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


                                  FORM 10-KSB/A
                               (Amendment No. 2)


                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

                      FOR THE YEAR ENDED DECEMBER 31, 1999

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

            For the transition period from ___________ to ___________

                             Commission file number

                              INTRACO SYSTEMS, INC.
                 (Name of Small Business issuer in its charter)

                   Nevada                                       87-0381511
                   ------                                       ----------
       (State or Other Jurisdiction of                       (I.R.S. Employer
       Incorporation or Organization)                     Identification Number)

             3998 FAU Boulevard
             Boca Raton, Florida                                  33431
             -------------------                                  -----
  (Address of Principal Executive Offices)                      (Zip Code)

         Issuer's Telephone Number, Including Area Code: (561) 367-0600
                                                         ---------------

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

           Securities registered pursuant to Section 12(g) of the Act:
                                  Common Stock

         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 past 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 there is no disclosure of delinquent filers pursuant 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]

State issuer's revenues for its most recent fiscal year: $2,925,268.

The aggregate market value of the issuer's Common Stock, $.01 par value, held by
non-affiliates on March 28, 2000 was approximately $57,735,000.

As of March 28, 2000, there were 18,169,969 shares of the issuer's Common Stock,
$.01 par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
         None.
<PAGE>
                           FORWARD-LOOKING STATEMENTS

      Certain important factors may affect our actual results and could cause
those results to differ materially from any forward-looking statements made in
this prospectus or that are otherwise made by us or on our behalf.
"Forward-looking statements" are not based on historical facts and are typically
phrased using words such as "may," "will," "expect," "believe," "anticipate,"
"intend," "could," "estimate" or "continue" and similar expressions or
variations.

      Differences in actual results may be caused by factors such as those
discussed in "Management's Discussion and Analysis or Plan of
Operations--Factors that may Affect Future Results" as well as those discussed
elsewhere in this report and in our filings with the SEC.

      Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee that they will be achieved.
Except as we are required by applicable law, we do not intend to update any of
the forward-looking statements to conform these statements to actual results.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

      Intraco is a full-service information technology, data and voice service
provider. We are using our in-house expertise with leading speech recognition
technologies, such as voice browsers and natural language engines, to create
comprehensive services for small and midsized businesses such as
websites/e-commerce companies and larger businesses such as telecommunications
companies. Ultimately, Intraco intends that its services will voice-power a wide
range of applications such as websites, e-commerce, auctioning, paging, e-mail
and unified messaging.

      We believe that a significant market opportunity exists with the emergence
of the Internet, especially for business use, and the subsequent expansion of
"application service providers" who lease software and telecommunications
services over the Internet or private data networks. According to Forrester
Research, the business-to-business Internet market is expected to grow from $109
billion in 1999 to $1.3 trillion in 2003, representing a compounded annual
growth rate of approximately 87%. Additionally, the business-to-business market
is estimated to be more than 12 times the size of the business-to-consumer
market in 2003. According to International Data Corporation and Dataquest, Inc.,
a unit of the Gartner Group, the application service provider market has been
estimated to range from $7.8 billion and $25.3 billion by 2004. We believe that
we are well-positioned to capture market share as companies become increasingly
familiar with and recognize the need for advanced speech recognition
technologies deployed on an application service provider basis.


         Intraco currently offers several packages of speech recognition based
products and services designed for businesses to use the Internet and
telecommunications applications. It has one fully operational prototype of its
voice enabled product, which is in the process of being evaluated by one client.
These products include:


      o      The voice-enablement of websites, which will be offered on an
             application service provider basis; and

      o      "Virtual office" systems including basic telephone services,
             unified messaging and voice-driven e-mail facilitation, which will
             also be offered on an application service provider basis.

      Intraco delivers it services over leased data lines from two rented data
centers currently located in Boca Raton, Florida and New York, New York.

      Intraco believes that it has been able to create these systems based upon
several advantages. Our senior management has extensive knowledge of the voice
recognition industry. Intraco's chief executive officer, Walt Nawrocki, spent
more than 30 years with IBM pioneering new technologies, where he was ultimately
responsible for the creation and ongoing management

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of IBM's speech recognition business. Subsequent to IBM, Mr. Nawrocki founded
and served as chief executive officer and president of Registry Magic Inc.,
where he established the Virtual Operator as the industry standard for
speech-driven auto-attendants.


      Intraco also believes that its extensive knowledge of the voice
recognition industry also gives Intraco the ability to identify which vendors
supply the most advanced and effective technological components. Intraco's
relationships with these vendors, which include Motorola and Nuance, have
allowed it to establish long-term working agreements in the form of licensing
agreements. As a result, Intraco is able to benefit from the significant
investments already made by these outside firms. Finally, Intraco operates as a
systems integrator; in other words, it combines software packages developed by
others into a system that integrates several separate technologies into one
cohesive system.


      Intraco intends to sell its products and services on an application
service provider basis primarily through major national network service
providers such as UUNET, Intermedia Communications, Cable and Wireless, Leve13
Communications and Verio and through portals that cater to small and midsized
businesses. In both cases, the focus is on distributors instead of end-users.
Intraco does not intend to service individual consumers, but instead is
targeting other business customers through the network service providers and
portals. Intraco intends to pursue these customers by using a sales team that
has more than 100 years of combined experience in the technology industry.
Additionally, Intraco's strategic relationships provide it with proven marketing
partners, with a history of successful products and services.

PRINCIPAL CUSTOMERS


         At the present time, Intraco is dependent on a limited number of
customers. Internet Financial Network represented 38% of Intraco's revenues as
of December 31, 1999. Our sales and marketing efforts, as described above, are
intended to increase our exposure to potential clients and to increase our
client base. We cannot guarantee that our efforts will be successful in this
regard, however. As a result, we are vulnerable to the loss of a major client.


THE INTRACO SOLUTION

      Intraco's products and services are designed to use the Internet and
standard telecommunications applications. The key components of the Intraco
solution include:

         o        FIRST-TO-MARKET. Intraco believes it has a substantial head
                  start in the development of language and speech recognition
                  products and services. Through its relationships with firms
                  that have been instrumental in the development of speech
                  recognition products, such as Microsoft, Motorola and Nuance,
                  Intraco has had access to and in some cases has helped develop
                  the software that Intraco currently uses in its speech
                  recognition systems. These relationships, combined with
                  Intraco's ability to integrate the software using its
                  proprietary technology, has enabled Intraco to produce what it
                  believes are superior, first-to-market, commercially viable
                  solutions.

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         o        LICENSING AGREEMENTS AND JOINT MARKETING RELATIONSHIPS.
                  Intraco has developed relationships with companies such as
                  Motorola, Microsoft and Nuance, which have provided Intraco
                  with access to newly developed speech recognition and other
                  technologies. Each of these firms has expended significant
                  amounts of resources developing these components, such as
                  voice browsers and natural language engines, but lacks the
                  ability to integrate these disparate pieces of software into a
                  set of services that can be delivered to the end-user. Intraco
                  believes that it has obtained access to these products because
                  of its expertise in the speech recognition sector and because
                  it is currently one of the few firms that can integrate these
                  applications into a commercially viable product.


                  Intraco currently has the following agreements in place:


                  o     Motorola: Definitive agreement for the joint marketing
                        of Motorola's VoxML Language Software, enabling voice
                        access to the Internet, using Intraco's application
                        service provider capabilities. The agreement is for a
                        term of one year and is renewable for successive
                        one-year terms upon 90 days' notice. The agreement may
                        be terminated by either party in certain circumstances.
                        Intraco paid certain royalty and set-up fees. In
                        addition, Intraco pays fees depending on the number of
                        terminals at which the software is used.

                  o     Nuance: Definitive agreement pursuant to which Intraco
                        has a non-exclusive license to use Nuance's software for
                        an indefinite period of time. Intraco may terminate the
                        agreement at any time. Nuance has the right to terminate
                        the agreement if Intraco breaches the terms of the
                        agreement and does not cure the breach within 30 days of
                        having received written notice of the breach. Royalty
                        fees were determined separately by the parties.

                  o     Microsoft: Definitive agreement pursuant to which
                        Intraco is authorized to provide services and products
                        developed by Microsoft. The agreement is for a term of
                        one year and is renewable for successive one-year terms
                        provided Intraco meets certain criteria. The agreement
                        may be terminated by either party with 30 days' notice.
                        Microsoft can terminate the agreement immediately if
                        Intraco: (i) breaches its obligations; (ii) pirates its
                        products; or (iii) transfers or assigns a significant
                        portion of its stock to a third party. Royalty fees were
                        determined separately by the parties.


            o     TECHNOLOGICAL EXPERTISE. Intraco has extensive experience in
                  speech recognition technology, as well as in programming and
                  software integration. This experience allows Intraco to create
                  integrated technologies and quickly bring them to market.
                  Intraco has the ability to identify which vendors supply the
                  most advanced and effective technological components.
                  Additionally, Intraco has significant systems integration
                  experience that enables Intraco to integrate the most advanced
                  and effective technological components into one cohesive
                  system. Intraco also has a team of engineers with the in-house
                  expertise to install and service both the hardware and
                  software components.

            o     MANAGEMENT EXPERTISE. Intraco's management team brings a
                  highly qualified and diverse background with extensive
                  experience in identifying and applying leading-edge
                  technology. Walt Nawrocki, our chief executive officer, has
                  significant experience in developing and integrating voice
                  automation

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                  technologies. Mr. Nawrocki spent more than 30 years with IBM,
                  where he became manager for worldwide product development and
                  business management. In that role, he managed a number of
                  business areas, including speech recognition products, and was
                  responsible for acquisitions, joint development and original
                  equipment manufacturing licensing programs.


            o     PRODUCTS WORK TODAY. Intraco currently has one fully
                  operational prototype of its speech recognition product, which
                  is being evaluated by one client. Intraco believes it is the
                  first to offer commercially viable speech recognition
                  solutions for use in Internet applications. As such, we
                  believe we are positioned to capture substantial market share
                  as companies become increasingly familiar with, and realize
                  the need for, advanced speech recognition technologies.


INDUSTRY OVERVIEW

      Intraco currently provides several service packages, on an application
service provider basis, which take advantage of the convergence of speech
recognition technologies and the Internet.

      SPEECH RECOGNITION TECHNOLOGIES. Various types of speech recognition
technologies have existed for several years and the number of commercially
available speech enabled products continues to grow. Until recently, however,
speech recognition products have worked poorly and have been costly, thereby
limiting widespread acceptance.


      Historically, emphasis in the speech recognition industry was placed on
the development of "core speech recognition engine" technology, a set of
algorithms that interpret speech patterns. Many companies, including IBM, Dragon
Systems, Voice Control Systems, Nuance, Nortel, SpeechWorks and Lucent, have
spent substantial sums of money over the last quarter century in developing core
speech recognition engine technology for the telephone. The development of
speech recognition engine technologies requires the use of speech algorithms,
statistics, digital signal processing algorithms, digital signal processing
programming, phonetics, linguistics, information theory and coding theory. For
the most part, these speech recognition engine manufacturers have allowed others
to develop commercial speech applications.


      As new technologies are developed, their accessibility and simplicity of
operation directly effects how often and how widely they are used. The advent of
the Internet, combined with recent advances in speech recognition technology,
has provided both the accessibility and simplicity to increase the popularity of
speech recognition products. As of a few years ago, the integration of speech
recognition within a call center environment required extensive systems
integration expertise, money and time. Now, with the availability of improved
technologies, the ability to turn websites into speech-driven call centers can
be achieved with the right speech recognition and Internet development skills.

      Speech is the most natural, efficient and simple means of human
communication. With the increase in the power and capability of speech
recognition engine technologies and the

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increase in speed and reduction in the cost of computer processors, the use of
human speech to access the Internet via a telephone is now feasible.

      GROWTH OF THE INTERNET. Internet usage and online commerce continue to
grow worldwide. Forrester Research estimates that revenue generated worldwide
from online commerce will grow to exceed $6.8 trillion in 2004.

      APPLICATION SERVICE PROVIDER MARKET. Application service providers are
service-oriented firms that provide contractual services, offering to deploy,
host, manage and enhance what is usually packaged application software from a
centrally managed facility. The application service provider provides services
remotely, either on line over the Internet or over dedicated telecommunications
lines. The application service provider hosts the software, builds and maintains
the network servers necessary to store and run the software application,
provides the systems necessary to deliver the software application directly to
the user's desktop, and provides the necessary information technology staff to
implement upgrades and provide support and maintenance functions. The
application service provider takes all administrative and technical
responsibilities from the client company, thereby cutting costs. Clients can use
leading business software applications without the cost and burden of owning
them.

