UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K



               [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934


                                       OR

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

                         For the transition period from
                 ..................to.........................


                   For the fiscal year ended December 31, 2000

                         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.)


               13900 Conlan Circle, Suite 150, Charlotte, NC 28277
               ---------------------------------------------------
               (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. [ ]

The aggregate  market value of the voting shares held by  non-affiliates  of the
Registrant  as of March 29, 2001 was  $9,138,900  (computed  by reference to the
average bid and asked prices of such shares on such date).
<PAGE>

Number  of  Common  Shares,  each  with  $0.01  par  value,  of  the  Registrant
outstanding as of date: March 29, 2001: 1,774,186 Common Shares.


                                     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".

     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,  Philips Magnavox,  Waterford,  Bulova,  Canon, and
Bushnell and Black & Decker.  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

     In 2000 the Company  engaged an  investment  banker to assist it in raising
capital  to fund a  subsidiary  of the  company  in the  business  of  providing
fulfillment  services  to  ecommerce  businesses.  At this time the  Company has
determined not to pursue development of an e-fulfillment business and had tabled
its efforts to raise funds for that purpose.

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.

LARGE CUSTOMERS

     The Company has relationships with certain customers that the loss of these
cusomters could have a material adverse effect on the Company. No one individual
customer  accounts  for greater than 10% of the  Company's  total  revenue.  See
SK101(c)(viii)

BACKLOG

     As of  March  20,  2001  the  Company  had a  backlog  of  orders  totaling
$1,098,025  compared to a backlog of $1,098,615 on March 20, 2000.  All of these
orders are expected to ship within the next thirty day period.

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.
<PAGE>

SALES AND MARKETING

     In 2000,  the Company  revamped its sales and  marketing  strategy.  It has
differentiated itself from the competition, which markets corporate symbolism to
personal   recognition,   which  combines  corporate  symbolism  and  individual
recognition.  The Company  clearly  defined and identified  target  prospects in
strategic  markets  across the country.  The Company's  mission is: "To have the
best trained,  most responsive,  performance  based sales force in America." The
Company plans on  accomplishing  these  initiatives by utilizing a fully staffed
inside  sales group,  employee  full time sales  representatives  and the use of
independent sales representatives throughout the country.

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 March 15, 2001 the Company employed a total of 120 regular employees.
The number of  seasonal  employees  fluctuated  during 2000 from a low of 5 to a
high of 43 in the months of  November,  December  and  January  when the Company
generates  approximately  thirty  six  percent of its  revenues  and most 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 March 15, 2001,  the Company's  health care plan covered 93 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
Shelby, North Carolina .........   Warehouse Outlet     4,000 sq. ft.     Leased

     These facilities are located in appropriately  designed buildings which are
kept in good repair.  The property  owned by the Company is pledged to a lender.
<PAGE>



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.

                                     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 bid prices for shares of the Company's
common stock and warrants.  Prices  represent  inter-dealer  quotations  without
adjustment for retail  markups,  markdowns or commissions  and may not represent
actual transactions.

                                                   Trade Price
Calendar Year Ended December               2000                     1999
                                     ----------------        -----------------
                                      High        Low         High        Low

Fourth Quarter
     CASC ...................         1.250       1.156       3.500       1.625
     CASCW ..................         0.219       0.031       0.688       0.281
Third Quarter
     CASC ...................         1.625       1.406       4.500       1.750
     CASCW ...................        0.594       0.250       1.094       0.406
Second Quarter
     CASC ....................        3.344       3.344       2.125       0.813
     CASCW ...................        1.125       0.375       0.500       0.188
First Quarter
     CASC ....................        4.719       4.469       1.750       0.875
     CASCW ...................        1.625       0.281       0.438       0.250

     As of March 29, 2001, 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.
<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,
                         -------------------------------------------------------
                             2000       1999        1998       1997      1996
                         -------------------------------------------------------
<S>                             <C>      <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenues .............  $    23,545  $  24,199   $  21,718  $  19,333  $ 21,959
Costs and expenses ..        22,952     23,549      22,102     20,007    22,542
                         -----------  ---------   ---------  ---------  --------

Income (loss) before income taxes and
    cumulative effect of change in
    accounting principle        593        650        (384)      (674)     (583)
Benefit (Provision) for
    income taxes               (252)      (293)        146        256       195
                         -----------  ----------  ---------- ---------  --------

Income (loss) before extraordinary gain and
     cumulative effect of change in
     accounting principle       341        357        (238)      (418)     (388)
Cumulative effect of change in
     accounting principle *      --         --          --         --       597
Extraordinary gain on
     retirement of debt          --         --         930         --        --
                         -----------  --------   ---------  --------- ---------

Net income (loss)       $       341        357         692       (418)      209
                         ===========  ========   =========  ========= =========


PRO FORMA PER SHARE DATA:
Income (loss) before cumulative effect of
    change in accounting
    principle           $      0.19   $   0.20     $ (0.13) $   (0.34) $  (0.39)
Cumulative effect of change in accounting
    principle                    --         --          --         --      0.59
Extraordinary gain on
    retirement of debt           --         --          --         --      0.52
                         -----------  --------   ---------  --------- ---------

Income (loss) per
    common share        $      0.19       0.20        0.39      (0.34)     0.20
                         ===========  ========   =========  ========= =========

