SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ------------------
                                  FORM 10-KSB/A
                   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 1999 Commission File No. 333-83123
                          -----------------

                            Talisman Enterprises Inc.
                            -------------------------
                 (Name of Small Business Issuer in Its Charter)

<TABLE>
<CAPTION>
         <S>                                                                    <C>
                    Ontario                                                     N/A
         --------------------------------------------                           ---------------
         (State or Other Jurisdiction of                                        (I.R.S. Employer
         Incorporation or Organization)                                         Identification Number)

    2330 Southfield Road, Unit 3-4 Mississauga, Ontario, Canada                 L5N 2W8
    -----------------------------------------------------------                 ---------
     (Address of principal executive offices)                                   (Zip Code)
</TABLE>

                                 (905) 826-3995
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act :

                                       Common Stock, $.001 Par Value Per Share

Check  whether  the Issuer:  (1) has filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days:

                                       Yes  []                      No  [x]

Check if there is no  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation S-B contained  herein,  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.

                                                          []

The Company's revenues for its most recent fiscal year were $925,987.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Company  was  $6,965,355  as of March 1, 2000 based on the average bid and asked
prices of such stock as of that date.

There were 3,035,817 shares of Common Stock,  $.001 par value  outstanding as of
March 1, 2000.
<PAGE>
                                     PART I

Item 1.  DESCRIPTION OF BUSINESS.

OVERVIEW

            Talisman,  through our wholly-owned  operating subsidiary,  Talisman
International  Inc.,  manufacturers  high-quality  AA size  disposable  alkaline
batteries  for  private  label  sale  by  retailers.  We are  currently,  to our
knowledge,  the only North  American-based  battery  manufacturer  that  focuses
primarily on the private label  market.  Our objective is to leverage our unique
strategic position to build market share in the private label battery market and
capitalize  on the  significant  growth in private  label battery sales in North
America.

OUR HISTORY

            Talisman was incorporated  under the laws of the Province of Ontario
on July 28,  1978 under the name  Firespur  Explorations  Ltd.  In May 1989,  we
changed our name to Firesand  Explorations Ltd. and, in September 1997, our name
changed to our Talisman Enterprises Inc.

            From 1978 to early 1997,  Talisman operated as a mineral exploration
company in the  Province  of  Ontario,  Canada.  During  such  period,  Talisman
conducted various  exploration  programs on patented mining claims held by us on
lands situated in Esquega Township, Province of Ontario, Canada. In spite of our
exploration  efforts,  no significant ore deposit or other  mineralized  targets
were identified which justified additional exploration  expenditures.  Effective
January 1997,  Talisman  wrote-off the value of all mineral  exploration  assets
then held and, as a result of such actions, Talisman now has no mining assets or
other mineral related interests.

            In August 1997,  Talisman  entered into a share  exchange  agreement
with  the  shareholders  of  Talisman   International   pursuant  to  which  the
shareholders of Talisman  International  exchanged  11,959,265  common shares of
Talisman  International  for 478,371 of Talisman's  common shares.  Prior to the
share  exchange,   there  was  no  affiliation  between  Firesand  and  Talisman
International.  As a result of the share exchange, Talisman International became
a wholly-owned  subsidiary of Talisman.  Upon completion of such  transaction in
September 1997, we changed our name from Firesand to our present name,  Talisman
Enterprises Inc.

INDUSTRY BACKGROUND

            The  worldwide  battery  market is  predominately  comprised of four
major chemical systems:

                               1.   Alkaline
                               2.   Heavy Duty - Zinc Chloride
                               3.   General Purpose - Zinc Carbon
                               4.   Rechargeable - Nickel Cadmium

Alkaline  batteries offer the best performance and are the most widely used type
of battery in North  America  with a greater  than 65%  market  share.  Industry
analysts  estimate the North American market for disposable  alkaline  batteries
was approximately $3 billion in 1997, representing consumption of an estimated 4
billion  batteries.  An estimated 40% increase in  battery-operated  devices has
driven  growth  in the use of  disposable  batteries  over  the  past 10  years.
Furthermore,  industry data reveals that within the North American  market,  the
alkaline  segment is the fastest growing.  Consumption of alkaline  batteries is
expected to continue to grow at a rate of 5-8% per year.


<PAGE>
     The consumer  battery market  consists  primarily of five major cell sizes,
AA, AAA, C, D and 9 volt.  The AA cell  accounts  for  approximately  65% of the
total unit sales, the AAA cell accounts for approximately 15% and the C, D and 9
volt  cell  sizes  account  for   approximately  7%  each.  We  believe  branded
manufacturer gross margins on the AA and AAA (80%) are approximately double that
of the C, D and 9 volt  (40%).  We  believe  that,  upon  implementation  of our
business plan, our gross margin for our AA batteries will be approximately  33%,
compared to an approximately 80% gross margin for branded manufacturers.

     Duracell Inc. and Eveready Battery Co., Inc. are the major manufacturers of
alkaline  batteries  and  currently  supply  approximately  83% of the  alkaline
batteries sold in the North American market.

PRIVATE LABEL BATTERY MARKET OPPORTUNITY

            The  market  for  private   label   consumer   products   has  grown
significantly in recent years. In order to generate  greater  customer  loyalty,
many  retailers  have sought to develop  private  label or  corporate  brands in
numerous  consumer  product  categories.  Private  label  affords  retailers  an
opportunity to enhance their store's  identity by offering high quality products
that are significantly less expensive than brand-name alternatives. According to
information supplied by the Private Label Manufacturers Association (PLMA), in a
number of product  categories,  including  light bulbs,  disposable  cameras and
tape,  private label items have  achieved a market share of 20-25%.  On average,
the study also shows  retailers are projecting a private label  category  growth
rate of 24% over the next three years across all major product categories.

            While private label batteries only comprise  approximately 9% of the
overall  disposable  alkaline battery market,  batteries are the fastest growing
segment within the private label market (source: PLMA). We believe, that despite
a limited  supply of private  label  product,  the battery  segment has grown at
almost double the rate of other private label products.  Currently, most private
label batteries are supplied either by offshore  manufacturers  or by brand-name
battery  manufacturers  such as  Duracell  and  Eveready.  It is our belief that
offshore battery suppliers,  however, have limited available alkaline production
capacities,  suffer from higher logistics costs, and typically produce batteries
with less than 25% of the life of  alkaline  batteries  because  of their use of
carbon zinc  technology.  Offshore  manufacturers  are those  manufacturers  not
located in the three North American Free Trade Agreement countries (USA, Mexico,
Canada).  While there are several  manufacturers in Europe,  most are located in
Asia.  Among  the large  number  of  manufacturers  in Asia,  a large  majority,
particularly  those located in the Peoples  Republic of China,  only produce old
technology  general  purpose or heavy duty  batteries.  Testing done by Talisman
identified  fewer than ten high-quality  producers  comparable to North American
manufacturers.

            Management of Talisman believes that, for brand-name  manufacturers,
supplying private label batteries represents a significant conflict of interest:
the growth of private label sales comes at the expense of higher margin  branded
product sales.  To date,  major companies such as Duracell and Eveready have, in
our opinion,  participated in private label manufacturing only when pressured by
certain  large  retailers.  This  is  primarily  because  it is not in the  best
interests of current branded  manufacturers  to provide a private label product.
Due to the lower retail prices of private label  batteries,  profit  margins are
lowered   significantly   and   line   changeovers   result   in   manufacturing
inefficiencies.  Accordingly, Talisman believes that brand-name manufacturers do
not actively solicit private label sales,  but serve demand  reactively in order
to maintain or secure  large  retail  accounts  for branded  products.  Accounts
requesting  private label  product from a major  branded  supplier are therefore
generally sold with the understanding that their branded product be carried as a
preferred product line.

            Given the general  reluctance of major  suppliers to provide private
label product to their  customers,  Talisman  believes that a tremendous  growth
opportunity exists.


<PAGE>
OUR STRATEGY

            Our  objective  is to become the industry  leader in the  marketing,
sale and  manufacture of private label alkaline  batteries in North America.  We
believe  we are the first and only  dedicated  private  label  alkaline  battery
manufacturer  in North America.  We intend to utilize our unique market position
to capitalize on the growth in private label product sales.

            Our  manufacturing  technology  and expertise  enables us to produce
batteries of comparable  quality to leading brand-name  batteries.  In addition,
our location in Southern  Ontario  allows us to streamline  logistics  costs and
develop  close  working  marketing  and sales  relationships  with leading North
American retailers. We currently supply private label batteries to 17 customers.

The key elements of our strategy include plans to:

o       Focus exclusively on alkaline batteries;
o       Manufacture  batteries  that are  equivalent  in  performance  to  brand
        -name batteries;
o       Sell batteries exclusively for private label purposes at a lower cost
        than brand-name  alternatives;
o       Initially  manufacture AA size batteries, which  comprise  the largest
        percentage  of the market and  provide  high gross margins;
o       Expand into the  production  and marketing of AAA, C and D battery  cell
        sizes and increase  production  capacity of the AA cell size. We believe
        that the addition of other cell sizes (i.e.  AAA, C and D) will allow us
        to expand  existing  customer  sales and  enhance   sales  opportunities
        with new customers that require all cell sizes;
o       Further develop an already established North American sales broker
        network;
o       Focus on  private  label  retail  customers  with  sales  potential that
        will optimize production run costs and thereby maximize margins.

            In addition to selling  high-quality  products  with the name of our
customers on them, it is our belief that our retail customers  typically improve
their  profitability  from 30-35% on the sale of a branded equivalent product to
50-60% for private label.  This also  typically  results in more profit per unit
measured in dollars and cents than typically realized from the sale of a branded
equivalent.

PRIVATE LABEL MANUFACTURING

            We currently manufacture a high quality AA alkaline cell for sale to
an established and growing customer base.

            We  currently  have two (2)  cell  lines  capable  of  producing  AA
alkaline  cells at the rate of 100 pieces  per minute per cell line.  Management
estimates  that we have the  capacity to produce in excess of  approximately  45
million batteries annually.

We believe that our AA cell is:

o     Comparable in performance to the competition on a majority of applications
      (source: ACTS Testing Labs Ltd.);
o     Advantageously priced compared to branded products, resulting  in prices
      which are  approximately  20-25% lower in retail price;
0     Environmentally friendly because we do not add mercury or cadmium.

            Supply of the AAA,  C, D and 9 volt is  currently  "out  sourced" by
Talisman  for certain  accounts  that desire to carry all five cell sizes.  Such
sourced  product  is  labeled,  packaged  and  shipped by us. We intend to use a
portion of the proceeds from our public  offering  which we completed in January
2000 to  complete  the  expansion  of our  operations  into the  production  and
marketing  of AAA  batteries,  to  increase  the  production  capacity of our AA
batteries,  and to commence the expansion of our operations  into the production

<PAGE>
and  marketing  of C and D battery  cell  sizes.  Our  ability to  complete  the
proposed  expansion of our operations into the production and marketing of C and
D battery cell sizes is dependent upon obtaining additional financing. We intend
to  continue  to out  source  our  need  for 9 volt  battery  cells  from  other
manufacturers  as the  volume  requirements  for the 9 volt  cell  size  are not
sufficient to justify the expense of producing the product in house.

            Our  strategy  is to  manufacture  bare  cell  batteries  in bulk in
anticipation of receipt of customer orders. Such bare cell batteries are kept on
hand  and  make up a  substantial  portion  of our  inventory.  We are then in a
position to prepare  finished  goods upon receipt of customer  orders.  Further,
after such goods are  packaged  and labeled  they are shipped to  customers.  To
date,  we have been able to fill  orders as they are  received,  and we have not
experienced  any  delays due to lack of  manufacturing  capacity  or  otherwise.
Moreover, as previously stated, we intend to expand our production capacity with
the proceeds from our financing activities.

BATTERY CUSTOMERS

            The  following  is a list of  customer  accounts  for the year ended
December 31, 1999 and the year ended December 31, 1998:
<TABLE>
<CAPTION>

                  <S>                                                      <C>
                  Blockbuster Video - U.S.                                 QDN -    U.S.
                  Amcon Distribution Co. - U.S.                            Cash Convertors - Canada
                  Drug Emporium - U.S.                                     Bradlees Distribution - U.S.
                  McLanes (a Subsidiary of WalMart) - U.S.                 Pirate Wholesale - U.S.
                  Discount Drug Mart - U.S.                                Daisytek - U.S.
                  A&P Fireco - Canada                                      Murphy Distributor - Canada
                  Harris Teeter - U.S.                                     Smoker Friendly - U.S.
                  Navarro Discount Pharmacy - U.S.                         Robert & James - U.S.
                  North Carolina Mutual Drug - U.S.                        Save-On - U.S.
                  Plus Distributors - U.S.                                 Win - Leader - Canada
                  RedCell - Canada                                         Best Buy - Canada
                  Romar - Canada                                           Zellers - Canada
                                                                           Myer Cox Co. - U.S.
</TABLE>
All of our sales are made to our  customers  pursuant  to purchase  orders.  Our
company has several large  customers upon which we depend on for the sale of our
battery  products.  For the  fiscal  year  ended  December  31,  1999,  sales to
Blockbuster Video  represented  30.0%, Drug Emporium  represented  15.4%,  Amcon
Distribution  Co.   represented   15.5%,   McLanes  (a  subsidiary  of  WalMart)
represented  10.6%,  Discount Drug represented  8.1% and A&P Fireco  represented
8.0%.  For the year  ended  December  31,  1998,  sales to  Discount  Drug  Mart
represented  28.6%, Drug Emporium  represented 23.6%,  Zellers Inc.  represented
9.1% and A&P Fireco  represented  6.6% of our  overall  sales.  No other  retail
customer  accounted  for more than 5% of our overall sales for either the fiscal
year ended December 31, 1999 or December 31, 1998.

COMPETITION

            The manufacture and sale of alkaline batteries is highly competitive
and there are no substantial  barriers to entry into the market. We believe that
the principal  competitive factors affecting the market for battery products are
the quality of the product,  price,  environmental  issues, turn around time for
production orders, payment terms for customers, and marketing and sales.