      The definition of an application service provider includes the following
characteristics:

      1. APPLICATION COMMERCIALLY AVAILABLE. Application service providers
provide access to and management of a software application that is commercially
available. This service is different from "business process outsourcing," where
the outsourcing contract encompasses the management of entire business processes
such as human resources or finance.

      2. "SELLING" APPLICATION ACCESS. Application service providers offer
customers access to new applications without requiring the customer to make
up-front investments in the application licenses, servers, people and other
resources. The application service provider either owns the software or has a
contractual agreement with the software vendor to license access to the
software.

      3. CENTRALLY MANAGED. The services are managed from a central location
rather than at each customer's site. Customers access applications remotely,
such as over the Internet or via leased lines.

      4. ONE-TO-MANY SERVICE. The services are designed to be offered to many
users. The application service provider partners with other vendors of
standardized offerings that require little or no customization, that many
companies will subscribe for over specific contract periods.

      5. DELIVERING ON THE CONTRACT. The application service provider is the
firm that is responsible, in the customer's eyes, for delivering the agreed-upon
service, ensuring that the application service is provided as promised.

      The application service provider industry is ideally suited for small to
midsized businesses. Unable to afford the huge fixed costs of network servers
and information technology

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staff to support them, small and midsized businesses can turn to an application
service provider to take care of the responsibility, financial and staffing
aspects. They pay a flat rate per user per month and receive access to the
latest and most sophisticated software applications that otherwise may be too
expensive. The application service provider can easily expand the services it
provides to meet the growth of the businesses it supports. With the help of
application service providers, small to midsized businesses should be able to
better compete with their larger competitors. According to International Data
Corporation, the number of customers of high-end application service providers
is expected to double or triple in the next few years as they become more
familiar with the benefits of the application service provider model and more
confident in its reliability.

      The application service provider industry has many strengths that could
make it very successful with resellers. First, more customers than ever have
remote and/or mobile workgroups with specific functions that are more easily
automated using Internet technologies. Second, the increasing costs of
information technology are making outsourcing a popular alternative. Third, the
privacy of networks is much more secure using an application service provider
server than individual in-house servers. Finally, large vendors such as Oracle
have shown great confidence in fledgling application service providers. The
application service provider industry offers products and services that provide
recurring revenue streams to resellers.

TECHNOLOGY

      The driving force behind Intraco's vision and technology is the telephone,
which should remain the preferred means of communication for the foreseeable
future. Statistically, there are 10 times as many telephones as computers with
Internet access, and phones, especially cellular phones, are much more
convenient to use. Via voice and speech recognition technologies, users will be
able to communicate by simply speaking, without having to press keys, talk to an
operator or agent, or use a visually based Web browser. The communication will
be completely automated and interactive, allowing for the ease and practicality
of voice recognition without sacrificing the functionality of traditional
services.

      The hardware for these systems has multiple voice telephone lines coming
in from the local exchange carrier's central office. This receives the incoming
calls and can originate outgoing calls. The software functions are:

      o     Voice browser -- this is the "voice gateway" through which the
            computer-based conversation is managed.

      o     Authentication, billing and accounting -- to track all system usage
            from which bills are created.

      o     Voice recognition -- to recognize and interpret your responses to
            prompts.

      o     Text-to-Speech -- to playback text-based information retrieved from
            the network in response to your commands.

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      The underlying technology that powers this capability was developed by
firms such as Microsoft, Motorola and Nuance, all having been instrumental in
the development of speech recognition software. For example, Motorola and
Microsoft each offers its own proprietary voice browser software enabling voice
access to the Web. Companies such as Nuance provide an extremely proficient
natural language engine. Each of these firms offers important technology
components of the overall solutions but lacks the overall expertise to integrate
these pieces. Intraco has recognized this opportunity, and as an early adopter
and leader in this technology, intends to make use of its strategic
relationships and apply its technological expertise to integrate each separate
capability into a single system.

SERVICE OFFERINGS

      In a very competitive global marketplace, businesses must focus on what
they do best and outsource other functions. Operating as an application service
provider enables small to midsized businesses to outsource their information
technology needs by allowing Intraco to provide these services. Initially,
Intraco will focus on the basic technology requirements of a business: Web
services, phone services, messaging and networks.

      VOICE-BASED SERVICES. The explosion of the Internet, especially the
business-to-business market, along with the expansion of the application service
providers, has led to the rapid expansion of the number of commercial websites
and the hosting of data centers that serve the websites. Through its voice-based
packages of services, Intraco believes that it can provide speech and voice
recognition services to these websites on an application service provider basis
through network service providers such as Verio and Exodus Communications, which
host the websites. These network service providers can incorporate Intraco's
voice-based capabilities with their own services that they provide to websites,
in addition to the standard Web-hosting services.

      Intraco will provide this service directly and will also offer its
voice-based services to business-to-business portal websites, which will
subsequently offer the voice-based service as part of the websites' standard
service offerings. Additionally, Intraco will provide this new service directly
by hosting sites for customers as well as support services either on the
customer's premise or at an Intraco site.

      Within the voice-based service line, Intraco intends to focus on three
categories of products. The first is voice information that would enable a user
to call into a website and have specific information read to them over the
telephone. For example, a traveling sales executive can access his company's
website from a cellular telephone and get order status or pricing information
for his next customer call. The second product is voice commerce, which would
enable a user with a traditional paper catalog to call a retailer's website from
a standard telephone and order products without involving a person in the
transaction unless there is a need to do so. Not only does speech recognition
provide increased convenience for customer but also allows businesses to expand
their distribution channels by providing customers website access via standard
telephones from anywhere on earth. This capability substantially reduces "missed
or dropped" calls due to hold times and busy signals while simultaneously
reducing personnel costs. The last product that stems from the voice browser is
voice alerts. This product will be

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used to provide information alerts for a variety of users. One potential area
that Intraco intends to target is construction and machinery auction sites. As
these users are typically onsite, without computer access, they must be able to
quickly react to pending contracts or competitors' bids. This automated process
would allow users, via cellular telephones, to not only receive alerts and
critical information instantly, but to respond as well.

      "VIRTUAL OFFICE." With the "Virtual Office" system, Intraco is developing
the basic building blocks for a business' telecommunications needs. The basic
services offered will include: voice-enabled e-mail, a service which allows a
person to access his/her e-mail and have it read to him/her over the phone;
unified messaging services including fax, e-mail and voicemail to a single
voice-enabled message box and global availability; and basic telephony services
such as call waiting and forwarding. This will be extremely useful to a small to
midsized company that does not want to expend resources to hire operators and/or
secretaries. Instead, even a start-up can portray a "high-tech" image by
subscribing to these services. Intraco intends to expand its services through
partnerships with providers of other applications typically needed by a
business.

SALES AND MARKETING

      Intraco markets its services through direct sales to customers by
Intraco's sales force and by indirect sales through channels such as
telecommunications companies and distributors of telecommunications equipment.

      Intraco's strategy is to focus its sales efforts on the large and growing
business-to-business market. Intraco intends to focus its sales and marketing
efforts on the small and midsized business market sector in the U.S. Intraco
will specifically rely on indirect marketing by utilizing established
distribution channels such as telecommunications companies and distributors of
telecommunications equipment, which ultimately offer Intraco's services to
end-users. Intraco will also generate additional sales leads by using its own
sales staff and through its joint marketing agreements.

      Through its strategic agreements, Intraco has built solid relationships
with many of the industry's leading technology companies, including Motorola,
Microsoft and Nuance. Intraco believes that its partners are fully committed to
the success of Intraco's speech recognition and voice-enabling products and
should provide a significant source of leads for Intraco, improve its technical
sales expertise, and offer significant name recognition for marketing events and
programs.

      Intraco's current sales management team of 12 sales personnel has more
than 100 years of combined experience in the technology industry, providing a
strong ability to understand existing and new technologies.

      Intraco's marketing staff intends to promote Intraco as a leading provider
of voice-enabled services through an ongoing public relations program including
trade shows, professional seminars and other promotional venues.


SECURITY

      Our services rely on encryption and authentication technology licensed
from third parties to provide the security required to safely transmit
confidential information. Breaches of this security could have severe
consequences for our clients. While we have implemented a variety of
state-of-the-art network security systems to protect against unauthorized
access, computer viruses, other intentional acts and accidents, and disruptions
may nonetheless occur. Our clients may experience service interruptions or
delays as a result of accidental or intentional disruptions, which could
jeopardize the security of confidential client information. This could
potentially result in liability to us, loss of existing clients, or the loss of
reputation leading to difficulties in attracting new clients.

      Although we plan to continuously upgrade our security systems, security
measures have been circumvented in the past and our security could be
circumvented in the future. In addition, the costs we must incur to prevent or
eliminate computer viruses or to alleviate other security threats are likely to
be significant.


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COMPETITION

      The application service provider market is new and rapidly changing. The
speech recognition for Internet applications sector is even further in its
infancy, which management believes is an advantage for Intraco. By combining
third-party software and technology with its own in-house expertise, Intraco
believes it maintains an advantage over any current competitor or potential
market entrant.

      Considering the extensive experience and advanced technology required to
successfully penetrate this market segment, current and new competitors may not
have the ability to offer comparable products and/or services without
significant speech recognition and systems integration expertise. Intraco
believes the principal competitive factors in this segment of the industry
include:

      o    Scope of services;

      o    Service delivery approach;

      o    Technical and industry expertise;

      o    Perceived value;

      o    Objectivity; and

      o    Results orientation.

         Intraco could potentially compete with a variety of competitors,
including:

      o     Voice enabling companies - Tellme Networks, @Motion and Online
            Anywhere, a company recently acquired by Yahoo! Inc.;

      o     Virtual assistant companies - General Magic, Wildfire Communications
            and Webley Systems. These companies are developing applications for
            interactive response and voice verification for the Internet;

      o     Communication services providers - AccessLine Technologies, Call
            Sciences and Intellivoice Communications; and

      o     Large manufacturers and developers - Motorola, Microsoft, IBM and
            Lucent Technologies, all of which have significantly greater
            financial, technical and marketing resources but lack the expertise
            to integrate each of the components into a single source commercial
            solution.

      Many of these competitors have significantly greater financial, technical
and marketing resources and greater name recognition than we have. There can be
no assurances that Intraco will complete successfully with its existing
competitors or with any new competitors.


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INTELLECTUAL PROPERTY

      Intraco relies on a combination of nondisclosure and other contractual
arrangements and trade secret, copyright, and trademark laws to its protected
proprietary rights and the proprietary rights of third parties. Intraco enters
into confidentiality agreements with key employees, and limits the distribution
of proprietary information.

      Our success is dependent, in part, on methodologies used in designing,
installing and integrating computer software and systems and other proprietary
intellectual property. We rely on a combination of nondisclosure and other
contractual arrangements and trade secret, copyright and trademark laws to
protect our proprietary rights and the proprietary rights of third parties. We
also enter into confidentiality agreements with our key employees and limit
distribution of proprietary information. There can be no assurance, however,
that the steps we take will be adequate to deter misappropriation of proprietary
information or that management will be able to detect unauthorized use and take
appropriate steps to enforce our intellectual property rights.

GOVERNMENT REGULATION

      At the present time, Intraco believes that its services are not subject to
regulation as telecommunications services. To the extent that local or long
distance telephone services are provided as part of a package of Intraco's
services, these telephone services are provided directly by a licensed carrier.

      Intraco may in the future determine to resell telephone services as part
of its packaged services. If so, Intraco will be required to obtain certificates
of authority or licenses from the telecommunications regulatory agencies in each
state in which it will provide such services. Intraco will also be required to
comply with various state law requirements, such as providing "911" emergency
services. The process to apply for these certificates or licenses can be lengthy
and expensive, and Intraco cannot guarantee that it will be able to obtain them.
If Intraco cannot obtain all necessary state certificates or licenses, the
services it will be able to resell directly will be affected.

      As a reseller of telephone services, Intraco may also be subject to
federal regulation by the Federal Communications Commission with respect to the
resale of international long-distance services. The FCC requires resellers of
international telecommunications services to obtain authorization, the process
for which can also be lengthy and expensive. Without such authorization, Intraco
would be precluded from offering such services.

EMPLOYEES

      As of June 30, 2000, Intraco had a total staff of 39 employees, composed
of 12 technical professionals, 15 sales and marketing personnel and 12
administrative personnel. No employees are represented by a labor union or
subject to a collective bargaining agreement. Management believes that employee
relations generally are good.


      Our success depends, in larger part, on our ability to attract, develop,
motivate and retain technical professionals. As of December 31, 1999,
approximately 30% of our employees were technical professionals. Qualified
technical professionals are in great demand and are likely to remain a limited
resource for the foreseeable future. Our location in South Florida can also make
the recruiting process more difficult, as there are a limited number of research
universities in the area and regions of the U.S. other than South Florida are
often seen as being more attractive to technical professionals.