Weighted average common and common
    equivalent shares     1,782,237  1,783,200   1,783,200  1,225,447 1,003,431
                         =========== =========   =========  ========= =========

*In 1996, 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 ....  $  4,920  $  4,787  $  4,606  $  7,202   $ 5,025

Total assets .......    16,544    17,344    18,843    16,148    18,249

Long-term debt .....     2,054     2,190     2,413     4,900     4,125

Stockholders' equity     6,560     6,237     5,880     5,188     3,328
</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,  not discussed 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
the  anticipated  renewal  of  the  Company's  credit  facility,  the  Company's
expectation  with respect to  expenditures  for property and equipment,  and the
Company's  expectations  with respect to the diminished effect of seasonality on
its business 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,
                                            2000         1999         1998
                                        ---------------------------------------
<S>                                         <C>           <C>          <C>

Total revenue ..........................     100.0%     100.0%      100.0%
Cost of goods sold .....................      53.7%      55.0%       58.6%
                                              -----      -----       -----


Gross profit ...........................      46.3%      45.0%       41.4%
Selling, general, and administrative ...      39.3%      37.8%       38.6%
Interest ...............................       1.3%       1.5%        1.6%
Depreciation and amortization ..........       3.2%       3.0%        2.4%
Loss on Sale of Building ...............        --         --         0.7%
                                              -----      -----       -----
                                              -----      -----       -----

Income (loss) from continuing operations
before income taxes ....................       2.5%       2.7%       (1.7%)
                                              =====      =====       =====
</TABLE>


YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999.

     Revenues for the year ended December 31, 2000  approximated  $23.5 million,
compared to $24.2  million in revenues  for the year ended  December 31, 1999, a
decrease of 2.7% or  approximately  $654,000.  The decrease is  attributable  to
one-time  incentive  sales in 1999  that did not  repeat  in 2000 as well as the
Company's  strategic decision to exit some low margin specialty accounts and the
continued decline in the holiday revenue.

     Cost of goods sold for the year ended December 31, 2000 approximated  $12.6
million,  compared to approximately  $13.3 million of cost of goods sold for the
year ended December 31, 1999, a decrease of 5.1% or approximately  $683,000. The
decrease in cost of goods sold was attributable to the decrease in revenues.  As
a percentage of revenues,  cost of goods sold  decreased to 54% in 2000 from 55%
in 1999. The 1.0% decrease in cost of goods sold was principally attributable to
a  change  in  product  mix,  as  well  as  increased  sales  in  new  programs.

     Selling,  general,  and administrative  expense for the year ended December
31, 2000 approximated $9.3 million,  compared to approximately  $9.1 million for
the year ended December 31, 1999, an increase of 1.3% or approximately $118,000.
The  increase in selling,  general and  administrative  expenses  was due to the
expansion  of the  employee  based sales force as well as the  expansion  of the
marketing  department.  As  a  percentage  of  revenues,  selling,  general  and
administrative  increased to 39.3% in 2000 from 37.8% in 1999. The 1.5% increase
as a percentage of revenues was principally attributable to the expansion of the
employee based sales force into new markets.

<PAGE>
     Interest expense was approximately $302,000 for the year ended December 31,
2000,  compared to $372,000 for the year ended  December 31, 1999, a decrease of
18.9% or approximately $70,500. The decrease was attributable to a lower average
outstanding debt by month in 2000. The average outstanding debt by month in 2000
approximated $3.6 million compared to $4.7 million for 1999.  Additionally,  the
average  interest rate for 2000  approximated  8.39%  compared to  approximately
7.94% for 1999.

     Depreciation and amortization  expense was  approximately  $761,300 for the
year ended  December 31, 2000,  compared to $722,100 for the year ended December
31,  1999,  an  increase  of 5.43% or  approximately  $39,200.  The  increase in
depreciation  and  amortization  expense  was  principally  attributable  to the
depreciation     of    newly    acquired    assets    in    1999    and    1998.

     Income tax  provision  was $252,000  for the year ended  December 31, 2000,
compared to an income tax provision of $293,000 for the year ended  December 31,
1999. The provisions for income tax were calculated through the use of estimated
income   tax   rates   based   upon   the   income    before    income    taxes.

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.

     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.
<PAGE>

     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.

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.
The  Company's  primary  uses  of  funds  consist  of  financing  inventory  and
receivables.

     Net working  capital  increased to  $4,920,000 as of December 31, 2000 from
net working  capital of  $4,787,000  as of December 31,  1999.  The increase was
primarily  attributed  to the  Company's  ability to pay down its line of credit
during 2000.

     The  Company  has  adopted a growth  strategy  which  will be  accomplished
through increased  efforts of the Company's  existing highly trained sales force
and the use of  independent  field  representatives  in order to expand  current
market  share  and  enter  into new  markets.  As a result of a change in market
conditions,  the Company  discontinued  its  efforts to enter the  e-fulfillment
business.

     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, 2001. 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  $429,000 due mostly from decreases
in  inventory  ($398,000).  The  decrease  in  inventory  is due to an  improved
purchasing  strategy coupled with an improved  processing and inventory ordering
system.  Current liabilities  decreased  approximately  $562,000 due mostly from
decreases in short-term debt  obligations  ($642,000),  and accounts payable and
accrued  liabilities  ($451,000),  and  taxes  payable  ($230,000)  offset by an
increase  of advance  deposits  ($760,765).  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.  The increase in advance deposits was due to the
change  in  the  mix  of  prepaid   deposits   from   noncurrent   to   current.

