SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF
1934, for the fiscal year ended December 31, 1999

                            Commission File No. _____

                            ELAST TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

     NEVADA                                               88-0380544
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)

2505 Rancho Bel Air, Las Vegas, Nevada                         89107
(Address of registrant's principal executive offices)        (Zip Code)

                                  702.878.8310
              (Registrant's Telephone Number, Including Area Code)

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

                         Yes [X]                  No [_]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $0.00

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified  date within the past 60 days.  (See  definition  of affiliate in Rule
12b-2  of  the  Exchange   Act).   As  of  February   29,  2000,   approximately
$8,000,000.00.

The number of shares  outstanding  of the issuer's  only class of Common  Stock,
$.001 par value, was 7,961,481 on December 31, 1999.

Documents  incorporated  by reference.  There are no annual  reports to security
holders, proxy information statements,  or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.

Transitional Small Business Disclosure format (check one):

                         Yes [_]                  No [X]


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PART I.

Item 1.  Description of Business.

Development of the Company.  Med Mark, Inc., a Nevada  corporation  ("Company"),
was  incorporated  in the State of Nevada on November 5, 1996.  On or about June
29,  1998,  the Company  filed a  Certificate  of  Amendment  to its Articles of
Incorporation  changing the name of the Company to Elast Technologies,  Inc. The
executive  offices of the Company are located at 2505 Rancho Bel Air, Las Vegas,
Nevada 89107.  On February 1, 2000,  we relocated  our research and  development
facilities  to San Diego's  Center for  Applied  Competitive  Technologies.  The
Company's  telephone  number  in Las  Vegas is  702.878.8310.

Business of the Company.  The Company was organized to engage in the business of
manufacturing and marketing  medical  equipment and supplies,  as well as health
related products,  including vitamins and nutritional  supplements.  The Company
plans to develop its own products and may also obtain marketing and distribution
rights to existing products or products  currently in development by others. The
Company currently spends a significant portion of its time and funds in research
and  development  activities,  and has done so for the last two fiscal years, as
specified below

On or  about  June  30,  1998,  the  Company  acquired  all  of the  issued  and
outstanding  capital  stock  of  Elast  Technologies  Corporation,   a  Delaware
corporation ("Elast Delaware"),  and, as specified above,  changed the Company's
name from Med Mark, Inc. to Elast Technologies,  Inc. The Company entered into a
licensing agreement with Dr. Robert D. Milne and acquired the rights to develop,
test,  manufacture,  and  market Dr.  Milne's  patented  allergy-testing  device
("ELAST Device",  U.S. Patent No. 5413113,  issued on or about May 9, 1995). Dr.
Milne is a board-certified  family practice physician with extensive  experience
in allergy testing and preventative  medicine. The Company has spent significant
amounts of time  during its last two fiscal  years on research  and  development
activities relating to the ELAST Device.

The  licensing  agreements  relating  to the ELAST  Device  are  specified  more
completely herein under the subsection  entitled  Licensing  Agreements Were Not
the Result of Arms-Length Negotiations,

The ELAST Device is based on the clinical  observation that the human body loses
energy (that is, the body's normal  electrical flow is interrupted) when exposed
to a substance to which that body is  sensitive or allergic.  The energy loss is
rapid and is measured in  micro-voltage.  The ELAST  Device  measures the body's
energy loss and documents it graphically,  providing the treating physician with
an accurate  assessment  of a  patient's  sensitivity.  The  Company  intends to
clinically  test the device under the  direction of Dr.  Milne.  After  clinical
testing,  the ELAST Device will be submitted to the United  States Food and Drug
Administration ("FDA") for approval.

Human  therapeutic  products are subject to rigorous  pre-clinical  and clinical
testing and other approval procedures. The FDA and comparable foreign government
regulatory agencies require laboratory and clinical testing and other costly and
time-consuming  procedures  before medical products such as the ELAST Device can
be marketed.  Various federal,  state and foreign statutes also govern or affect
the manufacturing, safety, labeling, storage, and marketing of such products, as
well as record-keeping  incidental to such marketing.  Obtaining such approvals,
and  maintaining  ongoing  compliance  with these  requirements  can require the
expenditure  of significant  resources.  To date, the Company has not determined
what  procedures,  if any, will be required in this regard and has not begun any
of these procedures. The Company is currently investigating the possibility that
the ELAST  Device falls under a category for which FDA approval has already been
given. The Company


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anticipates  that the ELAST  Device  may be  included  in such a  category,  but
research  is  currently  being  done  by the  Company  to  determine  regulatory
requirements.  In  addition,  regulatory  testing  and  approval  would  require
significant  funding  and, in the event that such  funding  exceeded the present
financial  resources of the Company,  the Company would have to raise additional
capital to market the ELAST Device.

In the event the FDA or other  domestic or foreign  regulatory  agency  requires
approval and testing of the ELAST Device, prior to its commercial  exploitation,
the Company  cannot  provide any  assurances  that  testing  procedures  will be
successfully  completed,  or if completed,  demonstrate that the ELAST Device is
safe and  efficacious.  Further,  there can be no  assurances  that any required
government  approvals will be obtained.  Accordingly,  there can be no assurance
that the Company will be able to market the ELAST Device in the United States or
any foreign country. Any failure by the Company,  its subsidiary,  collaborators
or  licensees  to obtain any required  regulatory  approvals  or licenses  would
adversely  affect the  ability of the Company to market its  products  and would
have a significant adverse affect on the Company's revenues.

Employees.  The Company  currently  has 3 employees.  Management  of the Company
anticipates using consultants for business,  accounting,  engineering, and legal
services on an as-needed basis.  Because the Company  anticipates  entering into
licensing  and  manufacturing   agreements  with  third  parties,   the  Company
anticipates that it will require few additional employees during the next fiscal
year.

Competition.  Because the ELAST Device is based on a new concept in  diagnostics
and is  patented,  there  are  currently  no direct  competitors  with a similar
product in the  marketplace.  Once the ELAST Device gains product  acceptance in
the  medical  community,  the Company  anticipates  physicians  could  prescribe
home-testing.

However,  competition in the medical products industry,  generally,  is intense.
The  Company  and its  subsidiary  compete  directly  with other  companies  and
businesses that have developed and are in the process of developing technologies
and products which will be competitive  with the products  developed and offered
by the  Company  and  its  subsidiary.  There  can be no  assurance  that  other
technologies  or products  which are  functionally  equivalent or similar to the
technologies  and  products  of the  Company  and its  subsidiary  have not been
developed  or are not in  development.  The Company  expects  that  companies or
businesses  which may have developed or are  developing  such  technologies  and
products as well as other  companies  and  businesses  which have the  expertise
which would encourage them to develop and market products  directly  competitive
with those developed and marketed by the Company. Many of these competitors have
greater  financial  and other  resources,  and more  experience  in research and
development, than the Company.

For example,  according to its 1994 Annual Report,  Bayer Corporation  (formerly
Miles,  Inc.) holds over 50% of the worldwide allergy testing market,  exclusive
of in vitro testing.  In 1994,  Pharmacia  (now  Pharmacia & Upjohn,  Inc.) held
approximately  73% of the worldwide market share for in vitro allergy tests. The
Company's  additional  competitors in this area include Sanofi, Ciba Corning and
Diagnostic Products Corporation.

There can be no  assurance  that  competitors  have not or will not  succeed  in
developing technologies and products that are more effective than any which have
been or are being developed by the Company or which would render the products of
the Company obsolete and noncompetitive.  Many of the competitors of the Company
have substantially  greater  experience,  financial and technical  resources and
production,  marketing and  development  capabilities  than the Company.  If the
Company  commences  commercial sales of its products,  it will also be competing
with respect to manufacturing efficiency and sales and marketing capabilities.

Compliance with Environmental  Laws. The Company's  management  believes that no
toxic or hazardous  materials will be byproducts of the manufacturing  processes
of the ELAST Device; accordingly, management


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of the Company  believes  that the Company  will not incur  unforeseen  material
expenditures  related to the cost of compliance  with  applicable  environmental
laws,  rules or  regulations.  The  Company  believes  that it is  presently  in
compliance with all applicable  federal,  state, and local  environmental  laws,
rules  and  regulations.  Furthermore,  in the event the  Company  licenses  the
manufacturing  rights, of the ELAST Device,  to third parties,  the Company will
not  become  subject  to any such  restrictions.  However,  at some  time in the
future, the research, development, manufacturing and production processes of the
Company may involve the controlled use of hazardous  materials.  The Company may
be subject to  various  laws and  regulations  governing  the use,  manufacture,
storage,  handling,  and disposal of such materials and certain waste  products.
The risk of accidental  contamination or injury from hazardous  materials cannot
be completely eliminated. In the event of such an accident, the Company could be
held liable for any damages that result and any such liability  could exceed the
financial resources of the Company. In addition,  there can be no assurance that
in the future the Company  will not be required  to incur  significant  costs to
comply with environmental laws and regulations  relating to hazardous materials.
The Company cannot estimate the potential costs of complying with local,  state,
and federal environmental laws.