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DESCRIPTION OF PROPERTY

      Intraco's corporate headquarters are located in approximately 6,800 square
feet of leased office space in Boca Raton, Florida. The lease expires in October
2003 and provides for annual payments ranging from $84,060 in the first year to
$98,431 in the fifth year. Intraco has two five-year renewal options.

      Intraco believes that its current headquarters location is suitable,
although it will require additional space in the future. Intraco has an option
to lease approximately 7,000 square feet of additional space in the same
building. Intraco has not yet determined whether it will exercise that option or
obtain additional office space nearby.

LEGAL PROCEEDINGS

      On October 29, 1999, Banker's Leasing Association filed a suit against
Intraco and Jack Berger in the Circuit Court of the Fifteenth Judicial Circuit
in and for Palm Beach County, Florida for breach of a master lease agreement and
personal guaranty related to computer equipment, software and services leased by
Intraco for the amount of $71,608. Intraco has filed a counterclaim based on
Banker's failure to provide services agreed to in the lease and breach of
fiduciary duty. Banker has answered Intraco's counterclaim and filed suit
against AIM Solutions, Inc., as successor to Enterprises Solutions Group, Inc.,
the third party responsible for setting up the computer equipment and software
and providing services. AIM has responded to the claims against it. Discovery
has not yet commenced.


                                       12
<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Our common stock began trading under the symbol "INSY" on the OTC Bulletin
Board operated by the NASDAQ Stock Market, Inc. on April 29, 1999. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and may not represent actual transactions. The quotations listed
below are the high and low closing prices and were obtained from the OTC
Bulletin Board.

             QUARTER ENDED                     HIGH                LOW
--------------------------------------   -----------------   -----------------

June 30, 1999......................           $7.750              $1.500
September 30, 1999.................           $2.250              $1.750
December 31, 1999..................           $2.625              $0.875

HOLDERS

      As of March 28, 2000, there were approximately 441 holders of record of
our common stock.

DIVIDEND POLICY

         Intraco paid aggregate dividends of $8,483 on its preferred stock in
1999. Intraco is obligated under an agreement with it series A preferred holders
to pay dividends for the first twelve months regardless of earnings. The
remaining obligation is approximately $26,000 which Intraco will pay in April
2000.

         Intraco has not paid any cash dividends on its Common Stock since its
inception. Intraco presently intends to retain future earnings, if any, to
finance the expansion of its business and does not anticipate that any cash
dividends will be paid in the foreseeable future. Future dividend policy will
depend on Intraco's earnings, capital requirements, expansion plans, financial
condition and other relevant factors.

SALES OF UNREGISTERED SECURITIES


      In November 1998, Intraco issued to Vestar warrants to purchase 150,000
restricted shares of common stock at $0.25 per share in exchange for the
cancellation of an anti-dilution clause in the consulting agreement with Vestar.
The warrants were issued pursuant to an exemption from registration under
Section 4(2) of the Securities Act. To Intraco's knowledge, management of Vestar
was sophisticated in financial investments and was familiar with Intraco's
business and operations. No offering document was prepared, and no public
solicitation or general advertising was done in connection with this issuance.
Intraco did not pay any fees or commissions in connection with this issuance.


      From December 1998 to July 1999, Intraco sold 714,900 restricted shares of
Series A preferred stock, par value $.001, for gross proceeds of $715,000. Each
share of Series A

                                       13
<PAGE>

preferred stock is convertible into one share of common stock. The shares are
redeemable by Intraco at any time. The Series A preferred stock was sold
pursuant to the exemptions from registration under the Securities Act pursuant
to Section 4(2) thereof and Regulation S promulgated thereunder. The Series A
preferred stock was offered to accredited investors only pursuant to an offering
memorandum setting forth the terms of the offering and the Series A preferred
stock; Intraco's business operations, proposed use of proceeds of the offering
and management; Intraco's business plan; and financial statements prepared by
management. No public solicitation or general advertising was done in connection
with the offering. Intraco paid fees totaling $212,000 in connection with this
sale.

      From October 1999 to December 1999, Intraco sold 989,400 restricted shares
of Series B preferred stock for gross proceeds of $989,000. Each share of Series
B preferred stock is convertible into one share of common stock. The shares are
redeemable by Intraco at any time. The Series B preferred stock was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof and
Regulation S promulgated thereunder. The Series B preferred stock was offered to
accredited investors only pursuant to an offering memorandum setting forth the
terms of the offering and the Series B preferred stock; Intraco's business
operations, proposed use of proceeds of the offering and management; Intraco's
business plan; and financial statements prepared by management. No public
solicitation or general advertising was done in connection with the offering.
Intraco paid fees totaling $40,000 in connection with this sale.


      In March 1999, Intraco entered into an agreement with H&J Investments
pursuant to which H&J Investments purchased 866,300 restricted shares of common
stock at $1.00 per share. H&J issued to Intraco three notes with principal
amounts totaling $866,300, of which $446,300 was paid as of March 31, 2000 and
the balance of which was paid on July 24, 2000. The sale of shares was exempt
from registration under the Securities Act pursuant to Section 4(2) thereof. To
Intraco's knowledge, management of the investor was sophisticated in financial
investments and received a variety of financial and other information about
Intraco in connection with its due diligence. No public solicitation or general
advertising was done in connection with this sale. Intraco did not pay any fees
or commissions in connection with this sale.

      In April 1999, Intraco issued 10,531,500 restricted shares of common stock
to a total of 40 shareholders of Intraco Systems, Inc., a Florida corporation,
as part of the share exchange with the Florida shareholders. The transaction was
completed pursuant to an agreement and plan of exchange in accordance with the
exemption from registration under Section 4(2) of the Securities Act. To
Intraco's knowledge, the shareholders of the acquired entity were sophisticated
in financial investments and received a variety of financial and other
information about Intraco in connection with its due diligence. No public
solicitation or general advertising was done in connection with the share
exchange.

      In June 1999, Intraco acquired the assets of Page Telecomputing and issued
60,000 restricted shares of its common stock as consideration to the sole
shareholder. The aggregate value of the consideration received for the issuance
was $90,000. An additional 50,000 restricted shares of common stock were issued
in June 2000 to the sole shareholder in settlement of his employment contract.
The aggregate value of the shares issued as settlement is $98,400. The shares
were issued pursuant to an exemption from registration under Section 4(2) of the
Securities Act. To Intraco's knowledge, the shareholder was sophisticated in
financial investments and received a variety of financial and other information
about Intraco in connection


                                       14
<PAGE>

with the shareholder's due diligence. No public solicitation or general
advertising was done in connection with this sale. Intraco did not pay any fees
or commissions in connection with this transaction.


      In February 2000, the Company sold 160,000 restricted shares of common
stock and warrants to purchase 30,000 restricted shares of common stock at $0.75
per share for $200,000 to one accredited investor. The sale was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof. To
Intraco's knowledge, the investor was sophisticated in financial investments and
received a variety of financial and other information about Intraco in
connection with the investor's due diligence. No public solicitation or general
advertising was done in connection with this offering. Intraco did not pay any
fees or commissions in connection with this sale.

      In March 2000, the Company sold 3,474,667 units for $4,805,799 net of fees
and expenses to a total of 11 accredited investors. Each unit consisted of one
restricted share of common stock and one warrant to purchase one restricted
share of common stock at $1.50 per share. The sale of the units was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof and were
made pursuant to a term sheet and unit purchase agreement. In addition to
Intraco's representations in the purchase agreement, the investors were provided
with a variety of financial and other information about Intraco in connection
with their due diligence. No public solicitation or general advertising was done
in connection with this offering. Intraco issued a warrant to purchase 210,000
restricted shares of common stock at $2.00 per share, 196,560 restricted shares
of common stock and a warrant to purchase 196,560 restricted shares of common
stock at $1.50 per share and paid a cash fee of $381,200 as a commission for
this sale and paid legal, accounting and other miscellaneous expenses of
$67,323.



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

      You should read the following discussion and analysis in conjunction with
our consolidated financial statements and the notes included elsewhere in this
report.


OVERVIEW

         Intraco is an information technology service provider. Its products and
services include computer hardware, computer networks, speech recognition
products and services, and voice-activated products and services. Intraco is in
the process of attempting to shift its business focus from direct sales of
computer hardware and computer networks to be installed on customer premises to
providing speech recognition and voice command products delivered from Intraco
data centers for recurring monthly fees. This manner of providing products and
services from a remote location for a recurring service charge is referred to as
being an "application service provider."


                                       15
<PAGE>


         At present, Intraco has established two data centers, one in New York
City and another in Boca Raton, Florida. Both of these data centers are equipped
to deliver Intraco's new services. Intraco's current speech and voice services
include a speech recognition telephone "operator" that answers incoming
telephone calls and directs them to the appropriate extension by responding to
the caller's voice request and a voice-activated telephone dialing system that
places outgoing calls. Intraco has begun signing contracts with customers for
the sale of some of these new services and for the testing of others.

         Management believes Intraco's competitive advantage lies in its ability
to combine its in-house expertise with leading speech recognition technologies
available from third parties, including voice browsers and natural language
engines, to create comprehensive packages of technology and voice services for a
variety of businesses. Management believes the major market for these services
is small- to medium-sized businesses and branch offices of larger companies.
Intraco's primary sales channel for these new products will be through
telecommunications companies with only a relatively small portion of its sales
coming from direct sales from its own sales force. At present, Intraco is
testing the "operator" and the voice-activated dialer with a client that is
assessing its services. Intraco expects test results to be available during the
first quarter of 2001.

         By January 31, 2001, Intraco will require additional funding to pay its
current operating expenses as well as to continue selling, marketing, testing
and installation of its new products. Intraco's operating expenses total
approximately $350,000 per month. The total funds it will need will depend on
both the length of time it takes to raise the funds as well as the rate at which
its new products gain acceptance in the marketplace. Management believes that
the faster it can generate revenues from its new products, the more operating
profit will become available to offset some of its cash requirements for its
operations. Intraco has only recently started to generate limited revenues from
these new products, however, and there can be no assurance it will be able to
generate sufficient revenues from these new products in order to fund all or a
part of its operating expenses. Intraco is also unable to estimate when
sufficient revenues may be generated by sales of its new products. Therefore, it
is actively seeking a capital infusion of approximately $5 million, which it
believes will provide substantially all of the funding needed to meet its
operating expenses and its product development and testing cash needs, while it
develops additional sales channels so as to increase its sales to profitable
levels. There can be no assurances that Intraco will be able to increase its
sales to profitable levels.

         Management is in the process of identifying potential private investors
for a private equity investment and a private debt offering. The specific terms
of any investment have not yet been negotiated with the potential investors.
Intraco may also obtain funds through the exercise of certain outstanding
warrants. There can be no assurances, however, that it will be able to complete
any offerings or that any warrant holders will exercise their warrants. As of
the date of this report, the trading price of Intraco common stock is below the
exercise prices of its outstanding warrants. If Intraco is not able to raise the
required capital, then it will reduce operations, seek a potential acquirer
and/or discontinue operations.

         Intraco was incorporated in Florida in March 1990. In April 1999, it
completed a share exchange with Custom Touch Electronics, Inc., a Nevada
corporation with no material operations whose common stock traded on the OTC
Bulletin Board. Pursuant to the share exchange, all of the outstanding shares of
Intraco capital stock were exchanged for 10,531,500 Custom Touch shares.
Thereafter, Custom Touch changed its name to Intraco Systems, Inc.


RESULTS OF OPERATIONS


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

         REVENUES. Revenues increased 8.1% to $2,925,268 for the year ended
December 31, 1999 from $2,704,931 for the year ended December 31, 1998. This
increase was primarily due to a $1,296,716 increase in systems/networks
revenues. Of the increase, $719,323 represented an unusually large sale in the
fourth quarter of 1999 to a single customer (Internet Financial Network). The
increases in systems/networks revenues were offset by a $1,076,379 decrease in
service contract revenues. Approximately 90% of the decrease in service contract
revenues was due to the cancellation of a service contract with Kender Thijssen
BV that Intraco had since 1990. Although Intraco is attempting to shift its
business focus away from its systems/networks products and service contracts,
management anticipates that its systems/networks revenues will continue to be a
significant portion of Intraco's revenues in the future.

         Our quarterly operating results fluctuate because of the number of
active client projects, the requirements of client projects, the termination of
major client projects, the loss of major clients, the timing of new engagements,
and the timing of personnel cost increases. Our information, data and voice
services are complex and often require a significant amount of time to design
for and sell to a new client. Because a high percentage of our expenses are
relatively fixed at the beginning of any period and our general policy is to not
adjust our staffing levels based upon what we view as short-term circumstances,
a variation in the timing of the initiation or the completion of client
assignments, particularly at or near the end of any quarter, can cause
significant variations in operating results from quarter to quarter and could
result in losses for any particular period. In addition, many of our engagements
are, and may be in the future, terminable by our clients without penalty. A
termination of a major project could require us to maintain under-utilized
employees, resulting in a higher than expected percentage of unassigned
professionals, or to terminate the employment of excess personnel.