     Cash  decreased  approximately  $2,200.  Net cash provided  from  operating
activities was approximately  $1,136,000.  Net cash used in investing activities
was  approximately  $343,000  due to payments for  purchases of new  information
systems. Net cash used by financing activities was approximately $795,000, which
was due to the  reduction on the line of credit and the purchase of 9,014 shares
of Company stock at $2 per share..
<PAGE>

     The Company does not anticipate any material  expenditures for property and
equipment during the next twelve months, out of the ordinary course of business.
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 in the
short term. The Company is concerned with the uncertainty of the economy and the
uncertainty  of the  increased  unemployment  rates in recent  months.  If these
trends would  continue it could  affect the  liquidity in an adverse way over an
extended   period  of  time.   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.

SEASONALITY

     The Company's  business is highly seasonal,  with  approximately 36% 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, 2000 was 9.5 percent  compared to 8.5 percent at
December 31, 1999.  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.
<PAGE>


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.

                                    PART III

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)    62   Chairman of the Board                   1990

Charles R. Davis (1)   39   President and Director                  1990

Jeffrey A. Ross ....   33   Chief Financial Officer and Secretary   1996

David J. Richards ..   48   Director                                1997

Michael P. Beauchamp   54   Director                                1997

Randall J. Asmo ....   36   Director                                1999

Rodney L. Taylor ...   45   Director                                1999

Philip Shasteen ....   52   Director                                2000

(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 been an investor and been
an officer of several private businesses  involving the developing,  sale and/or
leasing of real estate but devotes substantially all of his business time to the
Company. He is also a director of Media Source.

     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 is Chief  Executive  Officer and President of Preventive
Imaging  Technologies,  Inc.  Preventive  Imaging  Technologies,  Inc., is not a
parent,     subsidiary     or     other     affiliate     of    the     Company.

     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 a
position  he assumed in 1997.  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.

     PHILIP M.  SHASTEEN was elected  Director on March 22, 2000.  Since 1992 he
has been an attorney with and  shareholder  and director of Johnson Blakely Pope
Bokor Ruppel & Burns, P.A., a law firm located in Tampa,  Florida.  He is also a
director  of Dixon  Ticonderoga  Company,  an  American  Stock  Exchange  traded
company.
<PAGE>

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, except that Mr. Shasteen was delinquent in the filing of his Form
3 when he became a board member.

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.

EXECUTIVE COMPENSATION

     The following  table shows,  for the fiscal years ended  December 31, 2000,
1999,  and 1998 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 (the "Named 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

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

Charles R. Davis ......   2000   $250,000     $25,000        $0              0
President and .........   1999   $250,000     $     0        $0        200,000
Chief Executive Officer   1998   $178,325     $     0        $0         50,000

</TABLE>

(1)     Stock options previously granted to the named the Executive Officer, by
        their terms, automatically adjust to reflect certain changes in the
        outstanding Common Shares of the Company, including stock dividends.
<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 to   Exercise              for Option
                 Options     Employees          Price    Expiration     Term
        Name     Granted      in 1999          per Share    Date     5%      10%
        ----     -------      -------          ---------    ----     --      ---
<S>                <C>          <C>              <C>         <C>     <C>     <C>

Charles R. Davis    0            0                N/A        N/A    N/A      N/A
</TABLE>

<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
           Acquired              Options at FY-End        Options at FY-End
              on      Value     -----------------        -----------------
    Name  Exercised Realized Exercisable Unexercisable Exercisable Unexercisable
    ----  --------- -------- ----------- ------------- ----------- -------------
<S>         <C>      <C>        <C>         <C>           <C>            <C>

Charles R.
Davis       None      N/A      287,800        0           0               N/A
</TABLE>

<PAGE>

STOCK OPTION PLANS

     The Company has adopted a 1996  Incentive  Stock Option Plan, a 1997,  1999
and 2000 Employee  Stock Option Plans (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 and 100,000 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. In
January 2000, the Company  granted  options to purchase  20,000 shares of Common
Stock under the 1999 Incentive  plan at a purchase price of $2.06 per share.  In
February 2000, the Company  granted  options to purchase 20,000 shares of Common
Stock under the 1999 Incentive  plan at a purchase price of $2.13 per share.  In
March 2000,  the Company  granted  options to purchase  20,000  shares of Common
Stock under the 1999 Incentive  plan at a purchase price of $3.97 per share.  In
April 2000,  the Company  granted  options to purchase  10,000  shares of Common
Stock under the 1999  Incentive  plan at a purchase price of $4.13 per share and
1,000 shares of Common Stock under the 1999  Incentive  Plan at a purchase price
of $4.24 per share . In July 2000, the Company granted options to purchase 5,000
shares of Common  Stock  under the 2000  Incentive  plan at a purchase  price of
$2.61 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 and 2000 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 second 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 and 2000 Incentive Plan are
not exercisable until the expiration of six months after the date of grant.

