock Certificate                     1

           4.2             Warrant Agreement                             1

           4.3             Form of Warrant Certificate                   3

           4.4             Form of Warrant-R.L. Renck & Company          3

          *10.1            1996 Incentive Stock Option Plan              1

          *10.2            Employee Stock Option Plan                    1


          *10.3            Non-Employee Director Stock Option Plan       1

          *10.4            Amendment to 1996 Incentive Stock Option Plan 2

          *10.5            1997 Incentive Stock Option Plan              3

          *10.6            Charles R. Davis'
                           Performance Option Agreement                  2

           10.7            First National Bank Loan Document             2

           10.8            Branch Banking and Trust Loan Document        2

           10.9            Asset Purchase Agreement Awards & Gifts       2

          *10.10           1999 Stock Option Plan                        4

           27              Financial Data Schedule                       5

1.   Incorporated by reference to the Company's  registration  statement on Form
     10, file number 0-21717, filed in Washington, D.C.

2.   Incorporated by reference to the Company's  registration  statement of Form
     10-Q for the quarter ended September 30, 1998, filed in Washington, D.C.

3.   Incorporated by reference to the Company's  registration  statement of Form
     10K for the year ended December 31, 1998 filed in Washington, D. C.

4.   Incorporated  by reference to the  Company's  proxy  statement  file number
     0-271717, filed in Washington D.C.

5.   Filed herewith.

*Compensatory Plan.

(b)       Reports on Form 8-K
          None

<PAGE>


                                   SIGNATURES


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

                                                  CASCO INTERNATIONAL, INC.
                                                  (Registrant)


Dated:       March 27, 2000                   By:    /s/ Chares R. Davis
             -------------------------             ----------------------------
                                                     Charles R.  Davis
                                                     President


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


Dated:       March 27, 2000                     By:    /s/ S. Robert Davis
             -------------------------              ---------------------------
                                                       S. Robert Davis
                                                       Chairman of the Board,
                                                       and Director

Dated:       March 27, 2000                     By:    /s/ Charles R. Davis
             -------------------------              ---------------------------
                                                        Charles R. Davis
                                                        President, and Director
                                                   (Principal Executive Officer)


Dated:       March 27, 2000                      By:    /s/ Randall J. Asmo
             -------------------------               --------------------------
                                                        Randall J. Asmo
                                                        Director

Dated:       March 27, 2000                      By:    /s/ Michael P. Beauchamp
             -------------------------               ---------------------------
                                                        Michael P. Beauchamp
                                                        Director

Dated:       March 27, 2000                      By:    /s/ Jeffrey A. Ross
             -------------------------               ---------------------------
                                                        Jeffrey A. Ross
                                                        Chief Financial Officer,
                                                        and Secretary
                                                        (Principal Accounting
                                                         and Financial Officer)




<PAGE>



                            CASCO INTERNATIONAL, INC.

                          INDEX TO FINANCIAL STATEMENTS

                                                                          Page


Independent Auditors' Report--                                              30

         Hausser + Taylor LLP - for the years ended December 31, 1999,
        1998 and 1997.

Statements of operations--                                                  31

         Years ended December 31, 1999, 1998 and 1997.

Balance sheets--                                                            32

         December 31, 1999 and December 31, 1998.

Statements of cash flows--                                                  34

         Years ended December 31, 1999, 1998 and 1997.

Statements of stockholders' equity--                                        35

         Years ended December 31, 1999, 1998 and 1997.

Notes to the financial statements--                                         36

         Years ended December 31, 1999, 1998 and 1997.


         All schedules for which provision is made in the applicable  accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.



<PAGE>



                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders of
CASCO INTERNATIONAL, INC.
Shelby, North Carolina

We have audited the accompanying  balance sheets of CASCO  INTERNATIONAL,  INC.,
(the "Company"), as of December 31, 1999 and 1998, and the related statements of
operations,  stockholders' equity, and cash flows for each of the three years in
the  period  ended  December  31,  1999.  These  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on the financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audits provide a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of the  Company as of December  31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the  period  ended  December  31,  1999 in  conformity  with  generally
accepted accounting principles.


                                                /s/ Hausser +  Taylor LLP

Columbus, Ohio
March 16, 2000


<PAGE>

<TABLE>
<CAPTION>


                            CASCO INTERNATIONAL, INC.
                             STATEMENT OF OPERATIONS

              For the years ended December 31, 1999, 1998 and 1997



                                    1999              1998              1997
                               -------------     -------------     -------------
<S>                             <C>              <C>                <C>
Revenue ........................   $ 24,199,483    $ 21,718,213    $ 19,332,922

Operating costs and expenses:
     Cost of goods sold ........     13,318,115      12,716,740      11,417,111
     Selling, general and
     administrative ....       .      9,136,391       8,377,665       7,761,328
     Depreciation and amortization      722,104         520,027         358,855
                                    ------------    ------------    ------------
          Total operating costs
          and expenses .             23,176,610      21,614,432      19,537,294

Operating income (loss) ..........    1,022,873         103,781        (204,372)