         COST OF REVENUES. Cost of revenues increased 26.4% to $2,165,581 for
the year ended December 31, 1999 as compared to $1,712,720 for the corresponding
period in 1998. Cost of systems/networks revenues were $1,852,443, or 72.8%, of
systems/networks revenues for the year ended December 31, 1999, compared to
$638,885, or 51.2%, of systems/networks revenues for the corresponding period in
1998. This increase reflects Intraco's increased sales and also reflects the
effect of increased competition, which limits Intraco's ability to mark-up the

                                       16
<PAGE>

hardware and software sold. Cost of service contracts totaled $313,138, or
82.5%, of service contract revenues for the year ended December 31, 1999,
compared to $1,073,835, or 73.7%, for the corresponding period in 1998. The
increase in the cost of service contracts is primarily due to the increase in
labor costs, which Intraco contracts out.

         Intraco's overall gross profit margins for the years ended 1999 and
1998 were 26% and 37%, respectively. The profit margins on Intraco's
systems/networks products and service contracts continue to erode due to
increased competition, which limits Intraco's mark-ups on the hardware and
software it sells, and due to increased labor costs. The profit margins have,
therefore, been below management's targets of 35% on systems/networks products
and service contracts and 50% on new products. As a result, management is
directing more resources toward developing products and services with higher
profit margins. Management currently believes its voice-activated products can
be sold at higher margins. As a greater portion of Intraco's total revenues
begins to be derived from newer product offerings such as the voice-activated
auto attendant and telephone dialer, management expects the overall margins to
improve. As of December 31, 1999, however, the Company had not sold any such new
products or services. Although there can be no assurances that this strategy
will prove successful, management currently believes it is necessary for
Intraco's long-term viability.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1,159,663, or 111.7%, to $2,197,492 for the
year ended December 31, 1999 from $1,037,829 for the corresponding period in
1998. Of the dollar increase, $561,106 represented payroll costs in connection
with the hiring of two additional sales and marketing staff, and four additional
senior management personnel to begin developing new products and services and
entering new markets; $81,830 represented an increase in facilities and leased
equipment; $47,953 represented increased professional fees; and $216,073
represented increased financial advisory fees in connection with the decision to
complete the exchange offer with Custom Touch Electronics and possible
additional acquisitions. The remaining increases were attributable to other
additional selling, general and administrative expenses.

         INTEREST EXPENSE. Interest expense, net of interest income, decreased
$33,487 to $1,090 for 1999 from net interest expense of $34,577 in 1998,
reflecting the repayment of long-term debt.

         NET LOSS. As a result of the foregoing, we reported a net loss of
$1,438,895 for the year ended December 31, 1999 and a net loss of $80,195 for
1998.

         ACCOUNTS RECEIVABLE. Accounts receivable increased $485,522, or 973%,
to $535,422 for the year ended December 31, 1999 from $49,900 for the year ended
December 31, 1998. This increase primarily reflects that a greater portion of
Intraco's revenues in 1999 was derived from systems/networks as compared to
1998, in which a greater portion of revenues were derived from service
contracts. In 1999, 87% of Intraco's revenues were derived from
systems/networks, as compared to 46% of revenues from systems/networks in 1998.
In 1999, 13% of Intraco's revenues were from service contracts, whereas in 1998
54% of revenues were from service contracts. Intraco's practice has been to bill
its systems/networks clients when the product is delivered; by comparison
service contracts are billed and paid for by clients in advance of the services
being provided. As a result of Intraco's billing practices and the shift from
service contracts to systems/networks, the average number of days outstanding of
Intraco's receivables in 1999 was 36 days as compared to 19 days for 1998. The
average days outstanding was also skewed as of the end of 1999 because of a
large systems/networks sale to one customer in the fourth quarter of 1999 for
which payment was delayed. Excluding the effect of that sale, the average number
of days outstanding for Intraco's accounts receivable in 1999 declined to 12
days. Management continues to monitor Intraco's accounts receivable.

         ACCOUNTS PAYABLE. Accounts payable increased $693,476, or 209%, to
$1,025,952 for the year ended December 31, 1999 from $332,476 for the year ended
December 31, 1998. The increase was primarily due to an increase in the
purchasing of hardware to support the increase in revenues for the fourth
quarter of 1999. For the years ended December 31, 1999 and 1998, accounts
payable turned three times a year or an average of every four months.


                                       17
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES


      Intraco has historically incurred significant losses and has substantial
negative cash flow from operations. Intraco has included a footnote in its
annual biannual statements for the year ended December 31,1999, which expresses
concern about Intraco's ability to continue as a going concern unless sales
increase and/or additional investment capital is raised. Intraco expects
significant operating losses to continue at least during the first half of 2000.
Intraco received approximately $5.4 million from equity private placements
during the first half of 2000. Intraco will require additional funding to cover
current operations and the implementation of its business plan after January 31,
2001. Intraco is actively seeking additional financing, which may be either debt
or equity financing. There can be no assurance that any additional financing
will be raised or if raised, on favorable terms.


      At December 31, 1999, Intraco's current assets totaled $790,220 and
current liabilities totaled $1,330,725, resulting in a negative working capital
ratio. Intraco had long-term liabilities of $31,323 at December 31, 1999.
Management is seeking to raise additional investment capital, both for working
capital as well as to finance its growth and acquisition strategy. Although
there can be no assurance that management will be successful in securing the
needed capital, management is in discussion with potential investors and is
optimistic that additional funding will be available.

      Intraco had $151,725 of cash on hand at December 31, 1999, compared to
$32,245 at the end of 1998. Net cash used in operations for the year ended
December 31, 1999 totaled $1,104,543. This deficit was funded by the sale of
common and preferred stock. Intraco also repaid $294,147 of debt and incurred
costs of $283,153 in recapitalizing and merging with Custom Touch.


      Because of delays Intraco has experienced in obtaining the additional
financing required, Intraco has suspended any plans for expansion through
acquisitions or otherwise. Accordingly, Intraco has no material commitments for
capital expenditures at the present time. Because Intraco is operating at a
loss, however, it must secure additional funding to continue its current
operations. No assurance can be made that such funding will be available and, if
available, that such funding will be available on terms acceptable to Intraco.


FACTORS THAT MAY AFFECT FUTURE RESULTS

    The following important factors, among others, could cause actual results to
differ from those indicated in forward-looking statements made in this document.
The following factors contain some forward-looking statements. Forward-looking
statements give current expectations or forecasts of future events. You can
identify these statements by the fact that they do not relate strictly to
historical or current facts. They use words such as "anticipate," "estimate,"
"expect," "project," "intend," "plan," "believe," and other words and terms of
similar meaning in connection with any discussion of future operating or
financial performance. In particular, these include statements relating to our

                                       18
<PAGE>

anticipated operating results for the year ending December 31, 1999, and our
anticipated cash flow and to future actions, future performance or results of
current and anticipated sales and marketing efforts, expenses, the outcome of
contingencies, and other financial results. From time to time, Intraco or its
management may provide oral or written forward-looking statements in other
materials released to the public.

         Any or all forward-looking statements in this document and in any other
public statements made may turn out to be wrong. They can be affected by
inaccurate assumptions or by known or unknown risks and uncertainties. Many
factors mentioned in the discussion below will be important in determining
future results. Consequently, no forward-looking statement can be guaranteed.
Actual future results may vary materially.

         Neither Intraco nor its management undertake any obligation to publicly
update any forward-looking statements, whether as a result of new information,
future events or otherwise. The reader is advised, however, to consult any
further disclosures made on related subjects in future filings with the SEC.

      WE RECENTLY SHIFTED OUR BUSINESS FOCUS AWAY FROM NETWORK INSTALLATIONS TO
PROVIDING INFORMATION TECHNOLOGY AND TELEPHONE SERVICES, INCLUDING SPEECH
RECOGNITION PRODUCTS AND SERVICES. OUR REVISED BUSINESS PLAN IS STILL UNDER
DEVELOPMENT.

      With the hiring of Walt Nawrocki in 1999 as our chief executive officer,
we have shifted our business focus towards providing speech recognition products
and services. As a result of this shift in focus, our business plan is still in
development. There can be no assurance that our new business plan will be
successful. Although we are in discussions with several prospective clients, we
have not yet sold any of our newly developed speech recognition products and
services and demand for these products and services is uncertain. Additionally,
our previous financial history is not a good indication of how the business is
doing or how it is evolving.

      WE HAVE EXPERIENCED SIGNIFICANT LOSSES AND THESE LOSSES ARE EXPECTED TO
CONTINUE IN THE FUTURE.

      For the year ended December 31, 1999, we reported net losses of
$1,438,895.  As of December 31, 1999, we had an accumulated deficit of
$2,084,303, and stockholders' deficit of $237,635. There can be no assurance
that we will operate profitably in the future and that we will not continue to
sustain losses. Continued losses could materially and adversely affect our
business.

      WE WILL NEED SUBSTANTIAL ADDITIONAL CAPITAL IN ORDER TO CONTINUE OUR
OPERATIONS.


      We require substantial working capital to build our application service
provider systems, for marketing and promotion, and to fund our general business
operations. In addition, we anticipate that we will regularly need to make
capital expenditures to upgrade and modify our management information system,
including software and hardware, as we grow and the needs of our business
change. Without any outside funding, we currently anticipate that we will have
sufficient funds to meet our anticipated needs for working capital and capital
expenditures through January 31, 2001. After that, we will need to raise
additional funds. We are actively seeking additional financing, which may be
either debt or equity financing. After that, we will need to raise additional
funds. We cannot be certain that any additional financing will be available to
us when needed and if available, whether it will be on favorable terms. In
addition, if we raise additional funds through the issuance of equity,
equity-related or debt securities, the securities may have rights, preferences
or privileges senior to those of the rights of our current shareholders and our
shareholders may experience additional dilution.

      OUR SERVICES ARE BASED ON SOFTWARE OBTAINED FROM THIRD PARTIES. WE MAY
HAVE TO DISCONTINUE OR SIGNIFICANTLY CHANGE OUR PRODUCTS OR SERVICES IF THESE
THIRD PARTIES CANCEL OUR LICENSING AGREEMENTS OR DISCONTINUE PRODUCTION OF THE
SOFTWARE.


      We obtain software products pursuant to agreements with Motorola, Nuance,
and Lernout and Hauspie. We intend to enter into additional agreements as may be
necessary in the future. Obtaining this software, as well as any additional
software offerings, is critical to our expansion strategy because we offer
services based on the integration of these software packages to clients. If one
or more of our existing relationships with our key software partners were to be
terminated

                                       19
<PAGE>

or not renewed, we could be faced with discontinuing products or services or
delaying or reducing introduction of services unless we could find, license and
offer equivalent software packages.

      All of our third-party agreements are non-exclusive. Our competitors could
also license and offer software products that we offer as part of our
application service provider services. We cannot be sure that our current
vendors will continue to offer or support the software we currently license from
them in current form, nor can we be sure that we will be able to adapt our
systems to changes in such software.




      WE DEPEND ON JOINT MARKETING AGREEMENTS FOR THE ADVERTISING AND PROMOTION
OF OUR PRODUCTS. CANCELLATION OF ANY OF THESE AGREEMENTS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR OPERATIONS AND FINANCIAL RESULTS.


      We currently have a joint marketing agreement with Motorola and intend to
enter into additional agreements in the future. We will use these agreements for
our advertising and promotional programs. While these programs have been
available to us in the past, there is no assurance that these programs will be
continued. Any discontinuance or significant reduction in the availability of
these programs could have a material adverse effect on our operations and
financial results.

                                       20
<PAGE>



      OUR SERVICES INCLUDE INFORMATION, DATA AND VOICE SERVICES, SUCH AS E-MAIL
AND VOICE MAIL, THAT ARE OFTEN ESSENTIAL TO A BUSINESS. WE COULD BE SUBJECT TO
LIABILITY IF WE DO NOT PROVIDE OUR SERVICES TO OUR CLIENTS IN ACCORDANCE WITH
THE TERMS OF OUR ENGAGEMENTS.

      Many of the engagements we have begun or plan to undertake involve
projects involving information, data and voice services that are critical to the
operations of our clients' businesses and provide benefits to our clients that
may be difficult to quantify. If we fail or are unable to meet a client's
expectations in the performance of our services, our client's operations could
be adversely affected. This could give rise to claims against us or damage our
reputation, adversely affecting our business, operating results and financial
condition.