COMMITTEES OF THE BOARD OF DIRECTORS

     The Company's  committees are its Compensation  Committee,  Audit Committee
and a  committee  formed in 2000 to evaluate  an offer from  Messers.  S. Robert
Davis and Charles R. Davis to acquire the company. During 2000, 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.

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 Annual Report.

     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.
<PAGE>

     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' 2000 base salary and bonus 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


<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.,  its former
parent.  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.



 CASCO            1/15/97    6/30/97    12/31/97     6/30/98   12/31/98
                  100        149.00     90.00        80.00      52.00

                  6/30/99    12/31/99   3/31/00      6/30/00    9/30/00
                  63.00      68.00      146.00       110.00     46.00

                  12/31/00
                  39.00

Nasdaq            1/15/97    6/30/97    12/31/97     6/30/98   12/31/98
Composite         100        108.00     117.69       142.00     164.39

                  6/30/99    12/31/99   3/31/00      6/30/00    9/30/00
                  201.00     305.00     343.00       297.00     275.00

                  12/31/00
                  185.00

Nasdaq            1/15/97    6/30/97    12/31/97     6/30/98   12/31/98
Industrials       100        103.00     106.73       117.00     113.99

                  6/30/99    12/31/99   3/31/00      6/30/00    9/30/00
                  143.00     196.00     212.00       184.00     179.00

                  12/31/00
                  130.00



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, 2000,  exceeded  $100,000) and (iv) all
directors    and    executive    officers   of   the   Company   as   a   group:

<PAGE>

                                Amount and Nature of                Percent of
Name and Address               Beneficial Ownership (1)              Class (2)
----------------               ------------------------              ---------
S. Robert Davis                        375,820 (3)                       16.0%
15350 Amberly Drive
Suite 2014
Tampa, Florida 33647

Charles R. Davis                       412,066 (4)                       17.5%
4205 East Dixon Blvd.
Shelby, North Carolina 28150

David J. Richards                       65,609 (5)                        2.7%
6189 Memorial Drive
Dublin, OH 43017

Michael P. Beauchamp                    46,480 (5)                        2.0%
7422 Carmel Executive Park
Suite 107
Charlotte, NC 28226

Randall J. Asmo                         61,525 (5)                        2.6%
5720 Avery Road
Dublin, OH 43016

Rodney L. Taylor                        23,000 (5)                        0%*
P. O. Box 725
Marietta, OH 45750

Philip M. Shasteen                      11,713 (5)                        0%*
100 N. Tampa Street
Suite 1800
Tampa, FL 33602

Jeffrey A. Ross                         53,575 (5)                        2.3%
2242 Mt. Isle Harbor Drive
Charlotte, NC 28214

All directors  and  executive
  officers as a group                 1,049,788 (5)                      44.6%
  (8 persons)

*Less than 1%.

1)       Represents sole voting and investment power unless otherwise indicated.
<PAGE>

2)        Based on 1,774,186 shares of Company common stock outstanding as of
          December 31, 2000, plus, as to each person listed, that portion of the
          572,480 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 4,714 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 123,500 unissued shares of Common
          Stock as to which the Company's five non-employee directors have the
          right to acquire beneficial ownership upon the exercise of stock
          options within the next 60 days, 30,209 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 38,825
          shares of Common Stock owned by Mr. Asmo, a director of the Company
          and 3,000 shares of Common Stock owned by Mr. Taylor, a director of
          the Company and 1,713 shares of Common Stock beneficially owned by Mr.
          Shasteen, 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 51,180 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.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.


     Messrs.  S. Robert Davis and Charles R. Davis,  the Chairman and President,
respectively,  of the Company have offered to acquire the Company through a cash
merger.  Messrs.  S.  Robert and Charles R. Davis have  indicated  that they may
include  others in their  buyout  group.  The Special  Committee  of the outside
directors  formed to consider the offer has indicated that it will recommend for
approval this last offer of $2.10 per share for the outstanding shares of common
stock.

     Mr.  Shasteen,  who joined the  company as a director  in May,  2000,  is a
director and shareholder of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A.,
a law firm which  served as legal  counsel to the  company in 2000 and serves as
legal counsel to the Company in 2001.
<PAGE>

                                     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
<PAGE>

          10.8             Branch Banking and Trust Loan Document           2

          10.9             Asset Purchase Agreement Awards & Gifts          2

         *10.10            1999 Stock Option Plan                           4

         *10.11            2000 Stock Option Plan                           4

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
     10-K for the year  ended  December  31,  1999  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 29, 2001              By:    /s/ Charles 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 29, 2001               By:    /s/ S. Robert Davis
             -------------------------    --------------------------------------
                                                     S. Robert Davis
                                                     Chairman of the Board,
                                                     and Director


Dated:       March 29, 2001                By:    /s/ Charles R. Davis
             -------------------------     -------------------------------------
                                                      Charles R. Davis
                                                      President, and Director
                                                      (Principal Executive
                                                        Officer)


Dated:       March 29, 2001                By:    /s/ Randall J. Asmo
             -------------------------     -------------------------------------
                                                      Randall J. Asmo
                                                      Director


Dated:       March 29, 2001                By:    /s/ Michael P. Beauchamp
             -------------------------     -------------------------------------
                                                      Michael P. Beauchamp
                                                      Director


Dated:       March 29, 2001                By:    /s/ David J. Richards
             -------------------------     -------------------------------------
                                                      David J. Richards
                                                      Director

<PAGE>

Dated:       March 29, 2001                By:    /s/ Rodney L. Taylor
             -------------------------     -------------------------------------
                                                      Rodney L. Taylor
                                                      Director


Dated:       March 29, 2001                 By:    /s/ Philip M. Shasteen
             -------------------------      ------------------------------------
                                                       Philip M. Shasteen
                                                       Director


Dated:       March 29, 2001                 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--                                              28
         Hausser + Taylor LLP - for the years ended December 31, 2000,
                1999 and 1998.

