U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

               [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 fiscal year ended December 31, 1999
               Commission File Number: 33-18099-NY and 33-23169-NY

                           QUEST PRODUCTS CORPORATION
        (Exact Name of small business issuer as specified in its charter)

          DELAWARE                                11-2873662
(State or other jurisdiction of             (IRS Employer I.D. No.)
Incorporation or organization)

                 6900 Jericho Turnpike, Syosset, New York 11791
                    (Address of principal executive offices)

Issuer's telephone number, including area code:               (516) 364-3500
Securities registered pursuant to Section 12(b) of the Act:             None
Securities registered pursuant to Section 12(g) of the Act:             None

Check  whether the issuer (1) 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 _____

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not  contained in this form and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.      __X__

The registrant's operating revenues for its most recent fiscal year were $1,227.

The number of shares  outstanding on December 31, 1999 was 183,087,985 shares of
Common Stock, .00003 par value.

Continued...

<PAGE>


The aggregate market value of the voting Common Stock held by non-affiliates (1)
of the registrant  based on the average of the high and low bid prices ($.05) of
the Company's Common Stock, as of December 31, 1999, is approximately $4,866,118
based  upon  the  162,203,995  shares  of  Registrant's  Common  Stock  held  by
non-affiliates.

(1)  "Affiliates"  solely for purposes of this item refers to those persons who,
during the three months  preceding  the filing of this Form 10-KSB were officers
or  directors  of the  Company  and/or  beneficial  owners  of 5% or more of the
Company's outstanding stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE


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

<PAGE>


                           QUEST PRODUCTS CORPORATION
                                   Form 10-KSB
                       Fiscal Year Ended December 31, 1999


                                Table of Contents


PART I                                                                  PAGE
------                                                                  ----


Item 1.    Business                                                     4 - 7
Item 2.    Properties                                                       7
Item 3.    Legal Proceedings                                            7 - 8
Item 4.    Submission of Matters to a Vote of Security Holders              8

PART II
-------

Item 5.    Market for Company's Common Equity and                           9
           Related Stockholder Matters

Item 6.    Management's Discussion and Analysis of Financial          10 - 12
           Condition and Results of Operations
Item 7.    Financial Statements                                      F1 - F16
Item 8.    Changes in or Disagreement with Accountants on                  13
           Accounting and Financial Disclosure

PART III
--------

Item 9.    Directors, Executive Officers, Promoters and               13 - 14
           Control Persons; Compliance with Section 16(a)
           of the Exchange Act
Item 10.   Executive Compensation                                     15 - 16
Item 11.   Security  Ownership  of  Certain  Beneficial               16 - 17
           Owners and Management
Item 12.   Certain Relationships and Related Transactions             17 - 18

PART IV
-------

Item 13.   Exhibits and Reports on Form 8-K                                18


Signatures                                                                 19
Supplemental Information                                                   20

<PAGE>


PART 1

Item  1. Business

The Company

      Quest Products Corporation (the Company) is a corporation  organized under
the laws of Delaware on July 17, 1987, has a limited  operating  history and has
operated at a loss since  inception.  Since the completion of its initial public
offering in April 1989,  the Company had primarily  concentrated  its efforts in
two areas:  the  establishment  of medical  credibility  through clinical trials
performed at an independent  testing facility and the test marketing of PHASEOUT
(also referred to as the "Product" or the "device') throughout the United States
and internationally via various channels of distribution.

      The Company's primary product, PHASEOUT, is a patented device developed to
help  a  person  quit  smoking  without  the  use  of any  drugs,  chemicals  or
attachments.  The  device  was  designed  to  gradually  reduce  the  amounts of
nicotine, tar and carbon monoxide consumed from cigarette smoke.

      During the last four years, the Company has been concentrating its efforts
in three areas:  (1) test  marketing the product  domestically  through  various
channels of distribution (2) entering into international distribution agreements
utilizing  television  infomercials  and  commercials,  and (3) distributing the
product into domestic retail chain drug stores.

The Product

      The PHASEOUT  device is a simple,  easy to use,  mechanical,  light-weight
instrument  that allows the smoker to continue  to smoke their  preferred  brand
cigarettes  and at the  same  time,  gradually  and  sequentially  reduce  their
nicotine  intake  by  over  80%.  This  weaning  process  is the  same  type  of
detoxification  methodology that has proved successful with many other addictive
substances.  Once the smoker has been weaned, their chances to quit for good are
greatly enhanced.  PHASEOUT's  weaning  methodology has an important  additional
psychological benefit for all smokers. It allows the smoker to continue to smoke
their preferred brand until they are ready to quit. Of course,  to achieve these
results  under  normal  smoking  conditions,  smokers  must  avoid  compensatory
practices,  such as smoking more cigarettes and blocking the  ventilation  holes
created by the PHASEOUT device.

      The  PHASEOUT  system  works  without the use of any drugs,  chemicals  or
attachments.  The average  retail price to consumers is $19.95 plus shipping and
handling. The wholesale price averages approximately $12.00.

      The Company is currently having the product  manufactured by one vendor in
South Korea.  This source of supply will be able to produce all future  PhaseOut
units required for sale.

      The  Company  had  received  a  "warning  letter"  from  the Food and Drug
Administration  "FDA" in mid  1993,  stating  that the  PhaseOut  product  was a
medical device and subject to the  provisions of the FDA. The Company  responded
through legal  counsel,  taking the position that the PhaseOut  product is not a
medical  device  within the meaning of the Food,  Drug and  Cosmetics Act "FDCA"
(see Item 3, Legal Proceedings).


                                        4

<PAGE>


How PhaseOut Works

      A smoker  inserts their entire  unopened  pack of cigarettes  (filtered or
unfiltered - soft pack or box) into the PHASEOUT device. With a simple press and
release that takes just seconds, PHASEOUT processes all of the cigarettes within
the pack.

      The device strategically  creates from one to four microfine  perforations
in the lip end of each cigarette.  These  perforations  filter and ventilate the
smoke drawn through the cigarette,  thereby  reducing the amount of nicotine and
other toxins inhaled by the smoker.

      One miniature filter  (perforation) is created in Phase one, filtering out
up to 26% of the  nicotine,  and similar  amounts of other toxins such as carbon
monoxide and tar.  Additional  perforations  are created as the smoker  proceeds
through each of the four Phases.  With each  additional  perforation  there is a
progressive  reduction  of  nicotine  and other  harmful  substances  based upon
controlled laboratory studies. By Phase IV, 80.7% of the nicotine,  91.6% of the
tar, 89.2% of carbon monoxide and 90% of all other tobacco  constituents  (Total
Particulate  Matter) have been eliminated.  As discussed above, these reductions
under normal  smoking  conditions  depend upon proper use of the product and the
treated  cigarettes by smokers.  The suggested period on each phase is two weeks
(eight  week  total),  however,  smokers  can  tailor  the  program to their own
individual liking and proceed at their own pace, under their own timetable.  The
smoker is in control. There is no pressure, no fear of failure. Importantly, any
change in the taste,  flavor or draw of the  cigarette is lessened as the smoker
proceeds through the program due to the gradual transition from phase to phase.

The Smoking Cessation Market

      Cigarette smoking is the number one cause of preventable illness and death
in the United States.  In excess of 450,000  deaths were directly  attributed to
cigarette  smoking  last year.  More than one of every six deaths in the U.S. is
caused  by  cigarette  smoking.  Of the  country's  total  health  care  budget,
approximately  25% ($65  billion)  is spent  for  smoking  related  illness  and
disease.  This does not include an additional  $35 billion in lost  productivity
and higher insurance costs.

      In the United States,  there are currently reported to be approximately 46
million  smokers  and  worldwide  the number of smokers is  estimated  to be 1.2
billion.

Scientific and Clinical Testing

Scientific

      The United States Testing Company,  Inc., an independent  testing facility
which  tests  cigarettes  in  accordance  with  government  standards  for major
cigarette  manufacturers,  conducted  laboratory tests on the use of PHASEOUT on
cigarettes. These tests were based upon the F.T.C. method, which is used to rate
the tar,  nicotine and carbon  monoxide  yields of cigarettes sold in the United
States.  Their findings were reported in Determination  of Percent  Reduction of
Tar, Nicotine and Carbon Monoxide of Cigarettes with the Use of Phase-Out device
for Perforating Packaged Cigarettes/U.S.  Patent #4,231,378 . This report showed
reductions of tar, nicotine and carbon monoxide yields ranging from 26% in Phase
I to 92% in Phase IV using the PHASEOUT method.


                                        5

<PAGE>


Additional Studies

      The Company  conducted a  scientific  study at Ameritech  Laboratories  to
demonstrate  the  condensation  of  nicotine  and  tars  within  the  filter  of
cigarettes due to the use of the PhaseOut  device.  This study  demonstrated  an
increase of nicotine  content within the filter,  proportionate to the number of
PhaseOut  perforations in the cigarette.  The study concluded that the increased
weight of the filter was due to the  condensation of nicotine due to the cooling
effect of the  external  air  introduced  through  the wholes  pierced  into the
cigarette filters by the PhaseOut device.