Comparison  of Results of  Operations at December 31, 1999 and December 1, 1998.
The Company's available cash and equivalents decreased from $226,818 at December
31, 1998 to $205,715  at December  31,  1999.  The  Company's  accounts  payable
increased from $8,617 to $14,613 and accrued payroll and payroll taxes increased
from $4,375 to $38,898 because of an increase in executive  compensation  due to
the addition of one executive and increased research and development activities.
The Company's net property and  equipment  increased  from $3,434 to $10,672 due
primarily  to the  purchase of  additional  computer  equipment.  The  Company's
property and equipment  consists of computers with an expected  useful life of 5
years.  Depreciation expense for the years ended December 31, 1999 and 1998 were
$2,546 and $370, respectively.

Officers'  compensation  increased from $203,682 for the year ended December 31,
1998 to  $344,737  for the year ended  December  31, 1999 due  primarily  to the
addition of one corporate executive. Research and development expenses increased
from $108,161 to $329,684,  due to increased research and development activities
and the hiring of two outside consultants. For the year ended December 31, 1999,
the  Company  expended  $60,000  on  consulting  fees in an  attempt  to  obtain
institutional  financing.  The  Company  did not  secure the  financing  and the
consulting  fee was  expensed.  Legal  and  professional  costs  decreased  from
$502,231 to $111,812  during the same periods.  The Company's cash flows used in
operating  activities  were  $305,374  for the year ended  December 31, 1998 and
$816,942 for the year ended  December 31, 1999.  The increase in funds  expended
was  primarily  the result of ongoing  research  and  development  necessary  to
effectuate the Company's  business plan.  Cash provided by financing  activities
increased from $427,716 for the year ended December 31, 1998 to $808,232 for the
year ended  December  31,  1999 due to an influx of  $380,516  resulting  from a
private placement of the Company's common stock.

Item 2. Description of Property.

Property held by the Company.  The  consolidated  financial  statements filed as
exhibits to this Registration  Statement include the accounts of the Company and
its  wholly-owned  subsidiary,   Elast  Technologies  Corporation,   a  Delaware
corporation  (previously  defined  in  this  Registration  Statement  as  "Elast
Delaware").  All significant intercompany  transactions have been eliminated. As
of the dates  specified in the following  table,  the Company held the following
property:


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              Property                       Dec. 31, 1999      Dec. 31, 1998
              --------                       -------------      -------------
Cash and equivalents                          $205,715.00       $226,818.00

License to use Patent No. 5413113                 $240.00           $400.00

Property and Equipment                         $10,672.00         $3,434.00

The Company  defines cash  equivalents as all highly liquid  investments  with a
maturity  of 3  months  or less  when  purchased.  The  Company's  property  and
equipment consists of computers with an expected useful life of 5 years.

Item 3. Legal Proceedings

There are no legal  actions  pending  against the Company nor are any such legal
actions contemplated, except as specified below:

There is presently a dispute  regarding  the validity of certain  stock  options
relating to the purchase of certain shares of common stock of Elast Technologies
Corporation,  a Delaware  corporation  ("Elast  Delaware"),  a subsidiary of the
Company.  On or about May 14, 1999,  Dr. Gary Marrone,  the former  Secretary of
Elast  Delaware and a former  Director of Elast  Delaware,  notified the Company
that he believed that the 100,000 unexpired Elast Delaware stock options held by
each Director of Elast  Delaware had been  converted into options to purchase as
many as 400,000 shares of the Company's common stock at a significantly  reduced
price as a result of the Plan of Merger. The Company believes that Dr. Marrone's
claim is without merit.  The Company further  believes that Dr. Marrone may take
legal  action with regard to this  matter.  The  Company  intends to  vigorously
oppose any such action.

Certain  disputes  have arisen  between and among the present  management of the
Company, on the one hand, and Edward L. Hamilton,  a former officer and director
of the Company, on the other hand. Specifically,  on or about December 30, 1999,
the holders of at least two-thirds (2/3) of the Company's issued and outstanding
shares of $.001 par value common stock  provided the  Company's  Secretary  with
written consents  approving the removal of Edward L. Hamilton as a member of the
Company's  Board of Directors.  The Company's Board of Directors also terminated
Mr.  Hamilton's  employment  as an officer  of the  Company on or about the same
date.

The Company  anticipates  that Mr. Hamilton may take legal action with regard to
this matter.  The Company is currently  engaging in settlement  discussions with
Mr.  Hamilton.  The  Company  intends  to oppose  vigorously  any  action by Mr.
Hamilton  in  regard  to this  matter,  but  will  also  consider  a  reasonable
settlement if the  Company's  Board of Directors  determines  that the terms and
conditions of such a settlement are in the best interests of the Company.

Certain disputes have developed  between David Phillips,  a former consultant to
the Company, on the one hand, and the Company, on the other hand,  regarding the
Company's  research and  development  activities.  Specifically,  Mr.  Phillips'
consulting   services   initially  focused  on  the  measurement  of  electrical
resistance by the ELAST Device (U.S. Patent No. 5413113,  issued on or about May
9, 1995) which the Company  owns the rights to develop,  test,  manufacture  and
market. Before providing the Company with consulting services, Mr. Phillips had


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developed  a means to measure  electrical  potential,  as opposed to  electrical
resistance.  In or about April, 1999, Mr. Phillips'  consulting  services to the
Company were  terminated.  By that time,  however,  he had,  while  working as a
consultant  to the  Company,  developed a  prototype  diagnostic  machine  which
incorporated technology to detect variances in electrical potential. The Company
anticipates  seeking further patent  protection for a diagnostic  machine which,
among other things,  detects  variances in electrical  potential;  however,  the
Company is  continuing  to develop  its own  technology  and  processes  and has
already  replaced  the  analog  system  favored by Mr.  Phillips  with a digital
system. The Company is informed and,  therefore,  believes that Mr. Phillips may
claim that the Company's patent application infringes on existing patents or, in
the alternative, may claim to have certain rights to the use or ownership of the
technology on which the Company's patent application is based.

Patent infringement  occurs when a person or business "makes,  uses, or sells" a
patented invention.  The language specifying particular patent rights, typically
referred  to as the  "patent  claims",  allows a patent  owner to  prohibit  any
unauthorized  manufacture,  use or sale of  products  which  utilize  the patent
owner's patented technology.

When two or more  persons  work  together to make an  invention,  they are joint
inventors  and a patent will be issued to them  jointly on the basis of a proper
patent application. If, on the other hand, one of these persons has provided all
of  the  ideas  of the  invention,  and  the  other  person  has  only  followed
instructions in making that  invention,  the person who contributed the ideas is
the sole inventor and the patent  application  and patent shall be in his or her
name  alone.  Moreover,  if one  person  furnishes  all of the  ideas to make an
invention  and  another  person  employs him or her or  furnishes  the money for
building and testing the invention, the patent application must be signed by the
true inventor,  and filed in the Patent and Trademark  Office, in the inventor's
name. This is the person who furnishes the ideas, not the employer or the person
who furnishes the money.

At this time, Mr. Phillips'  potential claim against the Company is that he is a
joint  inventor (or even the "true" or sole  inventor) of the Elast  Device,  as
presently  constructed.  Mr.  Phillips has  indicated  that he would contest any
patent  applications,  by the Company,  relating to diagnostic machines based on
technology  which detects  variances in electrical  potential.  If Mr.  Phillips
claims  that  the  Company's  patent  application  infringed  on any  patent  or
technology in which he had an ownership interest, he could sue for relief in the
appropriate  federal court.  He could ask the court for an injunction to prevent
the continuation of that  infringement and could also ask the court for an award
of damages because of that infringement. In the event he prevailed, Mr. Phillips
could force the  Company to pay him a royalty  for making,  using or selling the
Elast  Device,  or could  prevent the Company from making,  using or selling the
Elast Device.

Because the right conveyed by a patent is the right to prohibit a certain action
related to the  patented  invention,  most  patent  infringement  claims must be
settled by filing a suit  against the party who is  violating a patent  holder's
rights.  Mr.  Phillips'  potential  claim  is not a claim  that the  Company  is
infringing  on a patent  which he holds;  rather,  as  specified  above,  he has
indicated that he would challenge the Company's  patent  application  itself and
seek to  prevent  the  issuance  of a  patent  to the  Company  because  he is a
co-inventor  (or sole inventor) of the Elast Device.  The Company  believes that
Mr. Phillips'  potential claim is without merit because (i) the Elast Device was
patented long before Mr. Phillips  became a consultant to the Company,  (ii) the
Company's  research and development  activities have resulted in the development
of new technology  significantly  different  from the technology  claimed by Mr.
Phillips;  and (iii) the general  concept of measuring  electrical  potential is
not,  in and of itself,  patentable.  Challenges  to patent  applications  occur
frequently  as part of the patent  application  process  and,  as the Company is
continuing to refine its  technology,  it is too early to determine the validity
of any such potential challenge. The Company intends to pursue patent protection
for its technology  vigorously and will respond in an appropriate  manner to any
challenges by any party,  including,  but not limited to, Mr.  Phillips,  to any
patent  applications  filed by the Company  relating to the Elast  Device or its
derivatives.