Other expense:
     Interest expense .............     372,378         335,871         469,355
     Loss on sale of building ........    ----          151,144           ----
                                    ------------    ------------    ------------
          Total other expenses ....     372,378         487,015         469,355

Income (loss) before income taxes and
     extraordinary item ...........     650,495        (383,234)       (673,727)
Benefit (provision) for income taxes ..(293,000)        145,500         256,000
                                    ------------    ------------    ------------

Income (loss) before extraordinary gain on
     retirement of debt .......        357,495         (237,734)       (417,727)
                                    ------------    ------------    ------------

Extraordinary gain on retirement of debt (less
      income taxes of $570,000) ..     ----             930,000          ----
                                    ------------    ------------    ------------
Net Income (Loss) ..............   $    357,495    $    692,266     $  (417,727)
                                    ============    ============    ============

EARNINGS PER SHARE BASIC AND DILUTIVE
Income (loss) before
   extraordinary item ......       $       0.20    $      (0.13)    $     (0.34)
Extraordinary gain on
   retirement of debt                      --              0.52            --
                                    ------------    ------------    ------------
Net Income (Loss) ...              $       0.20    $       0.39     $     (0.34)
                                    ============    ============    ============

Weighted average common
  shares outstanding ...              1,783,200       1,783,200       1,225,447
                                   ============    ============    ============
</TABLE>




          The accompanying notes are an integral part of the financial
                                  statements.


<PAGE>
<TABLE>
<CAPTION>



                            CASCO INTERNATIONAL, INC.
                                 BALANCE SHEETS

                           December 31, 1999 and 1998

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

Current Assets:
     Cash ......................                     $    6,797      $  107,482
     Accounts receivable .........................    4,910,886       5,540,162
     Inventory ...................................    4,714,063       5,265,797
     Prepaid expenses ............................    1,033,274       1,096,277
     Deferred tax asset ..........................      102,000            --
                                                   ------------    ------------

                 Total current assets ............   10,767,020      12,009,718
                                                   ------------    ------------
Buildings and equipment:
     Buildings ...................................    2,627,727       2,602,793
     Equipment .................................      3,223,615       2,819,104
                                                   ------------    ------------
                                                      5,851,342       5,421,897
     Less accumulated depreciation .............     (2,540,828)     (1,974,403)
                                                   ------------    ------------
                                                      3,310,514       3,447,494
Land ...........................................        111,468         111,468
                                                   ------------    ------------

                 Total property and equipment, net    3,421,982       3,558,962
                                                   ------------    ------------
Other assets:
     Cost in excess of net assets acquired, net of
        accumulated amortization of $479,819 and
        $342,244 respectively ....................    2,406,250       2,541,899
     Other .......................................      748,376         732,024
                                                   ------------    ------------
                                                      3,154,626       3,273,923
                                                   ------------    ------------

TOTAL ASSETS ...................................   $ 17,343,628    $ 18,842,603
                                                   ============    ============
</TABLE>



          The accompanying notes are an integral part of the financial
                                  statements.

<PAGE>
<TABLE>
<CAPTION>



                            CASCO INTERNATIONAL, INC.
                                 BALANCE SHEETS

                           December 31, 1999 and 1998

     LIABILITIES AND STOCKHOLDERS' EQUITY              1999            1998
                                                   ------------    ------------
<S>                                                 <C>            <C>

Liabilities:
     Accounts payable ..........................   $    965,112    $  1,234,869
     Short-term debt obligations ...............      2,500,465       3,882,269
     Accrued liabilities .......................        304,273         360,370
     Advanced deposits-current .................      1,854,785       1,926,406
     Accrued taxes payable .....................        355,000            --
                                                   ------------    ------------

                 Total current ...................    5,979,635       7,403,914
                 liabilities
                                                   ------------    ------------

Long-term debt ...................................    2,189,716       2,413,154
Advanced deposits-noncurrent .....................    2,402,975       2,653,353
Deferred tax liability ...........................      533,775         492,150
                                                   ------------    ------------

                 Total Liabilities .............     11,106,101      12,962,571
                                                   ------------    ------------

Commitments and contingencies                            --               --

Stockholders' equity:
     Preferred shares:  $.01 par value; authorized
       300,000 shares; none issued and outstanding       --               --
     Common shares par value $.01, authorized
       5,000,000, issued 1,783,200 ...............       17,832          17,832
     Capital in excess of par value ..............    6,417,586       6,417,586
     Accumulated deficit .........................     (197,891)       (555,386)
                                                   ------------    ------------

                 Total stockholders' equity ....      6,237,527       5,880,032
                                                   ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .....   $ 17,343,628    $ 18,842,603
                                                   ============    ============

</TABLE>


          The accompanying notes are an integral part of the financial
                                  statements.