            The private label AA alkaline  battery  products  which we currently
produce  compete  with  products  imported  from the  Pacific Rim  countries  of
Indonesia,  China,  Hongkong,  Japan and South Korea. We believe we offer to our
customers key advantages over offshore suppliers. Such advantages include:


<PAGE>
o             Providing superior and consistent product  performance.  It is our
              observation  that some Pacific Rim producers  utilize domestic raw
              materials which result in sub-standard performance.

o             Price. Our private label batteries offer our customers an
              attractively  priced alternative to the batteries sold by their
              competitors.

o             We do not add mercury to our  batteries.  Mercury is considered to
              be  environmentally  hazardous and,  accordingly,  the disposal of
              used batteries to which mercury has been added is problematic.

o             Efficient  turn around time.  It is our  experience  that offshore
              suppliers  generally  require  a minimum  of 30 to 60 days  notice
              prior to producing an order. Delivery time is a minimum of 30 days
              beyond that and full container loads are required. In contrast, we
              inventory  "bare" cells and can package  required  orders within a
              2-10 day period, depending on the order size.

o             Consumer  products"  industry  standard  payment terms. We provide
              creditworthy customers with terms calling for payment within 30-45
              days of shipment of its product to retailers. By comparison, it is
              our experience that off-shore  suppliers  require either a deposit
              in advance of  shipping or full  payment  prior to shipping in the
              form of a letter of credit or bank transfer.

o             Marketing and sales  support.  We provide  retailers with on-going
              sales  expertise  and  promotional  concepts  in order to maximize
              sales and profits.  Various  pack sizes are  available to meet the
              needs of  retailers  and product  displays  are supplied to ensure
              greater  in-store  visibility and product  movement.  In contrast,
              offshore suppliers, generally speaking, only supply product and do
              not offer any on-going marketing support.

            We believe  that  approximately  two-thirds  (66.6%) of the  private
label battery  market is controlled  by our three major  competitors  (Duracell,
Eveready and Ray-O-Vac),  while the remaining one-third (33.3%) is controlled by
offshore manufacturers.

            At present,  we do not directly compete (nor do we seek to) with any
major North  American  battery  manufacturer  (such as  Duracell,  Eveready  and
Ray-O-Vac) to supply  private label  batteries to large retail  chains.  This is
because we have, at present, limited production capability and limited marketing
resources  compared to the significant  and dominant market  capabilities of the
established  branded  manufacturers.  We believe that the overall  private label
market is sufficiently  large enough whereby we have an opportunity to penetrate
into this market, and thereby gain significant market share.

STRATEGIC PARTNERS AND KEY SUPPLIERS

     Our battery  manufacturing lines have been custom made by Pragmatek Inc. of
Mississauga,  Ontario,  Turning  Point Inc. of  Oakville,  Ontario and  Gwinnett
Industrial Machine Inc. of Norcross, Georgia. These companies have over 25 years
of combined  experience  in the  manufacture  of reliable  battery  equipment to
numerous  established  battery  manufacturers.   Pragmatek,  Turning  Point  and
Gwinnett are all shareholders of Talisman.

     We  have  a  number  of  key  suppliers  of  raw  materials  who  are  also
shareholders in Talisman.  They include Burlington  Stamping Inc. of Burlington,
Ontario and Hibar Systems Limited of Richmond Hill, Ontario. Burlington Stamping
supplies  all of our  battery  cans  while  Hibar  supplies  all of our  battery
pre-assemblies.  James C. McGavin,  a director of Talisman,  is also a director,
officer and shareholder of Burlington Stamping.
<PAGE>
PERSONNEL

            As of  December  31,  1999,  we  employed  a total  of 47 full  time
employees.  Twelve of such  persons are engaged in the areas of  administration,
finance,  production  planning,  marketing and sales. In addition,  18 of our 47
employees  have prior  battery  industry  experience.  None of our employees are
represented by a union. Management considers its relations with its employees to
be satisfactory.

MARKETING, SALES AND DISTRIBUTION

            Talisman  currently has an established  North American sales network
that is directed by individuals with considerable  experience in selling private
label batteries to established customers.  With the exception of Randy O. Curtis
and  Christian H.  Bunger,  all sales  agents and brokers are  compensated  on a
commission  basis  only  (generally  5%).  We  currently  have a full time sales
organization  consisting of four qualified  sales  professionals  who generate a
majority  of  business  through  a  network  of  brokers.  We have  developed  a
relationship  with two out of the four major,  national,  private  label brokers
dedicated  to the  food  class  of  trade.  In  addition,  we  have  established
relationships with twelve independent  regional sales agencies,  which handled a
myriad of non-food,  and drug battery customers throughout Canada and the United
States.

            In addition,  we support our product  merchandised in retail outlets
with a variety of  packaging  designs and displays  intended to create  consumer
interest in retail customers' private label disposable  alkaline battery product
line.  We also develop  special pack sizes and styles  intended to coincide with
peak buying periods such as back-to-school and Christmas.

            We have made every  effort to ensure that key  positions at Talisman
are filled by  qualified  individuals  with  previous  battery or private  label
experience. These individuals include:
<TABLE>
<CAPTION>

         <S>                                         <C>
         Garry J. Syme, Sr. Vice President           Former Project Manager Duracell
         Duncan C. MacFadyen, VP Finance             Former Controller Bossman
         Randy O. Curtis, VP Mktg. Canada            Former Managing Director - Eveready de Mexico
         Christian Bunger, Vp Sales                  Former South East Regional Mgr.--Eveready
         Dennis Hughey, Bus. Dev. Consultant         Former President - Beatrice Private Label
         Billie Burke, Purchasing Mgr.               Former Purchasing Dept. Duracell
</TABLE>

            For a more detailed  description of the professional  backgrounds of
many of the above noted persons, see "Management."

PRODUCT LIABILITY INSURANCE

            We  carry  product  liability  insurance  coverage  on  our  battery
products in the amount of Cdn.$1,000,000, with an additional umbrella protection
of Cdn.$14,000,000. We believe that the amount of insurance which we maintain is
adequate.

ENVIRONMENTAL AND SAFETY ISSUES

            We  have  made  every  attempt  to  ensure  that  our  manufacturing
facilities do not  contravene  any  environmental  laws.  Our AA battery cell is
mercury free and currently  meets North American  standards.  Certain  materials
used in our battery  products,  as well as one product used in the manufacturing
process,  are considered  hazardous under the Occupational Safety and Health Act
hazard communication  standards as to workplace care and employee  notification.
Employees  handling  these  chemicals  are  required  to wear  appropriate  over
protective  gear.  Once the product is assembled,  chemicals are sealed within a
metal  container  that seals the  chemicals  from both the  environment  and the
atmosphere.  All product  designated for "waste disposal,"  including  defective
goods,  are neutralized  immediately  and stored in an isolated  location at our
premises prior to final disposal. As required by provincial regulations, we have

<PAGE>
adopted a procedure  of  registering  all  hazardous  waste  products  requiring
disposal. We receive a registration number for all such products and communicate
such  registration  number to the approved  waste  disposal  company  before the
product is transported to a certified landfill waste site. We have factored into
our  budgeting  process an average  cost per  battery  of  Cdn.$0.001  for waste
disposal purposes.

TECHNOLOGICAL ISSUES/SCIENTIFIC ADVISORS

     We constantly test our product to ensure consistent  quality of production.
Qualified  Talisman employees test samples of each production run and additional
samples are sent to an independent consultant for evaluation. Our batteries also
meet the standard as set by the National Electronic Distributors Association and
the American National Standards Institute, which are European and North American
standardization   groups  that  are  comprised  of  representatives  of  battery
manufacturers around the world.

     Product  improvement is on-going through in-house quality control protocols
and through independent testing contracted to Dr. Klaus Tomantschger, President,
Rosecreek  Technologies Inc., of Mississauga,  Ontario. Dr. Tomantschger was the
co-inventor of the  rechargeable  alkaline battery and has a wealth of knowledge
in the area of battery performance improvements.


Item 2.  DESCRIPTION OF PROPERTY.

     We are  currently  housed in a 21,000  square  foot  leased head office and
production  facility located at 2330 Southfield  Road,  Units 3-4,  Mississauga,
Ontario, Canada. The location is situated close to major highways and is only 15
minutes from Toronto's  Pearson  International  Airport.  Significant  leasehold
improvements  have  been  undertaken  to  accommodate  state-of-the-art  quality
control facilities, manufacturing facilities, and sales and marketing offices.

     Our current lease expires July 31, 2002; however, an understanding has been
reached with our landlord that should  additional space be required,  then a new
facility would be made  available to us without  penalty.  In addition,  we have
leased an  additional  39,400 sq. ft. of  manufacturing  space  adjacent  to our
current  facility.  The extra space was considered  necessary to accommodate the
planned  addition  of  the  AAA,  C and D  cell  lines  into  our  manufacturing
operations. We pay approximately Cdn.$43,000 rent per month.

Item 3.  LEGAL PROCEEDINGS.

     We are a named  defendant in a legal action  commenced on March 8, 2000 and
filed in the Superior Court of Justice in the Province of Ontario in relation to
a dispute  over an amount  owing to a former  sales agent or ours,  Charles Holt
(Cob Label Makers).  The claim relates to amounts  allegedly owing by us for the
delivery to us of certain  battery  labeling  machinery  and other  supplies and
materials.  The  stated  amount  of the claim is  $300,504.  We intend to defend
ourselves vigorously with respect to the amount being claimed.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

     Not Applicable.

<PAGE>
                                     PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

          (a) The high and low bid price of the Company's  common stock for each
quarter since its initial public  offering which  commenced on January 14, 2000,
through March 14, 2000 are as follows:

         Start Date          End Date               High              Low
         ------------------- ---------------- ----------------- ----------------

         1/14/00             3/14/00               $6.00             $2.750
         ------------------- ---------------- ----------------- ----------------

         The Company has not paid dividends to date.

         (b) The Company made an initial  public  offering of 900,000  shares of
its common stock,  no par value  ("Common  Stock"),  pursuant to a  registration
statement  declared  effective by the  Commission on January 13, 2000,  File No.
333-83123 ("Registration Statement").  The shares of common stock were sold at a
price of $5.00 per share.  The public  offering was completed  with Capital West
Securities, Inc. and Institutional Equity Corporation, as underwriters.

         The following are the Company's  expenses  incurred in connection  with
the  issuance  and  distribution  of the  Securities  in the  offering  from the
effective date of the Registration Statement to the ending date of the reporting
period of this 10-KSB:
<TABLE>
<CAPTION>

          <S>                                                                        <C>
          Expense                                                                       Amount

          Underwriter's Discounts and Commissions                                    $ 450,000
          Registration and Filing Fees(1)                                               27,000
          Printing and Engraving Expenses(1)                                           110,000
          Legal Fees and Expenses(1)                                                    91,000
          Accounting Fees and Expenses(1)                                               43,000
          Blue Sky Fees and Expenses(1)                                                 39,000
          Underwriter's Non-accountable expense allowance                              135,000
          Total(1)                                                                     895,000
                                                                                       =======
</TABLE>
         -------------------
                  (1)      Estimate.

         None of the foregoing  expenses were paid,  directly or indirectly,  to
any  director or officer of the Company or their  associates,  to any person who
owns 10 percent or more of any class of equity securities of the Company,  or to
any affiliate of the Company.

         The net  offering  proceeds  to the  Company  after  deducting  for the
foregoing expenses are $3,605,000.


<PAGE>
         The following are the  application of the net proceeds by the Company
from the sale of the  Securities in the offering from the effective  date of the
Registration  Statement  to the  ending  date of the  reporting  period  of this
10-KSB:

    Item                                                    Amount
    ----                                                    ------
Expansion and Development of Battery Production Lines     $  257,000
Advertising and Sales Development .....................   $        0
Temporary Investments(1) ..............................   $1,427,000
Working Capital and General Corporate Purposes ........   $1,921,000
                                                          ----------
Total Application of Net Proceeds .....................   $3,605,000
                                                          ==========
           (1) Money Market investments

         The use of proceeds described above represents a material change to the
application  of the net  proceeds as  described  in the  Company's  Registration
Statement in the section "Use of Proceeds." Specifically, the Company has used a
materially  greater  amount of the net proceeds for working  capital and general
corporate  purposes.  The change in the use of net proceeds was  necessitated by
(i) Talisman's need to satisfy outstanding  obligations which were accrued prior
to the completion of the public  offering as a result of the delay in completing
such offering,  (ii) Talisman's decision to temporarily pay down the outstanding
balance of its operating  loan with General  Electric  Capital  Canada Inc., and
(iii) Talisman's purchase of additional raw materials and sourced product.


<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

         The statements contained in this prospectus that are not historical are
forward looking  statements,  including  statements  regarding our expectations,
intentions,   beliefs  or  strategies  regarding  the  future.  Forward  looking
statements include statements  regarding  liquidity,  anticipated cash needs and
availability  and  anticipated  expense levels.  All forward looking  statements
included in this prospectus are based on information available to us on the date
hereof  and  we  assume  no  obligation  to  update  any  such  forward  looking
statements.  It is  important  to note  that our  actual  results  could  differ
materially from those in such forward looking statements.

GENERAL

         Talisman was  incorporated in July 1978 and for almost 20 years carried
on business as a junior mineral  exploration company in the Province of Ontario,
Canada.  In September  1997,  Talisman (then known as Firesand  Resources  Ltd.)
entered  into a  share  exchange  agreement  with  Talisman  International  Inc.
pursuant to which Talisman acquired all of the issued and outstanding  shares of
common stock of Talisman International in exchange for shares of Talisman.  Upon
completion of the share exchange, Talisman changed its name to its current name,
Talisman  Enterprises  Inc. The share  exchange was  accounted  for as a reverse
takeover  and  accordingly,  the results of Talisman  (formerly  constituted  as
Firesand) have been included with those of Talisman  International from the date
of the share exchange.

RESULTS OF OPERATIONS

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

         REVENUES.  Total  revenues for the fiscal year ended  December 31, 1999
increased 23.8% to $925,987 from $748,254 for the fiscal year ended December 31,
1998.  This  increase  was  primarily  attributable  to the  addition of two new
customers, namely Blockbuster Video and McLanes (a subsidiary of WalMart).

         OPERATING  EXPENSES AND GROSS  MARGINS.  Operating  expenses  increased
41.7% to $2,106,909 for the fiscal year ended December 31, 1999, from $1,487,052
for the  fiscal  year  ended  December  31,  1998.  The  increase  was caused by
increases  in  variable  overhead  spending  in relation to the growth in sales,
added direct and indirect labor in  anticipation  of stronger sales volume,  and
the additional cost of leasing a 39,000 square foot facility in order to support
the planned growth of the manufacturing and packaging processes.

         Gross margins,  as a percentage of revenues,  decreased to (127.5%) for
the fiscal year ended December 31, 1999,  from (98.7%) for the fiscal year ended
December 31, 1998.  The decrease in gross margin  percentage  resulted  from the
increases in direct material, direct labor, indirect labor and the rental of the
additional facility outlined above.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense  for the  fiscal  year  ended  December  31,  1999  increased  47.4%  to
$1,675,282  from  $1,136,516 for the fiscal year ended  December 31, 1998.  This
increase  in  selling,   general  and  administrative   expenses  was  primarily
attributable to the following:

o      the hiring of three senior management positions, specifically,  President
       and CEO, Vice President and CFO, and Vice President sales - U.S.;


<PAGE>
o      relocation costs associated with the retention of the above positions;

o      the severance costs incurred in regards to the Vice President Sales -
       Canada and the Vice President New Market Development positions;

o      increased travel expense consistent with expanding the base of customers;
       and

o      a growth in marketing cost (i.e., customer artwork, printing and
       reproduction) required to satisfy request from new customers.