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Subsequent to year end, the Company initiated an offering of 1,000,000 shares of
its  $.001  par  value  common  stock  on a best  efforts  basis  pursuant  to a
Registration  Statement  on Form SB-2 filed  with the  Securities  and  Exchange
Commission.  On or about  February  23,  2000,  the Company was  informed by the
Securities and Exchange Commission that its Registration  Statement on Form SB-2
was effective and placed 800,000 of those shares in CEDE & Company  through DTC,
one of the world's largest  securities  depository and a national  clearinghouse
for the  settlement of trades in corporate and  municipal  securities.  DTC is a
limited  purpose  trust  company  under New York  Banking  Law,  a member of the
Federal Reserve System, and a registered clearing agency with the Securities and
Exchange  Commission.  Those shares were to be for the account of Crescent  Fund
Partners LP.  Additionally,  the Company  placed (i) 50,000 of those shares with
Xcell Associates, a market maker; (ii) 50,000 of those shares with NC Capital, a
market maker; and (iii) 33,334 of those shares with ARDT, an investment  banker.
On or about  March 7, 2000,  the  Company was  informed  by the  Securities  and
Exchange  Commission  that the  financial  statements  filed with the  Company's
Registration  Statement on Form SB-2 were not current, and that the Company must
file a Post-Effective  Amendment containing more recent financial statements and
a Consent of Auditors to use those more recent financial statements. The Company
directed that the 800,000 shares in DTC be returned to certificate form and none
of those shares were  delivered to any  prospective  purchaser.  As of March 13,
2000, the shares placed with Xcell Associates,  NC Capital and ARDT had not been
sold or  distributed  to any  person.  On March  14,  2000,  the  Company  filed
Post-Effective  Amendment No. 1 to the Registration  Statement on Form SB-2 with
current  financial  statements.  The Company has  demanded  that  Crescent  Fund
Partners LP return the 800,000  shares placed through the DTC, but Crescent Fund
Partners LP has only returned approximately 520,000 of those shares to date. The
Company believes Crescent Fund Partners LP may be selling or otherwise disposing
of those  shares  without  the  permission  of the  Company  and may seek  court
intervention if this matter cannot be resolved.

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

Not Applicable

PART II.

Item 5. Market for Common Equity and Related Stockholder Matters

Reports to  Security  Holders.  The  Company  is a  reporting  company  with the
Securities  and Exchange  Commission  ("SEC").  The public may read and copy any
materials  filed with the SEC at the SEC's  Public  Reference  Room at 450 Fifth
Street N.W.,  Washington,  D.C. 20549. The public may also obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports,  proxy and information
statements,  and other information  regarding  issuers that file  electronically
with the SEC.  The  address  of that  site is  http://www.sec.gov.  The  Company
currently maintains its own Internet address at www.elast.com.

The Company  participates  in the OTC Bulletin  Board,  an electronic  quotation
medium for  securities  traded  outside the Nasdaq Stock  Market.  The Company's
common stock trades on the OTC Bulletin  Board under the trading  symbol "ESTG".
This market is extremely  limited and the prices for the Company's  common stock
quoted by brokers is not  necessarily a reliable  indication of the value of the
Company's   common  stock.  The  Company  was  listed  with  Standard  &  Poor's
Corporation Records by publication on or about December 3, 1998.

The Company is authorized to issue 25,000,000 shares of common stock,  $.001 par
value, each share of common stock having equal rights and preferences, including
voting  privileges.  The shares of $.001 par value  common  stock of the Company
constitute  equity interests in the Company  entitling each shareholder to a pro
rata share


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of cash  distributions made to shareholders,  including  dividend payments.  The
Bylaws of the Company specify how the cash available for  distribution,  whether
occurring  from  operations or sales or  refinancing,  is to be shared among the
shareholders. The holders of the Company's common stock are entitled to one vote
for each share of record on all matters to be voted on by shareholders. There is
no cumulative voting with respect to the election of directors of the Company or
any other  matter,  with the  result  that the  holders  of more than 50% of the
shares voted for the election of those directors can elect all of the Directors.
The holders of the  Company's  common  stock are  entitled to receive  dividends
when, as and if declared by the Company's  Board of Directors from funds legally
available  therefor;  provided,  however,  that cash  dividends  are at the sole
discretion of the Company's  Board of  Directors.  In the event of  liquidation,
dissolution  or  winding up of the  Company,  the  holders  of common  stock are
entitled to share ratably in all assets remaining  available for distribution to
them after payment of  liabilities  of the Company and after  provision has been
made for each class of stock,  if any,  having  preference  in  relation  to the
Company's common stock.  Holders of the shares of Company's common stock have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions  applicable to the Company's  common  stock.  All of the  outstanding
shares of Company's common stock are duly authorized, validly issued, fully paid
and non-assessable.

Dividend  Policy.  The Company has never declared or paid a cash dividend on its
capital  stock and does not expect to pay cash  dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business.  Any  dividends  declared in the future will be at
the  discretion of the Board of Directors and subject to any  restrictions  that
may be imposed by the Company's lenders.

Stock Option Plan.  The Company's  Board of Directors has approved and adopted a
stock option plan ("Stock Option Plan"),  pursuant to which 5,000,000  shares of
the  Company's  $.001 par value  common  stock will be reserved  for issuance to
satisfy  the  exercise  of  options.  The Stock  Option Plan will be designed to
retain  qualified  and  competent  officers,  employees,  and  directors  of the
Company.  The  Company's  Board of  Directors,  or a  committee  thereof,  shall
administer  the  Stock  Option  Plan  and  will be  authorized,  in its sole and
absolute  discretion,  to grant options  thereunder to all eligible employees of
the Company, including officers, and to the Company's directors,  whether or not
those  directors  are also  employees  of the  Company.  Options will be granted
pursuant to the  provisions  of the Stock Option Plan on such terms,  subject to
such  conditions  and at such  exercise  prices  as shall be  determined  by the
Company's Board of Directors.  Options granted pursuant to the Stock Option Plan
shall not be  exercisable  after the  expiration  of ten years  from the date of
grant.

Warrants. At December 31, 1999, the Company had outstanding warrants to purchase
500,000 shares of the Company's  common stock at a price of $2.40 per share, all
of which expire by their own terms in July, 2004.

The high and low bid information for the Company's common stock that follows was
obtained from  Yahoo!Finance.  These  quotations  reflect  inter-dealer  prices,
without retail  mark-up,  mark-down or commission  and may not represent  actual
transactions. There is no information available prior to October, 1999.

Date                        Open           High           Low            Close
----                        ----           ----           ---            -----

October 1999               $2.125         $2.125         $1.875         $1.875

December 1999              $1.6875        $1.875         $0.9375        $0.9375

February 2000              $2.25          $2.25          $1.9375        $2.0312


                                        8

<PAGE>


Item 6. Plan of Operation

THIS  PROSPECTUS  SPECIFIES  FORWARD-LOOKING  STATEMENTS  OF  MANAGEMENT  OF THE
COMPANY   ("FORWARD-LOOKING    STATEMENTS")   INCLUDING,   WITHOUT   LIMITATION,
FORWARD-LOOKING STATEMENTS REGARDING OUR EXPECTATIONS,  BELIEFS,  INTENTIONS AND
FUTURE STRATEGIES.  FORWARD-LOOKING  STATEMENTS ARE STATEMENTS THAT ESTIMATE THE
HAPPENING   OF  FUTURE   EVENTS   AND  ARE  NOT  BASED  ON   HISTORICAL   FACTS.
FORWARD-LOOKING  STATEMENTS  MAY BE  IDENTIFIED  BY THE  USE OF  FORWARD-LOOKING
TERMINOLOGY,  SUCH AS "COULD",  "MAY", "WILL",  "EXPECT",  "SHALL",  "ESTIMATE",
"ANTICIPATE",  "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", "INTEND" OR SIMILAR
TERMS,   VARIATIONS  OF  THOSE  TERMS  OR  THE  NEGATIVE  OF  THOSE  TERMS.  THE
FORWARD-LOOKING  STATEMENTS  SPECIFIED IN THIS  PROSPECTUS HAVE BEEN COMPILED BY
MANAGEMENT OF THE COMPANY ON THE BASIS OF  ASSUMPTIONS  MADE BY  MANAGEMENT  AND
CONSIDERED BY  MANAGEMENT  TO BE  REASONABLE.  FUTURE  OPERATING  RESULTS OF THE
COMPANY, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION,  GUARANTY, OR
WARRANTY IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.

THE ASSUMPTIONS USED FOR PURPOSES OF THE  FORWARD-LOOKING  STATEMENTS  REPRESENT
ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES
IN ECONOMIC,  LEGISLATIVE,  INDUSTRY, AND OTHER CIRCUMSTANCES.  AS A RESULT, THE
IDENTIFICATION AND INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN
DEVELOPING  AND SELECTING  ASSUMPTIONS  FROM AND AMONG  REASONABLE  ALTERNATIVES
REQUIRE THE EXERCISE OF JUDGMENT.  TO THE EXTENT THAT THE ASSUMED  EVENTS DO NOT
OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM ANTICIPATED OR PROJECTED RESULTS,
AND,  ACCORDINGLY,  NO  OPINION  IS  EXPRESSED  ON THE  ACHIEVABILITY  OF  THOSE
FORWARD-LOOKING   STATEMENTS.  NO  ASSURANCE  CAN  BE  GIVEN  THAT  ANY  OF  THE
ASSUMPTIONS RELATING TO THE FORWARD-LOOKING  STATEMENTS SPECIFIED IN THIS REPORT
ARE ACCURATE,  AND WE ASSUME NO  OBLIGATION  TO UPDATE ANY SUCH  FORWARD-LOOKING
STATEMENTS.