                                       21
<PAGE>



ITEM 7.  FINANCIAL STATEMENTS

The financial statements are attached at the end of this document.

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

         None

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

      The following personnel serve as the directors and executive officers of
Intraco:

                                                                       DIRECTOR
       NAME            AGE                POSITION                      SINCE
       ----            ---                --------                      -----

Walt Nawrocki           55    Chief Executive Officer and Director       2000
Jack Berger             46    President and Director                     1999
Robert Marcus           57    Chief Financial Officer, Secretary and      --
                              Treasurer
Robert Hildreth, Jr.    66    Chairman of the Board of Directors         1999
William D. Hager        53    Director (Audit Committee Member)          2000
Benjamin W. Krieger     62    Director (Audit Committee Member)          2000

      WALT NAWROCKI joined Intraco in November 1999 as chief executive officer.
In 2000, he was appointed to Intraco's Board of Directors. Prior to joining
Intraco, Mr. Nawrocki served as president, chief executive officer and director
of Registry Magic Inc. from June 1996 through July 1999. Under Mr. Nawrocki's
direction, Registry Magic positioned its Virtual Operator as

                                       22
<PAGE>

the industry sales leader for speech-driven auto-attendant products, and created
the largest dealer network and garnered the most awards in the speech
recognition industry. Mr. Nawrocki also forged agreements with Microsoft and
Motorola to speech-enable Internet websites using technology from both
companies. Prior to that, Mr. Nawrocki spent more than 30 years at IBM, where he
held positions of increasing responsibility, eventually becoming manager for
worldwide product development and business management in August 1992. He served
in this position until May 1996. In this capacity, he oversaw a number of
business areas and was responsible for acquisitions, joint development and OEM
licensing programs. Mr. Nawrocki assembled the speech recognition team at IBM.
His working teams have earned 17 industry awards for technology development and
customer satisfaction.

      JACK S. BERGER founded the predecessor to Intraco in 1990 and has served
as its president since that time. He is currently Intraco's president and
director. Mr. Berger has more than 20 years of experience in the domestic and
international computer systems industry. Intraco initially specialized in
exporting computer hardware, and in doing so established strategic relationships
with major international information technology companies that continue today.
Mr. Berger later refocused the product and marketing strategy into higher
margin, higher value-added technology solutions, and shifted focus to the
domestic market. Prior to founding the predecessor to Intraco, Mr. Berger held
several key positions in the Real Time Products Division of Computer Products,
Inc. He supervised production control activity, and he also established and
managed the sales support department, which was responsible for supporting all
sales activity on a global basis. His leadership resulted in the division
meeting its quarterly revenue goals ahead of schedule for the first time. Mr.
Berger was then promoted to international sales manager, where he established
and managed a worldwide organization of distributors that continuously met its
revenue goals. Mr. Berger has a Bachelor of Science in Electrical Engineering
from the University of Miami.

      ROBERT MARCUS joined Intraco in January 1999 as chief financial officer,
secretary and treasurer. From June 1997 to July 1998, Mr. Marcus was a founder
and partner in American Imprints, LLC, an advertising specialty company. Prior
to that, he served as chief executive officer of In-Store Opportunities, Inc., a
marketing and display company serving major food manufacturers, from March 1991
to January 1996. While there he raised $8 million in investment capital, and
built a nationwide network of field representatives. As chief operating officer
of Pioneer Communications Network, a publicly traded publishing company, Mr.
Marcus managed the company's initial public offering. He also worked in various
positions for the information resources group of Xerox Corporation from 1972 to
1985, including manager of financial planning and analysis, assistant
controller, and manager of business development, where he was responsible for
mergers and acquisitions. During this time, Mr. Marcus was instrumental in
completing the acquisition of the microfilm business of The New York Times. He
was also a member of the turnaround team that brought two of Xerox's information
group companies to profitability. Mr. Marcus earned a Bachelor of Science from
C.W. Post College and a Masters of Business Administration from the University
of Connecticut.

      ROBERT HILDRETH, JR. is the Chairman of the Board of Directors and was the
first member of Intraco's Board of Advisors formed in May 1998. Mr. Hildreth
brings a broad scope of experience to Intraco, with more than 30 years in the
domestic and international financial

                                       23
<PAGE>

community. He is currently president of Hildreth Associates, a consulting firm,
and has served in that capacity since 1994. He was formerly the International
Director of the law firm of LeBouef, Lamb, Leiby & McRae, a Senior Utility
Advisor to Goldman Sachs & Co., a Managing Director of Investment Banking for
Merrill Lynch, and a Director of Merrill Lynch International Bank in London. Mr.
Hildreth is also a director of MerchantOnline.com, Inc., a provider of
e-commerce services to merchants.

      WILLIAM D. HAGER was elected a director in March 2000. He has been on
Intraco's Board of Advisors since its inception in 1998. He has been a principal
with Risk Metrics Corporation since 1998. Risk Metrics gathers and sells public
data to businesses. From 1990 to 1997, he was the president and chief executive
officer of NCCI, the nation's largest workers' compensation and health care
informatics corporation. During his service with NCCI, it employed 1,000 people
in 15 national offices and generated annual revenues approaching $150 million.
He is currently chairman of the board and chief executive officer of Cenetec
LLC, a technology accelerator located in Boca Raton, Florida.

      BENJAMIN W. KRIEGER was elected a director in March 2000. He has been on
Intraco's Board of Advisors since its inception in 1998. Since 1990, he has been
a partner in Corporate Development International, which specializes in
identifying potential merger and acquisition opportunities for its business
clients. He specializes in the pulp and paper, packaging, graphic arts and
distribution industries. From 1983 to 1990, he was president and chief executive
officer of Ris Paper Company, a private paper distribution company with 26
distribution centers and annual sales of approximately $500 million.

      Intraco's directors hold their positions until the next annual meeting of
shareholders and until their successors have been duly elected and qualified.
During 2000, the Board of Directors established an audit committee, whose
members currently are William Hager and Benjamin Krieger. Our non-employee
directors receive compensation in the form of stock options upon appointment and
reimbursement of expenses incurred while attending Board of Directors' meetings.

      Our officers hold office until the first meeting of the Board of Directors
following the annual meeting of our shareholders and until their successors have
been chosen and qualified, subject to early removal by the Board of Directors.

COMPENSATION OF EXECUTIVE OFFICERS

      SUMMARY COMPENSATION TABLE

      The following table summarizes all compensation awarded to, earned by, or
paid to our president, who served as our principal executive officer during
those years, for services rendered in each of the last three fiscal years. No
other executive officer earned total salary and bonus in excess of $100,000
during the last three fiscal years.

                                       24
<PAGE>

                                                        ANNUAL COMPENSATION
                                                    ---------------------------
    NAME AND PRINCIPAL POSITION          YEAR         SALARY ($)        BONUS
    ---------------------------          ----         ----------        -----

Jack S. Berger, President                1999          137,800            0
                                         1998          137,000            0
                                         1997           99,000            0

      The annual compensation also includes an allowance for automobile
expenses incurred by Mr. Berger.


 KEY PERSONNEL AND EMPLOYMENT AGREEMENTS


      Intraco entered into a three-year employment agreement with Jack S.
Berger, effective as of January 1, 1998 and amended effective January 1, 2000,
pursuant to which he serves as Intraco's president. The agreement now expires
December 31, 2002. The agreement provides for an annual salary of $160,000, with
base salary adjustments at the end of each year of employment at the discretion
of the Board of Directors.

      The agreement also provides that Mr. Berger's employment may be terminated
at Intraco's discretion at any time prior to December 31, 2002, provided that
Intraco shall pay Mr. Berger an amount equal to payment at his base salary rate
from the date of termination through December 31, 2002, plus an amount equal to
50% of his base salary. In the event of such termination, Mr. Berger is not
entitled to any incentive salary payment or any other compensation then in
effect, prorated or otherwise. At its discretion, Intraco may also terminate Mr.
Berger any time after the initial term, provided that in such case Mr. Berger
shall be paid 50% of his then applicable base salary. In the event of such
termination, Mr. Berger shall not be entitled to receive any incentive salary
payment or any other compensation then in effect, prorated or otherwise.

      In the event that Mr. Berger is in breach of any material obligation owed
to Intraco, habitually neglects the duties to be performed by him under the
agreement, engages in any conduct that is dishonest, damages the reputation or
standing of Intraco, or is convicted of any criminal act or engages in any act
of moral turpitude, then Intraco may terminate the agreement upon five days'
notice to Mr. Berger. In the event of such termination, Mr. Berger shall be paid
only at the then-applicable base salary rate up to and including the date of
termination, and shall not be paid any incentive salary payments or other
compensation, prorated or otherwise.

      Intraco entered into a three-year employment agreement with Walt Nawrocki,
effective as of September 24, 1999 and amended effective January 1, 2000,
pursuant to which he serves as Intraco's chief executive officer. The agreement
provides for an annual salary of $175,000, with base salary adjustments at the
end of each year of employment at the discretion of the Board of Directors. The
agreement otherwise has similar terms to Mr. Berger's agreement.

      Intraco entered into a three-year employment agreement with Robert Marcus,
effective as of January 18, 1999, as amended in September and December 1999,
pursuant to which he serves

                                       25
<PAGE>

as Intraco's chief financial officer. The agreement provides for a base salary
of $145,000 commencing in January 2000. Further increases in base salary will be
at the discretion of the Board of Directors.


      Our success is dependent on the services of Walt Nawrocki, our chief
executive officer, and Jack Berger, our president, both of whom have significant
experience in information, data and voice services and who developed the change
in our business plan to begin offering these services. The loss of the services
of Mr. Nawrocki, Mr. Berger or other key personnel could have a material adverse
effect on our business. We have entered into employment agreements with certain
of our key personnel, including Mr. Nawrocki and Mr. Berger. We do not, however,
currently maintain key man life insurance policies for any of our officers or
other personnel.


STOCK OPTION PLAN

      Intraco has adopted a stock option plan to attract and induce officers,
directors and key employees of Intraco to remain with Intraco. The plan provides
for the grant of options that qualify as incentive stock options under Section
422(a) of the Internal Revenue Code of 1986, as amended, and nonstatutory
options. The stock option plan was approved in 1998 and amended in 1999 to
increase the number of shares available for grant to 10,000,000.

      As of June 30, 2000, options to purchase an aggregate of 8,994,800 shares
of common stock were outstanding under the plan with exercise prices of $0.25 to
$4.87. These options vest immediately over a five-year period and expire from
two years to 10 years from the date of grant. In 1999, options to purchase an
aggregate of 6,789,800 shares were granted, including 4,000,000 to Mr. Nawrocki
and 2,000,000 to Mr. Marcus.

      The Board may terminate the plan or may amend the plan as it may deem
advisable. The Board may unilaterally amend the plan and incentive awards as it
deems appropriate to ensure compliance with Rule 16b-3 and to cause incentive
awards to meet the requirements of the Internal Revenue Code and the regulations
thereunder.

      All present and future employees of Intraco or of any parent or subsidiary
of Intraco and any consultant retained to provide services to Intraco, and who
is selected by the committee to be eligible to receive incentive awards under
the plan are entitled to receive options under the plan.

      All present and future non-employee directors are eligible to receive
nonstatutory options under the plan. Non-employee directors shall not be
entitled to receive any other form of incentive award under the plan.

      The exercise price of shares of common stock covered by an incentive stock
option cannot be less than 100% of the fair market value of such shares on the
date of grant; provided that if an incentive stock option is granted to an
employee who, at the time of the grant, is a 10% shareholder, then the exercise
price of the shares covered by the incentive stock option will not be less than
110% of the fair market value of such shares on the date of grant. The exercise
price of nonstatutory stock options will not be less than 85% of fair market
value of such shares on the date of grant.

                            PRINCIPAL SHAREHOLDERS

      The following tables show information, as of March 28, 2000, regarding our
common stock, Series A preferred stock and Series B preferred stock owned of
record or beneficially by (i) each shareholder who we know is the beneficial
owner of more than of 5% of the outstanding shares of our common stock, Series A
preferred stock, or Series B preferred stock; (ii) each director and executive
officer; and (iii) all directors and executive officers as a group. Each

                                       26
<PAGE>

shareholder listed below has sole voting and investment power. Unless otherwise
indicated, the address of each of the persons named below is 3998 FAU Boulevard,
Suite 210, Boca Raton, Florida 33431. As of the date of this prospectus, a total
of 18,169,969 shares of our common stock, 448,500 shares of our Series A
preferred stock and 972,400 shares of Series B preferred stock are issued and
outstanding. The shares of Series A preferred stock and Series B preferred stock
are convertible into a like number of shares of common stock.