         AMORTIZATION  EXPENSE.  Amortization  expense for the fiscal year ended
December 31, 1999 increased 212.9% to $951,739 from $304,182 for the fiscal year
ended December 31, 1998 primarily due to the  amortization of financing  charges
related to the outstanding  convertible  promissory notes which were issued in a
private placement offering.

         INTEREST EXPENSE AND OTHER FINANCING CHARGES. Interest expense and bank
charges for the fiscal year ended December 31, 1999 increased 221.4% to $319,120
from $99,292 for the fiscal year ended  December 31, 1998.  This  increase was a
consequence of the fee due to Spencer Trask for arranging  Talisman's  financing
facility with General  Electric  Capital Canada Inc. and the  commencement  fees
charged by G.E. Capital to establish such financing.

YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO THE SEVEN MONTHS ENDED
DECEMBER 31, 1997

         REVENUES.  Revenues  increased to $748,254 for the year ended  December
31, 1998, from $139,646 for the seven month period ended December 31, 1997. This
increase in sales was attributable to a growth in Talisman's  customer base from
11 to 34 customers,  as a result of the increased  ability of Talisman to supply
our customers.

         For the year ended December 31, 1998,  approximately  77% of Talisman's
sales  (representing  an aggregate of  approximately  $576,159 of revenues) were
made  to  customers  located  in the  United  States,  including  sales  to Drug
Emporium,  Discount  Drug Mart,  and  Save-On.  For the seven month period ended
December 31, 1997,  Talisman had only minimal sales to customers  located in the
United States (representing an aggregate of approximately $6,204 of revenues).

         OPERATING  EXPENSES AND GROSS MARGINS.  Operating expenses increased to
$1,487,052  for the year ended  December 31, 1998,  from  $180,582 for the seven
month  period  ended  December  31, 1997.  Gross  margins,  as a  percentage  of
revenues,  decreased to (99%) for the year ended  December 31, 1998,  from (29%)
for the seven month period ended December 31, 1997.

The gross  margin  percentage  (99%) is in a  negative  position  because  these
expenses were  incurred in advance of the increase in the  customers  sales base
(approximately 50% of sales occurred during the last 2 months of the period).

         SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSE.  Selling,  general and
administrative  expense  increased to $1,136,516 for the year ended December 31,
1998,  as compared to $597,558  for the seven month  period  ended  December 31,
1997.  The increase  reflects the impact of a full year of selling,  general and
administrative  expense  compared to seven  months  manufacturing  overhead  and
selling, general and administrative expense for the prior period.


<PAGE>
         AMORTIZATION  EXPENSE.  Amortization expense consisting  exclusively of
equipment  depreciation,  was $304,182 for the year ended  December 31, 1998, as
compared to  amortization  expense of $27,670 for the seven month  period  ended
December 31, 1997. This increase is attributable to the fact that  manufacturing
did not begin until the last quarter of 1997. Therefore,  only a small amount of
equipment depreciation was recognized for the period ended December 31, 1997.

         INTEREST EXPENSE AND OTHER FINANCING CHARGES. Interest expense and bank
charges  increased to $99,292 for the year ended  December 31, 1998 from $11,236
for the seven month period ended  December 31, 1997. For the year ended December
31, 1998, two loans were  outstanding  namely a term loan and an operating loan.
The term loan had an  average  principal  balance  for the  period  of  $386,536
bearing interest at a rate of 7.75% per annum. The operating loan had an average
principal balance for the period of $221,563 bearing interest at a rate of 7.75%
per annum.  Both  loans were  outstanding  for the  entire  period  consequently
interest expense totaled $47,137. The remaining $52,155 includes service charges
of $8,877,  short term bridge loans of $12,415 and financing charges of $30,863.
The only interest  charge relative to the seven month period ending December 31,
1997 is the term loan with a principal  balance of $320,401 at December 31, 1997
bearing  interest  at a rate of 7.75%,  which was  outstanding  from August 1997
through December 1997.

FOREIGN EXCHANGE

         For the year ended December 31, 1998,  Talisman had a foreign  exchange
gain of  approximately  $500,  which was  included in  Talisman's  results  from
operations.  During the period ended December 31, 1999,  Talisman  experienced a
foreign  exchange  gain of  $35,279  which  was  included  in the  results  from
operations of gains on U.S.  sales/receivables  and funds on deposit,  offset by
losses  on U.S.  purchase/payables  from U.S.  dollar  suppliers.  Currently,  a
majority of revenues  from sales are in U.S.  dollars and a majority of expenses
from goods purchased for resale are purchased in U.S. dollars. Since Talisman is
based in Ontario,  Canada,  approximately 90% of Talisman's combined operational
and selling,  general and administrative  expenses for the period ended December
31, 1999,  were  incurred in Canadian  dollars.  Variations  in the value of the
Canadian dollar,  as compared to the value of the U.S.  dollar,  could adversely
effect Talisman's results.

STOCK BASED COMPENSATION

         We account for our stock options and warrants  under APB Opinion 25. If
Talisman  was required to account for the stock  options and warrants  using the
fair value method,  the net loss for the year ended December 31, 1999 would have
increased  by  $35,274.  Such  amounts  represent  the fair value of options and
warrants at the time they  vested.  Since some of the options vest over a period
of time  there  will be future  charges to income  with  respect to the  options
granted in 1999 of $295,000 over the next 7 years.  There were no employee stock
options or warrants issued which vested during 1998.

INFLATION

         Talisman has  experienced  minimal  impact from  inflation and changing
prices on its net sales and on its income  from  continuing  operations  for the
periods it has been engaged in business.

LIQUIDITY AND CAPITAL RESOURCES

         Prior  to  the   completion   of  the  share   exchange  with  Talisman
International,  Talisman  had limited  working  capital and its  prospects  were
severely limited. Upon completion of the share exchange,  Talisman International
became a  wholly-owned  subsidiary of Talisman.  Up until the  completion of the
share  exchange,  Talisman  International  had sustained its operations from its

<PAGE>
inception (September 26, 1996) primarily from the sale of equity.  Specifically,
from September 1996 to immediately prior to the share exchange (September 1997),
Talisman  International sold (i) 428,371 shares of common stock for an aggregate
of  Cdn.$1,518,264 in cash, (ii) 50,000 shares of common stock for machinery and
equipment having a fair market value of Cdn.$200,000 and inventory having a fair
market value of Cdn.$50,000 and (iii) 3,300 Class A Special shares for machinery
and equipment having a fair market value of Cdn.$2,300,000 and technological and
intellectual  property having a fair market value of Cdn.$1,000,000 for Canadian
GAAP purposes.  It should be noted,  however, that no value has been ascribed to
the  technological  and  intellectual  property  assets for U.S. GAAP  purposes.
International  also had operating  credit  facilities  (both term and revolving)
from the  Hongkong  Bank of Canada,  such  facilities  being  secured by all the
assets of International.

         Subsequent to the  completion of the share  exchange,  Talisman sold an
additional  542,787 shares of common stock for an aggregate of Cdn.$3,293,208 in
cash. Of this new equity,  Cdn.$2,395,000 was provided by Talisman  Partners,  a
private investment  partnership,  through the completion of two separate private
placements.  For a complete  description of the private placement completed with
Talisman  Partners,  see "CERTAIN  RELATIONSHIPS AND RELATED  TRANSACTIONS." The
proceeds  of such  financings  were used by  Talisman  (i) to pay  approximately
Cdn.$670,000  owing to a prior short term secured  lender to  Talisman,  (ii) to
expand  Talisman's  battery  manufacturing  capabilities  and (iii) for  general
working capital purposes.

         From December 1998 through  March 1999,  Talisman  completed a $700,000
convertible note financing. The notes were converted into securities of Talisman
in connection with the first closing of Talisman's  private  placement  offering
which was  completed in March 1999.  For a complete  description  of the private
placement  completed  in March  1999,  see  "CERTAIN  RELATIONSHIPS  AND RELATED
TRANSACTIONS."  The  holders of the notes also  received  warrants to acquire an
aggregate of 72,465 shares of common stock of Talisman  exercisable at $7.50 per
share.

         In July 1999,  Talisman  established  new financing  arrangements  with
General  Electric Capital Canada Inc. In connection with the  implementation  of
such new  facilities,  Talisman paid out, in full, its previous  secured lender,
Canadian Imperial Bank of Commerce. The financing facilities provided by General
Electric  Capital  currently  consist of (1) a  Cdn.$940,800  term  loan;  (2) a
revolving credit line of up to  Cdn.$7,500,000,  and (3) a "capex" loan of up to
Cdn.$2,059,200.  The term loan is due and  payable on or before  June 30,  2002.
Interest charged on the General Electric Capital facilities is, (i) with respect
to funds advanced in Canadian dollars,  calculated at the average rate per annum
established by the Royal Bank of Canada as its discount rate for 30-day Canadian
bankers  acceptances plus 4.0% per year, and (ii) with respect to funds advanced
in U.S.  dollars,  the latest rate for 30-day  dealer placed  commercial  paper,
which  normally is  published  in the "Money  Rates"  section of the Wall Street
Journal.  Furthermore,  all  indebtedness of Talisman under the General Electric
Capital facilities is secured by Talisman's assets.

         In November  1999,  Talisman  borrowed  $350,000  from Kevin  Kimberlin
pursuant to a  promissory  note in the  principal  amount of  $350,000,  bearing
interest at an annual rate of 10%, and due on February  17, 2000.  Such loan was
converted  into 70,000 shares of common stock at $5.00 per share  simultaneously
with Talisman's January 2000 public offering.

         Talisman's   working   capital   deficit  at  December   31,  1999  was
($5,394,039). The negative working capital primarily represents the indebtedness
incurred in connection with a private placement offering completed in June 1999.
The  private  placement  offering,   which  was  completed  with  Spencer  Trask
Securities,  Inc. as  placement  agent,  resulted in the sale of an aggregate of
50.72985  units  solely to U.S.  investors  for gross  proceeds  to  Talisman of

<PAGE>
$5,174,472.70  (such  proceeds  being  inclusive  of the  $700,000  raised  from
December 1998 through March 1999  described  above).  The units  consisted of an
aggregate of (1) $5,073,135 principal amount of 8% convertible promissory notes,
and (2) 1,014,627  warrants to purchase  shares of common stock,  which warrants
are exercisable at $7.50 per share.  In connection  with such closings,  Spencer
Trask  received a placement fee equal to 10% of the aggregate  purchase price of
the securities  sold by it, plus a  non-accountable  expense  allowance equal to
three  percent of the  aggregate  purchase  price of the  securities  sold and a
warrant,  granted by Talisman for $1.00 consideration,  to purchase an amount of
common  stock  equal  to 20% of the  common  stock  sold in the  offering  at an
exercise   price  equal  to  120%  of  the  price  of  the  common  stock  sold.
Additionally,  upon the first closing of the offering, Talisman entered into (1)
an agreement  whereby  Spencer Trask was granted a right of first refusal to act
as  underwriter  or  agent  for any  proposed  private  or  public  offering  of
Talisman's securities by Talisman or by any of its principal  stockholders,  and
(2) a  non-exclusive  finder's  agreement  pursuant  to which  Spencer  Trask is
entitled to receive a fee based upon a  percentage  of the value of any business
combination or financing  arrangement,  including but not limited to a merger or
purchase  of assets,  which is  introduced  to  Talisman  by Spencer  Trask.  In
accordance with the  non-exclusive  finder's  agreement,  a fee in the amount of
$200,000 was paid to Spencer Trask Securities,  Inc. for arranging the financing
with  General  Electric  Capital  Canada  Inc.

         In January  2000,  we  completed  a public  offering in which we sold a
total of  900,000  shares of common  stock at a price of $5.00  per  share.  The
public  offering,  which was completed  with Capital West  Securities,  Inc. and
Institutional Equity Corporation,  as underwriters,  resulted in the realization
of aggregate gross proceeds of $4,500,000. In addition,  simultaneously with the
listing of our common stock on the Nasdaq  SmallCap  Market,  the outstanding 8%
convertible  promissory notes that were sold in our previous  private  placement
offering were  automatically  converted into an aggregate of 1,014,627 shares of
common stock, thereby resulting in a decrease in the current portion of our long
term debt and an increase in our working  capital.  After  giving  effect to the
approximately  $3,605,000 of net proceeds realized from our public offering, and
the  conversion  of our debt  simultaneously  therewith,  our pro forma  working
capital would be approximately $2,822,594.

         Except for the existing  financing  arrangements  with General Electric
Capital Canada Inc.,  Talisman has no other current  arrangements  in place with
respect to financing.  If additional financing arrangements are not obtained, we
may be unable to fully fund our operations,  pursue our business strategy,  take
advantage of new opportunities,  develop or enhance our products,  or respond to
competitive  pressures and financial or marketing hurdles.  Such inability could
have a materially adverse effect on Talisman's  business,  operating results and
financial condition.  Moreover,  the estimated cost of the proposed expansion of
our  production and marketing  activities is subject to numerous  uncertainties,
including the problems, expenses,  difficulties,  complications and delays, many
of which are beyond our control,  frequently  encountered in connection with the
establishment and development of new business activities, and may be affected by
the competitive environment in which we are operating. Accordingly, there can be
no assurance that we will complete the proposed  expansion of our production and
marketing activities described herein.

         Talisman's   management  believes  that  upon  full  implementation  of
Talisman's  business  plan,  sufficient  revenues  will  be  generated  to  meet
operating  requirements.  However, no assurance can be given that such goal will
be obtained or that any expected revenues will be realized.


<PAGE>
YEAR 2000

         Our  business  was not  adversely  impacted by  information  technology
issues related to Year 2000.

         We have not, to date, encountered any long-term Year 2000 problems from
our  customers,  most of  which  are  major  retail  corporations.  Any  loss of
information  or  data by such  customers  can be  easily  replaced  by  Talisman
manually  providing  them with  relevant  information.  Except for three  single
sourced vendors,  Talisman utilizes  multiple  suppliers from whom we obtain the
raw materials which are used in the manufacturing  process.  Talisman intends to
monitor carefully these sources and carry additional  inventory until the end of
the first quarter of Year 2000.

            With the exception of the cost that we incurred for  replacing  nine
personal  computers,  we did not incur any additional  costs in connection  with
implementing  solutions  to year 2000 issues  that had a material  impact on our
financial results or position.

Item 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The response to this item is set forth at the end of this report.

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

         Not applicable.