General.  We intend to manufacture and market medical devices.  We are currently
negotiating  proposed marketing agreements and plans to negotiate and enter into
marketing  agreements with appropriate  distributors and marketing agents. Other
than the ELAST  Device,  we do not  currently  have any plans to  develop  other
products.  We may,  however,  acquire the right to sell or  distribute  existing
products,  or  obtain  licensing,  marketing,  distribution  or other  rights to
compatible  products.  Therefore,  other  than costs  related  to the  continued
development of the ELAST Device, we do not anticipate  significant  expenditures
on acquisition or development of other products during the current fiscal year.

On February 1, 2000, we relocated our research and development facilities to San
Diego's Center for Applied  Competitive  Technologies  ("CACT").  Established in
1990, CACT is one of twelve advanced  technology centers designated by the State
of California to serve firms in the manufacture of biomedical and  bio-technical
products  and  to  assist  such  companies  in  transition   from  research  and
development activities to manufacturing their products.  CACT is a member of the
National Coalition of Advanced Technology Centers and has served since 1992 as a
regional  affiliate of the National  Institute for  Standards  and  Technology's
Manufacturing  Extension Centers. Since 1997, CACT has been a Regional Affiliate
of the  National  Aeronautics  and  Space  Administration's  Far  West  Regional
Technology Transfer Center.


                                        9

<PAGE>


We will focus our initial marketing and distribution  efforts on development and
commercial  exploitation  of the ELAST  Device.  Our present plan is to lease or
license the ELAST Device.  We believe that such a plan minimizes  variable costs
and creates an informed and updated client base.

Our  business  will  expose us to  potential  product  liability  risks that are
inherent in the testing,  manufacturing and marketing of medical products. We do
not have product liability insurance, and there can be no assurance that we will
be able to  obtain  or  maintain  such  insurance  on  acceptable  terms  or, if
obtained,  that such insurance will provide adequate  coverage against potential
liabilities.  We face an inherent business risk of exposure to product liability
and other claims in the event that the  development  or use of our technology or
products is alleged to have resulted in adverse  effects.  Such risk exists even
with respect to those products that are  manufactured  in licensed and regulated
facilities or that otherwise  possess  regulatory  approval for commercial sale.
There can be no  assurance  that we will  avoid  significant  product  liability
exposure. There can be no assurance that insurance coverage will be available in
the future,  on  commercially  reasonable  terms; or that such insurance will be
adequate  to  cover  potential  product  liability  claims;  or  that a loss  of
insurance coverage would not materially adversely affect our business, financial
condition and results of operations.  While we have taken,  and will continue to
take,  what we believe are  appropriate  precautions,  there can be no assurance
that we will  avoid  significant  liability  exposure.  An  inability  to obtain
product  liability  insurance at acceptable cost or to otherwise protect against
potential    product   liability   claims   could   prevent   or   inhibit   the
commercialization  of products  developed  by the Company.  A product  liability
claim could have a material adverse effect on our business,  financial condition
and results of operations.

Our strategy for growth is  substantially  dependent  upon our ability to market
and distribute  products  successfully.  Other  companies,  including those with
substantially greater financial, marketing and sales resources, compete with the
Company,  and have the  advantage of marketing  existing  products with existing
production and distribution  facilities.  There can be no assurance that we will
be able to market and distribute  products on acceptable  terms,  or at all. Our
failure to market our products successfully could have a material adverse effect
on our business, financial condition or results of operations.

The medical  products  industry  has been under  increasing  scrutiny by various
state and federal  regulatory  agencies.  While we do not presently  require any
government  approval to create,  develop or manufacture the ELAST Device, we may
be subject to various forms of government regulations, including consumer safety
laws and  environmental  safety laws.  Any future  violation  of, or the cost of
compliance with, these laws and regulations could have a material adverse effect
on our business, financial condition and results of operations.

The  medical  products  industry  is rapidly  changing  through  the  continuous
development  and  introduction  of new  products.  Our  strategy  for  growth is
substantially  dependent  upon our ability to  successfully  introduce the ELAST
Device. Accordingly, our ability to compete may be dependent upon our ability to
enhance and improve our products  continually.  There can be no  assurance  that
competitors  will not develop  technologies or products that render our products
obsolete  or less  marketable.  We may be  required  to adapt  to  technological
changes in the industry  and develop  products to satisfy  evolving  industry or
customer requirements, any of which could require the expenditure of significant
funds.  At this  time,  we do not have a source of  commitment  for such  funds.
Continued  refinement  and  improvement  costs are risks inherent in new product
development,  including  unanticipated  technical or other  problems which could
result in material delays in product commercialization.

Liquidity and Capital  Resources.  During the year ended  December 31, 1999, the
Company  received  approximately  $808,250  from the sale of  common  stock.  At
December 31,  1999,  the Company had cash  resources  of $205,715.  The cash and
equivalents constitute our present internal sources of liquidity. Because we are
not generating any revenues from the sale or licensing of our products, our only
external source of liquidity is the sale


                                       10

<PAGE>


of our capital  stock.  The Company  registered  1,000,000  shares of its common
stock for sale on a "best  efforts"  basis and believes it will sell some or all
of this stock during the next 12 months.

The Company  believes  its current cash  resources  coupled with those funds the
Company  expects to raise  pursuant to the sale of the  1,000,000  shares of its
common stock that the Company  recently  registered,  are sufficient to complete
prototype  development and limited  clinical trials of the ELAST Device.  If the
ELAST Device performs as anticipated,  the Company believes that it will be able
to raise the funds necessary to begin  production of the ELAST Devices - for the
North American and international  clinical trials and the FDA approval process -
through the sale of equity,  debt, or licensing.  Should the  development of the
prototype or clinical testing of the prototype take more time than  anticipated,
or if the  results of testing  require  significant  modifications  to the ELAST
Device,  sufficient  funds may not be available to enable the ELAST Device to be
completed and brought to market during the time period currently  anticipated by
the Company.

Manufacturing  and  Marketing  the  Company's  Products.  The  Company  does not
anticipate  any supply  problems.  As this time,  the  Company  does not require
manufacturing  facilities.  As the  principal  components  of the  ELAST  Device
consist of  electronic  parts that are readily  available,  the Company does not
anticipate that its manufacturer  will have any supply  problems.  The Company's
operations are not effected by any seasonal factors.

Company's Plan of Operation For Next 12 Months.  Once the initial testing of the
ELAST  Device  is  completed,  the  Company  will  manufacture,  or  cause to be
manufactured,  about 10 units of the ELAST  Device,  which will be provided to a
selected group of physicians,  including eye, ear, nose and throat  specialists,
chemical   ecologists,   and  allergy  specialist  doctors,   naturopaths,   and
chiropractors.  Thereafter,  the ELAST Device will be marketed to physicians and
hospitals  to test  patients  for  prescription  drug  compatibility,  to  avoid
drug-related  illnesses.  The  Company's  operating  plan is to market the ELAST
Device as a  stand-alone  device that can be  attached to "medical  environment"
computers.  Once the ELAST Device gains acceptance in the medical community, the
Company anticipates that a patient home-testing unit may be developed.

Impact of the Year 2000.  The Year 2000  (commonly  referred to as "Y2K")  issue
resulted  from the fact that many  computer  programs  were  written  using two,
rather than four, digits to identify the applicable year. As a result,  computer
programs with  time-sensitive  software might recognize a two digit code for any
year in the 21st  century as related to the 20th  century.  For  example,  "00",
entered in a date-field  for the year 2000, may be interpreted as the year 1900,
resulting in system failures or  miscalculations  and disruptions of operations,
including,  among other things, a temporary inability to process transactions or
engage in other normal business  activities.  While companies and governments in
the United States spent an estimated $150 billion to $225 billion  repairing the
problem,  countries like Russia and China, which spent relatively minor amounts,
seemed to clear the New Year's Day hurdle with equal  success.  Major news media
in the United  States are  reporting  that,  after years of work and billions of
dollars  spent  repairing  the Year  2000  computer  glitch,  the  technological
tranquility  of New Year's Day has raised a new concern  that the United  States
overreacted to this problem. While it is still too soon to state positively that
the Y2K transition has passed  without  mishap,  we believe that Y2K issues will
not have a material adverse affect on our business.

Changes in Number of  Employees.  During the next 12  months,  depending  on the
success of the Company's  market  expansion plan, the Company may be required to
hire  additional  employees;  however,  the  Company  is not able to  provide  a
reasonable  estimate  of the number of such  additional  employees  which may be
required at this time.


                                       11

<PAGE>


Item 7. Financial Statements

Copies of the financial  statements  specified in Regulation  228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.

Item  8.  Changes  In and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure

There have been no changes in or  disagreements  with the Company's  accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.

PART III.