Patents

      The United  States  Patent  Office has issued two patents for the PhaseOut
System  (Patent  Number  4,231,378  issued  November  4, 1980 and Patent  number
5,218,976  issued June 15,  1993).  The Company has  received  patents in China,
Taiwan and Japan.  In  addition,  the Company has applied for patents in fifteen
(15) foreign countries, including England, France, Germany and Italy.

Marketing (Domestic)

      The  focus  of the  Company's  marketing  to date has  been to  create  an
awareness for the product through the use of various direct  response  marketing
venues.  Some of these are: the use of a thirty minute  television  infomercial,
short form television  commercials,  sixty second radio commercials,  mail order
catalogs, print advertising and through credit card mailings (syndication).

      During 1998, the Company  entered into a joint venture  agreement with SAS
Group,  Inc.  whereby  distribution  began of the PhaseOut product into domestic
retail chain drug stores totaling  approximately  12,000 stores.  The Company is
primarily  responsible for the  manufacturing of the product and SAS Group, Inc.
is primarily responsible for the sale and distribution of the product.

New Products

      In  October  1999,  the  Company  successfully  completed  development  of
adjustable polarized  sunglasses,  which allow the wearer to change the color of
the  sunglass  lenses to a variety  of colors  without  changing  the  lenses or
altering  the frame.  The Company  will strive to begin  worldwide  distribution
during 2001.

      In  addition,  on October  31,  1999 the  Company  entered  into a license
agreement  with the owner of a patented  technology  as it  pertains to eyewear.
Under the agreement,  the licensor grants under the provisions of his patent the
exclusive  license to make,  use, and sell the patented  inventions  through all
channels of  distribution  and to otherwise  practice the patent on an exclusive
basis to the exclusion of the entire world,  including the inventor.  The patent
licensed  hereunder  relates to an adjustable  glasses product including but not
limited to sunglasses,  ski goggles and diving masks.  The territory  covered by
the patent is the World.

      In  consideration  for this license  granted to the Company,  the licensor
will receive  royalty  payments  based on the number of glasses  sold. A $10,000
advance royalty was paid on signing of contract.

      The Company continues to add new technology to the patent.


                                        6

<PAGE>


Competition

      The Company competes with numerous products and techniques designed to aid
smokers to stop smoking.  Many of the companies  promoting  these  products have
been in existence for longer  periods of time, are better  established  than the
Company,  have financial  resources  substantially  greater than the Company and
have more extensive facilities than those which now or in the foreseeable future
will become  available to the Company.  In addition,  other firms may enter into
competition with the Company in the near future.

      One type of significant  competitive  product is the nicotine patch, which
requires a  prescription  by  licensed  physicians  for  treatment  of  nicotine
withdrawal. This appears to be the quit smoking method that is now most commonly
prescribed.  However,  management  expects to counter the initial success of the
patch program because there are stirrings of adverse publicity regarding patches
due to their side effects and usage limitations.

      In addition to the nicotine patch, other  pharmaceutical  companies are in
the process of introducing  alternate nicotine delivery methods in the form of a
nasal spray, which will have many of the same side effects as the nicotine patch
and will most probably require a prescription  when first brought to the market.
Recently,  the FDA has  allowed  the  nicotine  gum,  which  was  formerly  only
available by prescription, to be sold over-the-counter.

Employees

      At the  present  time,  the  Company  has five  employees,  including  the
Company's two officers and directors and three  administrative  and  secretarial
personnel.

Item 2. Properties

      The Company leases approximately 2,600 square feet of office space at 6900
Jericho Turnpike, Syosset, New York 11791.

Item 3. Legal Proceedings

      In June 1993,  the  Company  received a "Warning  Letter"  from the FDA in
which the FDA stated its belief that the  Product is a "medical  device" and is,
therefore,  subject to the  provisions  of the FDA.  Since the  Company has been
marketing the product without seeking or obtaining  pre-marketing  approval from
the FDA, if the FDA's  position  is correct,  the  Company's  activities  are in
violation of the Food Drug and Cosmetics Act and the FDA would have the right to
enjoin  further  marketing by the Company of the  product.  The Company does not
believe that the product is a medical  device within the meaning of the FDCA and
has  advised the FDA of its  position  through the  Company's  Washington,  D.C.
counsel,  Hyman,  Phelps & McNamara,  specializing  in FDA  matters.  The answer
submitted  on July 7,  1993,  by the  Company  counsel  took the  position  that
PHASEOUT is a mechanical  device that treats just the cigarette (not the smoker)
by creating additional internal filters within the existing filter or cigarette.
However,  in an effort to cooperate  with the FDA, the Company  proposed to make
substantial  revisions to the promotional  statements for the product to make it
clearer to the public that the  product is not  intended to be used as a medical
device.  Neither the Company  nor its counsel has  received  any written or oral
response from the FDA since that time.  However,  no assurance can be given that
the FDA will not in the future seek to enjoin the  Company  from  marketing  the
product without  complying with the FDCA and seeking other remedies  against the
Company.


                                        7

<PAGE>


      Management  believes  that the FDA  letter  came as a result  of the FDA's
investigation   of  the  smoke   cessation   industry.   As  a  result  of  that
investigation,  the FDA  banned  the  sale  of  certain  over-the-counter  smoke
cessation product using active ingredients as of December 1993. PHASEOUT was not
affected by this ban.

      The Company was advised by the FTC by letter dated October 20, 1993,  that
the FTC was conducting a non-public,  informal inquiry to determine  whether the
Company had engaged in deceptive or unfair practices in violation of the Federal
Trade Commission Act (the "FTC Act") in connection with certain of the Company's
advertising  claims.  In that  connection,  the FTC  requested  that the Company
provide it with certain  information  and documents and also requested a meeting
on June 9, 1994, with the Company's officers.  The Company supplied the FTC with
all the information they requested.

      On August 20,  1996,  a consent  order was  agreed to with the FTC,  which
settled  charges that various  advertising  claims for the PhaseOut device ("the
device") were unsubstantiated or false. The order required the Company to send a
postcard to  identifiable  past  purchasers of the device  notifying them of the
commission's  action and  advising  them that the device has not been  proven to
reduce the risk of smoking  related  diseases or make  cigarettes  "safer".  The
order also  prohibits  the  Company  from making  certain  claims in its current
advertising.   The  Company   cost  to  comply  with  this  order  was  $15,102,
representing  the cost of identifying each purchaser and to mail the post cards.
On April 7, 1999, the Company received a letter from the FTC concluding,  on the
assumption  that the  information  submitted is accurate and  complete,  that no
action is indicated.

      In December 1999, a former officer and director,  Bernard Gutman,  brought
an action  against the Company in New York State Supreme  Court,  Nassau County,
for  alleged  consulting  fees  and loan  repayments  due him in the  amount  of
$100,445.  The Company has counterclaimed for fraud and breach of contract.  The
action  has been  settled  as of March 6, 2000,  although  the final  settlement
documents  have not yet been  executed.  The parties have agreed to issue to the
former director 400,000 shares of common stock which, on the date of settlement,
was valued at 17 cents per share based upon its closing price on that date.

      On March 30, 2000, Quest Products  Corporation  initiated a lawsuit in the
United States  District Court for the Southern  District of New York against SAS
Group Inc.,  Michael Sobo,  Scott Sobo and Century  Factors.  SAS Group Inc. has
been the  Company's  joint venture  partner  since 1998 in  connection  with the
distribution of the Company's patented PhaseOut product to drug stores and other
retailers.  The lawsuit  asserts  claims for patent and trademark  infringement,
unfair competition, breach of the joint venture agreement, fraud, conversion and
breach of fiduciary  duty,  and seeks  injunctive  relief,  monetary  damages in
excess of $750,000 and punitive damages of at least $7,500,000


Item 4.   Submission of Matters to a Vote of Security Holders

                          NONE


                                        8

<PAGE>


Item 5. Market for Company's Common Equity and Related  Stockholder
Matters

(a) Market information - The principal U.S. market in which the Company's Common
Shares ($.00003 par value) were tradable is in the over-the-counter market.