Statements of operations--                                                  29
         Years ended December 31, 2000, 1999 and 1998.

Balance sheets--                                                            30
         December 31, 2000 and December 31, 1999.

Statements of cash flows--                                                  32
         Years ended December 31, 2000, 1999 and 1998.

Statements of stockholders' equity--                                        33
         Years ended December 31, 2000, 1999 and 1998.

Notes to the financial statements--                                         34
         Years ended December 31, 2000, 1999 and 1998.

     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, 2000 and 1999, and the related statements of
operations,  stockholders' equity, and cash flows for each of the three years in
the  period  ended  December  31,  2000.  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, 2000 and
1999, and the results of its operations and its cash flows for each of the three
years in the  period  ended  December  31,  2000 in  conformity  with  generally
accepted accounting principles.


                                                  /s/ Hausser +  Taylor LLP

Columbus, Ohio
March 19, 2001


<PAGE>

<TABLE>
<CAPTION>


                            CASCO INTERNATIONAL, INC.
                             STATEMENT OF OPERATIONS
              For the years ended December 31, 2000, 1999 and 1998



                                       2000            1999            1998
                                  -------------   -------------   -------------
<S>                                 <C>               <C>             <C>

Revenue ...............  .......   $ 23,545,410    $ 24,199,483    $ 21,718,213

Operating costs and expenses:
     Cost of goods sold ........     12,634,959      13,318,115      12,716,740
     Selling, general and
      administrative ..               9,254,251       9,136,391       8,377,665

     Depreciation and amortization .    761,347         722,104         520,027
                                   ------------    ------------    ------------
          Total operating costs
           and expenses .            22,650,557      23,176,610      21,614,432

Operating income ....................   894,853       1,022,873         103,781


Other expense:
     Interest expense .............     301,859         372,378         335,871
     Loss on sale of building
                                           --              --           151,144
                                   ------------    ------------    ------------
          Total other expenses..        301,859         372,378         487,015


Income (loss) before income taxes and
     extraordinary item.........        592,994         650,495        (383,234)
Benefit (provision) for income taxes   (252,000)       (293,000)        145,500
                                   ------------    ------------    ------------

Income (loss) before extraordinary gain on
     retirement of debt ........        340,994         357,495        (237,734)
                                   ------------    ------------    ------------

Extraordinary gain on retirement of debt (less
      income taxes of $570,000)           ---             ---           930,000
                                   ------------    ------------    ------------

Net Income (Loss) ..............   $    340,994     $   357,495    $    692,266
                                   ============    ============    ============


EARNINGS PER SHARE - BASIC
Income (loss) before
  extraordinary item               $       0.19     $      0.20    $      (0.13)
Extraordinary gain on retirement of debt   --              --              0.52
                                   ------------    ------------    ------------
Net Income (Loss) ........         $       0.19     $      0.20    $       0.39
                                   ============    ============    ============

EARNINGS PER SHARE - DILUTIVE
Income (loss) before
  extraordinary item ......        $       0.17     $       0.20   $      (0.13)
Extraordinary gain on retirement of debt   --              --              0.52
                                   ------------    ------------    ------------
                                   $       0.17     $       0.20   $       0.39
                                   ============    ============    ============

Weighted average common
 shares outstanding ...               1,782,237       1,783,200       1,783,200
                                   ============    ============    ============
</TABLE>



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


<PAGE>

<TABLE>
<CAPTION>

                            CASCO INTERNATIONAL, INC.
                                 BALANCE SHEETS
                           December 31, 2000 and 1999




                 ASSETS                                  2000           1999
                                                    ------------     -----------
<S>                                                 <C>                <C>

Current Assets:
     Cash .......................................   $      4,551     $    6,797
     Accounts receivable .........................      4,955,595     4,910,886
     Inventory ...................................      4,316,076     4,714,063
     Prepaid expenses ............................        959,623     1,033,274
     Deferred tax asset ..........................        102,000       102,000
                                                     ------------   ------------

                 Total current assets ............     10,337,845    10,767,020
                                                     ------------   ------------

Buildings and equipment:
     Buildings ...................................      2,657,263     2,627,727
     Equipment ...................................      3,537,335     3,223,615
                                                     ------------   ------------
                                                        6,194,598     5,851,342
     Less accumulated depreciation ...............     (3,137,550)   (2,540,828)
                                                     ------------   ------------
                                                        3,057,048     3,310,514
Land .............................................        111,468       111,468
                                                     ------------   ------------

                 Total property and equipment, net      3,168,516     3,421,982
                                                     ------------   ------------

Other assets:
     Cost in excess of net assets acquired, net of
        accumulated amortization of $615,471 and
        $479,819 respectively ....................      2,270,598     2,406,250
     Other .......................................        767,167       748,376
                                                     ------------   ------------
                                                        3,037,765     3,154,626
                                                     ------------   ------------