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

The directors and principal  executive  officers of the Company are as specified
on the following table:

        Name                   Age                   Position
        ----                   ---                   --------
Thomas Krucker                  60         President and Director

Robert D. Milne, M.D.           53         Chairman of the Board of Directors

Nicholas Spencer                38         Director

Dr. Eduardo Daniel              58         Director
Jimenez Gonzalez

Thomas Krucker is the President,  Chief Executive Officer, and a director of the
Company.  Mr.  Krucker  graduated  from the  University  of  Arizona in 1962 and
received a Juris  Doctorate  degree  from  Pepperdine  University  in 1969.  Mr.
Krucker  served  with Toyota USA for  approximately  20 years.  Mr.  Krucker was
formerly  the  chief  operating  officer  of Fun City  Popcorn,  Inc.,  a Nevada
corporation  which in 1997 was  acquired by Tone  Products and now operates as a
wholly-owned  subsidiary  of Tone  Products.  Mr.  Krucker left Tone Products to
accept the office of President of the Company.

Robert D. Milne,  M.D. is the Chairman of the Board of Directors of the Company.
Dr.  Milne  is a board-  certified  family  practice  physician  with  extensive
experience in allergy testing and preventative medicine. He is also the inventor
of the ELAST  Device.  Before  starting  his own  practice at the Milne  Medical
Center in Las Vegas,  Nevada, Dr. Milne was Medical Director at the Omni Medical
Center  and  also  practiced  medicine  at  the  Nevada  Clinic  after  previous
assignments in emergency medicine and a family practice. Dr. Milne is the author
of  numerous  papers  in the  medical  field  and has  authored  several  books,
including The Definitive  Guide to Headaches and The Photon  Connection - Energy
for the New Millennium.

Nicholas  Spencer is a director  of the  Company.  Mr.  Spencer has more than 15
years experience in starting,  managing,  and improving business performance and
now  specializes  in business  planning  and start-up  companies  with a special
emphasis on marketing and development. Mr. Spencer currently serves on the Board
of Directors


                                       12

<PAGE>


of Medsearch Pty. Limited,  Sydney, New South Wales, and also serves as Chairman
of the Board for that company.

Dr.  Eduardo  Daniel  Jimenez  Gonzalez is an  international  banker and Mexican
attorney who  specializes in  immigration,  civil,  and criminal  matters in the
Republic of Mexico and who provides international  consulting services regarding
finance, credit, commerce, industrial and tourist development, import and export
matters, and administrative management. Dr. Gonzalez is a Fullbright Scholar who
received  a Master  of Arts  Degree  from  John  Hopkins  University,  School of
Advanced  International  Studies,  in  Washington,  D.C.  and  who  has  studied
International  Economics  at Harvard  University  and American  Civilization  at
Georgetown  University.  Dr.  Gonzalez  has served as a counselor at the Mexican
Embassy in  Washington,  D.C.,  as a Mexican  Minister in Bonn, as Ambassador at
Large for Mexico in Oslo,  Norway and Islandia,  and as private  secretary for a
former  President  of  Mexico.  He has  served as  Managing  Director  for Latin
American  Investment  Banking  for  First  Chicago  Bank  in  Panama,  Colombia,
Venezuela,  Ecuador and Peru, as as First Chicago Bank's  Vice-President for the
Western Hemisphere.  He is an international lecturer on economic development and
an International Law Professor at the University of Mexico.

There is no family relationship  between any of the officers or directors of the
Company. There are no orders,  judgments,  or decrees of any governmental agency
or  administrator,  or of any  court  of  competent  jurisdiction,  revoking  or
suspending  for cause any  license,  permit or other  authority to engage in the
securities  business or in the sale of a particular  security or  temporarily or
permanently  restraining any officer or director of the Company from engaging in
or  continuing  any  conduct,  practice or  employment  in  connection  with the
purchase  or sale of  securities,  or  convicting  such  person of any felony or
misdemeanor involving a security, or any aspect of the securities business or of
theft  or of any  felony,  nor  are  any of the  officers  or  directors  of any
corporation or entity affiliated with the Company so enjoined.

Section 16(a) Beneficial  Ownership Reporting  Compliance.  The Company does not
presently  have  knowledge  as to whether all of its  officers,  directors,  and
principal  shareholders  have filed all  reports  required  to be filed by those
persons on, respectively,  Form 3 ( Initial Statement of Beneficial Ownership of
Securities),  a  Form  4  (Statement  of  Changes  of  Beneficial  Ownership  of
Securities),   or  a  Form  5  (Annual  Statement  of  Beneficial  Ownership  of
Securities).

Item 10. Executive Compensation.

Any compensation  received by officers,  directors,  and management personnel of
the Company  will be  determined  from time to time by the Board of Directors of
the Company.  Officers,  directors, and management personnel of the Company will
be reimbursed for any out-of-pocket  expenses incurred on behalf of the Company.
Officers'  compensation,  in the aggregate,  increased from $203,682  during the
year ended 1998 to  $344,737  during the year ended  1999.  Compensation  to the
Company's officers is specified on the following chart:

<TABLE>
<CAPTION>
                   Cash          Auto                      Meals &                                    Total
               Compensation     Expense      Insurance  Entertainment     Travel       Housing     Compensation
               ------------     -------      ---------  -------------     ------       -------     ------------
<S>              <C>           <C>           <C>           <C>           <C>           <C>           <C>
T. Krucker       $ 66,040      $ 16,269      $  8,397      $ 69,004      $ 20,184      $   --        $179,894
T. Hamilton       110,894         8,470         1,701          --            --          15,000       136,065
Dr. Milne          28,778          --            --            --            --            --          28,778

Totals           $205,712      $ 24,739      $ 10,098      $ 69,004      $ 69,004        15,000      $344,737
</TABLE>


                                       13

<PAGE>


During 1999,  the Company also granted  options to purchase up to 150,000 shares
of the Company's common stock to two members of the Board of Directors; however,
because the exercise price of the options  equaled or exceeded the fair value of
the Company's  common stock at the date of grant,  no  compensation  expense was
recognized in connection with the issuance of these options. In 1999 the Company
paid  $11,000 to an officer and major  shareholder  for rental and purchase of a
vehicle.  Of the amount paid,  $2,700  represented  automobile rental and $8,300
represented  the purchase price.  The automobile was used for business  purposes
and subsequently sold to an independent party for $5,000. The Company recognized
a $2,608  loss  from the  sale of the  asset.  Other  expenditures  for  travel,
entertainment,  insurance,  car leases,  and  miscellaneous  expenses  were also
categorized as compensation to officers during fiscal 1999.

Shares Issued as Compensation for Services.  In 1998, the Company issued 270,000
shares of its $.001 par value common stock as  compensation  for  consulting and
engineering services, and employee compensation, as follows:

     (i) Consultants were issued 115,000 shares of the Company's $.001 par value
common stock as additional compensation for their services to the Company. Those
shares were valued at what the Company believes was the fair market value at the
time of issuance, which was $1.50 per share.

     (ii) Third party engineers were issued 55,000 shares of the Company's $.001
par value  common stock as  additional  compensation  for their  services to the
Company.  Those  shares were valued at what the  Company  believes  was the fair
market value at the time of issuance, which was $1.54 per share.

     (iii) Dr. Milne, an officer, director and major shareholder of the Company,
was issued  100,000  shares of the  Company's  $.001 par value  common  stock as
additional  compensation  for his  services to the  Company;  specifically,  his
continuing  efforts related to the development of certain  technology which will
be utilized by the Company in its business operations.  Those shares were valued
at what the Company  believes was the fair market value at the time of issuance,
which was $1.50 per share.

     In 1999,  the Company  issued shares of its $.001 par value common stock as
compensation for services provided to the Company, and employee compensation, as
follows:  13,400  shares to Gerald Klein;  4,700 shares to Ron  Almadova;  4,700
shares to  William  Milne;  3,333  shares  to Hope  Lane;  25,000  shares to Jim
Woodens; and 25,000 shares to John Martinez.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The following  table sets forth  certain  information  regarding the  beneficial
ownership of the  Company's  common  stock as of December 31, 1999,  by (i) each
person or entity known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of common stock, (ii) each of the Company's  directors
and named executive officers,  and (iii) all directors and executive officers of
the Company as a group.  The number of shares  outstanding  of the issuer's only
class of Common Stock, $.001 par value, was 7,961,481 on December 31, 1999.

(a) Security  Ownership of Certain  Beneficial  Owners.  Other than officers and
directors,  no  persons  are  beneficial  owners of 5% or more of the  Company's
issued and outstanding common stock.

(b) Security  Ownership of  Management.  The directors  and principal  executive
officers  of the  Company  directly  or  beneficially  own,  in  the  aggregate,
4,445,308 shares of the Company's  common stock, or approximately  55.8 % of the
issued  and  outstanding  common  shares,  as set forth on the  following  table
(percentages  are  rounded  off  to  the  nearest  one-tenth  of  one  percent).
Associates and family members residing


                                       14

<PAGE>


with directors and principal executive officers also own shares of the Company's
common  stock,  as specified  under the heading  entitled  Beneficial  Ownership
immediately below the table.