      The Class A Warrants  expired on November 2, 1993 and the Class B Warrants
expired on December 31, 1997. The aforesaid  securities are not traded or quoted
on any  automated  quotation  system.  The OTC  Bulletin  Board  symbol  for the
Company's  Common Stock is "QPRC".  The following  table sets forth the range of
high and low bid quotes of the Company's Common Stock per quarter as provided by
the National Quotation Bureau (which reflect  inter-dealer prices without retail
mark-up,  mark-down  or  commission  and may not  necessarily  represent  actual
transactions).
                                                                   Bid Price
                                                               -----------------
Period                                                         High          Low
------                                                         ----          ---
Quarter Ended March 31, 1998                                  .018          .018
Quarter Ended June 30, 1998                                   .014          .011
Quarter Ended September 30, 1998                              .012          .009
Quarter Ended December 31, 1998                               .011          .008
Quarter Ended March 31, 1999                                   .01          .007
Quarter Ended June 30, 1999                                   .058          .008
Quarter Ended September 30, 1999                              .063          .022
Quarter Ended December 31, 1999                               .056          .021

(b)   Holders  -- As of  December  31,  1999,  the  approximate  number  of  the
      Company's shareholders was 500.

c)    Dividends -- The Company has not paid or declared any  dividends  upon its
      Common Stock since its inception  and, by reason of its present  financial
      status and its contemplated financial  requirements,  does not contemplate
      or  anticipate   paying  any  dividends  upon  its  Common  Stock  in  the
      foreseeable future.


                                        9

<PAGE>


Item 6. Management's   Discussion   and   Analysis   of   Financial
        Condition and Results of Operations

Results of Operations

      During 1998, the Company began  distribution of the PhaseOut  product into
retail chain stores,  totaling approximately 12,000 stores,  pursuant to an oral
joint venture agreement with SAS Group,  Inc. ("SAS"),  for which it is entitled
to 50% of the income.  SAS handles all the marketing and operational  activities
of the joint venture. The investment in the joint venture is accounted for under
the equity method whereby the investment  account is increased for contributions
by the Company plus its share of the income of the joint venture and reduced for
distributions  and its share of any losses  incurred by the joint  venture.  The
Company's  results of  operations  include  its 50% share of the income from the
joint venture as a separate line item. As such, sales, cost of sales and selling
expenses of the joint  venture in 1999 and 1998 are  reported  in this  separate
"equity in net income of the joint  venture"  line item.  In January  2000,  the
Company informed SAS Group, Inc. that the Joint Venture was terminated.

      For 1999,  the Company  sold 59 units at an average  price of $20.80,  for
sales of $1,277,  and the joint  venture sold 3,188 units at an average price of
$12.93,  for sales of $41,225.  The 1999 sales for the joint  venture  were then
reduced by current and estimated  future sales returns and  allowances  totaling
$669,820.  The  Company  disputes  the  various  adjustments  to  sales  and has
instituted legal  proceedings  against SAS Group, Inc. to recover all monies for
which it is entitled,  which the Company believes is in excess of $750,000.  For
1998,  the Company  sold 3,375 units at an average  price of $13.27 for sales of
$44,781 and the joint  venture sold 62,659  units at an average  price of $16.42
for sales of $1,028,595.

      For 1999,  the  Company's  average cost was $3.36,  for a cost of sales of
$198, and the joint venture had an average cost of sales of $3.87.  During 1999,
the Company  adjusted its cost of sales figure as a result of current and future
cost  estimates  based on  information  provided by SAS Group,  Inc. The Company
disputes  the  various  adjustments  to cost of sales and has  instituted  legal
proceedings as discussed  above.  For 1998 the Company's  average cost was $5.55
for a cost of sales of $18,735. The average cost for the joint venture was $2.18
for a cost of sales of $136,433 due to a decrease in unit cost,  which  resulted
from a change in suppliers.

      Selling  expenses  incurred  by the  Company  increased  by  approximately
$54,000  from  $25,000 in 1998 to $79,000 in 1999.  This  increase is  primarily
attributable to an approximately  $52,000 increase in product  development costs
as it  relates  to the  Company's  sunglass  product,  an  approximately  $8,000
increase in costs  related to the design and upkeep of the  Company's  corporate
website, an approximate $15,000 decrease in expenses incurred in connection with
the after market  automobile  products  program  which ended in January 1998, an
approximately  $9,000 increase in travel expenses,  and an approximately  $2,000
decrease in shipping and postage expenses.

      General and  administrative  expenses incurred by the Company increased by
approximately  $13,000 from $543,000 in 1998 to $556,000 in 1999.  This increase
is primarily  attributable to an  approximately  $6,000 increase in salaries and
related payroll costs, and an approximately $7,000 net increase in various other
administrative areas.

      Interest expense increased by approximately $2,000 from $18,000 in 1998 to
$20,000 in 1999 due to an approximately $2,000 net increase in interest on loans
made to the Company.


                                       10

<PAGE>


Liquidity and Capital Resources

      Cash of $343,907 was used for  operations  for the year ended December 31,
1999 as compared to $192,673 used last year.  Cash increased  during the year by
$100,738.

      The Company's  working capital has  deteriorated due to the use of current
assets for operations. Working capital and current ratios were:

                                               December 31,         December 31,
                                                  1999                 1998
                                                  ----                 ----
Working capital
(deficiency)                                  $(1,309,038)          $(1,108,922)
Current ratios                                     0.09:1                0.15:1

      In order to meet short-term marketing goals, in July 1997 certain officers
and  directors  agreed to  acquire  an  aggregate  of  10,000,000  shares of the
Company's  common stock  (representing  8% of total shares  outstanding)  for an
aggregate purchase price of $100,000.  The Company is also seeking an additional
$1,100,000  of financing  under the same terms and  conditions as offered to the
officers and  directors.  From 1997 through  December 31, 1999,  the Company has
received $798,700. There is no assurance that the Company will be able to obtain
additional financing.

      In October 1999,  the Company has  successfully  completed  development of
adjustable  polarized  sunglasses  which allow the wearer to change the color of
the  sunglass  lenses to a variety  of colors  without  changing  the  lenses or
altering  the frame.  The Company is seeking the required  financing  needed for
this sunglass  project and will strive to begin  worldwide  distribution  during
2001.

Year 2000

      The "Year 2000 issue" refers to the potential harm from computer  programs
that  identify  dates by the last two digits of the year  rather  than using the
full four digits. Such programs could fail due to  misidentification of dates on
or after  January  1,  2000.  If such a failure  were to occur to the  Company's
internal  computer-based  systems  or  to  the  crucial  computer-based  systems
operated by third parties, the Company could be unable to process  transactions,
send invoices,  or engage in similar normal business operations.  Such failures,
if  they  occurred,  would  have a  material  adverse  effect  on the  Company's
business, results of operations and financial condition. However, because of the
complexity of the issues,  the number of parties involved and the fact that many
of the issues are outside the Company's  control,  the Company cannot reasonably
predict with certainty the nature or likelihood of such effects.

      The Company has conducted a review of most of its internal  computer-based
systems.  Much of the software used by the Company has been developed internally
and is regularly  modified and updated to meet the changing  requirements of its
business. The Company expects that its critical internal systems will be able to
process  relevant  date  information  in the  future to permit  the  Company  to
continue to provide its services  without  significant  interruption or material
adverse effect on its business,  results of operations and financial  condition.
However,  there  can be no  assurances  that the  Company  will  not  experience
unanticipated negative consequence caused by undetected errors or defects in the
technology used in its internal systems.


                                       11

<PAGE>


      Notwithstanding  the  Company's  expectation  that its own systems will be
able to process  Year 2000 date  information,  the  Company's  business  depends
significantly on receiving  uninterrupted services by other parties. The Company
has made inquiries of some of these parties regarding their respective levels of
preparedness  for Year 2000 issues as they may affect the  Company.  The Company
will continue to make such inquiries and will monitor the public  disclosures of
such companies  regarding their Year 2000 status.  So far, the responses to such
inquiries have been generally  non-committal regarding levels of preparedness or
willingness  to provide  assurances  to the  Company.  In almost all cases,  the
Company is not in a position to require either  affirmative action or assurances
by these  parties  regarding  continued  provision of services in the Year 2000.
Accordingly,  while  the  Company  has not been  advised  by any of these  other
companies  on which it depends that they do not expect to be ready for Year 2000
issues,  the  Company  does not  believe  it is in a  position  to  project  the
likelihood of such parties' abilities to provide  uninterrupted  services to the
Company. The failure of any of these companies to provide  uninterrupted service
to the Company  would  likely have a material  adverse  effect on the  Company's
business and its results of operations and financial condition.

      The Company does not separately identify costs incurred in connection with
Year 2000 compliance activities.  To date, however, the Company does not believe
such costs to be  significant  because they  generally have been incurred in the
normal  course of  internally  modifying  and  updating the  Company's  software
programs.  Future  expenditures  are not expected to be significant  and will be
funded out of cash flows.