<PAGE>
<TABLE>
<CAPTION>

                            CASCO INTERNATIONAL, INC.
                            STATEMENTS OF CASH FLOWS

              For the years ended December 31, 1999, 1998 and 1997

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

Cash flows from operating activities:

    Net income (loss)              $    357,495    $    692,266    $   (417,727)
    Adjustments to  reconcile  net income  (loss) to cash
      provided by operating activities:
      Depreciation and amortization    722,104         520,027         358,855
      Loss of sale of building ........  --            151,144            --
      Extraordinary gain on
       retirement of debt                --         (1,500,000)           --
      Changes in assets and liabilities:
      (Increase) decrease in assets:
         Accounts receivable .......   629,276        (496,739)       (399,396)
         Inventory . ..........        551,734        (595,713)      2,422,613
         Prepaid expenses and
           other assets ................28,246        (174,792)       (179,221)
       Increase (decrease) in liabilities:
         Accounts payable and
           accrued liabilities ...      29,146         212,970        (531,907)
         Advanced deposits ...........(321,999)         69,771        (377,955)
                                   ------------    ------------    ------------
            Total adjustments .......1,576,507       1,388,832       1,036,989
                                   ------------    ------------    ------------

Net cash provided by (used in)
  operating activities .........     1,934,002        (696,566)        619,262
                                  ------------    ------------    ------------

Cash flows from investing activities:
    Sale of building                      --           421,187            --
    Payments for purchases of
      property and equipment ..       (429,445)       (731,436)       (159,430)
                                   ------------    ------------    ------------
Cash used in investing activities .   (429,445)       (310,249)       (159,430)

Cash flows from financing activities:
    Proceeds from debt obligation   18,677,466      13,759,044      14,905,007
    Principal payments on debt .   (20,282,708)    (12,718,263)    (18,574,753)
    Issuance of Common Stock Units        --              --         3,152,459
                                   ------------    ------------    ------------
Cash provided by (used in)
   financing activities ............(1,605,242)      1,040,781        (517,287)

Increase (decrease) in cash ..........(100,685)         33,966         (57,455)
Cash, beginning of year .......        107,482          73,516          130,971
                                   ------------    ------------    ------------
Cash, end of year .                $     6,797     $   107,482     $     73,516
                                   ============    ============    ============

Other Cash Flow Information:
    Cash payments during the year for:
      Interest                     $   386,069     $   307,156     $    469,355
      Income taxes, net of refunds       7,000            --              --

Noncash Financing Activities:
    Payment of subordinated debt ..$      --       $ 3,500,000     $      --
    Subordinated debt replaced
      with line of credit .        $      --       $ 3,500,000     $      --
    Acquisitions of assets
      and goodwill                 $      --       $ 1,745,642     $      --
    Increase in line of credit
      for acquisitions .           $      --       $ 1,745,642 $
    Subordinated debt with Pages
      assumed at spin-off          $      --       $      --       $  5,000,000
    Due to Pages replaced with
      subordinated debt ..         $      --       $      --       $  4,124,975
    Decrease in capital in excess
      of par value and ...         $      --       $      --       $    875,025
      common stock from spin-off
</TABLE>

    The accompanying notes are an integral part of the financial statements.

<PAGE>
<TABLE>
<CAPTION>

                            CASCO INTERNATIONAL, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY

              For the years ended December 31, 1999, 1998 and 1997


                                            Capital in
                                   Common   Excess of Accumulated
                           Shares   Stock   Par Value   Deficit       Total
                          -------  ------   ---------  ---------    ---------
<S>                        <C>      <C>     <C>          <C>         <C>

Balance December 31, 1996 . 334.91 $    3  $4,157,982 $ (829,925)  $ 3,328,060

Spinoff from Pages         (334.91)    (3)   (884,313)  (884,316)

Distribution to
  Pages stockholders       929,103   9,291      ----       ----           9,291

Stock Dividend ..........   74,097     741        (741)    ----          ----

Offering ...............   780,000   7,800   3,144,658     ----       3,152,458

Net loss ....................----     ----      ----     (417,727)     (417,727)
                          --------- ------   ----------  ----------   ----------
Balance
  December 31, 1997 .    1,783,200  17,832   6,417,586 (1,247,652)    5,187,766

Net Income ..................----    ----       ----      692,266       692,266
                        ----------- -------  ----------  --------     ---------

Balance
  December 31, 1998 ..   1,783,200  17,832   6,417,586   (555,386)    5,880,032

Net Income ..................----    ----       ----      357,495       357,495
                        ----------- ------  ----------- ---------    -----------
Balance
  December 31, 1999 ..   1,783,200 $17,832 $ 6,417,586  $(197,891)  $ 6,237,527
                       =========== ======= ===========  ==========  ===========

</TABLE>



               The accompanying notes are an integral part of the
                             financial statements.

<PAGE>

                            CASCO INTERNATIONAL, INC.


                          NOTES TO FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

         The Company is engaged in the design,  implementation,  and fulfillment
of incentive  awards and  recognition  programs for  businesses  throughout  the
United States. The Company's corporate  headquarters is located in Shelby, North
Carolina.


BASIS OF PRESENTATION

         On February 28, 1990, in a transaction accounted for as a purchase, all
of the outstanding stock of the Company was acquired by Pages,  Inc.  ("Pages").
These  financial  statements  were  prepared  under the  resulting  new basis of
accounting  that  reflects the fair values of assets  acquired  and  liabilities
assumed.