<TABLE>
<CAPTION>
                                                                     Amount and
                         Name and Address                             Nature of              Percent of
Title of Class               of Owner                                   Owner              Class (approx.)
--------------           ----------------                            ----------            ---------------
<S>                    <C>                                     <C>                              <C>
$.001 par value        Dr. Robert Milne(1)                     4,029,976                        50.6%
Common Stock           2432 Greens Ave.                        Secretary and Director
                       Henderson, NV 89014

$.001 par value        Thomas Krucker(2)                       390,332                           4.9%
Common Stock           2505 Rancho Bel Air                     President and Director
                       Las Vegas, NV 89107

$.001 par value        Nicholas Spencer                        25,000                            0.3%
Common Stock           13 Edinburgh Road                       Director
                       N.S.W., Australia

                       Total shares beneficially
                       owned by all officers and directors
                       as a group                              4,445,308                        55.8%
</TABLE>

Beneficial Ownership.  Beneficial ownership is determined in accordance with the
rules of the Commission and generally  includes voting or investment  power with
respect to  securities.  In  accordance  with  Commission  rules,  shares of the
Company's  common stock which may be acquired  upon exercise of stock options or
warrants which are currently  exercisable or which become  exercisable within 60
days of the date of the table are deemed  beneficially  owned by the  optionees.
Subject to community  property laws, where  applicable,  the persons or entities
named in the table above have sole voting and  investment  power with respect to
all shares of the  Company's  common stock  indicated as  beneficially  owned by
them.

(1) Shares of the  Company's  common stock are held by (i) Dr.  Milne;  (ii) Dr.
Milne's spouse, Julie Milne; (iii) immediate family members Drew Milne, Meredith
Milne and Brook Milne, who reside with Dr. Milne; (iv) a Milne family trust; and
(v) the Milne Medical Center, an affiliate of Dr. Milne.

(2) Shares of the  Company's  common stock are held by (i) Mr.  Krucker;  (ii) a
trust  in the name of Mr.  Krucker's  spouse,  Katherine;  and  (iii)  Katherine
Krucker as custodian for his daughter, Kimberly, who resides with him.

On or about October 18, 1999, the Company issued a press release which specified
that Dr. Milne had agreed to retire 1.5 million  shares of the Company's  common
stock  held in his name in  exchange  for stock  options to  purchase  up to 1.5
million shares of the Company's  common stock at $1.68 per share.  Subsequent to
that press release,  the Company's Board of Directors  determined that Dr. Milne
had not received  consideration  for the retirement of those shares;  therefore,
those shares were not retired, and the stock options were never issued.

Changes in Control.  Management of the Company is not aware of any  arrangements
which  may  result in  "changes  in  control"  as that  term is  defined  by the
provisions of Item 403(c) of Regulation S-B.  Pursuant to a Plan of Merger filed
with the  Delaware  Secretary  of  State,  in  June,  1998,  Elast  Technologies
Corporation,  a Delaware  corporation  (previously  defined in this Registration
Statement as "Elast Delaware"), merged with and


                                       15

<PAGE>


into  Elast  Merger,  Inc.,  a  Nevada  corporation,  which  was a  wholly-owned
subsidiary  of the  Company.  Shareholders  who  formerly  held  stock  in Elast
Delaware received 4 shares of the Company's common stock for each share of their
Elast Delaware stock on or about June 30, 1998,  with the result that the former
shareholders  of Elast Delaware now hold a controlling  interest in the Company,
and Elast Delaware is now a wholly-owed  subsidiary of the Company.  The Company
changed  its name from Med Mark,  Inc. to Elast  Technologies,  Inc. on or about
October 27, 1998.

Item 12. Certain Relationships and Related Transactions.

Related Party Transactions. Dr. Milne, the Chairman of the Board of the Company,
provides office space and services to the Company, at no cost to the Company. At
such time as the Company begins receiving revenue from operations, management of
the Company  anticipates  that the Company will begin paying rent for 800 square
feet of this office space, at a rate of $1,200 per month.

Also in 1999, Edward L. Hamilton,  who was, at the time, an officer and director
of the Company, was provided housing in a residence owned by Thomas Krucker. The
Company paid Mr.  Krucker  $15,000 for the housing and that cost was included in
Mr. Hamilton's compensation for 1999.

In 1999, the Company paid to Thomas Krucker, an officer and major shareholder of
the Company, $11,000 for the rental and purchase of an automobile. Of the amount
paid, $2,700  represented  automobile rental and $8,300 represented the purchase
price. The automobile was used for business  purposes and who subsequently  sold
to an independent party for $5,000.  The Company recognized $2,608 loss from the
sale of the asset.

Licensing Agreement Was Not the Result of Arms-Length Negotiations. As set forth
above, on or about June 12, 1996, Elast Delaware  acquired a license from Robert
D. Milne, M.D., who was, at that time,  Chairman of the Board of Directors and a
major  shareholder  of Elast  Delaware,  whereby  Elast  Delaware  acquired  the
exclusive  right to  develop,  manufacture  and market the ELAST  Device.  Elast
Delaware issued to Dr. Milne 3,200,000 shares of its common stock to acquire the
licensing  rights.  The Company believes that the fair market value of 3,200,000
shares  of Elast  Delaware's  common  stock at the time of the  transaction  was
$800.00,  and, therefore,  the Company determined that 3,200,000 shares of Elast
Delaware's  common stock was fair  consideration  for the license agreement with
Dr. Milne. Because  modifications may be made during the development and testing
of the ELAST Device,  it is not certain that the final  technology  developed by
Elast Delaware will be protected by the original patent.

Item 13. Exhibits and Reports on Form 8-K

     (a) Exhibits

Exhibit No.

    3.1             Certificate of Incorporation
                    (Charter Document)*

    3.2             Amendment to Certificate of Incorporation
                    (Charter Document)*

    3.3             Bylaws*


                                       16

<PAGE>


    4.              Instruments Defining the Rights of Holders (not applicable)

    9.              Voting Trust Agreement - Not Applicable

   10.1             Financing Agreement
                    (material contract)**

   10.2             Frontier GlobalCenter, Inc. Agreement
                    (material contract)*

   11.              Statement Re: Computation of Per Share Earnings(Loss)**

   16.              Letter on change in certifying accountant (Not applicable)

   18.              Letter on Change in Accounting Principles (Not applicable)

   21.              Subsidiaries of the Registrant**

   22.              Published Report Regarding Matters Submitted to Vote
                    (not applicable)

   23.1             Consent of Auditors

   23.2             Consent of Counsel*

   24.              Power of Attorney (Not applicable)

   27.              Financial Data Schedule

   99.              Additional Exhibits (not applicable)

*Previously filed as Exhibits to Registration  Statement on Form SB-2 filed with
the Commission on December 7, 1999.

**Included in consolidated financial statements filed herewith.

     (b)  Reports on Form 8-K

          The Company has not filed any reports on Form 8-K with the Commission.


                                       17

<PAGE>


                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the  Registrant has
caused this report to be signed on its behalf by the  undersigned in the City of
Newport Beach, California, on March 29, 2000.

                                        Elast Technologies, Inc.,
                                        a Nevada corporation

                                        By:  /s/
                                             ---------------------------
                                                  Thomas Krucker
                                        Its:      President and Secretary


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.

ELAST TECHNOLOGIES, INC.

/s/
---------------------------            March  29, 2000
Director


/s/
---------------------------            March  29, 2000
Director


/s/
---------------------------            March  29, 2000
Director


                                       18

<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage )

                        Consolidated Financial Statements


                      As of December 31, 1999 and 1998 and
       For Each of the Two Years in the Period Ended December 31, 1999 and
       For the Period from June 12, 1996 (Inception) to December 31, 1999

<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                 Index to the Consolidated Financial Statements

                      As of December 31, 1999 and 1998 and
       For Each of the Two Years in the Period Ended December 31, 1999 and
       For the Period from June 12, 1996 (Inception) to December 31, 1999
--------------------------------------------------------------------------------

Report of Independent Auditors                                                1
Consolidated Financial Statements of Elast Technologies, Inc.:

  Consolidated Balance Sheets, December 31, 1999 and 1998                     2

  Consolidated  Statements of  Operations  for Each of the Two Years in
    the Period ended December 31, 1999 and for the Period from
    June 12, 1996 (Inception) to December 31, 1999                            3

  Consolidated  Statements of Shareholders'  Equity for Each of the Two
   Years in the Period ended December 31, 1999 and for the
   Period from June 12, 1996 (Inception) to December 31, 1999                 4

  Consolidated  Statements  of Cash  Flows for Each of the Two Years in
    the Period ended December 31, 1999 and for the Period from
    June 12, 1996 Inception) to December 31, 1999                             7

Notes to the Consolidated Financial Statements                               10

<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Shareholders
Elast Technologies, Inc.