<PAGE>
                                    PART III

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

Directors and Executive Officers

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
<S>                                 <C>     <C>
James A. Ogle                       53      President, Chief Executive Officer & Director
Norman R. Proulx                    52      Chairman of the Board
Garry J. Syme                       49      Senior Vice-President, Manufacturing
Thomas O'Dowd                       40      Vice-President & Chief Financial Officer
Duncan C. MacFadyen                 47      Vice-President, Finance & Controller
Randy O. Curtis                     43      Vice-President, Global Marketing & Canada Sales
Christian H. Bunger                 54      Vice-President, Sales--U.S.
James C. McGavin                    57       Director
Donald L. Matheson                  50      Director
Thomas A. Fenton                    39       Director
</TABLE>

         Set forth below is a brief  background  of the  executive  officers and
directors of the Company, based on information supplied by them.

     JAMES A. OGLE, 53, has been the President,  CEO, and a director of Talisman
since January 21, 1999.  Prior  thereto,  from January 1998 to January 1999, Mr.
Ogle  was  Vice  President  of  Operations  for  U.S.  Industries,  Inc.,  Elger
Plumbingware/U.S.  Brass  Division,  a leading  manufacturer of bath and kitchen
china and cast  iron  fixtures.  From 1992 to 1997,  Mr.  Ogle was  Senior  Vice
President,  Operations,  for  Tyco  Toys,  Inc.,  a  leading  international  toy
manufacturer  and  distributor.  From 1989 to 1992, Mr. Ogle was Vice President,
Operations  for  Wilkinson  Sword,  Inc., an  international  producer of shaving
products  and  disposable  lighters.  From 1978 to 1989,  Mr. Ogle held  various
positions with BIC Corporation,  a leading  producer of disposable pens,  razors
and disposable  lighters.  Prior thereto,  Mr. Ogle held various  positions with
General  Motors  Corporation.  Mr.  Ogle  obtained  an  Executive  MBA  from the
University of New Haven.

     NORMAN R. PROULX, 52, is the Chairman of the Board of Talisman.  Mr. Proulx
was first  appointed a director of Talisman in August 1998.  From  December 1998
through  January 1999, Mr. Proulx was the interim  President and CEO of Talisman
replacing the former  President  and CEO,  David R. Guy.  Since March 1998,  Mr.
Proulx has been a managing director of Spencer Trask Securities Incorporated,  a
New York based  venture  capital  investment  firm that  provides  financial and
operational support to start-up and early-stage companies. In such position, Mr.
Proulx concentrates his efforts on consumer products and retailing. In 1997, Mr.
Proulx was a managing  director of the Cortec  Group  ("Cortec"),  a private New
York equity investment firm which makes controlling investments in middle-market
manufacturing and distribution  businesses.  In connection with same, Mr. Proulx
was responsible for overseeing  Cortec's  investment in Gemeinhardt,  Inc., a US
based company which is a market leader in the  manufacture  and  distribution of
flutes and piccolos.  Mr. Proulx was also  responsible  for overseeing  Cortec's
investment  in Manco  Products,  Inc.,  a US based  company  which is a  leading
designer  and  manufacturer  of fun  karts.  From 1990 to 1996,  Mr.  Proulx was
President  and CEO of Seymour  Housewares  Corporation  of Seymour,  Indiana,  a
leading manufacturer of ironing boards. Prior thereto, Mr. Proulx was, from 1984
to 1990, the President, North America of Wilkinson Sword Limited. Prior thereto,
Mr. Proulx held  different  positions  from 1969 to 1984 with  Scripto/Wilkinson
Sword and The Gillette  Company.  Mr.  Proulx  obtained his Bachelor of Science,
Business Administration degree from Boston College in 1969.


<PAGE>
     GARRY J. SYME, 49, is the Senior Vice President,  Manufacturing of Talisman
and has been since September  1997.  Between August 1996 and September 1997, Mr.
Syme was the Senior Vice  President  Operations  for  International,  Talisman's
wholly-owned  subsidiary.  Prior  thereto,  Mr.  Syme  was  the  Vice  President
Operations,  from  January  1996  to  August  1996,  at  Infinity  Plus  Battery
Corporation of Mississauga,  Ontario. Prior thereto, from 1992 to 1995, Mr. Syme
was President of GJS International  Inc., a company providing  consulting advice
to major battery  manufacturers.  In such capacity, Mr. Syme was responsible for
the  development  of  manufacturing  facilities for Cegasa  (Spain),  Power Plus
Battery Corporation (United States), Euram (Europe),  Infinity Plus (Canada) and
two  facilities  in the Peoples  Republic of China.  In  addition,  Mr. Syme was
retained as  President  of Power Plus of America Inc. to implement a 100,000 sq.
ft. $20 U.S. million dollar  manufacturing  plant in Georgia,  USA. Mr. Syme has
also spent approximately 20 years with Duracell,  8 years of which were with the
Duracell  U.S.  R&D Centre and 12 of which were with  Duracell  Canada  Inc.  of
Mississauga, Ontario.

     THOMAS  O'DOWD,  40, is Vice  President  and  Chief  Financial  Officer  of
Talisman and has been since July 1999. From August 1992 to June 1998, Mr. O'Dowd
was a Financial Analyst for Seymour Housewares Corporation,  the world's largest
manufacturer  of ironing boards and covers and pads. From October 1990 to August
1991, Mr. O'Dowd was a Senior Auditor for Forstman  Little & Co. From April 1986
to September  1990,  Mr. O'Dowd held senior level  accounting  positions for two
subsidiaries of GenCorp,  a $3 billion Fortune 100 conglomerate.  From June 1981
to March 1986, Mr. O'Dowd was a Corporate Audit Supervisor for AMF Incorporated.
Mr. O'Dowd obtained a B.S. in Accounting from Marist College.

     DUNCAN C. MACFADYEN, 47, is Vice President Finance of Talisman and has been
since October 1, 1997. Prior thereto,  Mr. MacFadyen was, from September 1996 to
September  1997,  a financial  planer with  Investors  Group,  a Canadian  based
financial  planner  and mutual fund  company.  Prior  thereto,  from May 1991 to
September  1996, Mr.  MacFadyen was  comptroller  for Glen Oak Inc., a wholesale
supplier  of  various  consumer  products  including   "Bossman"  batteries  and
flashlights.  Mr.  MacFadyen  obtained a C.M.A.  and B.A. from the University of
Waterloo.

     RANDY O. CURTIS,  43, is Vice  President of Global  Marketing  and Canadian
Sales of Talisman,  since May 1999.  From January 1997 to April 1998, Mr. Curtis
was a Principal at R.O.  Curtis  Associates  Inc. From February 1992 to December
1997,  Mr.  Curtis was Managing  Director for Eveready de Mexico.  From November
1979 to January 1992, Mr. Curtis held senior level positions at Eveready Canada.
Mr. Curtis obtained a degree in Industrial  Engineering  Technology from Ryerson
Polytechnical Institute.

     CHRISTIAN H. BUNGER, 54, has been the Vice President of Sales--U.S.,  since
January 1999.  Since 1992,  Mr. Bunger has been the Southeast  Regional  Manager
(Atlanta, Georgia) for the Eveready Battery Company, a subsidiary of the Ralston
Purina  Corporation.  From 1986  through  1992,  Mr.  Bunger  was the South East
Division  Manager  (Atlanta,  Georgia) of the Eveready  Battery Company and from
1980   through   1986  he  had  held  the  title  of  South   Central   Division
Manager(Atlanta,  Georgia).  Mr. Bunger joined the Eveready  Battery  Company in
1974 as a Manager of National  Accounts  (New York,  New York) and has also held
positions  of Product  Manager as well as  District  Manager  and  merchandising
positions in Portland Oregon,  Boston Massachusetts and Providence Rhode Island.
Mr. Bunger obtained a B.B.A. from Tulane University.

     JAMES  C.  MCGAVIN,  57,  is  the  President  and a  major  shareholder  of
Burlington  Stamping  Inc. of  Burlington,  Ontario and has been since  December
1981.  BSI  manufacturers  small deep drawn  shells  and  stampings  principally
sourcing the  alkaline,  rechargeable,  military  and OEM battery cell  markets.
Prior to founding Burlington, Mr. McGavin was a partner in the public accounting
firm Ward Mallette (now BDO Dunwoody Ward Mallette) for  approximately 10 years.
Mr. McGavin obtained his Chartered Accountant designation in 1970.


<PAGE>
     DONALD L. MATHESON,  50, a director of Talisman,  is the President of Imark
Corporation (a Toronto Stock Exchange  listed company) and has been since August
1997.  Prior thereto,  Mr.  Matheson was, from December 1994 to July 1997,  Vice
President  Finance  and Chief  Financial  Officer  of Imark  Corporation.  Prior
thereto,  Mr.  Matheson was, from January 1992 to December 1994, the Director of
Finance for a heating  and  air-conditioning  business  operated  through  Clare
Brothers of Cambridge,  Ontario. Mr. Matheson is also an officer and director of
Animazing Entertainment Inc., a childrens entertainment company.

     THOMAS A. FENTON,  39, a director of Talisman,  is a partner in the Toronto
based law firm of Aird & Berlis and has been since June,  1997.  Prior  thereto,
Mr. Fenton was a partner in another Toronto based law firm and prior thereto, an
associate with such firm. His practice encompasses corporate and securities law.
Mr. Fenton  acquired his LL.B.  degree from the University of Western Ontario in
1986 and was called to the Bar in Ontario in 1988. Mr. Fenton is a director of a
number of public and private companies.

     The term of office of each  Director  is until the next  annual  meeting of
stockholders  and  until a  successor  is  elected  and  qualified  or until the
Director's earlier death, resignation or removal from office. Executive Officers
hold office until their successors are chosen and qualified,  subject to earlier
removal by the board of directors.

AUDIT COMMITTEE

     The Board of Directors has  established  an Audit  Committee  consisting of
Donald L.  Matheson,  Thomas A.  Fenton  and James C.  McGavin,  all of whom are
directors who are not salaried officers of the Company. The purpose of the Audit
Committee  is to review the  results  and scope of the audit and other  services
provided by Talisman's independent accountants, and to provide general oversight
of legal compliance and potential conflict of interest matters.

Section 16(a) Beneficial Ownership Reporting Compliance

     Based  solely  upon a review of Forms 3, 4 and 5, and  amendments  thereto,
furnished to the Company  during  fiscal year 1999,  the Company is not aware of
any  director,  officer  or  beneficial  owner of more than ten  percent  of the
Company's Common Stock that, during fiscal year 1999, failed to file on a timely
basis reports required by Section 16(a) of the Securities Exchange Act of 1934.


<PAGE>
Item 10.          EXECUTIVE COMPENSATION.

         The following table sets forth certain summary information with respect
to the  compensation  paid to the Company's  Chief  Executive  Officer,  and the
Company's Senior  Vice-President,  Manufacturing,  for services  rendered in all
capacities to the Company for the fiscal period ended  December 31, 1999.  Other
than as listed below,  the Company had no executive  officers whose total annual
salary and bonus exceeded $100,000 for that fiscal year:
<TABLE>
<CAPTION>
                                             ANNUAL COMPENSATION                              LONG-TERM COMPENSATION

                                                                                   AWARDS                           PAYOUTS
                                                               OTHER
                                                               ANNUAL        RESTRICTED  SECURITIES                       ALL OTHER
NAME AND PRINCIPAL                                             COMPENSATION    STOCK     UNDERLYING      LTIP PAYOUTS    COMPENSTION
POSITION                    YEAR    SALARY ($)      BONUS ($)  IOM ($)         AWARD     OPTIONS/SARS (#)       ($)           ($)
                                                                                         ----------------       ---           ---
JAMES A. OGLE, PRESIDENT
AND CHIEF EXECUTIVE
<S>                         <C>     <C>              <C>       <C>               <C>          <C>                <C>         <C>
OFFICER                     1999    $262,052(1)      -         70,285 (2)        -            5,069              -            -

GARRY SYME, SENIOR-VICE
PRESIDENT                   1999    $119,316         -         10,216 (3)        -            2,765              -            -

</TABLE>

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

     (1) Includes a tax gross up as per Mr.  Ogle's  employment  agreement  with
Talisman.

     (2) Represents $4,357 in car allowance, $443 in car insurance and $4,071 in
insurance  benefits paid to Mr. Ogle pursuant to his  employment  agreement with
the Company. Also includes $61,414 in moving expenses.

     (3) Represents $6,752 in car allowance, $759 in car insurance and $2,705 in
insurance  benefits paid to Mr. Syme pursuant to his  employment  agreement with
the Company.

     The following table shows the option grants to the named executive officers
during fiscal year ended December 31, 1999:
<TABLE>
<CAPTION>
                                                                      Option Grants in Last Fiscal Year
                                                                              (Individual Grants)

                                                            Percent of Total
                                  Number of Common Stock   Options Granted to
                                   Underlying Options         Employees in        Exercise Price
Name                                     Granted               Fiscal Year          ($/Share)        Expiration Date
<S>                                       <C>                     <C>                   <C>           <C>
                                                                                                      10 Years from
James A. Ogle                             5,069                   44.5%              CDN$1.25         date of grant
                                                                                                      10 years from
Garry Syme                                2,765                   24.3%              CDN$1.25         date of grant

</TABLE>
<PAGE>
         The following table shows the value at December 31, 1999 of unexercised
options held by the named executive officers:
<TABLE>
<CAPTION>

                 Aggregated Option Exercises in Last Fiscal Year
                        And Fiscal Year-end Option Values

                                                                 Number of Securities
                                     Shares                     Underlying Unexercised        Value of Unexercised
                                    Acquired       Value              Options at            In-the-Money Options at
                                       On         Realized       Fiscal Year-end (#)          Fiscal Year-end ($)
Name                              Exercise (#)      ($)       Exercisable/Unexercisable    Exercisable/Unexercisable
----                              ------------   -  ----      -------------------------    -------------------------

<S>                                    <C>          <C>             <C>                       <C>
James A. Ogle                          -             -              5,069/77,886(1)           $12,799/ $196,662(2)
</TABLE>


----------------
(1)  Represents presently exercisable options to purchase 5,069 shares of common
     stock at CDN$1.25 per share, and  unexercisable  options to purchase 77,886
     shares of common stock at CDN$1.25 per share.

(2)  As of December 31, 1999,  there was no public market for Talisman's  common
     stock.  On January 13, 2000,  Talisman  completed a public  offering of its
     common stock. Accordingly,  the values presented assume a fair market value
     of $3.375  per share of common  stock  which is the  closing  price for the
     Company's common stock on March 1, 2000.

(3)  Represents presently exercisable options to purchase 2,765 shares of common
     stock at CDN$1.25 per share, and  unexercisable  options to purchase 38,712
     shares of common stock at CDN$1.25 per share.