         In accordance with the SEC rules, shares that are not outstanding but
that are issuable upon the exercise of immediately exercisable options,
warrants, rights or conversion privileges have been included for the purpose of
computing the percentage of outstanding shares owned by the individual owning
the convertible security or right, but not when computing the percentage for any
other person. The number of shares reflected as owned by each of Messrs.
Nawrocki, Marcus, Hildreth, Hager and Kreiger include 4,000,000, 2,000,000,
195,000, 70,000 and 70,000 shares of common stock issuable upon exercise of
options, respectively. In addition, Mr. Hildreth's holdings also include 20,400
shares issuable upon conversion of preferred stock.

COMMON STOCK

                                      Amount and Nature of    Percent of Common
                                    Beneficial Ownership of  Stock Beneficially
       Name and Address                   Common Stock              Owned
----------------------------------  -----------------------  ------------------

Jack Berger                                 8,109,000                44.6%
Walt Nawrocki                               4,000,000                18.0
Robert Marcus                               2,000,000                 9.9
Robert Hildreth, Jr.                          235,400                 1.3
William D. Hager                              170,000                 *
Benjamin W. Kreiger                            90,000                 *
All executive officers and
directors as a group (six persons)         14,604,400                59.6

----------------------------
      *Less than 1%

      Messrs. Berger and Nawrocki have entered into a voting agreement with
respect to the shares they each beneficially own. The agreement provides that
each of Messrs. Berger and Nawrocki will grant the other an irrevocable proxy
for the voting of 50% of the shares of common stock owned by both of them. In
addition, they each agreed to vote their shares for their respective election to
the Board of Directors. The agreement will terminate at any time
upon the earlier of (i) the sale or merger of the company; (ii) the resignation
of either party as an officer or director; or (iii) January 31, 2003.

                                       27
<PAGE>

         SERIES A PREFERRED STOCK
<TABLE>
<CAPTION>

                                                Amount and Nature of Beneficial         Percent of Series A
                                                Ownership of Series A Preferred           Preferred Stock
             Name and Address                                Stock                       Beneficially Owned
-------------------------------------------   ------------------------------------- -----------------------------

<S>                                                          <C>                                 <C>

Peter Georg Studer, Sole Director                            100,000                             25.2%
Alpenstein Holding AG
Berkenstrasse 49
Rotkreuz, SZ


Mario Franchi                                                 50,000                             12.6
Sitel Corporation
No. 15 Andar No. 3, Floor 1050
Lisbon, Portugal

Rolf Frommel                                                  50,000                             12.6
P.O. Box 53
Taby, SW  18321

Osakeyhtio & Jukka Hallman                                    20,000                              5.0
Haapaniemenkatu 28 KRS
Kuspio, FI  70111

All executive  officers and directors as a                         0                                0
group (six persons)

         SERIES B PREFERRED STOCK


                                                 Amount and Nature of Beneficial         Percent of Series B
                                                 Ownership of Series B Preferred           Preferred Stock
             Name and Address                                 Stock                       Beneficially Owned
-------------------------------------------    ------------------------------------  -----------------------------


<S>                                                           <C>                                 <C>

Peter Georg Studer, Sole Director                             401,200                             41.3%
Alpenstein Holding AG
Berkenstrasse 49
Rotkreuz, SZ


Robert Hildreth, Jr.                                           20,400                              2.1

Song Lin                                                      100,300                             10.3
4251 Coral Hills Drive
Coral Springs, FL  33065

Richard A. Persson TTEE                                       401,200                             41.3
Richard A. Persson Declaration
625 Prestwick Drive
Frankfort, IL  60423

All executive  officers and directors as a                     20,400                              2.1
group (six persons)
</TABLE>

                                       28
<PAGE>

                             CERTAIN TRANSACTIONS

      From time to time, Intraco has loaned funds and sold products to Intraco
Systems Pty., Ltd., an Australian corporation that is indirectly controlled by
Jack S. Berger, Intraco's president. Mr. Berger is a majority stockholder in
Intraco International, Inc., the corporation that owns a majority interest in
Intraco Systems Pty. In 1998, Intraco sold products to Intraco Systems Pty.
valued at $235,255 and received cash payments of $199,126. The balance remaining
due to Intraco for those products, together with the balance due from the prior
year's sales, totaled $169,539 and was converted into a note receivable bearing
interest at 6% per annum and payable in 36 monthly installments. In 1999,
$74,000 was collected and the remaining $48,000 was determined to be
uncollectible.


      In May 1997, Intraco entered into a consulting agreement with Vestar
Capital Corporation pursuant to which Vestar provides organizational and
strategic planning services. Vestar assisted Intraco with an internal
reorganization in 1998 and assisted in the identification of potential
acquisitions. The compensation under this agreement provided for monthly fees of
$3,000 through February 1998, and $1,650 per week thereafter. Vestar received
891,000 restricted shares of Intraco common stock from the principal shareholder
of Intraco on behalf of Intraco, which represented 9.9% of the then outstanding
shares, and had the right to be issued warrants to maintain its 9.9% interest in
Intraco despite any further issuances of capital stock until May 2000 pursuant
to an anti-dilution provision in its consulting agreement. During November 1998,
Intraco issued to Vestar warrants to purchase 150,000 shares of common stock at
$0.25 per share in exchange for the cancellation of the anti-dilution clause of
its consulting agreement. The consulting agreement with Vestar was terminated
February 1, 2000.


      In April 1999, Intraco completed a share exchange with Custom Touch, a
Nevada corporation with no material operations whose common stock traded on the
OTC Bulletin Board. Under the share exchange agreement, all outstanding shares
of Intraco capital stock were exchanged for 10,531,500 Custom Touch shares,
which represented 81% of the total Custom Touch shares outstanding at the time
of the exchange. Upon the completion of the exchange, the prior shareholders and
promoters of Custom Touch held 2,429,489 shares and the Intraco shareholders
held 10,531,500 shares. Thereafter, Custom Touch changed its name to Intraco
Systems, Inc. A total of 1,487,298 shares were issued to Jensen Services and
Associates for services associated with the share exchange.

      In March 2000, Jack S. Berger and Walt Nawrocki entered into a voting
agreement pursuant to which they agreed to share equally in voting the shares
owned by each of them. Each also agreed to vote all of the shares of Intraco
securities to which he is entitled to vote in favor of the other person in the
election of Intraco directors and to not take any action, directly or
indirectly, that will assist, facilitate, encourage or solicit another party in
the removal of the other from Intraco board or from their current positions as
executive officers of Intraco.



ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)    Exhibits
Exhibit No.         Description
-----------         -----------
2.1                 Exchange Agreement among Intraco Systems, Inc., Custom Touch
                    Electronics, Inc. (1)
3.1                 Amended and Restated Certificate of Incorporation(1)
3.2                 Bylaws(1)
10.1                Stock Option Plan(1)
10.2                Employment Agreement between Intraco and Jack Berger(1)
10.2(a)             Amendment to Berger Employment Agreement (2)
10.3                Employment Agreement between Intraco and Bob Marcus(1)
10.3(a)             Amendment to Marcus Employment Agreement (2)
10.4                Employment Agreement between Intraco and Walt Nawrocki (2)
10.5                Voting Agreement between Jack Berger and Walt Nawrocki (2)
10.6                Motorola Software License Agreement dated January 18, 2000
                    by and between Intraco and Motorola (3)
10.7                Software License and Support Agreement between Nuance
                    Communications (3)
10.8                Microsoft Certified Solution Provider Agreement by and
                    between Intraco and Microsoft Corporation (3)
27.1                Financial Data Schedule

(1) Incorporated by reference to the Registrant's Registration Statement on Form
    10-SB filed on August 18, 1999.
(2) Incorporated by reference from the Registrant's Annual Report on Form 10-KSB
    for the year ended December 31, 1999, as originally filed.
(3) Incorporated by reference from the Registrant's Amendment No. 1 to the
    Registration Statement on Form SB-2 dated November 3, 2000, SEC File No.
    333-44268.

(b) Intraco did not file any Reports on Form 8-K during the fourth quarter of
    the year ended December 31, 1999.

                                       29
<PAGE>

                                   SIGNATURES


      In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused the Amendment No. 2 to its Annual Report on Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized.


                                      INTRACO SYSTEMS, INC.


Date: January 17, 2001              By:      /s/ WALT NAWROCKI
                                             -----------------------------------
                                             Chief Executive Officer and
                                             Director (Principal Executive
                                             Officer)


                                       30
<PAGE>
                              INTRACO SYSTEMS, INC.

                              FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE>

                                TABLE OF CONTENTS




Independent Auditor's Report..................................................1

Financial Statements:

   Balance Sheets...........................................................2-3

   Statements of Operations ..................................................4

   Statements of Changes in Stockholders' Deficit.............................5

   Statements of Cash Flows...................................................6

   Notes to Financial Statements...........................................7-13

<PAGE>


                       DASZKAL BOLTON MANELA DEVLIN & CO.
                          CERTIFIED PUBLIC ACCOUNTANTS
                  A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS

     2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431
                 TELEPHONE (561) 367-1040 FAX (561) 750-3236


JEFFREY A. BOLTON, CPA, P.A.            MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A.            OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN. CPA, P.A.
MICHAEL S. KRIDEL, CPA, P.A.



                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Intraco Systems, Inc.

We have audited the accompanying balance sheets of Intraco Systems, Inc., as of
December 31, 1999 and 1998, the related statements of operations, changes in
stockholders' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Intraco Systems, Inc., as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.



Boca Raton, Florida
February 18, 2000, except for
Note 13, as to which the date is
March 16, 2000

                                       F-1
<PAGE>

                             INTRACO SYSTEMS, INC.
                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------


                                     ASSETS
                                     ------

<TABLE>
<CAPTION>
                                                                  1999           1998
                                                               ----------     ----------
<S>                                                            <C>            <C>
Current assets:
  Cash                                                         $  151,725     $   32,245
  Accounts receivable, net of allowance of $6,639 and $-0-        535,422         49,900
  Inventory                                                        16,678         65,840
  Prepaid expenses                                                 86,395        125,945
                                                               ----------     ----------
     Total current assets                                         790,220        273,930
                                                               ----------     ----------

Property and equipment, net                                       233,914        113,076
                                                               ----------     ----------

Other assets:
  Goodwill, net of amortization of $1,125 and $-0-                 82,785              -
  Due from related party                                                -         46,480
  Note receivable - related party                                       -        123,059
  Due from shareholder                                              2,800         20,500
  Deposits                                                         15,064         13,819
                                                               ----------     ----------
     Total other assets                                           100,649        203,858
                                                               ----------     ----------
     Total assets                                              $1,124,783     $  590,864
                                                               ==========     ==========
</TABLE>

               See accompanying notes to financial statements.

                                       F-2
<PAGE>

                             INTRACO SYSTEMS, INC.
                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------


                     LIABILITIES AND STOCKHOLDERS' DEFICIT
                     -------------------------------------

<TABLE>
<CAPTION>
                                                                    1999             1998
                                                                -----------      -----------
<S>                                                             <C>              <C>
Current liabilities:
  Accounts payable                                              $ 1,025,952      $   332,476
  Deferred revenue                                                  165,494          152,174
  Customer deposits                                                   3,900          172,195
  Capital lease payable                                               9,314                -
  Note payable                                                      126,065          306,526
  Due to shareholder                                                      -           17,700
                                                                -----------      -----------
     Total current liabilities                                    1,330,725          981,071
                                                                -----------      -----------

Capital lease payable                                                31,323                -

Note payable                                                              -          113,686
                                                                -----------      -----------
     Total long term liabilities                                     31,323          113,686

Stockholders' deficit:
  Series A convertible redeemable preferred stock,
   $.001 par value, 2,500,000 shares authorized and
   767,400 and 52,500 shares issued and outstanding,
   7% cumulative, with a $1.00 per share preference value               767               53
  Series B convertible redeemable preferred stock,
   $.001 par value, 1,700,000 shares authorized and
   989,400 shares issued and outstanding, with a $1.00
   per share preference value and $.997 for
   subscriptions over $100,000                                          989                -
  Common stock, $.001 and $.001 par value,
   100,000,000 and 50,000,000 shares authorized, 13,020,989
   and 9,665,200 shares issued and outstanding                       13,021            9,665
Subscriptions receivable                                           (446,300)               -
Additional paid-in capital                                        2,251,561          131,797
Outstanding stock options                                            27,000                -
Accumulated deficit                                              (2,084,303)        (645,408)
                                                                -----------      -----------
Total stockholders' deficit                                        (237,265)        (503,893)
                                                                -----------      -----------
Total liabilities and stockholders' deficit                     $ 1,124,783      $   590,864
                                                                ===========      ===========
</TABLE>

                See accompanying notes to financial statements.