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Elast
Technologies,  Inc. (a company in the development stage) as of December 31, 1999
and 1998, and the related consolidated  statements of operations,  shareholders'
equity,  and cash flows for each of the two years in the period  ended  December
31, 1999 and for the period from June 12, 1996 (inception) to December 31, 1999.
These consolidated  financial statements are the responsibility of the company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of Elast
Technologies,  Inc. (a  development  stage  company) as of December 31, 1999 and
1998,  and the  consolidated  results of operations and cash flows for the years
ended  December  31,  1999 and  1998  and for the  period  from  June  12,  1996
(inception)  to  December  31,  1999,  in  conformity  with  generally  accepted
accounting principles. Kelly & Company


/s/ Kelly & Company
Kelly & Company
Newport Beach, California
March 1, 2000


                                       1

<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                           Consolidated Balance Sheets

                           December 31, 1999 and 1998
--------------------------------------------------------------------------------


                                     ASSETS
                                                      1999              1998
                                                  -----------       -----------
Current assets:
  Cash and equivalents                            $   205,715       $   226,818
                                                  -----------       -----------

      Total current assets                            205,715           226,818

Property and equipment, net                            10,672             3,434
License, net                                              240               400
                                                  -----------       -----------
Total  assets                                     $   216,627       $   230,652
                                                  ===========       ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable, trade                         $    14,613       $     8,617
  Accrued payroll and payroll taxes                    38,898             4,375
                                                  -----------       -----------
Total  liabilities                                     53,511            12,992
                                                  -----------       -----------

Shareholders' equity:
  Common  stock, $.001 par value;
    25,000,000 shares authorized;
    7,961,481 and 7,179,448 shares
    issued and outstanding at December
    31, 1999 and 1998, respectively                     7,961             7,179
  Additional paid-in capital                        2,130,488         1,413,886
  Additional paid-in capital for warrants             205,000              --
  Deficit accumulated during the
    development stage                              (2,180,333)       (1,203,405)
                                                  -----------       -----------
Total shareholders' equity                            163,116           217,660
                                                  -----------       -----------
Total liabilities and shareholders' equity        $   216,627       $   230,652
                                                  ===========       ===========


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


                                       2

<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                      Consolidated Statements of Operations

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                                            Period from
                                                     For the              For the          June 12, 1996
                                                   Year Ended           Year Ended        (Inception) to
                                               December 31, 1999    December 31, 1998    December 31, 1999
                                               -----------------    -----------------    -----------------
<S>                                               <C>                  <C>                  <C>
Operating costs:

  Officers compensation                           $   344,737          $   203,682          $   548,419

  Research and development                            329,684              108,161              506,065

  Legal and professional                              111,812              502,231              638,377

  Investor relations                                   86,082              238,759              324,841

  Financing consulting fee                             60,000                 --                 60,000
  Other operating costs and expenses                   54,842               63,107              133,913
                                                  -----------          -----------          -----------
      Total operating costs                          (987,157)          (1,115,940)          (2,211,615)
                                                  -----------          -----------          -----------
Interest income                                        10,229               13,566               31,282
                                                  -----------          -----------          -----------
Net loss                                          $  (976,928)         $(1,102,374)         $(2,185,333)
                                                  ===========          ===========          ===========

Loss per common share - basic and diluted         $     (0.13)         $     (0.19)         $     (0.40)
                                                  ===========          ===========          ===========
</TABLE>


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


                                       3

<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                 Consolidated Statements of Shareholders' Equity

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                     Elast
                                                               Technologies, Inc.
                                          Elast Technologies        (Formerly
                                             Corporation         Med Mark, Inc.)
                                             (A Delaware            (A Nevada                                            Deficit
                                             Corporation)          Corporation)                            Detachable  Accumulated
                                         --------------------    ----------------    Price    Additional      Stock    During the
                                         Common        Common    Common    Common     Per      Paid-in      Purchase   Development
                                         Shares         Stock    Shares     Stock    Share     Capital      Warrants      Stage
                                         ------         -----    ------     -----    -----     -------      --------      -----
<S>                                     <C>            <C>           <C>       <C>   <C>      <C>              <C>     <C>
Balance, June 12, 1996
  (inception)                                --            --        --        --       --          --         --            --

  Shares issued for the
    medical device license              3,200,000      $3,200        --        --       --    $ (2,400)        --            --

  Shares issued for legal
    services                               21,332          21        --        --    $0.31       6,698         --            --

  Contribution of funds
    expended by the major
    shareholder on the
    Company's behalf                         --            --        --        --       --       4,167         --            --

  Shares issued in private
    placement                             546,672         547        --        --     0.38     204,453         --            --

  Net loss from inception to
    December 31, 1996                        --            --        --        --       --          --         --            --
                                        ---------      ------      ----      ----    -----    --------       ----      --------
Balance, December 31, 1996              3,768,004       3,768        --        --       --     212,918         --       (38,309)

  Contribution of funds
    expended by the major
    shareholder on the
    Company's behalf                         --            --        --        --       --       1,500         --            --

  Net loss for the year ended
    December 31, 1997                        --            --        --        --       --          --         --            --
    (62,722)
                                        ---------      ------      ----      ----    -----    --------       ----      --------
Balance, December 31, 1997              3,768,004       3,768        --        --       --     214,418         --      (101,031)
                                        ---------      ------      ----      ----    -----    --------       ----      --------
<CAPTION>
                                                            Less:
                                                            Common
                                                            Stock
                                                         Subscription
                                            Subtotal       Receivable       Total
                                            --------       ----------       -----
<S>                                        <C>              <C>           <C>
Balance, June 12, 1996
  (inception)                                     --            --            --

  Shares issued for the
    medical device license                 $     800            --        $    800

  Shares issued for legal
    services                                   6,719            --           6,719

  Contribution of funds
    expended by the major
    shareholder on the
    Company's behalf                           4,167            --           4,167

  Shares issued in private
    placement                                205,000        $(10,000)      195,000

  Net loss from inception to
    December 31, 1996                        (38,309)        (38,309)         --
                                           ---------        --------      --------
Balance, December 31, 1996                   178,377         (10,000)      168,377

  Contribution of funds
    expended by the major
    shareholder on the
    Company's behalf                           1,500            --           1,500

  Net loss for the year ended
    December 31, 1997                        (62,722)        (62,722)         --
    (62,722)
                                           ---------        --------      --------
Balance, December 31, 1997                   117,155         (10,000)      107,155
                                           ---------        --------      --------
</TABLE>


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


                                       4

<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                 Consolidated Statements of Shareholders' Equity

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                     Elast
                                                               Technologies, Inc.
                                          Elast Technologies        (Formerly
                                             Corporation         Med Mark, Inc.)
                                             (A Delaware            (A Nevada                                            Deficit
                                             Corporation)          Corporation)                            Detachable  Accumulated
                                         --------------------    ----------------    Price    Additional      Stock    During the
                                         Common        Common    Common    Common     Per      Paid-in      Purchase   Development
                                         Shares         Stock    Shares     Stock    Share     Capital      Warrants      Stage
                                         ------         -----    ------     -----    -----     -------      --------      -----
<S>                                     <C>            <C>       <C>         <C>     <C>     <C>               <C>     <C>
Balance, December 31, 1997              3,768,004      $3,768        --        --       --   $  214,418        --      $(101,031)
  Shares outstanding prior
    to the reorganization                    --            --    1,220,000   $1,220     --       29,506        --           --
  Shares issued in private
    placement                             394,000         394        --        --    $0.50      196,606        --           --
  Payment of receivable arising
    from issuance of common stock            --            --        --        --       --         --          --           --
  Shares issued on the exercise
    of warrants                           506,640         507        --        --     0.38      189,483        --           --
  Shares issued to consultant
    in connection with the
    reorganization                      1,007,472       1,007        --        --     0.38      376,791        --           --
  Shares issued and surrendered
    in the  acquisition of Elast
    Technologies, Inc. (a Nevada
    Corporation) (reverse merger)      (5,676,116)     (5,676)  5,676,116     5,676     --         --          --           --
  Shares issued for consulting
    services, engineering services,
     and employee compensation               --            --     270,000       270   1.51      407,095        --           --
  Shares issued to an existing
    shareholder to correct a
    stock issuance error                     --            --      13,332        13    (13)        --          --           --
  Net loss for the year ended
    December 31, 1998                        --            --        --        --       --         --          --     (1,102,374)
                                        ---------      ------   ---------    ----    -----   ----------      ----    -----------
Balance, December 31, 1998                   --            --   7,179,448    $7,179     --   $1,413,886        --    $(1,203,405)
                                        ---------      ------   ---------    ----    -----   ----------      ----    -----------
<CAPTION>
                                                            Less:
                                                            Common
                                                            Stock
                                                         Subscription
                                            Subtotal       Receivable       Total
                                            --------       ----------       -----
<S>                                       <C>               <C>         <C>
Balance, December 31, 1997                $  117,155        $(10,000)   $  107,155
  Shares outstanding prior
    to the reorganization                     30,726            --          30,726
  Shares issued in private
    placement                                197,000            --         197,000
  Payment of receivable arising
    from issuance of common stock               --            10,000        10,000
  Shares issued on the exercise
    of warrants                              189,990            --         189,990
  Shares issued to consultant
    in connection with the
    reorganization                           377,798            --         377,798
  Shares issued and surrendered
    in the  acquisition of Elast
    Technologies, Inc. (a Nevada
    Corporation) (reverse merger)               --              --            --
  Shares issued for consulting
    services, engineering services,
     and employee compensation               407,365            --         407,365
  Shares issued to an existing
    shareholder to correct a
    stock issuance error                        --              --            --
  Net loss for the year ended
    December 31, 1998                     (1,102,374)           --      (1,102,374)
                                          ----------        --------    ----------
Balance, December 31, 1998                $  217,660            --      $  217,660
                                          ----------        --------    ----------
</TABLE>

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


                                       5

<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                 Consolidated Statements of Shareholders' Equity