EMPLOYMENT AGREEMENTS

         On January 4, 1999,  James Ogle  entered into an  employment  agreement
with Talisman  pursuant to which Mr. Ogle has been retained as the President and
Chief  Executive  Officer  of  Talisman.  The term of the  employment  agreement
commenced on January 21, 1999 and continues  until December 31, 2002;  provided,
however,  that the  termination  date may be extended for an additional one year
period at each anniversary of Mr. Ogle's employment  agreement dated January 21,
1999.  Pursuant to the  employment  agreement,  Mr. Ogle will  receive an annual
salary of $182,000 based on the exchange rate in effect on January 21, 1999. The
exchange  rate upon which Mr. Ogle's annual salary is based shall be adjusted as
of  June 14 and  December  14 of each  year  during  Mr.  Ogle's  employment  by
Talisman.  Mr. Ogle will also  receive a bonus of a maximum of 50% of one year's
base salary,  which bonus shall be payable  within 30 days of the  completion of
the  audit  of  Talisman's  financial  statements,  provided  Talisman  achieves
financial  objectives as determined by the  Talisman's  board of directors.  The
employment  agreement also provides for additional  compensation and/or benefits
to be paid or provided to Mr. Ogle as follows:

    - On the first  anniversary  of January 21, 1999,  Mr. Ogle shall receive an
      additional  bonus,  to be paid in the  form of  shares  of the  Talisman's
      common stock,  in an amount equal to $45,000.  The shares are to be valued
      at the price per share at the close of the January 20, 1999 trading day.


<PAGE>
    - On the first  anniversary  of January  21,  1999,  Mr.  Ogle shall also be
      obligated to purchase from Talisman  shares of common stock having a total
      market  value on January 21, 1999 equal to $55,000 and Talisman has agreed
      to loan Mr. Ogle the necessary funds to purchase such shares.

    - Talisman  shall pay Mr. Ogle a tax  adjustment  in an amount  equal to the
      amount by which the actual  income taxes to be paid by Mr. Ogle exceed his
      hypothetical  United  States income tax  (assuming  certain  deductions to
      which he would be entitled to) if he were living in Texas.

    - Mr. Ogle shall be granted options to purchase shares of Talisman's  common
      stock equal to 5% of Talisman's total outstanding shares as of January 21,
      1999 (on a fully diluted  basis),  which options shall be exercisable at a
      price equal to  Cdn.$1.25  (which  price is equal to 25% of the average of
      the high bid and low  asked  prices  per  share  on the  Canadian  Dealing
      Network on January  21,  1999).  The  exercisability  and  vesting of such
      options are subject to certain conditions,  including,  but not limited to
      (i) Mr. Ogle's continued  employment by Talisman,  (ii) the achievement of
      specified  levels of annual  performance to be established by the board of
      directors,  and (iii) the  achievement  of  specified  levels of  investor
      returns. The employment agreement also provides that in the event that Mr.
      Ogle  exercises  any of the  options  while he is  employed  by  Talisman,
      Talisman  shall loan him the amount of the exercise  price for the options
      at an interest rate equal to the applicable  federal rate, such loan to be
      repaid within six months of the exercise of the options. The note shall be
      forgiven in the event that Mr. Ogle remains in the  employment of Talisman
      for a period of at least six months  following the exercise of the options
      or his employment is terminated as a result of death,  disability or other
      termination  entitling  Mr.  Ogle to  severance  under  the  terms  of the
      employment agreement.

    - Mr. Ogle is  entitled to  participate  in any  benefit  plans  extended to
      Talisman's employees or executives.

    - Mr. Ogle is entitled to receive  reimbursement for all reasonable expenses
      incurred by him in the course of his employment by Talisman.

The Employment  Agreement may be terminated  (i) by Talisman for cause;  (ii) at
any time by Talisman,  without cause,  by paying to the employee up to a maximum
of his then  current  base  salary and the annual  bonus to be paid in an amount
pro-rated through the date of termination calculated as if all performance goals
for the year  have  been  achieved;  or (iii) at any time by the  employee  upon
written  notice.  The employment  agreement also contains a prohibition  against
competing  with Talisman for a period of one year after the  termination  of the
agreement and  soliciting  customers or employees  from Talisman for a period of
two years after the termination of the agreement.

     On January 6, 1999, Garry J. Syme entered into an employment agreement with
Talisman. Mr. Syme has been retained as the Senior Vice President, Manufacturing
of Talisman.  The term of his employment agreement is until January 4, 2002, and
thereafter,  is  renewable  for  successive  one  year  terms.  Pursuant  to the
employment  agreement,  Mr. Syme will receive an annual salary of Cdn. $150,000,
which  shall be reviewed  annually,  and Mr. Syme shall be entitled to receive a
bonus up to a maximum of 40% of his annual base salary,  payable  within 30 days
of the  completion of the audit of  Talisman's  financial  statements,  provided
Talisman  achieves  financial  objectives as  determined by Talisman's  board of
directors.  The employment  agreement also provides for additional  compensation
and/or benefits to be paid or provided to Mr. Syme as follows:
<PAGE>
    - Mr. Syme shall be granted options to purchase shares of Talisman's  common
      stock equal to 2% of Talisman's total outstanding shares as of January 21,
      1999 (on a fully diluted  basis),  which options shall be exercisable at a
      price equal to  Cdn.$1.25  (which  price is equal to 25% of the average of
      the high bid and low  asked  prices  per  share  on the  Canadian  Dealing
      Network on January  21,  1999).  The  exercisability  and  vesting of such
      options are subject to certain conditions,  including,  but not limited to
      (i) Mr. Syme's continued  employment by Talisman,  (ii) the achievement of
      specified  levels of annual  performance to be established by the board of
      directors,  and (iii) the  achievement  of  specified  levels of  investor
      returns. The employment agreement also provides that in the event that Mr.
      Syme  exercises  any of the  options  while he is  employed  by  Talisman,
      Talisman  shall loan him the amount of the exercise  price for the options
      at an interest rate equal to the applicable  federal rate, such loan to be
      repaid within six months of the exercise of the options. The note shall be
      forgiven in the event that Mr. Syme remains in the  employment of Talisman
      for a period of at least six months  following the exercise of the options
      or his employment is terminated as a result of death,  disability or other
      termination  entitling  Mr.  Syme to  severance  under  the  terms  of the
      employment agreement.

    - Mr. Syme is  entitled to  participate  in any  benefit  plans  extended to
      Talisman's employees or executives.

         The  employment  agreement may be terminated (i) by Talisman for cause;
(ii) at any time by Talisman, without cause, by paying to the employee a maximum
of one year's current  annual salary;  or (iii) at any time by the employee upon
written  notice.  The employment  agreement also contains a prohibition  against
competing  with Talisman for a period of one year after the  termination  of the
agreement.

         On January 7, 1999,  Christian  H. Bunger  entered  into an  employment
agreement  with  Talisman.  Mr.  Bunger  has been  retained  as Vice  President,
Sales--U.S.  of  Talisman.  The term of the  employment  agreement  commenced on
January 25, 1999. Pursuant to the employment agreement,  Mr. Bunger will receive
an annual salary of $75,000,  which shall be reviewed  annually,  and Mr. Bunger
shall be  entitled  to receive a bonus up to a maximum of 35% of his annual base
salary at the end of each  calendar  year.  The bonus award will be based on the
attainment of profitability  targets and other objectives  approved by the board
of directors. The employment agreement also provides for additional compensation
and/or benefits to be paid or provided to Mr. Bunger as follows:

    - Mr.  Bunger  shall be granted  options to  purchase  shares of  Talisman's
      common stock equal to 1.5% of Talisman's  total  outstanding  shares as of
      January  21,  1999 (on a fully  diluted  basis),  which  options  shall be
      exercisable at a price equal to Cdn.$1.25  (which price is equal to 25% of
      the average of the high bid and low asked prices per share on the Canadian
      Dealing Network on January 21, 1999).  The  exercisability  and vesting of
      such options are subject to certain conditions, including, but not limited
      to (i) Mr. Bunger's continued employment by Talisman, (ii) the achievement
      of specified  levels of annual  performance to be established by the board
      of directors,  and (iii) the  achievement of specified  levels of investor
      returns. The employment agreement also provides that in the event that Mr.

<PAGE>
      Bunger  exercises  any of the options  while he is  employed by  Talisman,
      Talisman  shall loan him the amount of the exercise  price for the options
      at an interest rate equal to the applicable  federal rate, such loan to be
      repaid within six months of the exercise of the options. The note shall be
      forgiven  in the  event  that Mr.  Bunger  remains  in the  employment  of
      Talisman for a period of at least six months following the exercise of the
      options or his  employment is terminated as a result of death,  disability
      or other termination  entitling Mr. Bunger to severance under the terms of
      the employment agreement.

    - Mr.  Bunger is entitled to receive a car  allowance of $600 payable on the
      first day of each month.

         The  employment  agreement may be terminated (i) by Talisman for cause;
(ii) at any time by Talisman, without cause, by paying to the employee a maximum
of six months  severance  pay; or (iii) at any time by the employee upon written
notice. The employment  agreement also contains a prohibition  against competing
with Talisman for a period of six months after the termination of the agreement.


<PAGE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The  following  table  sets  forth,  as  of  March  1,  2000,   certain
information  concerning  beneficial  ownership  of shares of Common  Stock  with
respect  to (i)  each  person  known  to the  Company  to own 5% or  more of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii) the
executive  officers of the Company,  and (iv) all  directors and officers of the
Company as a group:
<TABLE>
<CAPTION>

                           Name and                                                      Percentage of
                          Address of                                                     Common
                       Beneficial Owner                         Amount Owned*            Stock**
                       ----------------                         -------------            -------------
<S>                                                      <C>     <C>                          <C>
       Kevin Kimberlin                                   896,416 (1)                          26%
       New York, New York

       Norman R. Proulx                                  74,272 (2)                           2.4%
       New York, New York

       James A. Ogle                                     5,993 (3)                             **
       Burlington, Ontario

       Garry J. Syme                                     43,121(4)                            1.4%
       Mississauga, Ontario

       James C. McGavin                                  28,046 (5)                            **
       Burlington, Ontario

       Donald L. Matheson                                4,046 (6)                             **
       Toronto, Ontario

       Thomas A. Fenton                                  4,092 (7)                             **
       Mississauga, Ontario

       John E. Aderhold                                  400,000 (8)                         12.2%
       Atlanta, Georgia

       Directors and Officers as a                       165,841(9)                           5.4%
       Group (9 persons)
------------------
</TABLE>

*  Percentages  are based upon the  assumption  that the named  shareholder  has
exercised  all of the  currently  exercisable  options  he or she owns which are
currently   exercisable  or  exercisable  within  60  days  and  that  no  other
shareholder  has  exercised  any options he or she owns.  The  information  with
respect to shares owned  beneficially  by those named above not being within the
knowledge of Talisman, has been furnished by each shareholder respectively.

Unless otherwise  provided herein,  Talisman  believes that all persons named in
the table have sole voting and  investment  power with  respect to all shares of
common stock beneficially owned by them.

* * Less than One Percent.


<PAGE>
(1) Includes  (i) 362,332  shares  owned by  Kimberlin  Family  Partners LP and
50,876 shares owned by Spencer Trask  Securities,  Inc., (ii) 362,332 shares and
50,876 shares which may be issued pursuant to options owned by Kimberlin  Family
Partners LP and Spencer Trask Securities, Inc., respectively,  which options are
currently exercisable,  and (iii) 70,000 shares of common stock which was issued
upon  conversion of a $350,000  promissory  note  concurrently  with  Talisman's
Public offering.

(2) Includes  35,613 shares which may be issued pursuant to options owned by Mr.
Proulx, which options are currently exercisable.

(3) Includes 5,993 shares which may be issued  pursuant to options issued to Mr.
Ogle under the 1999  Senior  Executive  Stock  Option  Plan,  which  options are
currently exercisable. Does not include an additional 76,961 shares which may be
issued  pursuant to options  issued to Mr. Ogle under the 1999 Senior  Executive
Stock Option Plan, which options are not currently exercisable.

(4) Includes (i) 3,902 shares which may be issued  pursuant to options issued to
Mr. Syme under the 1997 Stock  Option  Plan,  and (ii) 3,220 shares which may be
issued  pursuant to options  issued to Mr. Syme under the 1999 Senior  Executive
Stock Option Plan,  all of which  options are  currently  exercisable.  Does not
include an  additional  38,257  shares  which may be issued  pursuant to options
issued to Mr. Syme under the 1999 Senior  Executive  Stock  Option  Plan,  which
options are not currently exercisable.

(5) Includes  20,000 shares which may be issued pursuant to options owned by Mr.
McGavin, which options are currently exercisable.

(6) Includes  1,000 shares which may be issued  pursuant to options owned by Mr.
Matheson, which options are currently exercisable.

(7) Includes (i) 3,046 shares of common stock own by Aird & Berlis, Barristers &
Solicitors,  in which Mr. Fenton is a member, and (ii) 1,000 shares which may be
issued  pursuant to options  owned by Mr.  Fenton,  which  options are currently
exercisable.

(8) Includes 200,000 shares to be issued upon the exercise of outstanding class
A common stock purchase warrants held by Mr. Aderhold.

(9) Includes 35,613 shares which may be issued pursuant to options  beneficially
owned by Norman R. Proulx, which options are currently  exercisable,  (ii) 3,902
shares  which may be issued  pursuant  to  options  owned by Garry  Syme,  which
options are  currently  exercisable,  (iii)  20,000  shares  which may be issued
pursuant to options  owned by James C.  McGavin,  which  options  are  currently
exercisable,  (iv) 1,000 shares which may be issued pursuant to options owned by
Donald L. Matheson,  which options are currently  exercisable,  (v) 1,000 shares
which may be issued  pursuant  to options  owned by Thomas A.  Fenton,  (vi) 470
shares  owned by  Duncan  C.  MacFadyen  and  4,000  shares  which may be issued
pursuant to options owned by Duncan C.  MacFadyen,  (vii) 5,991 shares which may
be  issued  pursuant  to  options  owned by James A.  Ogle,  which  options  are
currently  exercisable,  and (viii) 3,226 shares which may be issued pursuant to
options owned by Garry J. Syme, which options are currently exercisable and (ix)
1,797  shares  which may be issued  pursuant to options  owned by  Christian  H.
Bunger,  which  options  are  currently  exercisable.  Does not  include  (i) an
additional  76,964 shares which may be issued  pursuant to options issued to Mr.
Ogle,  which options are not  currently  exercisable,(ii)  an additional  38,251
shares which may be issued pursuant to options issued to Mr. Syme, which options
are not currently  exercisable,  (iii) an additional  23,089 shares which may be
issued pursuant to options issued to Mr. Bunger, which options are not currently
exercisable.