Item  7. Financial Statements


                                       12

<PAGE>


QUEST PRODUCTS CORPORATION
Table of Contents
================================================================================


                                                                           Page


Independent Auditors' Report                                                F-1


Financial Statements

     Balance Sheet
         December 31, 1999                                            F-2 - F-3

     Statements of Operations
         For the Years Ended December 31, 1999 and 1998               F-4 - F-5

     Statements of  Changes  in  Shareholders' (Deficit)
         For the  Years  Ended December 31, 1999 and 1998                   F-6

     Statements of Cash Flows
         For the Years Ended December 31, 1999 and 1998               F-7 - F-8


Notes to Financial Statements                                        F-9 - F-16

<PAGE>


                          Independent Auditors' Report


To the Board of Directors and Shareholders
Quest Products Corporation

We have audited the accompanying  balance sheet of Quest Products Corporation as
of December 31, 1999 and the related  statements  of  operations,  shareholders'
(deficit),  and cash flows for the years ended December 31, 1999 and 1998. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements 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,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Quest Products  Corporation as
of December  31, 1999 and the results of its  operations  and its cash flows for
the years ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.

As  discussed  in Note 12 to the  financial  statements,  the  Company  has been
subject to certain  governmental  regulatory  matters by the U.S.  Food and Drug
Administration.  At present time,  neither the Company nor its legal counsel can
predict the ultimate  outcome of the matters  addressed  by this  agency.  These
matters,  if pursued by this agency,  may have a material  adverse effect on the
operations of the Company.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial  statements,  the Company has had recurring net operating losses since
its  inception,  has relied upon debt and equity  financing to provide funds for
operations  and, as of December  31, 1999  current  liabilities  exceed  current
assets  by  $1,105,108.  These  conditions  raise  substantial  doubt  about the
Company's  ability to continue as a going concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


RAICH ENDE MALTER LERNER & CO.
East Meadow, New York
March 21, 2000


                                     - F1 -

<PAGE>


QUEST PRODUCTS CORPORATION
Balance Sheet
December 31, 1999
================================================================================


Assets
     Current Assets
       Cash                                                             $113,338

       Inventory                                                           7,301

       Prepaid expenses                                                    6,234
                                                                        --------
                                                                         126,873
                                                                        --------

     Investment and Advances - PhaseOut Partners                          85,874

     Furniture and Equipment - at cost - net of accumulated
       depreciation of $35,513                                            12,902

     Deferred royalties                                                   10,000

     License acquisition cost - net of accumulated
       amortization of $500                                               28,500

     Patents - at cost - net of accumulated
       amortization of $5,856                                             33,579

     Security Deposits                                                     3,861
                                                                        --------

                                                                         174,716
                                                                        --------
                                                                        $301,589
                                                                        ========


                                     - F2 -

See notes to financial statements.

<PAGE>


QUEST PRODUCTS CORPORATION
Balance Sheet
December 31, 1999
================================================================================


Liabilities and Shareholders' (Deficit)
     Current Liabilities
       1992 convertible debentures - including accrued interest
         of $7,900                                                  $    17,900
       Accounts payable                                                 517,019
       Accrued officer and director's compensation                      628,142
       Accrued expenses                                                  68,920
                                                                    -----------

                                                                      1,231,981
                                                                    -----------
     Other Liabilities
       Due to former officer and directors                              203,431
                                                                    -----------

     Commitments and Contingencies

     Shareholders' (Deficit)
       Series A  Convertible  Preferred  Stock
         - par  value  $.001 -  authorized
         600,000 shares - no shares issued and outstanding                   --
       Series B Convertible Preferred Stock
         - par value $.001 -authorized 5,000,000
        shares - no shares issued and outstanding                            --
       Common Stock - par value $.00003 - authorized
         200,000,000 shares - 183,087,985 shares
         issued and outstanding                                           5,492
       Capital in excess of par                                       4,156,599
       Accumulated (deficit)                                         (5,295,914)
                                                                    -----------

                                                                     (1,133,823)
                                                                    -----------

                                                                    $   301,589
                                                                    ===========


                                     - F3 -

See notes to financial statements.

<PAGE>


QUEST PRODUCTS CORPORATION
Statements of Operations                                             Page 1 of 2
================================================================================


<TABLE>
<CAPTION>
                                                               For the Years Ended
                                                                   December31,
                                                              1999             1998
                                                          -------------    -------------
<S>                                                       <C>              <C>
Sales - net                                               $       1,227    $      44,781

Cost of Sales                                                       198           18,735
                                                          -------------    -------------

                                                                  1,029           26,046
                                                          -------------    -------------


Selling Expenses                                                 79,051           25,428

General and Administrative Expenses                             556,308          543,389
                                                          -------------    -------------

                                                                635,359          568,817
                                                          -------------    -------------

(Loss) Before Other Income (Expenses) and
   Equity in Net Income of PhaseOut Partners                   (634,330)        (542,771)
                                                          -------------    -------------


Other Income (Expenses)
     Interest income                                                 --               15
     Interest (expense)                                         (19,622)         (17,634)
                                                          -------------    -------------

                                                                (19,622)         (17,619)
                                                          -------------    -------------

(Loss) Before Equity in Net Income of PhaseOut Partners        (653,952)        (560,390)

Equity in Net Income (Loss) of PhaseOut Partners               (228,738)         272,329
                                                          -------------    -------------

Net (Loss) Before Extraordinary Item                           (882,690)        (288,061)

Extraordinary Item - Gain on Settlement of Debt
     (No applicable income taxes)                                46,952               --
                                                          -------------    -------------


Net (Loss)                                                $    (835,738)   $    (288,061)
                                                          =============    =============
</TABLE>


                                     - F4 -

See notes to financial statements.

<PAGE>


QUEST PRODUCTS CORPORATION
Statements of Operations                                             Page 2 of 2
================================================================================


<TABLE>
<S>                                                       <C>              <C>
Net (Loss) per Share:
     Basic:
       (Loss) from Continuing Operations                          - 0 -            - 0 -
       Extraordinary Item                                         - 0 -            - 0 -
                                                          -------------    -------------
       Net (Loss)                                                 - 0 -            - 0 -
                                                          =============    =============

     Diluted:
       (Loss) from Continuing Operations                          - 0 -            - 0 -
       Extraordinary Item                                         - 0 -            - 0 -
                                                          -------------    -------------
       Net (Loss)                                                 - 0 -            - 0 -
                                                          =============    =============



Weighted Average Number of Shares
     Outstanding (to nearest 1,000,000)                     169,000,000      152,000,000
                                                          =============    =============
</TABLE>


                                     - F5 -

See notes to financial statements.

<PAGE>


QUEST PRODUCTS CORPORATION
Statements of Shareholders' (Deficit)
For the Years Ended December 31, 1999 and 1998
================================================================================


<TABLE>
<CAPTION>
                                                                Number of
                                                              Common  Stock         Amount          Capital in
                                                                  Shares           $.00003           Excess of          Accumulated
                                                               (Post-Split)        Par Value         Par Value           (Deficit)
                                                               ====================================================================
<S>                                                            <C>                <C>                <C>                <C>
Balance - December 31, 1997                                    138,083,713        $     4,142        $ 3,360,410        $(4,172,115)
   Proceeds from sales of stock                                 22,829,272                685            195,515                 --
                                                                                                                        -----------
   Net (loss)                                                           --                 --                 --           (288,061)
                                                               -----------        -----------        -----------        -----------

Balance - December 31, 1998                                    160,912,985              4,827          3,555,925         (4,460,176)
   Proceeds from sales of stock                                 19,000,000                570            379,430                 --
   Proceeds from issuance of warrants                                   --                 --             50,000                 --
   Stock issued in settlement of debt                            3,175,000                 95            171,244                 --

   Net (loss)                                                           --                 --                 --           (835,738)
                                                               -----------        -----------        -----------        -----------

Balance - December 31, 1999                                    183,087,985        $     5,492        $ 4,156,599        $(5,295,914)
                                                               ===========        ===========        ===========        ===========
</TABLE>


                                     - F6 -

See notes to financial statements.

<PAGE>


QUEST PRODUCTS CORPORATION
Statements of Cash Flows                                            Page 1 of 2
===============================================================================


                                                           For the Years Ended
                                                              December 31,
                                                           1999         1998
                                                        ---------    ---------
Cash Flows from Operating Activities
   Net (loss)                                           $(835,738)   $(288,061)
   Adjustments to reconcile net (loss) to net cash
     (used for) operating activities:
       Depreciation                                         8,708        7,462
       Amortization                                         3,541        3,041
       Gain on settlement of debt                         (46,952)          --

       Accrued interest                                    19,236       17,634
       Equity in net (income) loss of PhaseOut Partners   228,738     (272,329)

       (Increase) decrease in:
         Accounts receivable                                   --        2,712
         Inventories                                          199       60,961
         Prepaid expenses                                  (6,234)       1,496

       Increase (decrease) in:
         Accounts payable                                  (9,936)     (43,818)
         Accrued officer compensation                     290,143      308,000
         Accrued expenses                                   4,388       10,229
                                                        ---------    ---------

                                                         (343,907)    (192,673)
                                                        ---------    ---------

Cash Flows from Investing Activities
   Deferral of royalty paid                               (10,000)          --
   Distributions from PhaseOut Partners                    25,000      (67,283)
   Payment of security deposits                              (355)         631
                                                        ---------    ---------

                                                           14,645      (66,652)
                                                        ---------    ---------

Cash Flows from Financing Activities
     Proceeds from sales of common stock                  380,000      196,200
     Proceeds from issuance of stock options               50,000           --
     Loans from directors                                      --       50,000
Repayments to directors                                        --       (1,863)
                                                        ---------    ---------

                                                          430,000      244,337
                                                        ---------    ---------


                                     - F7 -

See notes to financial statements.