        On July 30, 1998 the Company  entered  into an  agreement  with Awards &
Gifts,  Inc.  and  Richard  W.  Terlau,  Jr.,  providing  for  the  purchase  of
substantially  all  assets  and  certain  liabilities  of  Awards & Gifts by the
Company.  The Company utilized purchase  accounting for this acquisition.  Under
the terms of the Asset Purchase  Agreement,  the assets  included Awards & Gifts
customer list, machinery and equipment, inventories, Awards & Gifts intellectual
property assets, prepaid expenses, and a real property lease. The purchase price
for the assets was $1.5  million  with certain  adjustments  made for  pro-rated
items,  with $1.3 million in cash and a $200,000  promissory  note.  The note is
secured by an  Irrevocable  Standby  Letter of Credit issued by Branch Banking &
Trust  Company.  The  purchase  price  under the Asset  Purchase  Agreement  was
determined by arm's length negotiations  between the parties based on the market
value  of  the  assets  purchased  and  sold.  The  goodwill  acquired  in  this
transaction will be amortized over fifteen years using the straight-line method.
The  acquisition  was financed with proceeds from its revolving  credit facility
with Branch Banking & Trust Company.

        On October 1, 1998 the Company  entered into an agreement  with American
Awards & Gifts,  Inc.  and Frank G. and Judith J.  McGinnis,  providing  for the
purchase of substantially all assets and certain  liabilities of American Awards
& Gifts, Inc. by the Company.  The Company utilized purchase accounting for this
acquisition.  Under  the  terms of the  Asset  Purchase  Agreement,  the  assets
included American Awards & Gifts customer list,  machinery and equipment,  tools
and dies,  inventories,  intellectual  property assets, and general intangibles,
the  liabilities  included  the  assumption  of certain  accounts  payable.  The
purchase  price for the assets was $255,177 with $100,000 in cash and a $155,177
promissory  note.  The purchase  price under the Asset  Purchase  Agreement  was
determined by arm's length negotiations  between the parties based on the market
value  of  the  assets  purchased  and  sold.  The  goodwill  acquired  in  this
transaction will be amortized over fifteen years using the straight-line method.


<PAGE>


         Effective  at the close of business on December  31,  1996,  a tax free
spin off of the  Company's  common stock from its parent,  Pages,  was completed
(the "Distribution").  In the Distribution, for every ten shares of Pages common
stock  outstanding on the record date, one and one-half  shares of the Company's
common stock was distributed to Pages' stockholders.

USE OF MANAGEMENT ESTIMATES

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles requires that management make certain estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements.  The reported  amounts of revenues and expenses during the reporting
period may be affected by the estimates and  assumptions  management is required
to make. Actual results could differ from those estimates.

REVENUE RECOGNITION

         Revenues  from the sale of incentive  awards are  generally  recognized
upon  shipment  and  delivery  of the  related  merchandise  except for  revenue
recognized   relating  to  advanced   deposits.   Revenues   from  services  are
insignificant.  Returns from the sales of incentive awards and from services are
insignificant.


ACCOUNTS RECEIVABLE

         The Company sells its products to numerous  commercial  and  industrial
customers across the United States and Canada. The accounts  receivable are well
diversified and are expected to be repaid in the normal course of business.

INVENTORY

         Inventory consists of general retail  merchandise.  Inventory is valued
at the lower of cost or market using the first-in, first-out (FIFO) method.


PREPAID EXPENSES

         Prepaid  expenses at December  31, 1999 and 1998  include  $629,263 and
$694,338,  respectively,  of  prepaid  selling  costs  that  include  costs  for
commissions paid to sales people that relate to advanced  deposits for the sales
of  incentive  and  recognition   awards  programs.   Such  costs  are  directly
attributable to obtaining  specific  future  commitments and are expensed in the
year the related revenue is recorded.


BUILDINGS AND EQUIPMENT

         Buildings and equipment are recorded at cost and depreciated over their
estimated useful life on the straight-line method.  Estimated useful lives range
from three to thirty-one  years.  Major repairs and betterments are capitalized;
minor repairs are expensed as incurred. Depreciation expense for the years ended
December 31,  1999,  1998 and 1997,  totaled  $566,424,  $438,681 and  $324,691,
respectively.


<PAGE>


COST IN EXCESS OF NET ASSETS ACQUIRED AND OTHER ASSETS

         Cost in excess of net assets  acquired are amortized on a straight line
basis over 40 and 15 years. Management periodically evaluates its accounting for
cost in excess of net assets acquired by considering  such factors as historical
performance,  current  operating  results and future operating  income.  At each
balance sheet date, the Company evaluates the realizability of cost in excess of
net assets acquired based upon estimated  nondiscounted  cash flows.  Based upon
its most recent analysis,  the Company  believes that no material  impairment of
cost in excess of net assets acquired exists at December 31, 1999. Based on this
periodic review,  management  believes that the carrying value of cost in excess
of net assets acquired is reasonable and the amortization period is appropriate.
Amortization  expense  on cost in excess of net  assets  acquired  for the years
ended December 31, 1999,  1998 and 1997 totaled  $137,575,  $77,274 and $34,162,
respectively.