<PAGE>
Item 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Thomas A. Fenton,  LL.B.,  a director of Talisman,  is a partner of the
Toronto  based law firm  Aird &  Berlis,  Barristers  and  Solicitors,  which is
Canadian legal counsel to Talisman.  During the fiscal period ended December 31,
1998,  Talisman  paid to Aird & Berlis  Cdn.$66,425  in  consideration  of legal
services  performed,  and during fiscal period ended December 31, 1999, Talisman
paid to Aird & Berlis Cdn.$118,590 in consideration of legal services performed.

         James C. McGavin,  a director of Talisman,  is a director,  officer and
shareholder  of  Burlington  Stamping  Inc., a key supplier to Talisman.  During
fiscal period ended December 31, 1998,  Talisman paid to Burlington  Stamping an
aggregate of approximately $34,246 in consideration of battery cans manufactured
and sold by  Burlington  Stamping to Talisman,  and during  fiscal  period ended
December  31,  1999,  Talisman  paid to  Burlington  Stamping  an  aggregate  of
approximately  $129,333  for battery  cans.  Talisman  further  paid to James C.
McGavin  during  the  fiscal  year  ended  December  31,  1998,   Cdn.$6,480  in
consideration  of a car  allowance.  During fiscal year ended December 31, 1999,
Talisman paid to James C. McGavin Cdn.$6,510.46 consisting of (1) Cdn.$6,480 car
allowance; and (2) Cdn.$30.46 in Director's fees.

         On January and March 1998, Garry J. Syme exercised  warrants to acquire
16,098 common shares, in aggregate, for gross cash consideration of Cdn.$104,098
and Cdn.$160,500 in property and equipment.

         On August 5, 1998, Talisman raised  Cdn.$1,495,000 in connection with a
private  offering of 263,504  shares of Talisman's  common stock and warrants to
purchase an additional  263,504  shares of common stock at an exercise  price of
Cdn.$7.50 per share, with Talisman Partners.  Prior to the private offering with
Talisman  Partners,  there was no  affiliation  between  Talisman  and  Talisman
Partners.  Talisman Partners is a private investment  partnership located in New
York, New York. Effective with the completion of the private offering, Norman R.
Proulx,  the  appointed  nominee of  Talisman  Partners,  became a  director  of
Talisman.  Effective  December  4, 1998,  Mr.  Proulx was  appointed  Talisman's
interim President and Chief Executive  Officer.  Mr. Proulx was a partner with a
minority  interest  in  Talisman  Partners  and an  employee  of  Spencer  Trask
Securities  Inc., a  securities  dealer  based in New York,  New York.  Talisman
Partners was majority owned by the Kevin Kimberlin Partnership, L.P., a New York
limited  partnership,  which was  controlled  by Kevin  Kimberlin,  Chairman  of
Spencer Trask, and minority owned by certain other Spencer Trask employees.

         On  October  19,  1998,  Talisman  raised  a  further  Cdn.$900,000  in
connection with a private offering of 240,000 shares of Talisman's  Common stock
and  warrants to purchase an  additional  240,000  shares of Common  stock at an
exercise price of Cdn.$5.00 per share, with Talisman Partners.

         From  December  1998 to  March  1999,  Talisman  sold an  aggregate  of
$700,000 of 8% convertible  promissory notes to nineteen persons.  The principal
amount of the notes were  converted  into  securities  of Talisman in connection
with the  completion  of the  first  closing  of  Talisman's  private  placement
offering with Spencer Trask in March 1999. The holders of the notes,  which have
now been converted into equity as a result of our January 2000 public  offering,
also received  warrants to acquire an aggregate of 72,465 shares of common stock
of Talisman exercisable at $7.50 per share.

         During  1998,   shareholders   transferred   45,000  common  shares  to
individuals in exchange for machinery and  professional  services,  the value of
which $309,233  was  contributed to capital.  This was adjusted to 40,000 common
shares with a value of $284,233 in 1999 in connection  with the  settlement of a
dispute.

         On January 4, 1999, Talisman entered into an employment  agreement with
James A. Ogle, a senior officer of Talisman.  For a complete  description of the
terms and conditions of the employment  agreement between Talisman and Mr. Ogle,
see "Management--Employment Contracts."


<PAGE>
         On January 6, 1999, Talisman entered into an employment  agreement with
Garry J. Syme, a senior officer of Talisman.  For a complete  description of the
terms and conditions of the employment  agreement between Talisman and Mr. Syme,
see "Management--Employment Contracts."

         On January 7, 1999, Talisman entered into an employment  agreement with
Christian H. Bunger, an officer of Talisman.  For a complete  description of the
terms and  conditions  of the  employment  agreement  between  Talisman  and Mr.
Bunger, see "Management--Employment Contracts."

         In March,  April and June 1999,  Talisman completed three closings of a
private placement  offering,  with Spencer Trask Securities,  Inc., as placement
agent, in which it sold an aggregate of 50.72985 units solely to U.S. investors.
The units  consisted of an aggregate of (1)  $5,073,135  principal  amount of 8%
convertible  promissory notes, and (2) 1,014,627  warrants to purchase shares of
common stock,  which warrants are  exercisable at $7.50 per share. In connection
with such  closings,  Spencer Trask received a placement fee equal to 10% of the
aggregate  purchase price of the securities  sold by it, plus a  non-accountable
expense allowance equal to three percent of the aggregate  purchase price of the
securities sold and a warrant,  granted by Talisman for $1.00 consideration,  to
purchase an amount of common  stock equal to 20% of the common stock sold in the
offering  at an exercise  price  equal to 120% of the price of the common  stock
sold.  Additionally,  upon the first closing of the offering,  Talisman  entered
into (1) an agreement  whereby  Spencer  Trask has the right of first refusal to
act as  underwriter  or agent for any  proposed  private or public  offering  of
Talisman's securities by Talisman or by any of its principal  stockholders,  and
(2) a  non-exclusive  finder's  agreement  pursuant  to which  Spencer  Trask is
entitled to receive a fee based upon a  percentage  of the value of any business
combination or financing  arrangement,  including but not limited to a merger or
purchase  of assets,  which is  introduced  to  Talisman  by Spencer  Trask.  In
accordance with the  non-exclusive  finder's  agreement,  a fee in the amount of
$200,000 was paid to Spencer Trask Securities, Inc.

         In November  1999,  Talisman  borrowed  $350,000  from Kevin  Kimberlin
pursuant to a  promissory  note in the  principal  amount of  $350,000,  bearing
interest at an annual rate of 10% and due on February  17,  2000.  Such loan was
converted  into 70,000 shares of common stock at $5.00 per share  simultaneously
with Talisman's January 2000 public offering.

         None of the transactions  with officers or shareholders of Talisman and
their  affiliates  were made on terms  less  favorable  to  Talisman  than those
available from  unaffiliated  parties.  In future  transactions  of this nature,
Talisman  will ensure that more  favorable  terms are not  available  to it from
unaffiliated  third parties before engaging officers or shareholders of Talisman
or their  affiliates.  Talisman  presently  has four  independent  directors and
Talisman  will  continue to maintain at least two  independent  directors on its
board of  directors.  Transactions  Talisman  entered into with its officers and
directors and their affiliates were unanimously  approved by Talisman's board of
directors,   which  included  at  least  two  independent   directors  who  were
uninterested  with  respect to each  respective  transaction.  Such  independent
directors had access to Talisman's  counsel at  Talisman's  expense.  All future
material affiliated transactions and loans will be made or entered into on terms
that are no less  favorable  to Talisman  than those that can be  obtained  from
unaffiliated  third parties.  All future material  affiliated  transactions  and
loans,  and  any  forgiveness  of  loans,  will be  approved  by a  majority  of
Talisman's independent directors who do not have an interest in the transactions
and who had access, at Talisman's  expense, to Talisman's counsel or independent
legal counsel.


<PAGE>
Item 13. EXHIBITS, LIST, AND REPORTS ON FORM 8-K.

         (a)  Exhibits  are listed on the Index to  Exhibits  on page 31 of this
report.  The Exhibits  required by Item 601 of Regulation S-B are listed on such
Index in response to this Item and are incorporated herein by reference.

     Financial  Statements  required by Regulation S-X are listed in response to
this  Item and are set  forth  at the end of this  report  and are  incorporated
herein by reference.

         (b)      Reports on Form 8-K:

     None.

<PAGE>
                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                         TALISMAN ENTERPRISES INC.

                                         By:   /s/    JAMES A. OGLE
                                              ---------------------
                                                      James A. Ogle,
                                             President & Chief Executive Officer

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

<TABLE>
<CAPTION>
<S>                                           <C>
Date:  March 30, 2000                         /s/ JAMES A. OGLE
                                              -----------------
                                              James A. Ogle, President & Chief Executive Officer

Date:  March 30, 2000                         /s/ NORMAN R. PROULX
                                              --------------------
                                              Norman Proulx, Chairman of the Board

Date:  March 30, 2000                         /s/ THOMAS O'DOWD
                                              -----------------
                                              Thomas O'Dowd, Vice President & Chief Financial Officer

Date:  March 30, 2000                         /s/ JAMES MCGAVIN
                                              -----------------
                                              James McGavin, Director

Date:  March 30, 2000                         /s/ DONALD L. MATHESON
                                              ----------------------
                                              Donald L. Matheson, Director

Date:  March 30, 2000                         /s/ THOMAS A. FENTON
                                              --------------------
                                              Thomas A. Fenton, Director
</TABLE>
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Number                Description
------                -----------
<S>               <C>
3.1               Articles of Incorporation, as amended*
3.2               By-Laws*
4.1               Form of Underwriter's Warrants**
4.2               Form of Common Stock Certificate*
10.1              Registrant's 1997 Stock Option Plan *
10.2              1999 Senior Executive Stock Option Plan**
10.3              1999 Directors Company Stock Plan**
10.4              Employment Agreement with Gary J. Syme*
10.5              Employment Agreement with James A. Ogle*
10.6              Employment Agreement with Christian H. Bunger**
21.1              List of Subsidiaries of the Registrant**
23.1              Consent of Sichenzia, Ross & Friedman LLP **
23.2              Consent of Ernst & Young LLP**
23.3              Consent of Sichenzia, Ross & Friedman LLP**
23.4              Consent of Aird & Berlis**
27.1              Financial Data Index - Year Ended December 31, 1999
</TABLE>


     * Incorporated  by reference to the Form 20-F filed by the registrant  with
the Commission on January 19, 1999 under SEC File No. 0-29972.

     **  Incorporated  by reference to the  Registration  Statement on Form SB-2
filed by the registrant on January 13, 2000 under SEC file No. 333-83123.

<PAGE>
                        CONSOLIDATED FINANCIAL STATEMENTS

                            TALISMAN ENTERPRISES INC.

                           December 31, 1999 and 1998
                       With Report of Independent Auditors


<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
Talisman Enterprises Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  Talisman
Enterprises  Inc. as at December 31, 1999 and 1998 and the related  consolidated
statements of loss and deficit, shareholders' equity (deficiency) and cash flows
for the years then ended.  These financial  statements are the responsibility of
the company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States.  Those standards require that we plan and perform an audit
to obtain  reasonable  assurance  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  consolidated   financial  position  of  Talisman
Enterprises Inc. as at December 31, 1999 and 1998 and the  consolidated  results
of its  operations and cash flows for the years then ended,  in conformity  with
accounting principles generally accepted in the United States.

The accompanying  consolidated  financial statements have been prepared assuming
that the company will continue as a going concern. As discussed in note 1 to the
consolidated  financial  statements,  the company has suffered  recurring losses
from  operations  and  has  an  accumulated  deficit.   These  conditions  raise
substantial  doubt about the company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in note 1. The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

Hamilton, Canada,                                       /s/ ERNEST & YOUNG LLP
March 9, 2000.                                             Chartered Accountants


<PAGE>
Talisman Enterprises Inc.
Incorporated under the laws of Ontario

                           CONSOLIDATED BALANCE SHEETS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]

As at December 31
<TABLE>
<CAPTION>




                                                                         1999                1998
                                                                           $                   $
---------------------------------------------------------------------------------------------------------------------------
ASSETS
Current
<S>                                                                     <C>                <C>
Cash                                                                    16,557             16,701
Accounts receivable                                                    400,672            361,826
Inventories [note 2]                                                 1,035,006            409,180
Prepaid expenses and other assets [note 14]                            511,193             51,952
Deferred financing costs                                               366,505                 --
---------------------------------------------------------------------------------------------------------------------------
Total current assets                                                 2,329,933            839,659
---------------------------------------------------------------------------------------------------------------------------
Capital assets [note 3]                                              3,430,218          2,752,663
---------------------------------------------------------------------------------------------------------------------------
                                                                     5,760,151          3,592,322
---------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current
Bank indebtedness [note 5]                                             539,872            423,656
Accounts payable and accrued liabilities                             1,622,594            905,169
Note payable [note 4]                                                  358,003                 --
Current portion of long-term debt [notes 5 and 14]                   5,203,503            574,221
---------------------------------------------------------------------------------------------------------------------------
Total current liabilities                                            7,723,972          1,903,046
---------------------------------------------------------------------------------------------------------------------------
Long-term debt [note 5]                                                314,640                 --
Future tax liabilities                                                 491,111            546,815
Shareholders' equity (deficiency) [statement]
Share capital [note 6]                                               4,277,540          4,277,370
Warrants                                                               101,463                 --
Contributed surplus                                                    284,233            309,233
Deficit                                                             (7,279,842)        (3,238,982)
Accumulated other comprehensive loss                                  (152,966)          (205,160)
---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity (deficiency)                             (2,769,572)         1,142,461
---------------------------------------------------------------------------------------------------------------------------
                                                                     5,760,151          3,592,322
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Commitments and contingencies [notes 1 and 10]

See accompanying notes

On behalf of the Board:

                                    Director                      Director


<PAGE>
Talisman Enterprises Inc.