                                       F-3
<PAGE>

                             INTRACO SYSTEMS, INC.
                            STATEMENTS OF OPERATIONS
                        AS OF DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------


                                             1999              1998
                                         ------------      ------------
Revenues:
  Systems/networks                       $  2,545,540      $  1,248,824
  Service contracts                           379,728         1,456,107
                                         ------------      ------------
     Total revenues                         2,925,268         2,704,931
                                         ------------      ------------
Cost of revenues:
  Systems/networks                          1,852,443           638,885
  Service contracts                           313,138         1,073,835
                                         ------------      ------------
     Total cost of revenues                 2,165,581         1,712,720
                                         ------------      ------------
Gross profit                                  759,687           992,211
General and administrative                  2,197,492         1,037,829
                                         ------------      ------------
(Loss) from operations                     (1,437,805)          (45,618)
Interest income                                39,311             2,490
Interest expense                              (40,401)          (37,067)
                                         ------------      ------------
Net (loss)                               $ (1,438,895)     $    (80,195)
                                         ============      ============
Net loss per share (basic & diluted)     $      (0.12)     $      (0.01)
                                         ============      ============
Weighted average number of shares
  outstanding and to be issued             12,067,309         9,075,864
                                         ============      ============


                See accompanying notes to financial statements.

                                       F-4
<PAGE>

                             INTRACO SYSTEMS, INC.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                            Preferred Stock A           Preferred Stock B              Common Stock
                                        -------------------------   -------------------------   -------------------------
                                           Shares        Amount        Shares        Amount        Shares        Amount
                                        -----------   -----------   -----------   -----------   -----------   -----------
<S>                                     <C>           <C>           <C>           <C>           <C>           <C>
Balance at December 31, 1997                      -   $         -             -   $         -           100   $       100
Common stock split                                -             -             -             -     8,999,900         8,900
Issuance of common stock
  for cash                                        -             -             -             -       665,200           665
Costs associated with issuance
  of stock                                        -             -             -             -             -             -
Issuance of preferred stock
  for cash                                   52,500            53             -             -             -             -
Net loss for the year                             -             -             -             -             -             -
                                        -----------   -----------   -----------   -----------   -----------   -----------
Balance at December 31, 1998                 52,500            53             -             -     9,665,200         9,665
Issuance of preferred stock
  for cash - Series A                       714,900           714             -             -             -             -
Issuance of preferred stock
  for cash - Series B                             -             -       989,400           989             -             -
Stock options                                     -             -             -             -             -             -
Costs associated with
  issuance of stock                               -             -             -             -             -             -
Issuance of common stock                          -             -             -             -       866,300           866
Acquisition of CTE assets                         -             -             -             -     2,429,489         2,430
Costs associated with recapitlization             -             -             -             -             -             -
Issuance of common stock
  for acquisition                                 -             -             -             -        60,000            60
Dividends paid                                    -             -             -             -             -             -
Subscriptions receivable                          -             -             -             -             -             -
Net loss for the year                             -             -             -             -             -             -
                                        -----------   -----------   -----------   -----------   -----------   -----------
Balance at December 31, 1999                767,400   $       767       989,400   $       989    13,020,989   $    13,021
                                        ===========   ===========   ===========   ===========   ===========   ===========

<CAPTION>
                                                           Additional    Outstanding
                                          Subscriptions     Paid-in         Stock      Accumulated
                                            Receivable      Capital        Options       Deficit         Total
                                           -----------    -----------    -----------   -----------    -----------
<S>                                        <C>            <C>            <C>           <C>            <C>
Balance at December 31, 1997               $         -    $    32,722    $         -   $  (565,213)   $  (532,391)
Common stock split                                   -         (8,900)             -             -              -
Issuance of common stock
  for cash                                           -        165,635              -             -        166,300
Costs associated with issuance
  of stock                                           -       (110,107)             -             -       (110,107)
Issuance of preferred stock
  for cash                                           -         52,447              -             -         52,500
Net loss for the year                                -              -              -       (80,195)       (80,195)
                                           -----------    -----------    -----------   -----------    -----------
Balance at December 31, 1998                         -        131,797              -      (645,408)      (503,893)
Issuance of preferred stock
  for cash - Series A                                -        714,286              -             -        715,000
Issuance of preferred stock
  for cash - Series B                                -        988,011              -             -        989,000
Stock options                                        -              -         27,000             -         27,000
Costs associated with
  issuance of stock                                  -       (244,846)             -             -       (244,846)
Issuance of common stock                             -        865,434              -             -        866,300
Acquisition of CTE assets                            -         (1,425)             -             -          1,005
Costs associated with recapitlization                -       (283,153)             -             -       (283,153)
Issuance of common stock
  for acquisition                                    -         89,940              -             -         90,000
Dividends paid                                       -         (8,483)             -             -         (8,483)
Subscriptions receivable                      (446,300)             -              -             -       (446,300)
Net loss for the year                                -              -              -    (1,438,895)    (1,438,895)
                                           -----------    -----------    -----------   -----------    -----------
Balance at December 31, 1999               $  (446,300)   $ 2,251,561    $    27,000   $(2,084,303)   $  (237,265)
                                           ===========    ===========    ===========   ===========    ===========
</TABLE>

                See accompanying notes to financial statements.

                                       F-5
<PAGE>

                             INTRACO SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                              1999             1998
                                                          -----------      -----------
<S>                                                       <C>              <C>

Cash flows from operating activities:
  Net (loss)                                              $(1,438,895)     $   (80,195)
  Adjustments to reconcile net loss to net cash
    provided (used) by operating activities:
      Depreciation and amortization                            72,331           18,426
      Warrants                                                 27,000                -
      Allowance for note receivable - related party            48,096                -
      Changes in assets and liabilities:
      (Increase) decrease in:
        Inventory                                              49,162          (65,840)
        Accounts receivable                                  (485,522)         185,727
        Prepaid expenses                                       39,549            1,320
        Due from related parties                               46,480          (38,929)
        Security deposits                                      (1,245)         (11,111)
      Increase (decrease) in:
        Accounts payable                                      693,476          143,236
        Deferred revenue                                       13,320         (441,559)
        Customer deposits                                    (168,295)         172,195
                                                          -----------      -----------
Net cash used by operating activities                      (1,104,543)        (116,730)
                                                          -----------      -----------
Cash flows from investing activities:
  Purchase of property and equipment                         (145,316)         (58,058)
                                                          -----------      -----------
Cash flows from financing activities:
  Proceeds from issuance of common stock                      421,005          166,300
  Proceeds from issuance of preferred stock                 1,704,000           52,500
  Costs associated with issuance of stock                    (244,846)        (110,107)
  Proceeds from capital lease                                   9,363                -
  Repayment of capital lease                                   (9,363)               -
  Proceeds from note receivable - related party                74,963                -
  Dividends paid                                               (8,483)               -
  Repayment of long-term debt                                (294,147)        (156,694)
  Costs associated with recapitalization                     (283,153)               -
                                                          -----------      -----------
Net cash provided (used) by financing activities            1,369,339          (48,001)
                                                          -----------      -----------
Net increase (decrease) in cash                               119,480         (222,789)
Cash, beginning of year                                        32,245          255,034
Cash, end of year                                         $   151,725      $    32,245
                                                          ===========      ===========
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Interest                                              $    40,401      $    37,067
                                                          ===========      ===========
Non-cash transactions affecting financing activities:
  Common stock issued for note                            $   446,300      $         -
                                                          ===========      ===========
  Conversion of accounts payable to note payable          $         -      $   438,906
                                                          ===========      ===========
  Issuance of common stock for acquisition                $    90,000              $ -
                                                          ===========      ===========
  Assets acquired under capital lease                     $    50,000              $ -
                                                          ===========      ===========
</TABLE>


                See accompanying notes to financial statements.

                                       F-6
<PAGE>

                              INTRACO SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Intraco Systems, Inc. (the "Company") was incorporated in Florida in March 1990.
In April, 1999, CTE, a public shell, acquired all of the outstanding common
stock of the Company. For accounting purposes, the acquisition has been treated
as an acquisition of CTE by the Company and as a recapitalization of the
Company. As a result of the recapitalization, the Company is now a Nevada
Corporation. Intraco is a Communications Solution Provider, offering the
integration of voice, data and Internet based technology solutions to a wide
range of customers. Intraco offers complementary information technology
solutions to clients on a local and regional basis. Intraco's targeted customers
include small and mid-size companies in a wide range of industries including
communications, healthcare, financial services, manufacturing, professional
services and technology.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS
The Company considers all highly-liquid debt instruments with original
maturities of three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated using the
straight-line method over their estimated useful lives.

ADVERTISING COSTS
Advertising costs, which are principally included in general and administrative
expenses, are expensed as incurred. Advertising expense was $16,231 and $10,742
for the years ended December 31, 1999 and 1998, respectively.

USE OF ESTIMATES
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.

REVENUE RECOGNITION
Generally, revenues from sales of products are recognized when products are
shipped unless the Company has obligations remaining under a sales or licensing
agreement, in which case revenue is either deferred until all obligations are
satisfied or recognized ratably over the term of the contract. Revenues from
maintenance contracts are recognized ratably over the life of the contract,
usually one year. Deferred income on maintenance contracts at 1999 and 1998 was
$165,494 and $152,174, respectively. Revenues from sales of maintenance
contracts in 1999 and 1998 were $379,728 and $1,456,107, respectively.

INVENTORY
Inventory consists primarily of computer equipment purchased for resale, and is
stated at the lower of cost or market, with cost determined on the first-in,
first-out (FIFO) method.

AMORTIZATION OF GOODWILL
Goodwill represents the amount by which the purchase price of a business
acquired exceeds the fair market value of the net assets acquired under the
purchase method of accounting. Goodwill is being amortized on a straight-line
basis over 15 years. Accumulated amortization at December 31, 1999 is $1,125.
The Company assesses whether its goodwill and other intangible assets are
impaired as required by SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" based on an
evaluation of undiscounted projected cash flows through the remaining
amortization period. If an impairment exists, the amount of such impairment is
calculated based on the estimated fair value of the asset.

                                       F-7
<PAGE>

                              INTRACO SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

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

Leasehold improvements               $  51,971      $  50,282
Equipment                              302,050        111,696
Furniture and fixtures                  22,260         22,260
                                     ---------      ---------
    Total property and equipment       376,281        184,238
Less: accumulated depreciation        (142,367)       (71,162)
                                     ---------      ---------
    Property and equipment, net      $ 233,914      $ 113,076
                                     =========      =========

Depreciation expense for the years ended December 31, 1999 and 1998 was $71,206
and $18,426, respectively.


NOTE 4 - RELATED PARTY TRANSACTIONS

The Company is affiliated with various companies through common ownership.
During the years ended December 31, 1999 and 1998, the Company had the following
transactions with a related party (Intraco, Ltd.):

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

Due from related party - beginning of year              $  46,480    $ 133,410
Sales to related party                                          -      235,255
Cash received                                             (46,480)    (199,126)
Less: amount converted to note receivable (Due in 36
  monthly installments, with an interest rate of 6%)            -     (123,059)
                                                        ---------    ---------
Due from related party - end of year                    $       -    $  46,480
                                                        =========    =========

During the year ended December 31, 1999, the Company collected approximately
$74,000 of the note receivable balance. At December 31, 1999, the Company
determined that the remaining $48,000 was uncollectable.


NOTE 5 - OPERATING LEASES

The Company leases facilities and equipment under operating leases, with terms
from three to five years, payable in monthly installments. Total lease expense
for the years ended December 31, 1999 and 1998, was $152,904 and $71,074,
respectively.

Future minimum lease payments for leases with a term in excess of one year are
as follows:

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

     2000          $ 123,231
     2001            123,231
     2002            107,068
     2003            107,068
     2004                  -
                   ---------
                   $ 460,598
                   =========

                                       F-8
<PAGE>

                              INTRACO SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 6 - CAPITAL LEASE

Certain non-cancelable leases are classified as capital leases, and the leased
assets are included as part of "Property and equipment." Other leases are
classified as operating leases and are not capitalized. Details of the
capitalized leased assets are as follows:

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

Equipment                          $  50,000      $       -
Less: accumulated depreciation       (10,000)             -
                                   ---------      ---------
    Total                          $  40,000      $       -
                                   =========      =========

At December 31, 1999, the future minimum lease payments under the capital lease
are as follows:

             Years Ended               Capital
             December 31,              Leases
             ------------             --------

                2000                  $ 11,940
                2001                    11,940
                2002                    11,940
                2003                    10,945
                                      --------
Total minimum lease payments            46,765
                                      --------
Less: amount representing interest      (6,128)
                                      --------
Present value of net minimum
  lease payments                        40,637
Less: current maturities                (9,314)
                                      --------
    Long-term obligation              $ 31,323
                                      ========


NOTE 7 - LONG-TERM DEBT

At December 31, 1999 and 1998, long-term debt consists of the following:

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

Note payable due in monthly installments
ranging from $12,000 to $39,000 including
interest at 10%, with remaining balances due
March 2000. Secured by all assets of the
Company                                          $ 126,065      $ 420,212
  Less current portion                            (126,065)      (306,526)
                                                 ---------      ---------
Note payable - long term                         $       -      $ 113,686
                                                 =========      =========

Total interest expense for the years ended December 31, 1999 and 1998, was
approximately $40,400 and $37,000, respectively.