         Other assets include cash surrender value of life  insurance,  deferred
loan costs and  non-compete  agreements.  The deferred  loan costs are amortized
using  the  straight  line  method  over  the  terms of the  related  contracts.
Amortization  expense  totaled  $18,105,  $7,071  and $0,  for the  years  ended
December 31, 1999, 1998 and 1997, respectively.


INCOME TAXES

         The Company  utilizes  Statement  of  Financial  Accounting  Statements
("SFAS")  No.  109,  "Accounting  for Income  Taxes".  Under SFAS No.  109,  the
liability  method is used in accounting for income taxes.  Deferred income taxes
reflect  the net tax  effects of  temporary  differences  between  the  carrying
amounts of assets and  liabilities  for  financial  reporting  purposes  and the
amounts used for income tax  purposes,  and are  measured  using the enacted tax
rates and laws  that will be in effect  when the  differences  are  expected  to
reverse.  As noted above,  the Company was a  wholly-owned  subsidiary  of Pages
through December 31, 1996 when a tax-free spin off was completed.


PROFIT SHARING PLANS

         The Company has a noncontributory  profit sharing  retirement plan (the
"Plan"),  covering a significant number of employees for which accrued costs are
funded.  Company  contributions  to the Plan are  discretionary.  There  were no
Company contributions for the years ended December 31, 1999, 1998 and 1997.

LONG-LIVED ASSETS

         The Company  utilizes SFAS No. 121  "Accounting  for the  Impairment of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed of" which required
adoption in 1996.  The general  requirements  of SFAS No. 121 apply to the fixed
and  intangible  assets of the Company and require  impairment  to be considered
whenever  assets are disposed of or whenever  events or change in  circumstances
indicate that the carrying amount of the asset will not be recoverable  based on
expected future cash flows of the asset. The Company periodically  evaluates the
recoverability  of  long-lived  assets and measures the amount of  impairment if
any. There were no impairment adjustments at December 31, 1999, 1998 and 1997.


FAIR VALUE OF FINANCIAL INSTRUMENTS

     The estimated  fair value of amounts  reported in the financial  statements
have  been  determined   using  available   market   information  and  valuation
methodologies,  as  applicable.  The  carrying  value of all current  assets and
liabilities  approximates the fair value because of their short term nature. The
fair values of non-current  assets and  liabilities  approximate  their carrying
value  based  on  current  market  prices.  (Refer  to  Note 8 for  purchase  of
debentures in 1999.)


STOCK-BASED COMPENSATION

         The Company has elected to follow  Accounting  Principles Board Opinion
No.  25,  "Accounting  for  Stock  Issued  to  Employees"  (APB 25) and  related
interpretations  in accounting  for its employee  stock  options.  Under APB 25,
because the exercise prices of employee stock options equals the market price of
the underlying stock on the date of grant, no compensation  expense is recorded.
The  company  has  adopted  the  disclosure-only  provisions  of SFAS  No.  123,
"Accounting for Stock-Based Compensation" (SFAS No. 123).

2.       STOCK OPTIONS AND WARRANTS

         At  December  31,  1999,  835,000  common  shares of the  Company  were
reserved for issuance under the incentive stock option plans, 40,000 shares were
reserved under the non-employee director stock option plans and 1,620,000 shares
were reserved under outstanding warrants. The 1999 option plan of 600,000 shares
includes both  employees and directors.  Additionally,  200,000 common shares of
the Company were reserved under a performance option plan for the President.



<PAGE>
<TABLE>
<CAPTION>




                                   December 31, 1999         December 31, 1998
                                 ------------------------  ---------------------
                                         Weighted Average       Weighted Average
Incentive Stock Option Plan       Number  Exercise Price  Number  Exercise Price
---------------------------       ------  -------------- ------   --------------
<S>                              <C>             <C>      <C>     <C>

  Outstanding, beginning of year ...273,140   $ 2.8001    93,460   $ 3.4005
  Granted ......................... 421,500   $ 1.7649   189,000   $ 2.5331
  Canceled ..........................93,500   $ 2.3529     9,320   $ 3.4067
  Exercised ...........................None      --       None      --
                                    -------   -------   -------   -------

Outstanding, end of year ........   601,140   $ 2.1438   273,140   $ 2.8001
                                     -------   -------   -------   --------

Exercise price range of options
outstanding ..............          $1.0000             $1.0000
                                         to                  to
                                    $3.7037             $3.7037

Non-Employee Director Option Plan

  Outstanding, beginning of year     55,800   $2.8094    10,800    $4.1700
  Granted ..........................180,000   $1.7500    45,000    $2.5833
  Canceled ..........................15,000   $2.0000     None        --
  Exercised .......................... None      --       None        --
                                    -------   -------    -------   -------

Outstanding, end of year ...........220,800   $2.0212    55,800    $2.8904
                                    -------   -------    -------   -------


Exercise price range of options
outstanding ........                $  1.75              $ 2.00
                                         to                  to
                                    $  4.17              $ 4.17
</TABLE>

         The weighted average remaining life on options  outstanding at December
31, 1999 is 4.23 years.