                   CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]

Years ended December 31
<TABLE>
<CAPTION>




                                                                         1999                1998
                                                                           $                   $
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                    <C>                <C>
Revenues                                                               925,987            748,254
Operating expenses [exclusive of
   amortization shown separately below]                              2,106,909          1,487,052
---------------------------------------------------------------------------------------------------------------------------
Gross profit                                                        (1,180,922)          (738,798)
---------------------------------------------------------------------------------------------------------------------------

Expenses
Selling, general and administrative                                  1,675,282          1,136,516
Amortization                                                           951,739            304,182
Interest and other financing charges [note 5]                          319,120             99,292
---------------------------------------------------------------------------------------------------------------------------
                                                                     2,946,141          1,539,990
---------------------------------------------------------------------------------------------------------------------------
Loss before income taxes                                            (4,127,063)        (2,278,788)
Income taxes                                                           (86,203)            (4,586)
---------------------------------------------------------------------------------------------------------------------------
Loss for the year                                                   (4,040,860)        (2,274,202)

Deficit, beginning of year                                          (3,238,982)          (964,780)
---------------------------------------------------------------------------------------------------------------------------
Deficit, end of year                                                (7,279,842)        (3,238,982)
---------------------------------------------------------------------------------------------------------------------------

Loss per share                                                           (3.87)             (3.69)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes


<PAGE>
Talisman Enterprises Inc.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]

Years ended December 31
<TABLE>
<CAPTION>



                                                                         1999                1998
                                                                           $                   $
---------------------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES

<S>                                                                 <C>                <C>
Loss for the year                                                   (4,040,860)        (2,274,202)
Charges to income not affecting cash
   Amortization                                                        951,739            304,182
   Future tax liabilities                                              (86,203)            (4,586)
Change in non-cash working capital items                              (424,686)           114,490
---------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities                                   (3,600,010)        (1,860,116)
---------------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITY
Purchase of capital assets                                            (861,274)          (286,862)
---------------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Issue of convertible promissory note and warrants                    5,074,598                 --
Deferred financing costs                                              (943,111)                --
Issuance of other long-term debt                                       432,279            609,430
Repayment of other long-term debt                                     (488,472)          (325,894)
Increase (decrease) in note payable                                    347,763            (77,233)
Issue of common shares                                                     170          1,493,441
Bank indebtedness                                                       88,028            437,196
---------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities                                4,511,255          2,136,940
---------------------------------------------------------------------------------------------------------------------------

Effect of exchange rate changes on cash                                (50,115)                --
---------------------------------------------------------------------------------------------------------------------------

Decrease in cash during the year                                          (144)           (10,038)
Cash, beginning of year                                                 16,701             26,739
---------------------------------------------------------------------------------------------------------------------------
Cash, end of year                                                       16,557             16,701
---------------------------------------------------------------------------------------------------------------------------

Non-cash investing activity

Contribution by shareholders of capital assets                              --             68,000
---------------------------------------------------------------------------------------------------------------------------

Non-cash financing activity

Contribution by shareholders of professional services                  (25,000)           241,233
---------------------------------------------------------------------------------------------------------------------------

SUPPLEMENTARY INFORMATION

Cash interest paid                                                      78,969             26,431
Cash income taxes paid                                                      --                 --
</TABLE>

See accompanying notes


<PAGE>
Talisman Enterprises Inc.

          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
       [in U.S. dollars and prepared in accordance with generally accepted
                  accounting principles in the United States]
<TABLE>
<CAPTION>





                                                                                                                         Accumulated
                                                                          Number of    Class "A"   Number of             Contributed
                                                 Number of     Common     Class "A"     special    warrants   Warrants     surplus
                                                  common       shares     special       shares        #          $            $
                                                  shares         $        shares          $
------------------------------------------------------------------------------------------------------------------------------------

<S>                                              <C>         <C>           <C>       <C>              <C>         <C>         <C>
Balance December 31, 1997 ....................     515,956   1,338,147       3,300   1,687,083        --          --          --
Issued for exercise of warrants ..............      10,893     119,391        --          --          --          --          --
Issued for cash [net of expenses],
   services and capital assets [note 6]            503,481   1,132,749        --          --          --          --       309,233
Cumulative translation
   adjustment ................................        --          --          --          --          --          --          --
Net loss .....................................        --          --          --          --          --          --          --
------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 ....................   1,030,330   2,590,287       3,300   1,687,083        --          --       309,233
------------------------------------------------------------------------------------------------------------------------------------

Share adjustment [note 6] ....................        --          --          --          --          --          --       (25,000)
Shares issued pursuant to
   1999 Directors company
   stock plan ................................      15,230         103        --          --          --          --          --
Shares issued for professional
   services ..................................      10,000          67        --          --          --          --          --
Warrants .....................................        --          --          --          --     1,014,627     101,463        --
Cumulative transaction
   adjustment ................................        --          --          --          --          --          --          --
Net loss .....................................        --          --          --          --          --          --          --
------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1999 ....................   1,055,560   2,590,457       3,300   1,687,083   1,014,627     101,463     284,233
------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes

<PAGE>
Talisman Enterprises Inc.

          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
       [in U.S. dollars and prepared in accordance with generally accepted
                  accounting principles in the United States]

(CONTINUED)
                                                           Other
                                                       comprehensive
                                                Deficit      loss           Total
                                                  $           $              $
----------------------------------------------------------------------------------------------------------

<S>              <C> <C>                    <C>            <C>         <C>
Balance December 31, 1997 .............     (964,780)      (99,082)    1,961,368
Issued for exercise of warrants .......         --            --         119,391
Issued for cash [net of expenses],
   services and capital assets [note 6]         --            --       1,441,982
Cumulative translation
   adjustment .........................         --        (106,078)     (106,078)
Net loss ..............................   (2,274,202)         --      (2,274,202)
                                                                      ----------
Balance December 31, 1998 .............   (3,238,982)     (205,160)    1,142,461
                                                                      ----------

Share adjustment [note 6] .............         --            --         (25,000)
Shares issued pursuant to
   1999 Directors company
   stock plan .........................         --            --             103
Shares issued for professional
   services ...........................         --            --              67
Warrants ..............................         --            --         101,463
Cumulative transaction
   adjustment .........................         --          52,194        52,194
Net loss ..............................   (4,040,860)         --      (4,040,860)
                                                                      ----------
Balance December 31, 1999 .............   (7,279,842)     (152,966)   (2,769,572)
                                                                      ----------

See accompanying notes
</TABLE>
<PAGE>

Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]

December 31, 1999 and 1998



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations

Talisman Enterprises Inc. is a company incorporated to primarily produce premium
private label alkaline  batteries.  The consolidated  financial  statements have
been prepared by management in accordance with accounting  principles  generally
accepted in the United States on a going concern basis,  which  contemplates the
realization  of assets and the discharge of  liabilities in the normal course of
business for the foreseeable future. The company has incurred significant losses
and negative cash flow from  operations in each of the last two years and has an
accumulated deficit of $7,279,842 at December 31, 1999 [1998 - $3,238,982].  The
company's  ability to continue as a going concern is in substantial doubt and is
dependent  upon  achieving a profitable  level of operations  and, if necessary,
obtaining additional  financing.  Management of the company has undertaken steps
as part of a plan to  improve  operations  with the goal of  sustaining  company
operations  for the next 12 months and beyond.  These steps include (i) focusing
sales and  marketing  on specific  markets and  customers  and (ii)  controlling
overhead  and  expenses.  There  can be no  assurance  the  company  can  attain
profitable operations in the future. These consolidated  financial statements do
not give effect to any adjustments  which would be necessary  should the company
be unable to continue as a going concern and  therefore,  be required to realize
its assets and  discharge  its  liabilities  in other than the normal  course of
business  and at amounts  different  from those  reflected  in the  accompanying
consolidated financial statements.

Basis of presentation

The consolidated  financial statements have been prepared in U.S. dollars and in
accordance with accounting  principles  generally  accepted in the United States
and include certain estimates based on management's judgements.  These estimates
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
consolidated  financial  statements  and the  reported  amount of  revenues  and
expenses during the year. Actual results may differ from those estimates.

For purposes of these consolidated financial statements, the company has adopted
the U.S. dollar as the reporting  currency.  This improves investors' ability to
compare  the  company's  results  with  those  of  most  other  publicly  traded
businesses in the industry.  These consolidated  financial  statements have been
translated  from  Canadian  dollars to U.S.  dollars by  translating  assets and
liabilities  at the rate in  effect at the  respective  balance  sheet  date and
revenues and expenses at the average rate for the year.  Any  resulting  foreign
exchange gains or losses are recorded in accumulated other comprehensive  income
(loss).


<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Principles of consolidation

The consolidated  financial  statements  include the accounts of the company and
its wholly-owned subsidiary, Talisman International Inc.

Inventories

Inventories are valued at the lower of average cost and net realizable value.

Capital assets

Capital assets are stated at cost. Amortization is provided at rates designed to
write-off the assets over their estimated useful lives at the following rates:

<TABLE>
<CAPTION>
<S>                                              <C>
Production and warehouse equipment               10 years straight-line basis
Dies and molds                                   5 years straight-line basis
Furniture and fixtures                           5 years straight-line basis
Computer equipment                               3 years straight-line basis
Leasehold improvements                           Straight-line basis over the term of the lease
</TABLE>

Revenue recognition

Revenue from the sales of products is  recognized  at the time title  transfers,
which is generally when the goods are shipped.

Loss per share

The  calculation  of loss per  common  share is based on the  reported  net loss
divided by the weighted  average number of shares  outstanding  during the year.
The weighted  average  number of common  shares  outstanding  for the year ended
December 31, 1999 was 1,042,945 [December 31, 1998 - 615,581].


<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments

The  carrying  amount of cash,  accounts  receivable,  bank  operating  line and
accounts payable and accrued  liabilities are considered to be representative of
their respective fair values due to their short maturities.


The company has no derivative financial instruments or any financial instruments
that  potentially  subject the company to  concentrations  of credit  risk.  The
company is exposed to credit risk on the accounts receivable from its customers.
Management has adopted credit  policies in an effort to minimize those risks. At
December  31,  1999,  three  customers  accounted  for  17%,  15% and 11% of the
accounts receivable balance.


Income taxes

The company follows the liability  method of accounting for income taxes.  Under
this  method,  future  income  taxes  reflect the net tax  effects of  temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.

2. INVENTORIES
<TABLE>
<CAPTION>

                                                                          1999               1998
                                                                            $                  $
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                      <C>              <C>
Raw materials and packaging                                              316,829          243,801
Finished goods                                                           718,177          165,379
---------------------------------------------------------------------------------------------------------------------------
                                                                       1,035,006          409,180
---------------------------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


3. CAPITAL ASSETS
<TABLE>
<CAPTION>

                                                                           1999
                                                                       Accumulated       Net book
                                                          Cost        amortization         value

                                                            $               $                $
---------------------------------------------------------------------------------------------------------------------------

<S>                                                      <C>                <C>         <C>
Production equipment                                     3,352,298          629,574     2,722,724
Warehouse equipment                                         48,499            7,762        40,737
Computer equipment                                          37,891           13,353        24,538
Dies and molds                                              47,358           10,742        36,616
Furniture and fixtures                                      21,905            9,180        12,725
Leasehold improvements                                     123,675           44,092        79,583
Construction in progress                                   513,295               --       513,295
---------------------------------------------------------------------------------------------------------------------------
                                                         4,144,921          714,703     3,430,218
---------------------------------------------------------------------------------------------------------------------------

                                                                           1998
                                                                       Accumulated       Net book
                                                          Cost        amortization         value

                                                            $               $                $
---------------------------------------------------------------------------------------------------------------------------

Production equipment                                     2,741,827          292,910     2,448,917
Warehouse equipment                                         32,568            3,196        29,372
Computer equipment                                          11,763            4,028         7,735
Dies and molds                                              26,112            2,968        23,144
Furniture and fixtures                                      20,657            4,525        16,132
Leasehold improvements                                      59,718           12,355        47,363
Construction in progress                                   180,000               --       180,000
---------------------------------------------------------------------------------------------------------------------------
                                                         3,072,645          319,982     2,752,663
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Certain  of the above  production  equipment  was  acquired  pursuant  to a s.85
rollover  under  Canadian tax laws.  Although the  equipment was recorded in the
financial  statements  based  on its  fair  value,  it has no tax  basis  to the
company.
<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


4. NOTE PAYABLE

The note payable is due to a  shareholder,  bears interest at 10% per annum with
interest and principal due on February 17, 2000.

5. LONG-TERM DEBT AND LINES OF CREDIT
<TABLE>
<CAPTION>

                                                                         1999                1998
                                                                           $                   $
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                  <C>
Term loan, bearing interest at prime plus
  1 1/4% with monthly principal repayments of $12,500 Cdn.,
  maturing October 23, 2003, repaid in 1999                             --               474,221

Term loan, interest payable at index rate [established by the
  Royal Bank of Canada discount rate for 30-day
  Canadian bankers acceptances] plus 4% per annum
  with monthly principal repayments of $15,680 Cdn.,
  maturing July 31, 2002                                              445,008                 --

Convertible U.S. dollar promissory notes bearing
  interest at 8%, interest and principal on the note
  shall be paid in cash one year from the date
  of issuance of the note.  No interest is payable if the
  notes are converted into common shares of the company             5,073,135            100,000
---------------------------------------------------------------------------------------------------------------------------
                                                                    5,518,143            574,221
Less current portion                                                5,203,503            574,221
---------------------------------------------------------------------------------------------------------------------------
Long-term debt                                                        314,640                 --
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]

5. LONG-TERM DEBT AND LINES OF CREDIT [continued]

The  company  has  available  revolving  credit  facility  of  $7,500,000   Cdn.
which  bears  interest  at index rate  [established  by the Royal Bank of Canada
discount rate for 30-day Canadian bankers  acceptances] plus 4%. The facility is
available up to 75% on eligible accounts receivable and the lesser of $3,000,000
Cdn.  or 60% of  eligible  inventory.  At  December  31,  1999,  the company had
utilized $779,197 Cdn. [$539,872 U.S.] of the line.

The company has pledged as security for its revolving  credit  facility and term
loan, a first  priority on all of its existing real and tangible and  intangible
assets of the company.

Pursuant to a confidential  private placement memorandum prepared by the company
dated January 28, 1999,  50.72985  units were sold to  accredited  investors for
proceeds of approximately $5,174,000,  before deducting agent fees and placement
allowance and expenses of the offering which are included in deferred  financing
costs are being amortized over the life of the debt. Each unit consists of an 8%
convertible subordinated promissory note in the principal amount of $100,000 and
20,000 Class "A" common stock purchase warrants to purchase common shares of the
company until 2004. The notes are convertible into common shares at a conversion
rate of one  common  share for  every $5 in  principal  amount of note,  and the
warrants are  exercisable at a price of $7.50 per share,  subject to adjustments
in certain events. In addition, the notes shall be automatically  converted into
common shares of the company upon the company's common shares becoming traded on
the OTC Bulletin Board in the United States or any other U.S.  based  securities
exchange.

Subsequent  to the  year-end,  the notes were  converted  into common  shares in
connection with the company's listing on NASDAQ [note 14].

The fair value of the long-term debt has been calculated on the contractual cash
flows of the  financial  instruments  discounted  using market  rates  currently
available to the company.  At December 31, 1999, the fair value of the long-term
debt  approximated  the carrying value.  During the year,  interest on long-term
debt amounted to $40,222 [December 31, 1998 - $26,431].