TOTAL ASSETS .....................................   $ 16,544,126  $ 17,343,628
                                                     ============  ============

</TABLE>



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

<TABLE>
<CAPTION>


                            CASCO INTERNATIONAL, INC.
                                 BALANCE SHEETS
                           December 31, 2000 and 1999



     LIABILITIES AND STOCKHOLDERS' EQUITY                 2000          1999
                                                     ------------  ------------
<S>                                                       <C>          <C>

Liabilities:
     Accounts payable ............................   $    488,726  $    965,112
     Short-term debt obligations .................      1,858,485     2,500,465
     Accrued liabilities .........................        329,858       304,273
     Advanced deposits-current ...................      2,615,550     1,854,785
     Accrued taxes payable .......................        125,000       355,000
                                                     ------------  ------------

                 Total current liabilities........      5,417,619     5,979,635
                                                     ------------  ------------

Long-term debt ...................................      2,054,236     2,189,716
Advanced deposits-noncurrent .....................      1,966,003     2,402,975
Deferred tax liability ...........................        545,775       533,775
                                                     ------------  ------------

                 Total Liabilities ...............      9,983,633    11,106,101
                                                     ------------  ------------

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
     Retained earnings (deficit) .................        143,103      (197,891)
                                                     ------------  ------------
                                                        6,578,521     6,237,527
     Less treasury stock, at cost 9,014 shares ...        (18,028)          ---
                                                     ------------  ------------

                 Total stockholders' equity ......      6,560,493     6,237,527
                                                     ------------  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......   $ 16,544,126  $ 17,343,628
                                                     ============  ============

</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, 2000, 1999 and 1998

                                             2000          1999          1998
                                        -----------    ----------    -----------
<S>                                         <C>          <C>             <C>
        Cash flows from operating activities:
    Net income (loss) .................  $  340,994    $  357,495    $  692,266

    Adjustments to reconcile net income (loss) to cash provided by
       operating activities:
       Depreciation and amortization ....   761,347       722,104       520,027
       Loss of sale of building                ---           ---        151,144
       Extraordinary gain on retirement
        of debt                                ---           ---     (1,500,000)
       Deferred provision (benefit)          12,000       (62,000)      424,500

       Changes in assets and liabilities:
       (Increase) decrease in assets:
          Accounts receivable ......        (44,709)      629,276      (496,739)
          Inventory .................       397,987       551,734      (595,713)
          Prepaid expenses and other assets  34,830        28,246      (174,792)

       Increase (decrease) in liabilities:
          Accounts payable and accrued
           liabilities                     (680,801)       29,146       212,970
          Advanced deposits ............    323,793      (321,999)       69,771
                                         -----------    ----------    ----------
            Total adjustments ...........   804,447     1,576,507    (1,388,832)
                                        ------------    ----------    ----------

Net cash provided by (used in)
 operating activities                     1,145,441     1,934,002      (696,566)
                                        ------------    ----------    ----------
Cash flows from investing activities:
    Sale of building .....................     ---            ---       421,187
    Sale of equipment ...............        17,890           ---           ---
    Payments for purchases of property
     and equipment .............           (370,089)     (429,445)     (731,436)
                                        ------------    ----------    ----------
Cash used in investing activities .........(352,199)     (429,445)     (310,249)


Cash flows from financing activities:
    Proceeds from debt obligation ....   20,082,765    18,677,466    13,759,044
    Principal payments on debt .....    (20,860,225)  (20,282,708)  (12,718,263)
    Payment for purchase of common stock    (18,028)          ---          ---
                                        ------------    ----------    ----------
Cash provided by (used in) financing
  activities .....                         (795,488)   (1,605,242)    1,040,781


Increase (decrease) in cash .........        (2,246)     (100,685)       33,966
Cash, beginning of year ..............        6,797       107,482        73,516
                                        ------------    -----------   ----------

Cash, end of year .................... $      4,551    $    6,797    $  107,482
                                        ============    ===========   ==========

Other Cash Flow Information:
    Cash payments during the year for:
     Interest .....................$    298,805    $    386,069    $    307,156
     Income taxes, net of refunds .     545,678           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

</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, 2000, 1999 and 1998

                          Capital in   Retained
                Common    Excess of    Earnings     Treasury
     Shares      Stock    Par Value    (Deficit)      Stock            Total
   ---------  ---------   ---------    ---------    --------         ----------
<S>   <C>         <C>        <C>         <C>           <C>               <C>

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

Net Income
       --        --           --          340,994           --          340,994

Purchase of 9,014 shares
       --        --           --              --         (18,028)       (18,028)

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

Balance December 31, 2000
   1,774,186   $17,832   $6,417,586   $   143,103    $   (18,028)   $ 6,560,493
  =========    =======   ==========   ===========    ===========    ===========
 </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, 2000, 1999 AND 1998

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>


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,  2000 and 1999  include  $651,076  and
$629,263,  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, 2000,  1999 and 1998,  totaled  $605,667,  $566,424,  and $438,681,
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, 2000. 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, 2000,  1999 and 1998 totaled  $135,650  $135,650 and $77,274,
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 $20,030,  $20,030,  and $7,071, for the years ended December 31,
2000, 1999 and 1998, 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.