         The incentive stock options are exercisable at the fair market value on
the date of grant,  and were available from the 1996, 1997 and 1998 stock option
plans.  The options  outstanding  at December 31, 1999 are  exercisable  through
January 17, 2002, December 29, 2002 and May 5, 2004 respectively.

         The  non-employee  Director  options are exercisable at the fair market
value on the date of grant.  The non-employee  Director  options  outstanding at
December 31, 1999 are exercisable through October 12, 2003.
<PAGE>

         Warrants  to purchase  1,560,000  shares of CASCO  INTERNATIONAL,  INC.
common stock were issued in  September  1997 as part of the unit  offering.  The
warrants are  exercisable  for five years from the date of issuance at $5.50 per
share.

     Warrants to purchase  30,000 shares of CASCO  International,  Inc.,  common
stock were issued February 28, 1998 to R. L. Renck & Co., Inc. The Warrants vest
at 2,500 per month  commencing  on  February  28,  1998 and  continuing  through
January 31,  1999 at an  exercise  price of $3.00 per share.  The  warrants  are
exercisable for five years from the date of issuance.

     Additional warrants to purchase 30,000 shares of CASCO International, Inc.,
common  stock were issued June 27, 1999 to R. L. Renck & Co.,  Inc. The warrants
vest at 10,000  shares on June 27, 1999 then at a rate of 2,500 shares per month
from June 27, 1999 to February 26, 2000 at an exercise price of $2.75 per share.
The warrants are exercisable for five years from the date of issuance.

<TABLE>
<CAPTION>

                                                                Proceeds
             Date Granted         Shares        Exercise       to Company
               or Issued        Exercisable       Price        Upon Exercise
             -------------      -----------     --------       -------------
Incentive
Stock Options:
<S>             <C>                <C>           <C>             <C>

1996 Plan   January 17, 1997      19,440   $     3.7037      $ 72,000
1996 Plan   March 26, 1997         5,400         3.7037        20,000
1996 Plan   March 12, 1997        37,800         3.2407       122,498
1997 Plan   December 29, 1997      9,000         3.0625        27,563
1997 Plan   January 20, 1998      65,000         2.8750       186,875
1997 Plan   March 3, 1998         30,000         2.8125        84,375
1997 Plan   March 10, 1998         3,000         3.0000         9,000
1997 Plan   April 1, 1998          5,000         3.5000        17,500
1997 Plan   October 12, 1998       5,000         1.0000         5,000
1997 Plan   May 27, 1999          15,000         1.7500        26,250
1999 Plan   May 27, 1999         396,500         1.7500       693,875
1999 Plan   October 20, 1999      10,000         2.3800        23.800



Non-Employee

1996 Plan ..June 25, 1997         10,800   $     4.1667       45,000
1996 Plan ..January 20, 1998      30,000         2.8750       86,250
1999 Plan ..May 27, 1999         180,000         1.7500      315,000

Warrants: ..September 19, 1997 1,560,000       $ 5.50      8,580,000
            February 28, 1998     30,000         3.00         90,000
            June 27, 1999 ...     30,000         2.75         82,500

Total ...........              2,441,940                 $10,487,486
                         ===============                 ===========

</TABLE>

<PAGE>


         Pro forma  information  regarding  net income and earnings per share is
required by SFAS 123, and has been  determined  as if the Company had  accounted
for its employee  stock options  under the fair value method of that  Statement.
The fair value for these  options  was  estimated  at the date of grant  using a
Black-Scholl's   option  pricing  model  with  the  following  weighted  average
assumptions for 1999, 1998 and 1997.

<TABLE>
<CAPTION>

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

Risk-free interest rate               6%                6%                6%
Dividend yield                        0%                0%                0%
Volatility factor                 104.4%            107.7%             82.7%
Weighted average expected
  life in years                       5                 5                 5
</TABLE>

         For purposes of pro forma disclosures,  the estimated fair value of the
options is amortized to expense over the options' vesting period.  The Company's
pro forma net income (loss) and earnings per share were as follows:
<TABLE>
<CAPTION>


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

Net income (loss) as reported      $   1,357,000   $   692,266  $    (417,727)
Net income (loss)-pro forma              357,495       623,266       (430,727)
Income (loss) per
  common share-as reported         $         .20   $       .39  $       (.34)
Income (loss) per
  common share-pro forma           $         .13   $       .35  $       (.35)
Weighted average fair value of
   options granted during the year $        1.76   $      2.53  $       2.60
</TABLE>

         The pro forma  effect of these  options on net loss and loss per common
share was not material. These pro forma calculations only include the effects of
1999, 1998 and 1997 grants. As such, the impacts are not necessarily  indicative
of the effects on reported net income of future years.