<PAGE>


QUEST PRODUCTS CORPORATION
Statements of Cash Flows                                            Page 2 of 2
===============================================================================


                                                           For the Years Ended
                                                              December 31,
                                                           1999         1998
                                                        ---------    ---------
Net Increase (Decrease) in Cash                         $ 100,738    $ (14,988)

Cash - beginning                                           12,600       27,588
                                                        ---------    ---------

Cash - end                                              $ 113,338    $  12,600
                                                        =========    =========



Cash paid for:
Interest                                                      386           --
                                                        ---------    ---------



Supplemental Disclosures
     Non-cash Investing and Financing Transactions:
         Stock issued for settlement of debt            $ 171,339    $      --
                                                        ---------    ---------

         License acquisition cost accrued               $  29,000    $      --
                                                        ---------    ---------


                                     - F8 -

See notes to financial statements.

<PAGE>


QUEST PRODUCTS CORPORATION
Notes to Financial Statements
December 31, 1999
================================================================================


1 -  The Company

     Quest  Products  Corporation  (the  "Company")  was organized as a Delaware
     Corporation  on July 17, 1987 and operated as a  development  stage company
     through  1993.  The  Company's  purpose  is to market  and  distribute  its
     consumer  products,  including  the  patented  "Phase-Out"  system  smoking
     cessation device (the "Product").

     In 1998,  the  Company  began  distribution  of the  PhaseOut  device  into
     domestic retail chain drug stores through PhaseOut  Partners pursuant to an
     oral joint venture arrangement with SAS Group Inc. ("SAS").

     During 1999, the Company entered into a License  Agreement with the holders
     of a patent  for the  exclusive  worldwide  license  to make,  use and sell
     inventions  related to an adjustable  lens product such as sunglasses,  ski
     goggles or diving masks.

2 -  Summary of Significant Accounting Policies


     a.   Cash and Cash  Equivalents  - The Company  considers  all  short-term,
          highly liquid  investments  with maturities of three months or less at
          the date of their acquisition to be cash  equivalents.  These balances
          are  maintained  at a high quality  financial  institution.  At times,
          these balances are in excess of FDIC insurance limits.


     b.   Inventory  -  Inventory  is valued at cost (on a  first-in,  first-out
          basis) which is not in excess of market value.  Inventory is comprised
          entirely of finished goods.


     c.   Furniture and Equipment - Furniture and equipment are carried at cost.
          Depreciation  is  computed  using the  straight-line  and  accelerated
          methods over the estimated  useful lives (three to seven years) of the
          assets.


     d.   Long-lived  Assets - The Company  reviews  furniture and equipment and
          certain  identifiable  intangibles  for impairment  whenever events or
          changes in circumstances indicate that the carrying amount of an asset
          may not be recoverable. A review for impairment includes comparing the
          carrying  value of an asset to an  estimate  of the  undiscounted  net
          future cash inflows over the life of the asset. An asset is considered
          impaired  when the  carrying  value  exceeds  the  calculation  of the
          undiscounted  net  future  cash  inflows  or  fair  market  value.  An
          impairment loss is defined as the amount of the excess of the carrying
          value over the fair market value of the asset.


                                     - F9 -

<PAGE>


     e.   Intangibles:

               Patents - Patents represent a patent dated June 15, 1993 that was
               acquired by the Company on October 25, 1994 and a foreign  patent
               acquired in 1997. The acquisition  cost has been  capitalized and
               amortized (straight-line method) over the life of 16 years.

               License  Acquisition  Cost -- The cost of  obtaining  the license
               will  be  amortized  using  the  straight-line  method  over  the
               remaining life of the agreement.


     f.   Stock-Based Compensation - Statement of Financial Accounting Standards
          ("SFAS") No. 123 Accounting for Stock-Based Compensation,  encourages,
          but  does  not  require  companies  to  record  compensation  cost for
          stock-based employee compensation plans at fair value. The Company has
          chosen to continue to account for stock-based  compensation  using the
          intrinsic  value method  prescribed  in  Accounting  Principles  Board
          Opinion No. 25,  Accounting for Stock Issued to Employees.  APB No. 25
          requires no recognition of  compensation  expense for the  stock-based
          compensation  arrangements  provided by the Company where the exercise
          price is equal to the market price at the date of the grants.


     g.   Basic and Diluted  Earnings  (Loss) per Share - Basic earnings  (loss)
          per share is computed by dividing  net income  (loss) by the  weighted
          average  numbers  of shares of common  stock  outstanding  during  the
          period. Diluted earnings (loss) per share is computed giving effect to
          all dilutive  potential common shares that were outstanding during the
          period.  Dilutive  potential  common shares consist of the incremental
          common shares issuable upon the exercise of warrants. For fiscal 1999,
          potentially  dilutive  securities that related to shares issuable upon
          the exercise of stock options granted by the Company were excluded, as
          their effect was antidilutive. See Note 4 of the financial statements.


     h.   Advertising  - The Company and the joint  venture  expense the cost of
          advertising  as  incurred.  Advertising  expense was $4,000 and -0- in
          1999 and 1998  respectively.  The joint venture's  expense was -0- and
          $51,000 in 1999 and 1998 respectively.


     i.   Revenue  Recognition  - The  Company's  customers  include  end users,
          retailers and  distributors.  Revenue,  less reserves for returns,  is
          generally recognized upon shipment to the customer.

          The Joint Venture's  customers are primarily retail chain drug stores.
          For  customers  to whom  sales  are  subject  to  return,  revenue  is
          recognized  upon  collection,  at which  time  the sale is  considered
          final. For customers to whom sales are not subject to return,  revenue
          is recognized upon shipment.


                                     - F10 -

<PAGE>


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


3 -  Status of the Company

     The financial statements have been prepared on a going-concern basis, which
     contemplates  the realization of assets and the satisfaction of liabilities
     in the normal course of business over a reasonable length of time.

     The Company has had recurring net operating  losses since its inception and
     has made use of privately-placed debt and equity financing to provide funds
     for operations. As of December 31, 1999, current liabilities exceed current
     assets by $1,105,108.  Those factors,  as well as the Company's  relatively
     recent  entry  into  the  marketplace,  create  an  uncertainty  about  the
     Company's ability to continue as a going concern.

     The Company has intentions of expanding and refining its marketing  efforts
     to improve the  efficiency  of these efforts and to increase  revenues.  In
     addition,  the  Company  is  continuing  its  efforts  to obtain  long-term
     financing through the issuance of long-term debt and equity securities.

     The  financial  statements  do not  include any  adjustments  that might be
     necessary should the above or other factors affect the Company's ability to
     continue as a going concern.

4 -  Joint Venture

     In 1998,  the  Company  began  distribution  of the  PhaseOut  device  into
     domestic retail chain drug stores through PhaseOut  Partners pursuant to an
     oral joint venture agreement with SAS Group Inc.  ("SAS").  SAS handles all
     the  marketing  and  operational  activities  of  the  joint  venture.  The
     investment in PhaseOut  Partners is accounted for under the equity  method,
     whereby  the  investment  account is  increased  for  contributions  by the
     Company  plus its 50% share of the income of the joint  venture and reduced
     for  distributions  and its 50% share of any losses  incurred  by the joint
     venture.  In 1998 the  Company  invested  $67,283,  consisting  of cash and
     inventory  and in 1999  received  a  $25,000  distribution  from the  joint
     venture.

     During 1998,  the Company  recorded its increase in the equity in the Joint
     Venture of  $272,329,  based on  information  reported  to it by SAS.  This
     information  included  collected  sales of  $1,028,595  and net  income  of
     $544,658.  During 1999,  the Company  reduced its investment by $228,738 to
     $85,874 based on information provided by SAS which includes purported price
     concessions given to certain retail chain drug stores,  estimates of future
     returns,  projected future price  concessions and charges for certain other
     costs. The Company disputes these price  concessions and charges,  which it
     believes were not originally  agreed to nor actually incurred in connection
     with the PhaseOut program. In January 2000, the Company informed SAS Group,
     Inc. that the Joint Venture was  terminated.  In March 2000 the Company has
     instituted legal proceedings against SAS to recover all monies for which it
     is entitled under the joint venture  agreement,  which the Company believes
     is in excess of $750,000.  The outcome of  litigation  cannot be reasonably
     predicted at this time.