<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


5. LONG-TERM DEBT AND LINES OF CREDIT [continued]

Estimated repayments of long-term debt over the next 3 years are as follows:
<TABLE>
<CAPTION>

                                                                                            $
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>
2000                                                                                    5,203,503
2001                                                                                      130,000
2002                                                                                      184,640
---------------------------------------------------------------------------------------------------------------------------
                                                                                        5,518,143
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

6. SHARE CAPITAL

Authorized

Unlimited 6% non-cumulative,  non-voting Class "A"
  special shares, redeemable at the company's
  option, with a redemption value of $1,000 each

Unlimited common shares without nominal par value

On January 27, 1999, the company  implemented a consolidation of the outstanding
common  shares on the basis of  exchanging 1 new common share for each 25 common
shares  previously held. All prior information has been adjusted to reflect this
consolidation.

During 1998,  shareholders  transferred  45,000 common shares to  individuals in
exchange for machinery and professional  services, the value of which [$309,233]
was  contributed  to capital.  This was adjusted to 40,000  common shares with a
value of $284,233 in 1999.

<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


6. SHARE CAPITAL - continued

The company has in place a sStock  Option Plan [the "Stock  Option  Plan"] as an
incentive  for  directors,  officers  and key  employees  and other  persons who
provide ongoing  services to the company and its  subsidiaries.  Under the Stock
Option Plan,  non-assignable options may be granted by the board of directors of
the company, to directors, officers, key employees and other persons who provide
ongoing  services to the company to purchase  common shares of the company for a
term not exceeding 5 years  [subject to earlier  termination  of the  optionee's
employment, upon the optionee ceasing to be a director, officer or other service
provider,  as applicable,  or upon the optionee  retiring,  becoming disabled or
dying] at an exercise  price not less than the market price for common shares of
the company.  The granting of options is subject to the further conditions under
the Stock Option Plan that: [i] not more than 10% of the number of shares issued
and outstanding from time to time [the "Outstanding  Issue"] may be reserved for
the  granting of options to insiders at any time or to insiders in any  one-year
period;  [ii] that no more than 5% of the outstanding issue may be issued to any
one insider of the company in a one-year  period;  and, [iii] the maximum number
of common  shares  issuable  under the Stock Option Plan is 31,200  shares.  The
options are non-transferable.

In  addition,  the  company has an annual  Senior  Executive  Stock  Option Plan
["senior  plan"]  offered to selected  senior  executives  and  employees of the
company and any of its subsidiary  companies.  The maximum number of shares that
may be granted under the senior plan is, initially, not to exceed 225,000. Under
the terms of the senior plan, options are non-transferrable,  except pursuant to
the laws of descent and distribution.  Any options granted under the senior plan
is subject to certain  vesting and other  requirements  contained  in the senior
plan.  Specifically,  any options  granted under the senior plan will vest:  [i]
with  respect  to  one-third  of  all  options  granted,  in  60  equal  monthly
installments,  [ii] with  respect to  one-third  of all  options  granted,  upon
attainment  of prescribed  annual  performance  targets over a five-year  period
[notwithstanding anything to the contrary herein, all such unexercisable options
become  exercisable on the 7th anniversary of the employment  date),  [iii] with
respect to the remaining  one-third of all options  granted only in the event of
an "Investor  Sale" as defined by the senior plan  [notwithstanding  anything to
the contrary herein,  all such  unexercisable  options become exercisable on the
seventh  anniversary  of the  employment  date].  During the year,  the  company
granted 199,091 options under this senior plan. Such options vest  incrementally
over a period of 5 years  commencing on the date of the  individuals  employment
agreement.

<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


6. SHARE CAPITAL - continued

Also,  the  company has in place an annual  Directors  Stock  Compensation  Plan
["directors plan"] whereby each non-employee  director of Talisman who serves as
such on the day the directors plan is ratified by  shareholders  of the company,
will earn the right to receive,  subject to certain  conditions,  15,230  common
shares of the company for no  consideration.  For each  director,  3,046 of such
shares will be received upon  shareholder  ratification  of the  directors  plan
while  additional   installments  of  3,046  shares  will  be  granted  to  each
non-employee director upon the first, second, third and fourth anniversary dates
of the date of initial shareholder  ratification.  In order to earn the right to
receive subsequent  installment grants on the aforesaid  anniversary dates, each
direct recipient must have continuously served as a director for the year ending
on such  anniversary.  During the year,  the company issued 15,230 common shares
under this directors plan.

The company  options and warrants to acquire  common shares at various  exercise
prices are summarized below:
<TABLE>
<CAPTION>

                                                                 Exercise            Expiration
                                                 Number           price                date
                                                                     $
---------------------------------------------------------------------------------------------------------------------------
                                                                [Canadian]

<S>                                             <C>               <C>               <C>
Options                                         6,000             16.25             Nov. 13, 2001
                                                  760             31.25             Nov. 13, 2001
                                              199,091              1.25             Jan. 31, 2009
Warrants                                        2,000             12.50             Apr. 15, 2000
                                                2,000             20.00             Apr. 15, 2000
                                               83,902             16.25             Aug. 15, 2000
                                               12,000             12.50              June 7, 2001
                                              263,504              7.50             July 31, 2001
                                              240,000              5.00             Oct. 14, 2001
---------------------------------------------------------------------------------------------------------------------------
                                               24,000              7.50             April 1, 2002
                                            1,014,627              7.50            March 19, 2004
Total options and warrants                  1,847,884
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]

7. SHAREHOLDERS RIGHTS PLAN

On  September  26,  1997,  the  shareholders   approved  a  Shareholders  Rights
Protection  Plan [the  "Plan"].  The Plan  applies to all common  shares and all
future issues of common shares. The term of the Plan is for 5 years,  subject to
reconfirmation  by the  shareholders at the first annual meeting of shareholders
called after  September  26, 2000.  The Plan is intended to ensure that,  in the
event of a bid which  could  affect  control of the  company,  holders of common
shares will  receive full and fair value for their shares and that there will be
sufficient  time  for  the  fairness  of the  bid to be  properly  assessed,  to
negotiate with the bidder and to explore,  develop and evaluate  alternatives to
maximize shareholder value.

Under the terms of the Plan,  one Right has been granted for each common  share.
Each Right  entitles  the  registered  holder to purchase  additional  shares of
common stock for $1,500 Cdn. but is not exercisable  until certain events occur.
If a person  or group  wishes to  acquire  20% or more of the  company's  common
shares [an  "acquiring  person"],  the Plan  effectively  requires the acquiring
person to [i] negotiate  terms which the Directors  approve as being fair to the
shareholders or, alternatively,  [ii] without Board approval,  make a "permitted
bid" which must contain  certain  provisions  and which must be accepted by more
than 50% of the common shares not held by the acquiring person.

In the event that an  acquiring  person  acquires  20% or more of the  company's
voting  shares other than as  described  in [i] and [ii] above,  then the Rights
become exercisable and will automatically change to allow all holders except the
acquiring  person to purchase,  upon payment of the  exercise  price,  shares of
common stock with a total market value of two times the exercise price [ie. at a
50% discount from the then current market price of the common stock].


<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


8. STOCK BASED COMPENSATION

The company  applies APB Opinion 25 in accounting for its employee stock options
and warrants.

During the year,  the  company  recorded  compensation  expense of $23,163  with
respect to options  which had an exercise  price less than  market  price at the
time of granting.

For purposes of meeting  requirements  of FASB Statement No. 123, the fair value
was estimated at the date of grant using a  Black-Scholes  option  pricing model
with the following weighted-average assumptions for 1999 and 1998, respectively;
risk-free  interest  rates of 6%,  6%,  dividend  yields of 0%,  0%,  volatility
factors of the expected market price of the company's  common stock of 30%, 30%,
and weighted average expected life per option and warrant of 4 years.

The  Black-Scholes  option pricing model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option  pricing  models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  company's   employee  stock  options  and  warrants  have   characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  options, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options and warrants.

For  purposes of the  pro-forma  disclosures,  the  estimated  fair value of the
options and  warrants is amortized to expense  over their  vesting  period.  The
company's  pro-forma net loss would be [$4,076,134]  for the year ended December
31, 1999.  The company's  pro-forma loss per share would be [$3.91] for the year
ended  December  31,  1999.  There were no employee  stock  options and warrants
issued or which vested during 1998.


<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


8. STOCK BASED COMPENSATION [continued]

A summary  of the  company's  stock  option and  warrant  activity  and  related
information is as follows:
<TABLE>
<CAPTION>

                                                          1999                        1998
                                                            $                           $
---------------------------------------------------------------------------------------------------------------------------
                                                       [Canadian]                  [Canadian]
                                                              Weighted                     Weighted
                                                              -average                     -average
                                                            exercise price             exercise price

Employee options

<S>                                              <C>            <C>          <C>            <C>
Outstanding, beginning of year                   10,760         17.25        10,760         17.25
Granted                                         199,091          1.25            --            --
Cancelled                                        (4,000)       (16.25)           --            --
---------------------------------------------------------------------------------------------------------------------------
Outstanding and exercisable, end of year        205,851          1.79        10,760         17.25
---------------------------------------------------------------------------------------------------------------------------

Employee warrants

Outstanding, beginning of year                   33,902         16.25        44,798         16.25
Exercised                                            --         --          (10,896)        16.25
---------------------------------------------------------------------------------------------------------------------------
Outstanding and exercisable, end of year         33,902         16.25        33,902         16.25
---------------------------------------------------------------------------------------------------------------------------

Total employee options and
   warrants outstanding and

   exercisable, end of year                     239,753          3.83        44,662         16.50
---------------------------------------------------------------------------------------------------------------------------

Other warrants
Outstanding, beginning of year                  584,104          8.35        68,600          8.35
Granted                                       1,038,627          7.50       515,504          8.35
Cancelled                                       (14,600)       (30.82)           --            --
---------------------------------------------------------------------------------------------------------------------------
                                              1,608,131          7.60       584,104          8.35
---------------------------------------------------------------------------------------------------------------------------

Total options and warrants outstanding,
   end of year                                1,847,884          7.11       628,766          8.93

Total options and warrants outstanding
   and exercisable, end of year               1,661,936          7.76       628,766          8.93
---------------------------------------------------------------------------------------------------------------------------

The weighted - average fair value of the 199,091 employee options granted during
the year is $2.51 Cdn.
</TABLE>


<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


9. INCOME TAXES

The significant  components of the company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>

                                                                          1999               1998
                                                                            $                  $
---------------------------------------------------------------------------------------------------------------------------

Deferred tax assets
<S>                                                                  <C>                  <C>
Income tax losses available for carryforward                         2,535,000            537,500
Share issue costs                                                       57,581            191,441
---------------------------------------------------------------------------------------------------------------------------
                                                                     2,592,581            728,941
---------------------------------------------------------------------------------------------------------------------------
Less valuation allowance                                             2,592,581            728,941
Net deferred tax assets                                                     --                 --
---------------------------------------------------------------------------------------------------------------------------

Deferred tax liabilities
Temporary differences on capital assets                                491,111            546,815
---------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities                                         491,111            546,815
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The  company  has  available   non-capital   loss  carryovers  of  approximately
$7,025,000  [$10,139,000 Cdn.] available to offset future taxable income.  These
non-capital loss carryovers expire as follows:
<TABLE>
<CAPTION>

                                                                                             $
---------------------------------------------------------------------------------------------------------------------------
                                                                                        [Canadian]

<S>                                                                                       <C>
2002                                                                                      551,000
2003                                                                                    1,763,000
2004                                                                                    1,374,000
2005                                                                                    1,137,000
2006                                                                                    5,314,000
---------------------------------------------------------------------------------------------------------------------------
                                                                                       10,139,000
---------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


10. COMMITMENTS AND CONTINGENCIES

The minimum lease payments for building and equipment leases are as follows:
<TABLE>
<CAPTION>

                                                                                               $
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                       <C>
2000                                                                                      240,500
2001                                                                                      102,500
2002                                                                                       37,300
thereafter                                                                                     --
---------------------------------------------------------------------------------------------------------------------------
                                                                                          380,300

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

                                                                          1999               1998
                                                                            $                  $
---------------------------------------------------------------------------------------------------------------------------

Rent expense                                                           205,696            125,480
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

In the ordinary course of business  activities,  the company may be contingently
liable for litigation and claims with third  parties.  Management  believes that
adequate provisions have been recorded in the accounts where required.  Although
it is not  possible  to  estimate  the  potential  costs  and  losses,  if  any,
management  believes that the ultimate resolution of such contingencies will not
have a  material  adverse  effect  on  the  financial  position  or  results  of
operations of the company.


<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


11. SEGMENTED INFORMATION

The company is  organized  and managed as a single  business  segment  being the
production of batteries and the company is viewed as a single operating  segment
by the chief operating  decision maker for the purposes of resource  allocations
and assessing performance.

The geographic  sources of the company's revenues based on location of customers
is as follows:
<TABLE>
<CAPTION>

                                                                          1999               1998
                                                                            $                  $
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                     <C>               <C>
Canada                                                                  87,969            172,098
United States                                                          838,018            576,156
---------------------------------------------------------------------------------------------------------------------------
                                                                       925,987            748,254
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

In addition,  sales to the company's four largest  customers  accounted for 30%,
16%, 15% and 11% of revenues for the year ended  December 31, 1999. In 1998, the
company's two largest customers accounted for 29% and 24% of revenues.

12. RELATED PARTY TRANSACTIONS

The company had the following transactions with a company that is a shareholder,
key supplier and whose president is also a director and officer of the company:
<TABLE>
<CAPTION>

                                                                          1999               1998
                                                                            $                  $
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                    <C>                 <C>
Acquisition of raw materials                                           129,333             34,246
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Talisman Enterprises Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       [in U.S. dollars and prepared in accordance with generally accepted
                   accounting principles in the United States]


13. RECENT REPORTING DEVELOPMENTS

The Financial  Accounting  Standards  Board has issued  FAS133,  Accounting  for
Derivative Instruments and Hedging Activities which introduces revised standards
for the recognition and measurement of derivatives and hedging  activities.  The
company  must  adopt  this  standard  in  the  first  quarter  of  fiscal  2001.
Implementation  of this standard is currently  expected to have no impact on the
company's  financial  position or results of operation  since the company has no
derivative financial instruments or hedging activities.

14. SUBSEQUENT EVENTS

Subsequent to year-end,  the company was approved to begin trading on NASDAQ. As
a result of this listing, the convertible U.S. promissory notes in the amount of
$5,073,135 were converted into 1,014,627 common shares of the company.

In connection with the listing, the company issued 900,000 common shares for net
proceeds of  approximately  $3,600,000.  Costs  incurred  to  December  31, 1999
relating to the issuance of common  shares,  have been  deferred and included in
prepaid expenses and other assets.

In addition,  the note payable to a shareholder  was settled in full through the
issuance of 70,000 common shares.