3.       STOCK DIVIDENDS

         On June 1, 1997,  the  Company  declared  an 8% stock  dividend  on its
common stock for  stockholders  of record on July 16, 1997. The payment date for
the stock dividend was August 1, 1997. As a result of the stock dividend, 74,097
additional  shares  were  issued;  capital in excess of par value was reduced by
$741. There was no distribution or cash payment relating to fractional shares.
<PAGE>


4.       DEBT OBLIGATIONS

         Debt obligations consisted of the following:
<TABLE>
<CAPTION>


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

Line of  credit  with  interest  at
prime  plus 1/2  percent;  interest  payable
monthly,  maturing on July 30, 2000,  collateralized
by accounts  receivable and
inventory of the Company ($2,737,811 available
at December 31,1999).                2,262,189                      $3,644,492

First National Bank first deed of trust
on the Shelby facilities.  Payable in
monthly installments of $24,088 including
interest (7 1/2 percent) through March of
2013.  The term of the loan is fifteen years,
callable after five years and guaranteed by the
President.                           2,209,767                       2,302,460

Promissory note payable with
interest at 8 percent, payable in
two annual installments through July 30, 2000.
Collateralized by letter of credit at Branch
Banking & Trust.                       100,000                         200,000

Promissory  note  payable  with  interest
at  6  percent,  payable  in  monthly
installments through
October 1, 2003.                       118,225                         148,471
                           --------------------          ----------------------
                                     4,690,181                       6,295,423
Current portion                      2,500,465                       3,882,269
                           --------------------          ----------------------
Long term portion                   $2,189,716                      $2,413,154
                           ====================          ======================
</TABLE>

     The  interest  rate for the line as of December 31, 1999 and 1998 was prime
plus 1/2 percent.

     The prime  interest  rate at December 31, 1999 and 1998 was 8.5 percent and
7.75 percent, respectively. The carrying amount of the Company's short term debt
obligations approximates fair value.

     The line of credit  facility also  includes  certain  financial  covenants,
including  covenants that the Company  maintain  certain  financial  ratios.  In
addition,  the credit  facility  contains  limitations on capital  expenditures,
fixed  asset  sales,  loans  and/or  advances  to  shareholders  and  employees,
restrictions  on operating  leases and  limitation  on dividends  paid on common
stock to $100,000  annually.  As of December 31, 1999 the Company was in default
on the capital  expenditure  covenant.  The Company received a waiver letter for
the default as of December 31, 1999.

The  aggregate  long-term  debt payments as of December 31, 1999 for each of the
next five years are:

                        2000     $  229,582
                        2001        141,763
                        2002        152,266
                        2003      1,901,970
                        2004              0
                                ------------
                   Thereafter    $2,425,581
                                 ==========

<PAGE>




5.       COMMITMENTS AND CONTINGENCIES

     The Company is obligated  under  various  noncancelable  operating  leases.
Operating leases are principally for office and warehouse facilities,  equipment
and vehicles. Rent expense under operating leases amounted to $269,962, $152,128
and  $125,570,   for  the  years  ended  December  31,  1999,   1998  and  1997,
respectively.  The future minimum rentals under non-cancelable  operating leases
during subsequent fiscal years are as follows:


                              YEARS ENDING
                               DECEMBER 31,
                                    2000                      $  236,921
                                    2001                         151,798
                                    2002                          68,460
                                                             ------------
                                                               $ 457,179

         The  Company is also  involved  in  certain  legal  proceedings  in the
ordinary course of its business  which,  if determined  adversely to the Company
would, in the opinion of management,  not have a material  adverse effect on the
Company or its operations.


6.       INCOME TAXES


         Temporary  differences  between income for financial reporting purposes
and tax reporting  purposes relate primarily to accounting methods for inventory
costs,  revenues  earned,   accrued  and  prepaid  expenses  and  reserves,  and
depreciation.

         For the years  presented,  the expense  (benefit) for income taxes from
continuing operations consisted of the following.
<TABLE>
<CAPTION>

                                          December 31, December 31, December 31,
                                             1999          1998         1997
                                             ----          ----         ----
<S>                                        <C>            <C>            <C>

Current ................................   $ 355,000         --           --

Deferred

   Federal .............................     (58,000)    (130,300)    (217,000)
   State and Local .....................      (4,000)     (15,200)     (39,000)
                                           ---------    ---------    ---------
Net deferred benefit ...................     293,000     (145,500)    (256,000)

Net deferred expense (benefit) for taxes   $ (62,000)   $(145,500)   $(256,000)
                                           =========    =========    =========

</TABLE>


<PAGE>



         For  the  years  presented,  a  reconciliation  of  income  taxes  from
continuing  operations  based upon the application of the federal  statutory tax
<TABLE>
<CAPTION>
rate is as follows:

                                          December 31, December 31, December 31,
                                             1999         1998          1997
                                             ----         ----          ----
<S>                                         <C>             <C>            <C>

Income tax expense (benefit)
  at statutory rate                           $247,000   $(145,700)   $(229,100)
Goodwill amortization ......................    13,000      13,650       13,650
State taxes net of federal benefit .........    26,000     (15,300)     (40,400)
Other ......................................     7,000       1,850         (150)
                                              --------   ---------    ---------

       Total income tax expense (benefit) ..  $293,000   $(145,500)   $(256,000)
                                              ========   =========    =========

</TABLE>

The components of net deferred taxes are as follows:
<TABLE>
<CAPTION>

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

Assets:
   Inventory costs capitalized
     for tax purposes ...........                 $68,000             $  73,100
   Accruals and reserves to be
     expensed as paid for tax purposes             34,000                81,500
   Other ............................................--                  27,850
   Net operating loss carry forwards ..............  --                 296,400
                                                 ---------            ---------
Deferred tax assets ..............................102,000               478,850