                                     - F11 -

<PAGE>


5 -  License Agreement

     Under the License Agreement  described in Note 1, the Company has agreed to
     issue warrants to purchase 1,000,000 shares of stock at a 25% discount from
     the closing  price on October 6, 1999,  the date the License was  executed.
     The Company has  estimated  the fair value of these  warrants to be $29,000
     and has recorded this License  Acquisition Cost as a long-term asset on its
     balance  sheet.  These  acquisition  costs  will  be  amortized  using  the
     straight-line method over the remaining life of the Agreement.  The life of
     the  Agreement  is based on the  remaining  life of the  Patent  which,  at
     acquisition date, had 13 years remaining.

     Pursuant to the License Agreement, the Company is subject to annual minimum
     royalty  payments  of  $25,000,  commencing  from  the  date  of the  first
     commercial  sale of any  product  covered  by the  License  Agreement.  The
     Company paid $10,000,  which will be used to offset future royalty payments
     due.


6 -  Warrants and Convertible Debentures

     The pro forma  information  required by SFAS 123  regarding  net income and
     earnings per share has been  presented as if the Company had  accounted for
     its warrants under the fair value method. The fair value of each warrant is
     estimated on the date of the warrant grant using the  Black-Scholes  option
     pricing model with the following weighted average assumptions:

                                                 1999              1998
                                                 ----              ----
           Assumptions:
              Expected life of warrants          3.9 years         3.6 years
              Risk free interest rate            6.0%              6.0%
              Volatility of stock                194%              266%
              Expected dividend yield             --                --

          The weighted  average fair value of the warrants  granted  during 1999
          and 1998 was $45,900 and $173,561, respectively. Had the fair value of
          the  warrants  been  amortized  to expense  over the  related  service
          period,   the  pro  forma  impact  on  earnings  of  the   stock-based
          compensation  for the warrants under the provision  would have been as
          follows:

                                                 1999              1998
                                                 ----              ----
           Net (Loss):
              As reported                 $     (835,738)     $    (288,061)
              Pro forma                   $   (1,080,239)     $    (659,223)

           Earnings Per Share:
              As reported                 $      - 0 -        $      - 0 -
              Pro forma                   $     (.01)         $      - 0 -


                                     - F12 -

<PAGE>


     In accordance with SFAS 123, the weighted average fair value of warrants is
     required to be based on a theoretical statistical model using the preceding
     assumptions.  In  actuality,  the  Company's  warrants  do not  trade  on a
     secondary  exchange and,  therefore,  the  employees  and directors  cannot
     derive any benefit from holding the warrants  under these plans  without an
     increase in the market  price of Company  stock.  Such an increase in stock
     price would benefit all shareholders commensurately.


     a.   Warrants  -Presented  below is a summary of warrant  activity  for the
          years shown: All warrants are immediately exercisable upon grant.

                                                               Weighted Average
                                                  Warrants      Exercise Price


         Balance - December 31, 1997             52,511,129          0.05
           Granted                               12,272,216          0.04
                                                 ----------

         Balance - December 31, 1998             64,783,345          0.05
           Granted                                9,000,000          0.02
           Expired                               (5,156,061)         0.13
                                                 ----------

         Balance - December 31, 1999             68,627,284          0.04
                                                 ==========


The following table summarizes  information for warrants  currently  outstanding
and exercisable at December 31, 1999:

                                        Warrants Outstanding
                        ------------------------------------------------------
         Range of                          Weighted Average    Weighted Average
          Prices            Number          Remaining Life      Exercise Price
       -----------      ------------------------------------------------------
       $ .015-.025         9,750,000           3 years               0.02
         .030-.040        21,500,000           3 years               0.03
         .050-.075        37,377,284           2 years               0.05
                         ----------
       $ .01-.075         68,627,284           2 years               0.04


     b.   1992 Convertible  Debentures - In 1992, the Company initiated a series
          of private  placement  offerings  of two and  three-year  Subordinated
          Convertible  Debentures  with an annual  interest rate of 10% and with
          variable conversion rates (ranging from $.05 to $.10 per share). These
          offerings  raised a total of  $117,500.  The  Company is in default on
          interest  payments and is in violation of  covenants.  Of the original
          $117,500 raised,  $107,500 has been paid back or converted into stock.
          As of December 31, 1999,  $10,000 of principal  and $7,900 of interest
          remain unpaid or unconverted on these debentures.

     At  December  31,  1999,  the amount of shares  issuable on exercise of all
     convertible  securities  would  exceed the number of  authorized  shares by
     approximately 52,000,000.


                                    - F13 -

<PAGE>


7 -  Related Party Transactions

     a.   Loans from Former Officer and Director - A former officer and director
          was owed $100,445 for various expenses and loans which are included in
          the December 31, 1999 Balance Sheet. In December 1999, he brought suit
          against the Company in New York State Supreme  Court,  Nassau  County,
          for alleged  consulting  fees and loan repayments due him. The Company
          counterclaimed  for fraud and breach of contract.  The action has been
          settled as of March 6, 2000 although final  settlement  documents have
          not been  executed.  The  parties  have  agreed  to issue  the  former
          director 400,000 shares of common stock in settlement of the debt. The
          debt was reclassified to non-current liabilities at December 31, 1999.

          During  1998,  the Company  received  from a former  director  $50,000
          payable  with a  stated  interest  rate of 10%.  Accrued  interest  at
          December 31, 1999 amounted to $5,986. Both the loan amount and accrued
          interest  are included in the  December  31, 1999  balance  sheet.  On
          February 3, 2000, the former  director  accepted  1,250,000  shares of
          common stock in settlement of this debt plus accrued  consulting  fees
          in the amount of $47,000.  The debt was  reclassified  to  non-current
          liabilities at December 31, 1999.

     b.   Officer's and Director's Compensation - During 1996, an investor group
          brought in by two individuals  acquired an 18% ownership  interest for
          $500,000.  In addition,  if and when any warrants existing at the time
          of the $500,000 investment to purchase common stock of the Company are
          exercised  or,  if  during  the next five  years  the  Company  raises
          additional funds through  issuance of equity,  then the investors will
          be issued,  without  additional  payment,  additional shares of common
          stock of the Company  pro rata so that they will own in the  aggregate
          18% of the then outstanding shares of common stock of the Company. The
          two  individuals  were  awarded  seats on the Board of  Directors  and
          officers  positions.  In addition,  the two individuals  each received
          9,778,975 warrant shares with the same anti-dilution provisions as the
          investor  group.  The two  individuals  had consulting  agreements for
          which the Company accrued fees of $5,000 per month for each individual
          from  July,  1996  through  November,  1997.  During  1997,  these two
          individuals  each agreed to receive  3,333,333 shares of stock in lieu
          of $50,000 in accrued consulting fees. In December,  1997, the Company
          entered into  employment  contracts with each of these two individuals
          for  $150,000  per year for five years  from  December,  1997  through
          November,  2002 and issued warrants to purchase  7,500,000 shares each
          at an exercise  price of $.03 per share.  As of December 31, 1999, the
          two  individuals  were owed  $315,062  and  $313,080  respectively  in
          accrued  expenses and salaries.  As of December 31, 1998, the investor
          group owns 28,064,340  shares and the two individuals have warrants to
          purchase 31,877,284 shares under these anti-dilution provisions.


8 -  Shareholder's Loan

     During 1996, the Company received  $200,000 from an individual as a loan in
     connection with the Company's  media  campaign.  Repayments of $35,000 were
     made in cash and $7,500 in stock.  In November  1999,  the  Company  issued
     2,875,000 shares of Company stock in repayment of the $157,500 loan balance
     and any accrued interest.  Consequently,  the Company  recognized a $46,952
     gain on the restructuring of this debt.


                                     - F14 -

<PAGE>


9 -  Income Taxes

     The Company has available net operating loss carryforwards of approximately
     $6,100,000,  which expire in 2002 until 2014. Deferred income taxes reflect
     the net tax  effects  of net  operating  loss  carryforwards  and result in
     deferred tax assets of approximately  $2,086,000 and $1,590,000 at December
     31,  1999 and 1998,  respectively,  which  were fully  offset by  valuation
     allowances due to  uncertainties  surrounding  the ultimate  realization of
     these assets.


10 - Lease Commitments

     The Company is obligated  under a lease for office space through  November,
     2001.   Rental   expense  was  $60,361  and  $38,760  for  1998  and  1997,
     respectively.  The future minimum lease payments  required under this lease
     are as follows:

                           2000                     62,626
                           2001                     49,941


11 - Economic Dependence

     The  Company  purchased  100% of its  products  from one vendor in 1998 and
     there were no purchases in 1999.