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,  2000,  1999 and 1998.

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, 2000,  1999 and 1998.
<PAGE>


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.

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".  For stock based  compensation other
than  employees,  the Company  utilizes the fair value method as provided for in
FASB #123.

EFFECTS OF RECENT ACCOUNT PRONOUNCEMENTS

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting   Bulletin  ("SAB")  No.  101,  "Revenue   Recognition  in  financial
Statements."  The guidance in SAB 101 must be adopted  during the fourth quarter
2000 and the effects, if any, are required to be recorded through a retroactive,
cumulative-effect  adjustment  as of the  beginning of the fiscal  year,  with a
restatement of all prior interim  quarters in the year.  Management has reviewed
their policies for revenue  recognition in comparison to the requirements in SAB
101 and no change  occurred  to its  income  statement  presentation,  operating
results or financial position as a result of implementing SAB 101.

2.       STOCK OPTIONS AND WARRANTS

         At December 31, 2000, 935,000 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 2000 option plan of 100,000 shares
includes both employees and directors. 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, 2000       December 31, 1999
                                  ---------------------  -----------------------
                                       Weighted Average         Weighted Average
Incentive Stock Option Plan       Number Exercise Price  Number  Exercise Price
---------------------------       ------ --------------  ------  --------------
<S>                                <C>         <C>          <C>       <C>

Outstanding, beginning
   of year .............          601,140   $2.0212      273,140   $2.8001
  Granted ......................   66,000   $2.7347      421,500   $1.7649
  Canceled .......................117,360   $2.1302       93,500   $2.3529
  Exercised .........................None      --         None        --
                                   ------   -------      -------   -------


Outstanding, end of year .........549,780   $2.2177      601,140   $2.1438
                                  -------   -------      -------   -------

Exercise price range of
 options outstanding              $1.0000                $1.0000
                                       to                     to
                                  $4.2400                $3.7037

Non-Employee Director Option Plan
  Outstanding, beginning
   of year ....................   220,800   $2.0212       55,800   $2.8094
  Granted .........................10,000   $4.1250      180,000   $1.7500
  Canceled ..........................None      --         15,000   $2.0000
  Exercised .........................None      --         None        --
                                  -------   -------      -------   -------

Outstanding, end of year ......   230,800    2.1124      220,800   $2.0212
                                  -------   -------      -------   -------

Exercise price range of options
outstanding ...............       $1.75                  $1.75
                                     to                     to
                                  $4.17                  $4.17

</TABLE>

     The weighted average remaining life on options  outstanding at December 31,
2000 is 4.19 years.

     The incentive stock options are exercisable at the fair market value on the
date of grant,  and were  available  from the 1996,  1997,  1999 and 2000  stock
option plans. The options  outstanding at December 31, 2000 are exercisable from
January 17, 2002, through July 31, 2005.

     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,     2000     are      exercisable      through     October     12,     2003.

     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.
<PAGE>
<TABLE>
<CAPTION>

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

1996 Plan       January 17, 1997     14,580   $  3.7037         $ 54,000
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     7,000      3.0625           21,438
1997 Plan       January 20, 1998     60,000      2.8750          172,500
1997 Plan       March 3, 1998        20,000      2.8125           56,250
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        349,000      1.7500          610,750
1999 Plan       January 19, 2000     20,000      2.0600           41,200
1999 Plan       February 1, 2000     20,000      2.1300           42,600
1999 Plan       April 25, 2000        1,000      4.2400            4,240
2000 Plan       July 31, 2000         5,000      2.6100           13,050



Non-Employee
Director Options:
1996 Plan       June 25, 1997        10,800     $4.1667           45,000
1996 Plan       January 20, 1998     30,000      2.8750           86,250
1997 Plan       May 27, 1999        180,000      1.7500          315,000
1999 Plan       April 5, 2000        10,000      4.1300           41,300



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                               2,400,580                $10,421,076
                                    ==========               ============
</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 2000, 1999, and 1998.

                                            2000       1999            1998
                                            ----       ----            ----
Risk-free interest rate ...............       6%        6%              6%
Dividend yield ........................       0%        0%              0%
Volatility factor .....................     105.0%      104.4%          107.7%
Weighted average expected life in years       3.3       5               5

     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:

                                           2000        1999         1998
                                           ----        ----         ----
Net income as reported .........         $340,994    $357,495     $692,266
Net income-pro forma .............       $240,594     357,495      623,266
Income per common share -
   as reported ...................       $    .19    $    .20     $    .39
Income per common shares -
   pro forma .....................       $    .13    $    .13     $    .35
Weighted average fair value of
   options granted during the year       $   2.73    $   1.76     $   2.53

     These pro forma  calculations  only include the effects of 2000,  1999, and
1998 grants. As such, the impacts are not necessarily  indicative of the effects
on reported net income of future years.