Liabilities:
   Revenues to be earned net of cost ............... --                (301,000)
   Excess of tax over financial accounting
     depreciation and amortization ..........    (533,775)             (670,000)
                                                 ---------            ---------
Deferred tax liability ..........................(533,775)             (971,000)
                                                 ---------            ---------

Net deferred tax liability .....................$(431,775)            $(492,150)
                                                 =========            =========
</TABLE>


         The Company changed its effective rate to 38% in 1998 from 40% in 1997.
The Company  utilized  approximately  $780,000,  $1,065,000  and $647,000 of net
operating  loss  carryforward  for the years ended  December 31, 1999,  1998 and
1997, respectively.


7.      Earnings Per Common and Common Equivalent Share

         Earnings  per common  and common  equivalent  share  were  computed  by
dividing  net income by the  weighted  average  number of shares of common stock
outstanding during the year. At December 31, 1999 and 1998, the number of common
shares  was  increased  by the  number of shares  issuable  on the  exercise  of
outstanding stock options and warrants when the market price of the common stock
exceeds the exercise  price of the options and  warrants.  This  increase in the
number of common  shares was  reduced by the  number of common  shares  that are
assumed  to have been  purchased  with the  proceeds  from the  exercise  of the
options;  those purchases were assumed to have been made at the average price of
the  common  stock  during  that part of the year when the  market  price of the
common stock exceeded the exercise price of the options.

         The  following  data show the amounts  used in  computing  earnings per
share (EPS) and the effect on income and the weighted  average  number of shares
of dilutive potential common stock.



Income available to common
 stockholders used in basic
 EPS and diluted EPS                $        357,495  $       692,266
                                     ===============  ===============
Weighted average number
of common shares used in
basic EPS                                  1,783,200        1,783,200

Effect of dilutive securities:
  Stock options and warrants                  43,242           16,500
                                      --------------   --------------

Weighted number of common
shares and dilutive potential
common stock used in diluted
EPS                                        1,826,442        1,799,700
                                      ==============    =============


         Options and warrants on 1,461,815 and 1,353,940  shares,  respectively,
of common stock were not  included in computing  diluted EPS for the years ended
December 31, 1999 and 1998 because their effects were antidilutive.


     The common  equivalent  stock  outstanding  at  December  31, 1997 would be
antidilutive for the year due to the net operating loss.

8.       LOSS ON SALE OF BUILDING

     On March 4, 1998 the  Company  sold its  167,000  sq.  ft.  Kings  Mountain
Warehouse.  The sale  netted the  Company  approximately  $425,000.  The Company
recorded a loss on the sale, which totaled $151,144.

<PAGE>


9.       EXTRAORDINARY GAIN ON RETIREMENT OF DEBT

         On  January  23,  1998,  the  Company  redeemed  at  a  discount,   the
subordinated  debenture  due to Pages on January 1, 2002.  The  debenture in the
original  principal  amount of $5 million was  redeemed  for $3.5  million.  The
Company replaced the Pages debt with proceeds from the line of credit.  The debt
retirement resulted in an extraordinary gain of $930,000 after tax of $570,000.

         For the year ended December 31, 1998,  the impact of the  extraordinary
gain on basic and diluted earnings (loss) per share was as follows:

                                                          Basic        Diluted

  Loss before extraordinary gain         $  (237,734)  $    (.13)   $     (.13)
  Extraordinary gain on retirement
     of debt (less income taxes
     of $570,000)                            930,000         .52           .52
                                       --------------   -----------  -----------
  Net income                             $   692,266   $     .39    $      .39
                                       --------------   ----------- ------------


<PAGE>





DIRECTORS:                                COMPANY OFFICES:

S. Robert Davis, Chairman of the Board    Headquarters:
                                          13900 Conlan Circle, Suite 150
Charles R. Davis, President and CEO       Charlotte, NC 28277

David J. Richards, Director

                                          Operations and Distribution Center:
Michael P. Beauchamp, Director            4205 East Dixon Boulevard
                                          Shelby, North Carolina 28152
Randall J. Asmo, Director

Rodney L. Taylor, Director


CORPORATE OFFICERS:


Charles R. Davis, President
Jeffrey A. Ross, Chief Financial
Officer and Secretary

AVAILABILITY OF EXHIBITS TO FORM 10-K:
Exhibits  to Form 10-K  Report  are on file  with the  Securities  and  Exchange
Commission  and are  referenced  on the Exhibit  Index  contained  herein above.
Exhibits  are  available  upon  request,  at $0.25  per page,  representing  the
Registrant's reasonable expenses in furnishing such exhibit(s).  Exhibits may be
obtained by writing to Jeffrey A. Ross, Secretary, CASCO INTERNATIONAL, INC.


STOCK TRANSFER AGENT AND REGISTRAR:

American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005



AUDITORS:

Hausser + Taylor LLP
471 East Broad Street
Suite 1200
Columbus, Ohio 43215