12 - Contingencies

     a.   Regulatory  Matters  - On  June  1,  1993,  the  U.S.  Food  and  Drug
          Administration  ("FDA")  sent a  warning  letter to the  Company.  The
          letter  stated that due to the  Company's  marketing  and  promotional
          materials  used at the  time for the  product,  the FDA  believed  the
          product  was being  sold as a medical  device and should be subject to
          regulation  as a medical  device  under  the  Federal  Food,  Drug and
          Cosmetic  Act ("FDC  Act"),  and that the product was in  violation of
          certain provisions of that Act.

          The Company  believes that the product is not a medical  device within
          the meaning of the FDC Act and has  advised  the FDA of its  position.
          However,   in  an  act  of  cooperation  with  the  FDA,  the  Company
          volunteered to make revisions in its promotional  material in order to
          make it clearer to the public that the  product is not  intended to be
          used as a medical device.

          Since these revisions have been made, the Company has not received any
          communications  from the FDA about this matter.  However, no assurance
          can be  given  that  the  FDA  will  not in the  future  continue  its
          investigation and prohibit the Company from marketing the product,  or
          invoke  other  remedies,  without the Company  complying  with medical
          device status requirements of the FDC Act.


                                     - F15 -

<PAGE>


     On October 20,  1993,  the Federal  Trade  Commission  ("FTC")  advised the
     Company  that  they were  conducting  a  non-public,  informal  inquiry  to
     determine  whether the Company had engaged in deceptive or unfair practices
     in violation of the Federal Trade  Commission Act ("FTC Act") in connection
     with certain  advertising claims made by the Company.  The Company provided
     certain information and documents requested by the FTC.

     On  August  20,  1996,  a consent  order  was  agreed to with the FTC which
     settled  charges  that  various  advertising  claims for the  product  were
     unsubstantiated or false. The order required the Company to send a postcard
     to identifiable  past-purchasers of the product notifying them of the FTC's
     action and advising them that the product has not been proven to reduce the
     risk of  smoking-related  diseases or make cigarettes safer. The order also
     prohibits   the  Company  from  making   certain   claims  in  its  current
     advertising. The Company's cost to comply with this order was $15,102.

     On April 7, 1999, the Company received a letter from the FTC concluding, on
     the  assumption  that the  information  submitted is accurate and complete,
     that no action is indicated.


13 - Disclosure About Fair Value of Financial Instruments

     The carrying  amounts of cash,  accounts  receivable,  accounts payable and
     other current assets and liabilities  approximate fair value because of the
     short maturity of these items.

     The  carrying  amounts of various  loans  payable  exceed the fair value by
     approximately $3,000, based on an estimated borrowing rate of 10%.

     These  fair  value   estimates   are   subjective  in  nature  and  involve
     uncertainties and matters of significant judgment and, therefore, cannot be
     determined  with  precision.  Changes in  assumptions  could  significantly
     affect these estimates.


                                    - F16 -

<PAGE>


Item 8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosures.

                                      NONE


Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance
        with Section 16 (a) of the Exchange Act.

     The following table sets forth certain information concerning the directors
and executive officers of the Company:

Name                      Age                Position(s) with the Company

Burton A. Goldstein       64           Chairman of the Board of Directors
                                       Secretary, Chief Executive Officer

Herbert M. Reichlin       58                        President, Treasurer,
                                        Chief Operating Officer, Director

Richard Bruno             54                                     Director

James F. Leary            70                                     Director

Alfred Fabricant          46                                     Director

Richard Mascola           63                                     Director

Angelo J. Vassallo        54                                     Director

Milton J. Walters         55                                     Director


     Directors   are  elected  to  serve  until  the  next  annual   meeting  of
stockholders  and until their  successors  have been elected and have qualified.
Officers  are  appointed  to serve until the  meeting of the Board of  Directors
following the next annual  meeting of  stockholders  and until their  successors
have been  elected and have  qualified.  Each  director  receives  warrants  for
500,000 shares at market price each February, and out-of-pocket travel expenses.

     A summary of the  business  experience  of each officer and director of the
Company is as follows:

     BURTON A.  GOLDSTEIN  has been  Chairman of the Board of  Directors  of the
Company  since March 10, 1997 and became its  Secretary  in December  1997.  Mr.
Goldstein  is  President  of American  Employer  Services  Corp.,  a provider of
employee benefit consulting  services to industry and associations.  A chartered
Life  Underwriter,  Mr.  Goldstein  is also  active in estate  preservation  for
business owners and wealthy individuals.


                                       13

<PAGE>


     HERBERT M.  REICHLIN has been a Director and Treasurer of the Company since
July 30, 1996 and became its  President  in  December  1997.  Mr.  Reichlin is a
Certified  Public  Accountant  and is also the  President  of  Program  Resource
Organization, a consulting company to the health industry.

     RICHARD BRUNO has been a Director of the Company since June 1998.  Prior to
retirement,  Mr.  Bruno was employed as Managing  Director of NASDAQ  trading at
Paine Webber Inc. from 1964 thru June 1998.

     JAMES F. LEARY has been a Director of the Company  since August  1994.  Mr.
Leary the President and Founder of Sunwestern  Management,  Inc., Dallas, Texas,
engaged in venture capital investing through two limited partnerships.  Prior to
Sunwestern's  inception in 1981, Mr. Leary was Senior  Executive Vice President,
Chief  Financial  Officer and Director of the  Associates  Corporation  of North
America, Dallas, Texas. Prior to his tenure with Associates, he served as Senior
Vice  President of The National Bank of North America (now National  Westminster
Bank USA) and as an Assistant Treasurer of CIT Financial Corporation.  Mr. Leary
is Vice Chairman of Finance of Search Capital Group,  Inc.,  Dallas, TX (NASDAQ)
and is a director of MaxServ, Inc. (NASDAQ), several open-end mutual stock funds
under the management of Capstone Asset Management Company,  and Anthem Financial
Services,  Inc.  Mr.  Leary has a B.A.  degree in Business  Administration  from
Georgetown  University  1951,  an MBA in  Banking  and  Finance  from  New  York
University  1953, and is also a graduate of the Advanced  Management  Program of
the Harvard University Graduate School of Business in 1956.

     ALFRED  FABRICANT has been a Director since October 7, 1997. Mr.  Fabricant
is the  founding  partner of the New York law firm of Fabricant & Yeskoo LLP and
is currently a partner of the law firm of Ostrolenk,  Faber, Gerb & Sofken.  Mr.
Fabricant  was  educated  at the  University  of  Miami  (1975)  and at the John
Marshall Law School (1978).

     DR.  RICHARD F. MASCOLA has been a Director  since  December 16, 1997.  Dr.
Mascola  is a  practicing  Doctor  of Dental  Surgery  and is  President  of the
American  Dental  Association.  Dr. Mascola was educated at Holy Cross (1958) at
New York University College of Dentistry,  D.D.S. and at Brookdale Dental Center
of New York University.

     ANGELO J. VASSALLO has been a Director since October 22, 1999. Mr. Vassallo
has 30 years of marketing and sales  experience at Seagram where he is presently
the Director of Marketing for the North America Atlantic/Pacific Region.

     MILTON J. WALTERS has been a Director  since December 28, 1999. Mr. Walters
is President of Tri-River  Capital Group, a company that serves the  specialized
investment banking needs of the financial service industry.

Compliance With Section 16(a) of The Securities Exchange Act of 1934

     The Company does not have any securities registered under Section 12 of the
Securities Exchange Act of 1934, and, accordingly, compliance with Section 16(a)
thereof is not required or applicable.


                                       14

<PAGE>


Item 10.   Executive Compensation

     The following table sets forth the annual  long-term  compensation  for the
Company's Chief Executive  Officer,  and the only other executive officer during
the Company's last three fiscal years:


                           Summary Compensation Table

                                         Annual         Long-Term    All Other
                                      Compensation    Compensation  Compensation
                                                       Securities
                                                       Underlying
Name and Principal Positions  Year      Salary         Warrants (#)
--------------------------------------------------------------------------------

Burton A. Goldstein           1999     $   150,000        500,000   $   7,200
(Chief Executive Officer)     1998     $   150,000      4,511,108          --
                              1997     $    67,500     10,648,559          --


Herbert M. Reichlin           1999     $   150,000        500,000   $  15,362
(President and Chief          1998     $   150,000      4,511,108          --
Operating Officer)            1997     $    67,500     10,648,559          --



Warrant Grants in Last Fiscal Year

     The following  table sets forth  certain  information  concerning  warrants
granted during 1999 to the named executives:

                                Individual Grants

                               Number of     % of Total      Exercise
                              Securities   Warrants Granted   or Base
                              Underlying    to Employees in    Price  Expiration
Name                       Warrants Granted   Fiscal Year    ($/share)   Date
--------------------------------------------------------------------------------

Burton A. Goldstein            500,000            6%           0.01     2/15/04

Herbert M. Reichlin            500,000            6%           0.01     2/15/04


                                       15

<PAGE>


Aggregated  Warrant  Exercises in Last Fiscal Year and Fiscal  Year-End  Warrant
Values

     The following table summarizes  warrants exercised during 1999 and presents
the  value of  unexercised  warrants  held by the  named  executives  at  fiscal
year-end:

                                                Number of
                                               Securities
                                                Underlying          Value of
                         Shares                Unexercised        Unexercised
                        Acquired               Warrants at        In-the-Money
                          on       Value       Fiscal Year-       Warrants at
                        Exercise  Realized     End (#) All        Fiscal Year-
Name                      (#)        ($)       Exercisable          End ($)
------------------------------------------------------------------------------

Burton A. Goldstein        0          0        25,438,642           38,000

Herbert M. Reichlin        0          0        25,438,642           38,000



Item 11. Security Ownership of Certain Beneficial Owners and Management

(a)  Security Ownership of Certain Beneficial Owners -- The persons set forth on
     the charts  below are known to the Company to be the  beneficial  owners of
     more than 5% of the  Company's  outstanding  voting  Common Stock as of the
     date hereof.