3.       DEBT OBLIGATIONS

         Debt obligations consisted of the following:

                                    December 31,                   December 31,
                                        2000                           1999
                                        ----                           ----
Line of credit with interest
at prime plus 1/4 percent;
interest payable monthly,
maturing on July 30, 2001,
collateralized by accounts
receivable and inventory of
the Company ($3,280,226 available
at December 31,2000).                $1,719,774                      $2,262,189

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.      2,101,892                       2,209,767
<PAGE>

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

Promissory note payable with interest
at 6 percent, payable in monthly
installments through October 1, 2003.    91,055                         118,225
                                   -------------                   ------------
                                      3,912,721                       4,690,181
Current portion                       1,858,485                       2,500,465
                                   -------------                   -------------
Long term portion                    $2,054,236                      $2,189,716
                                   =============                   =============


     The  interest  rate for the line as of December 31, 2000 and 1999 was prime
plus   1/4    percent    and    prime    plus   1/2    percent,    respectively.

     The prime  interest  rate at December 31, 2000 and 1999 was 9.5 percent and
8.5 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.  The  Company  was in  violation  of one  covenant
pertaining  to purchase of its common  stock.  The Company has received a waiver
for   this    violation    for   the   year    ended    December    31,    2000.

The aggregate long-term debt payments as of December 31, 2000 for each of the
next three years are:


                                    2001              1,858,485
                                    2002                152,266
                                    2003              1,901,970
                                                      ---------

                                    Total            $3,912,721
                                                     ==========
<PAGE>

4.       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 $248,571, $269,962
and $152,128, for the years ended December 31, 2000, 1999 and 1998,
respectively. The future minimum rentals under non-cancelable operating leases
during subsequent fiscal years are as follows:


                              YEARS ENDING
                               DECEMBER 31,

                                   2001          $  236,910
                                   2002             123,518
                                                    -------

                                                 $  360,428


     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.


5.       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.

                                         December 31,  December 31, December 31,
                                             2000         1999         1998
                                             ----         ----         ----
Current ................................   $240,000   $ 355,000        ---

Deferred
   Federal .............................      8,000     (58,000)   (130,300)
   State and Local .....................      4,000      (4,000)    (15,200)
                                           --------   ---------    --------
Net deferred expense (benefit) .........     12,000      62,000    (145,500)


Net deferred expense (benefit) for taxes   $252,000    $293,000   $(145,500)
                                           ========   =========    ========

<PAGE>

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

                                           December 31, December 31,December 31,
                                                2000        1999        1998
                                                ----        ----        ----
Income tax expense (benefit) at statutory
   rate                                       $ 225,000    $247,000   $(145,700)
Goodwill amortization .......................    13,000      13,000      13,650
State taxes net of federal benefit ..........    26,000      26,000     (15,300)
Other .......................................   (12,000)      7,000       1,850
                                               ---------    --------   ---------

       Total income tax expense (benefit)     $ 252,000    $293,000   $(145,500)
                                               =========    ========   =========


The components of net deferred taxes are as follows:

                                                      December 31,  December 31,
                                                            2000         1999
                                                            ----         ----
Assets:
   Inventory costs capitalized for tax purposes          $  68,000    $  68,000
   Accruals and reserves to be expensed as paid for tax
   purposes ..........................................      34,000       34,000
                                                          ---------    ---------
Deferred tax assets                                        102,000      102,000


Liabilities:
   Excess of tax over financial accounting depreciation and
   amortization ......................................    (545,775)    (533,775)
                                                          ---------    ---------
Deferred tax liability ...............................    (545,775)    (533,775)
                                                          ---------    ---------

Net deferred tax liability ...........................   $(443,775)   $(431,775)
                                                          =========    =========


     The Company  changed its  effective  rate to 42.5% in 2000 from 38% in 1999
from 40% in 1997. The Company utilized approximately $0, $780,000 and $1,065,000
of net operating loss carry forward for the years ended December 31, 2000,  1999
and 1998, respectively.

6.      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, 2000 and 1999,  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.
<PAGE>


                                              December 31,
                                         -----------------------
                                            2000         1999
                                         ----------   ----------

          Income available to common
          stockholders used in basic EPS
          and diluted EPS ....           $  340,894   $  357,495
                                         ==========   ==========


          Weighted average number
          of common shares used in
          Basic EPS ..........            1,782,237    1,783,200


          Effect of dilutive securities:
             Stock options and warrants     190,163       43,242
                                         ----------   ----------


          Weighted number of common
          Shares and dilutive potential
          Common stock used in diluted
          EPS ................            1,972,400    1,783,200
                                         ==========   ==========



     Options and warrants on 1,807,080 and 1,353,940  shares,  respectively,  of
common  stock were not  included  in  computing  diluted EPS for the years ended
December  31,  2000,  1999 and 1998 because  their  effects  were  antidilutive.

     The common  equivalent  stock  outstanding  at  December  31, 1998 would be
antidilutive    for    the    year    due   to   the   net    operating    loss.

7.       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.

8.       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.


<PAGE>


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

Options and warrants on 1,807,080, 1,461,815 and 1,353,940 shares, respectively,
of common stock were not included in computing EPS for the years ended December
31, 2000, 1999 and 1998 because their effects were antidilutive.

The common equivalent outstanding at December 31, 1998 would be antidilutive for
the year due to the net loss before extraordinary items.

9.       STOCK ACQUISITION PROPOSAL BY RELATED PARTIES

     The  Chairman of the Board and  President  of the Company  have  offered to
acquire all of the outstanding shares of the Company not currently held by them.
A Special  Committee of the outside  directors  was formed to consider the offer
and has indicated  that it will recommend for approval the latest offer of $2.10
per    share    for    the     outstanding     shares    of    common     stock.