                                       F-9
<PAGE>

                              INTRACO SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 8 - CONCENTRATION OF CREDIT RISK

The Company maintains its cash bank deposits at various financial institutions.
Accounts at these institutions are insured by the Federal Deposit Insurance
Corporation up to $100,000 and the balances, at times, may exceed federally
insured limits. At December 31, 1999 the balance exceeding this limit was
approximately $147,000. At December 31, 1998, the Company's cash balance did not
exceed the insured limit. The Company routinely assesses the financial strength
of its customers, and, as a consequence, believes its trade accounts receivable
exposure is limited.


NOTE 9 - MAJOR CUSTOMERS

Sales to one customer in 1999 represented approximately 38% of total sales, and
sales to another customer represented approximately 29% of total sales in 1998.


NOTE 10 - STOCKHOLDERS' DEFICIT AND STOCK OPTION PLAN

In August and in November 1998, the Company amended and restated the Articles of
Incorporation. The Company increased the aggregate number of shares to
60,000,000 consisting of 50,000,000 shares of common stock, par value $.001 per
share and 10,000,000 shares of preferred stock, par value $.001 per share, 7%
cumulative dividend, payable quarterly starting February 1, 1999. Five years
from the date of issuance or 180 days after the effective date of the Company's
initial public offering, the holders of at least 51% of the Series A preferred
stock will have one demand registration right. The Company will be contractually
required to use its best efforts to file a registration statement and to have
such registration statement become effective.

In November of 1998, the Company commenced a Regulation D 504 stock offering,
and, as a result of the offering, the Company issued 665,200 shares of common
stock for $166,300, or $0.25 per share. Also in November of 1998, the Company
began a preferred stock Series A offering and as a result of the offering, the
Company issued 767,400 shares of preferred stock of which $187,000 were issued
under Regulation D 506 and $580,400 under Regulation S at $1.00 per share. Costs
incurred associated with these offerings totaled $212,000. The Company is
continuing the offering.


Holders have the right to convert the Series A preferred stock, in whole or in
part, at any time or from time to time, into the common stock, par value $.001,
of the Company. The initial conversion rate is one-to-one, and is subject to
adjustments in certain circumstances, including proportional stock splits, stock
dividends and reverse stock splits. The shares of Series A preferred stock shall
be subject to redemption, in whole or in part, at any time and from time to
time, at the option of the Company, at the stated Preference Value per share.

In October of 1999, the Company began a Series B preferred stock offering, and,
as a result of the offering, the Company issued 989,400 shares under Regulation
S of preferred stock, for a total of $989,000. Holders will have the right to
convert the Series B preferred stock, in whole or in part, at any time, or from
time to time, into the common stock, par value $.001, of the Company. The
initial conversion rate is one-to-one, and is subject to adjustment in certain
circumstances including proportional stock splits, stock dividends, and reverse
stock splits. The shares of Series B preferred stock shall be subject to
redemption, in whole or in part, at any time and from time to time, at the
option of the Company, at the stated Preference Value per share.


In March, 1999, the Company sold 866,300 shares of $.001 par value common stock
to an investment company at $1.00 per share for an interest-bearing note. At
December 31, 1999, the Company held $446,300 of this note from the investment
company.

                                      F-10
<PAGE>

                              INTRACO SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 10 - STOCKHOLDERS' DEFICIT AND STOCK OPTION PLAN, CONTINUED

STOCK OPTION PLAN

Under the Company's stock option plan, 10,000,000 shares of common stock were
reserved for issuance upon exercise of options granted to directors, officers
and employees of the Company. Options issued through December 31, 1999 carry
exercise prices equal to that of the fair market value on the date of the grant.
The options vest immediately or equally over a period of one to three years
following the date of grant and the unexercised portion of the options expires
and ceases to be exercisable on the earlier of the tenth year after the date of
the grant or specified date following termination of employment.

The Company has elected to account for the stock options under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Accordingly, no compensation expense has been
recognized on the stock options.

Had compensation expense for the stock option plan been determined based on the
fair value of the options at the grant date consistent with the methodology
prescribed under Statement of Financial Standards No. 123, "Accounting for Stock
Based Compensation," the Company's 1999 and 1998 net loss would have increased
by $1,539,000 and $6,500, respectively. The fair value of each option is
estimated on the date of grant using fair market option pricing model with the
assumption:

Risk-free interest rate                                6%
Expected life (years)                                  10
Expected volatility                                   n/a
Expected dividends                                   None
Weighed average remaining contractual life      9.5 years

A summary of option transactions during the years ended December 31, 1999 and
1998, is shown below:

                                                                Weighted Average
                                    Number of                    Exercise Price
                                     Options    Price Per Share    Per Option
                                   ----------    -------------     ----------

Outstanding at December 31, 1998      815,000    $        0.25     $     0.25
Granted (1/1/99 - 3/31/99)            260,000             0.25           0.25
Granted (4/1/99 - 4/30/99)             10,000             0.25           0.25
Granted (5/1/99 - 9/30/99)            270,000     1.50 to 2.00           1.97
Granted (10/1/99 - 12/31/99)        6,249,800      .88 to 2.18           0.89
Exercised                                   -                -              -
Forfeited                                   -                -              -
                                   ----------    -------------     ----------
Outstanding at December 31, 1999    7,604,800    $ .25 to 2.18     $     0.84
                                   ==========    =============     ==========

For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The effect of
Statement No. 123 resulted in a pro forma net loss of $2,977,895 and $86,695 for
the years ended December 31, 1999 and 1998 respectively. In addition, the pro
forma net loss per share was $.25 and $.01 per share for the years ended
December 31, 1999 and 1998, respectively.

WARRANTS


In November 1998 the Company granted 150,000 warrants to Vestar Capital
Corporation, a company controlled by a minority shareholder, as part of a
consulting agreement. Compensation expense for the warrants has been determined
based on the fair value of the warrants at the grant date consistent with the
methodology prescribed under Statement of Financial Standards No. 123,
"Accounting for Stock Based Compensation". Compensation expense of $27,000,
which is equal to the estimated fair market value of the warrants, was recorded
in 1999. Fair market value of $0.25 was used for the Company's common stock at
the date of issuance based on the offering price in the Regulation D 504 common
stock offering in November of 1998 of $0.25 per share. The fair value of each
warrant is estimated on the date of grant using fair market option pricing model
with the assumptions as stated above.


                                      F-11
<PAGE>

                              INTRACO SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 10 - STOCKHOLDERS' DEFICIT AND STOCK OPTION PLAN, CONTINUED


                                                                Weighted Average
                                    Number of                    Exercise Price
                                     Warrants    Price Per Share   Per Warrant
                                   ----------    -------------     ----------


Outstanding at December 31, 1998            -    $           -     $        -
Granted                               150,000             0.25           0.25
                                   ----------    -------------     ----------
Outstanding at December 31, 1999      150,000    $        0.25     $     0.25
                                   ==========    =============     ==========

The Company paid approximately $70,000 and $90,000 for the years ended December
31, 1999 and 1998, respectively, to Vestar Capital Corporation as part of a
consulting agreement.


NOTE 11 - INCOME TAXES

The Company has an unused net operating loss carryforward of $1,917,667
available for use on its future corporate federal and state income tax returns.
The Company was taxed as an S corporation until May 7, 1997, when a
disqualifying event occurred and the Company began taxation as a C corporation.
The Company's evaluation of the tax benefit of its net operating loss
carryforward is presented in the following table. The tax amounts have been
calculated using the 34% federal and 5.5% state income tax rates.

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

Taxes currently payable                        $       -     $       -
Deferred income tax benefit                      530,952        27,485
Change in beginning valuation allowance         (530,952)      (27,485)
                                               ---------     ---------
Provision (benefit) for income taxes           $       -     $       -
                                               =========     =========

Reconciliation of the Federal statutory income tax rate to the Company's
effective income tax rate is as follows:

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

Computed at the statutory rates (34%)          $(480,044)     $ (27,266)
Increase (decrease) resulting from:
  Non-deductible expenses                            344          2,692
State income taxes, net of federal income
  tax benefit                                    (51,252)        (2,911)
Reinstatement/change in deferred tax asset
  valuation allowance                            530,952         27,485
                                               ---------      ---------
Tax provision (benefit)                        $       -      $       -
                                               =========      =========

                                      F-12
<PAGE>

                              INTRACO SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 11 - INCOME TAXES, CONTINUED

The components of the deferred tax asset were as follows at December 31:

                                          1999           1998
                                       ---------      ---------
Deferred tax assets:
Net operating loss carryforward        $ 721,619      $ 249,648
Deferred revenue                          62,275         57,263
Deferred costs                           (10,591)       (41,239)
                                       ---------      ---------
    Total deferred tax asset             773,303        265,672
                                       ---------      ---------
Deferred tax liabilities:
Depreciation expense                      (5,464)        (8,290)
Allowance for receivables                 20,495              -
                                       ---------      ---------
    Total deferred tax liabilities        15,031         (8,290)
                                       ---------      ---------
    Net deferred tax asset               788,334        257,382
                                       ---------      ---------
Valuation allowance:
  Beginning of year                     (257,382)      (229,897)
  Decrease (increase) during year       (530,952)       (27,485)
                                       ---------      ---------
    Ending balance                      (788,334)      (257,382)
                                       ---------      ---------
Net deferred taxes                     $       -      $       -
                                       =========      =========

The net operating loss carryover is summarized below:

      Year Loss Originated         Year Expiring          Amount
      --------------------         -------------        ----------

        December 31, 1997               2012            $  583,231
        December 31, 1998               2013                80,195
        December 31, 1999               2014             1,254,241
                                                        ----------
Total available net operating loss                      $1,917,667
                                                        ==========


NOTE 12 - ACQUISITIONS

On June 7, 1999, the Company acquired the assets of Page Telecomputing. As
consideration, the Company issued 60,000 shares of its $.001 par value common
stock. The total value of the stock issued was $90,000. The acquisition was
accounted for using the purchase method of accounting. The results of operations
are included in the financial statements of operations from the date of
acquisition. The excess of the cost over the purchase price resulted in goodwill
of $83,910, which is being amortized over 15 years using the straight-line
method. The Company believes that the products and the intangible purchased will
be generating revenue for at least 15 years. The estimated fair market value of
the net assets acquired was $6,090.


                                      F-13
<PAGE>

                              INTRACO SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 13 - MANAGEMENT'S PLAN


As shown in the accompanying financial statements, the Company incurred a net
loss of $1,438,895 during the year ended December 31, 1999, and $80,195 for the
year ended December 31, 1998. The Company's current liabilities exceeded its
current assets by $540,505 and $707,141, respectively. The ability of the
Company to continue as a going concern is dependent on increasing sales and
obtaining additional capital and financing.

Management's plan to increase sales and obtain additional capital includes
several specific actions. On the sales side, greater emphasis will be placed on
emerging technologies such as speech-to-text, voice recognition, ASP services,
and web development as these areas have higher profit margins and represent a
market which is growing much more rapidly than the Company's traditional
services. In the last quarter of 1999 and the first quarter of 2000 several
employees, were added, which are expected to have a significant effect on sales.
For capital sourcing, management will continue the private placement offerings
of common and preferred stock, which during the period from January 1, 2000
through March 16, 2000 have raised approximately $4,400,000. Management believes
that through this additional capital raised the going concern has been mitigated
through December 31, 2000.


No estimate has been made should management's plan be unsuccessful.


NOTE 14 - LITIGATION

The Company is party from time to time to various legal proceedings. None of
these proceedings are expected to have a material impact on its financial
position or results of operations.


NOTE 15 - PUBLIC SHELL SHARE EXCHANGE


In April 1999, CTE, an inactive public shell, acquired all of the outstanding
common stock of the Company. For accounting purposes, the acquisition has been
treated as an acquisition of CTE by the Company and as a re-capitalization of
the Company. The exchange ratio of common shares was one-for-one. The estimated
fair market value of the net assets acquired was $1,005. Costs associated with
this re-capitalization totaled $283,153. As a result of the re-capitalization,
the Company is now authorized to issue 100,000,000 shares of common stock.
Former stockholders of CTE owned following the share exchange 2,429,489 shares
of common stock of the Company.



                                      F-14