(b)  Security  Ownership of Management -- Information  concerning the number and
     percentage  of shares of voting Common Stock of the Company owned of record
     and beneficially by management, is set forth on the charts below:


                                  Shares of Common Beneficially Owned
                                  -----------------------------------
Name and Address                            Shares Acquirable
Of Beneficial Owner         Shares Owned    Within 60 Days(1)   Percent Owned
-------------------         ------------    -----------------   -------------
Burton A. Goldstein          5,333,333         25,438,642          14.8%
6900 Jericho Turnpike
Syosset, New York 11791

Herbert M. Reichlin          5,333,333         25,438,642          14.8%
6900 Jericho Turnpike
Syosset, New York 11791

James F. Leary                 104,516          2,500,000           1.4%
6900 Jericho Turnpike
Syosset, New York 11791


                                       16

<PAGE>


Alfred Fabricant             2,806,434         1,000,000            2.1%
6900 Jericho Turnpike
Syosset, New York 11791

Richard Mascola              2,806,434         1,000,000            2.1%
6900 Jericho Turnpike
Syosset, New York 11791

Richard Bruno                2,500,000           750,000            1.8%
6900 Jericho Turnpike
Syosset, New York 11791

Angelo J. Vassallo                   0         1,000,000            0.5%
6900 Jericho Turnpike
Syosset, New York 11791

Milton J. Walters            2,000,000         2,000,000            2.2%
6900 Jericho Turnpike
Syosset, New York 11791

All Directors and Officers            80,011,334                   33.0%
and Beneficial Owners of more
than 5% of the Company's Common Stock

Under the rules of the Securities and Exchange  Commission (the "SEC"), a person
is deemed to have  "beneficial  ownership"  of any Common  Stock over which that
person has or shares  voting or  investment  power,  plus any Common  Stock that
person may acquire  within 60 days,  including  through the  exercise of a stock
option or the conversion of a convertible security.


Item 12. Certain Relationships and Related Transactions

     a.   Loans  from  Former  Officer  and  Director  - A  former  officer  and
          director,  Bernard Gutman,  was owed $100,445 for various expenses and
          loans due him at December 31, 1999. In December  1999, he brought suit
          against the Company in New York State Supreme  Court,  Nassau  County,
          for alleged  consulting  fees and loan repayments due him. The Company
          counterclaimed  for fraud and breach of contract.  The action has been
          settled as of March 6, 2000 although final  settlement  documents have
          not been  executed.  The  parties  have  agreed  to issue  the  former
          director 400,000 shares of common stock in settlement of the debt.

          During 1998,  the Company  received  $50,000  from a former  director,
          Luther H. Hodges,  Jr.,  payable with a stated  interest  rate of 10%.
          Accrued interest at December 31, 1999 amounted to $5,986.  On February
          3, 2000, the former director accepted 1,250,000 shares of common stock
          in settlement of this debt plus accrued  consulting fees in the amount
          of $47,000.


                                       17

<PAGE>


     b.   Officer's and Director's Compensation - During 1996, an investor group
          brought in by two individuals  acquired an 18% ownership  interest for
          $500,000.  In addition,  if and when any warrants existing at the time
          of the $500,000 investment to purchase common stock of the Company are
          exercised  or,  if  during  the next five  years  the  Company  raises
          additional funds through  issuance of equity,  then the investors will
          be issued,  without  additional  payment,  additional shares of common
          stock of the Company  pro rata so that they will own in the  aggregate
          18% of the then outstanding shares of common stock of the Company. The
          two  individuals  were  awarded  seats on the Board of  Directors  and
          officers  positions.  In addition,  the two individuals  each received
          9,778,975 warrant shares with the same anti-dilution provisions as the
          investor  group.  The two  individuals  had consulting  agreements for
          which the Company accrued fees of $5,000 per month for each individual
          from  July  1996  through  November  1997.   During  1997,  these  two
          individuals  each agreed to receive  3,333,333 shares of stock in lieu
          of $50,000 in accrued  consulting  fees. In December 1997, the Company
          entered into  employment  contracts with each of these two individuals
          for  $150,000  per year for five  years  from  December  1997  through
          November 2002 and issued options to purchase  7,500,000 shares each at
          an exercise price of $.03 per share.  As of December 31, 1999, the two
          individuals  were owed $315,062 and $313,080  respectively  in accrued
          salaries and various expenses.

Item 13. Exhibits and Reports on Form 8-K

(A)    Exhibits

         3.1  Articles of Incorporation (4)

         3.2  By-laws (4)

       10.01  Agreement dated August 21, 1995 with J&R Intercontinental (3)

       10.02  Consulting  Agreement  dated July 9, 1996  between the Company and
              Herbert M. Reichlin (2)

       10.03  Consulting  Agreement  dated July 9, 1996  between the Company and
              American Employer Service Corporation (2)

       10.04  Warrant  Agreement  dated July 9, 1996  between  the  Company  and
              Herbert M. Reichlin (2)

       10.05  Warrant  Agreement  dated July 9, 1996  between  the  Company  and
              Burton A. Goldstein (2)

       10.06  Warrant  Agreement  dated July 9, 1996  between  the  Company  and
              Milton J. Walters (2)

       10.07  Securities Purchase Agreement dated July 9, 1996 (2)

       10.08  Agreement dated April 30, 1997 with Kingdom Blinds  Manufacturing,
              Inc. (1)

       10.09  Employment  Agreement  dated  December 1, 1997 between the Company
              and Burton A. Goldstein. (1)

       10.10  Employment  Agreement  dated  December 1, 1997 between the Company
              and Herbert M. Reichlin. (1)

       10.11  Consulting  Agreement  dated  December 9, 1997 between the Company
              and Bernard Gutman. (1)

       10.12  License  Agreement  dated October 31, 1999 between the Company and
              Charles E. Wheatley, Geoff Coy and James A. Mitchell

              (1)    Incorporated  by  reference  to  Exhibits  to Form  10K for
                     fiscal year ended December 31, 1997.

              (2)    Incorporated  by  reference  to  Exhibits  to Form  10K for
                     fiscal year ended December 31, 1996.

              (3)    Incorporated  by  reference  to  Exhibits  to Form  10K for
                     fiscal year ended December 31, 1995.

              (4)    Incorporated  by  reference  to  Exhibits  to Form  10K for
                     fiscal year ended December 31, 1989.

(B)    Reports on Form 8-K

              (5)    No reports on Form 8-K were filed  during the last  quarter
                     of 1998.


                                       18

<PAGE>


                                   SIGNATURES

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


                           QUEST PRODUCTS CORPORATION

Dated:  March 30, 2000                  By: /S/:
                                            -----------------------------------
                                                Herbert M. Reichlin, 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.

      SIGNATURES AND TITLE                                DATE
      --------------------                                ----

                                                     March 30, 2000
----------------------------------
Burton A. Goldstein
Chairman of the Board of Directors
Secretary, Chief Executive Officer

                                                     March 30, 2000
----------------------------------
Herbert M. Reichlin
President, Treasurer, Chief
Operating Officer, Director

                                                     March 30, 2000
----------------------------------
Richard Bruno
Director

                                                     March 30, 2000
----------------------------------
James F. Leary
Director

                                                     March 30, 2000
----------------------------------
Alfred Fabricant
Director

                                                     March 30, 2000
----------------------------------
Richard Mascola
Director

                                                     March 30, 1000
----------------------------------
Angelo J. Vassallo
Director

                                                     March 30, 1000
----------------------------------
Milton J. Walters
Director


                                       19

<PAGE>


                            SUPPLEMENTAL INFORMATION


     Supplemental  Information  to be Furnished  with Reports Filed  Pursuant to
Section 15(d) of the Act by Registrants  Which Have Not  Registered  Pursuant to
Section 12 of the Act.


                                      NONE


                                       20