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                     Elast
                                                               Technologies, Inc.
                                          Elast Technologies        (Formerly
                                             Corporation         Med Mark, Inc.)
                                             (A Delaware            (A Nevada                                            Deficit
                                             Corporation)          Corporation)                            Detachable  Accumulated
                                         --------------------    ----------------    Price    Additional      Stock    During the
                                         Common        Common    Common    Common     Per      Paid-in      Purchase   Development
                                         Shares         Stock    Shares     Stock    Share     Capital      Warrants      Stage
                                         ------         -----    ------     -----    -----     -------      --------      -----
<S>                                     <C>            <C>       <C>         <C>     <C>     <C>            <C>    <C>
Balance, December 31, 1998                   --            --    7,179,448   $7,179     --   $1,413,886        --     $(1,203,405)

  Shares issued in private placement         --            --      205,900   $  206  $1.50      308,044        --            --

  Shares issued in private placement         --            --      500,000      500   0.59      294,482     $205,000         --

  Shares issued for consulting services      --            --       26,133       26   1.54       40,126        --            --

  Shares issued for research and
    development services                     --            --       50,000       50   1.48       73,950        --            --

  Net loss for the year ended
    December 31, 1999                        --            --         --         --     --         --       (976,928)        --
                                          -----         -----    ---------   ------  -----   ----------     --------  -----------

Balance, December 31, 1999                   --            --    7,961,481   $7,961     --   $2,130,488     $205,000  $(2,180,333)
                                          =====         =====    =========   ======  =====   ==========     ========  ===========

<CAPTION>
                                                           Less:
                                                            Common
                                                            Stock
                                                         Subscription
                                            Subtotal       Receivable       Total
                                            --------       ----------       -----
<S>                                       <C>               <C>         <C>
Balance, December 31, 1998                $  217,660           --       $  217,660

  Shares issued in private placement         308,250           --          308,250

  Shares issued in private placement         499,982           --          499,982

  Shares issued for consulting services       40,152           --           40,152

  Shares issued for research and
    development services                      74,000           --           74,000

  Net loss for the year ended
    December 31, 1999                       (976,928)    (976,928)              --
                                          ----------     --------       ----------
Balance, December 31, 1999                $  163,116           --       $  163,116
                                          ==========     ========       ==========
</TABLE>



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

                                       6
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                      Consolidated Statements of Cash Flows

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

<TABLE>
<CAPTION>
                                                                                                     Period from
                                                     For the                 For the                June 12, 1996
                                                   Year Ended               Year Ended             (Inception) to
                                                December 31, 1999        December 31, 1998        December 31, 1999
                                                -----------------        -----------------        -----------------
<S>                                              <C>                      <C>                      <C>
Cash flows from operating activities:

     Net loss                                        $(976,928)             $(1,102,374)              $(2,180,333)

Adjustments to reconcile net loss
  to net cash used in operating
  activities:
     Depreciation and amortization                       2,706                      770                     3,476
     Issuance of stock for services                    114,152                  785,163                   906,034
     Loss on sale of asset                               2,608                     --                       2,608
Increase (decrease) in liabilities:
        Accounts payable, trade                          5,997                    8,617                    14,614
        Accounts payable, officer                         --                     (1,925)                     --
     Accrued payroll taxes                              34,523                    4,375                    38,898
                                                     ---------              -----------               -----------

Cash used in operating activities                     (816,942)                (305,374)               (1,214,703)
                                                     ---------              -----------               -----------
Cash flows used in investing activities:

     Purchase of equipment                             (17,393)                  (3,804)                  (21,197)
     Sale of equipment                                   5,000                     --                       5,000
                                                     ---------              -----------               -----------

Cash used in investing activities                      (12,393)                  (3,804)                  (16,197)
                                                     ---------              -----------               -----------
</TABLE>

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

                                       7
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                      Consolidated Statements of Cash Flows

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

<TABLE>
<CAPTION>
                                                                                                             Period from
                                                              For the                  For the              June 12, 1996
                                                            Year Ended               Year Ended            (Inception) to
                                                         December 31, 1999        December 31, 1998       December 31, 1999
                                                         -----------------        -----------------       -----------------
<S>                                                           <C>                     <C>                   <C>
Cash flows provided by financing activities:

  Acquisition of MedMark, Inc.                                    --                  $ 30,726              $   30,726

  Proceeds from the exercise of warrants                          --                   189,990                 189,990

  Payment of common stock subscription receivable                 --                    10,000                  10,000

  Proceeds from the issuance of common stock                  $808,232                 197,000               1,200,232

  Contribution to additional paid-in capital                      --                      --                     5,667

Cash provided by financing activities                          808,232                 427,716               1,436,615
                                                              --------                --------              ----------

Net increase (decrease) in cash                                (21,103)                118,538                 205,715

Cash at beginning of period                                    226,818                 108,280                    --
                                                              --------                --------              ----------

Cash at end of period                                         $205,715                $226,818                $205,715
                                                              ========                ========              ==========
</TABLE>

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

                                       8
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                      Consolidated Statements of Cash Flows

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

<TABLE>
<CAPTION>
                Supplemental Disclosure of Cash Flow Information

                                                                                                             Period from
                                                              For the                  For the              June 12, 1996
                                                            Year Ended               Year Ended            (Inception) to
                                                         December 31, 1999        December 31, 1998       December 31, 1999
                                                         -----------------        -----------------       -----------------
<S>                                                            <C>                      <C>                    <C>
Interest paid                                                  --                       --                     $  1,375

Income taxes paid                                              $170                     $1,403                 $  1,973


      Supplemental Schedule of Non-Cash Investing and Financing Activities


Assets acquired in non-cash transactions:

      Acquisition of medical device license                    --                       --                     $    800

      Increase in common stock subscription receivable         --                       --                     $ 10,000

      Issuance of common stock                                 --                       --                     $(10,800)
</TABLE>


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

                                       9
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

                   Notes to Consolidated Financial Statements

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

1.   Development Stage Operations

     Elast Technologies, Inc. (a company in the development stage) has a limited
     operating  history with no revenues and no products or operable  technology
     ready for the market. The Company is engaged in the ongoing  development of
     its first product, a non-invasive medical device to test for allergies with
     real time, quantifiable,  visually displayed results.  Management's efforts
     to date have focused primarily on the development of the medical device and
     the raising of equity capital. As such, the Company is subject to the risks
     and  uncertainties  associated  with a new  business.  The  success  of the
     Company's  future  operations  is  dependent,  in part,  upon the Company's
     ability to successfully  market its yet to be developed products and obtain
     additional capital. Management's plans are discussed further in Note 11.

2.   Summary of Significant Accounting Policies

     Principles of Consolidation

     The accompanying  consolidated financial statements include the accounts of
     Elast  Technologies,  Inc. (a Nevada  corporation)  (the "Company") and its
     subsidiary, Elast Technologies Corporation (a Delaware corporation) ("Elast
     Delaware"). All significant intercompany transactions have been eliminated.
     Prior to June 10, 1998, the Company was named Med Mark,  Inc. ("Med Mark").
     The name  change was in  conjunction  with the reverse  merger  acquisition
     (Note 10).

     Revenue Recognition

     Revenue will be recognized when the Company's  goods are shipped.

     Cash and Equivalents

     The  Company  invests   portions  of  its  excess  cash  in  highly  liquid
     investments.  Cash and  equivalents  include time  deposits and  commercial
     paper with original  maturities  of three months or less. In addition,  the
     Company has no compensating balance requirements. The Company maintains its
     cash in bank accounts,  which exceeded federally insured limits by $104,334
     and $131,886 at December 31, 1999 and 1998,  respectively.  The Company has
     not experienced any losses in such accounts. The Company believes it is not
     exposed to any significant credit risk on cash.


                                       10
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

2.   Summary of Significant Accounting Policies, Continued

     Property and Equipment

     The  Company   records   property  and   equipment  at  cost.   Significant
     improvements,   which  extend  the  life  of  the  underlying   asset,  are
     capitalized,  and  expenditures  for normal  maintenance  and  repairs  are
     charged to operations.  Depreciation is provided for property and equipment
     using  the  straight-line  method  over  the  expected  useful  lives.  The
     Company's  property and  equipment  consists of computers  with an expected
     useful life of 5 years.

     Intangible Asset

     The Company  recorded its intangible asset at cost. The intangible asset is
     amortized  on a  straight-line  method  over the  shorter of its  estimated
     useful live or its  contractual  term,  whichever is shorter.

     Research and Development Costs

     Research and development expenditures are charged to operations as they are
     incurred.

     Impairment of Long-Lived Assets

     The  Company  annually  evaluates  its  long-lived  assets,  including  its
     intangible  asset,  described  as a license  to  patented  technology,  for
     potential impairment.  When circumstances indicate that the carrying amount
     of  the  asset  is  not  recoverable,  as  demonstrated  by  the  projected
     undiscounted  cash  flows,  an  impairment  loss  will be  recognized.  The
     Company's  management  has  determined  that  there was no such  impairment
     present at December 31, 1999 and 1998.

     Income Taxes

     The Company accounts for income taxes using the liability method. Under the
     liability method, deferred income taxes are determined based on differences
     between the financial  reporting  and tax bases of assets and  liabilities.
     They are  measured  using  the  enacted  tax rates and laws that will be in
     effect  when the  differences  are  expected  to  reverse.  The  Company is
     required  to adjust its  deferred  tax  liabilities  in the period when tax
     rates or the provisions of the income tax laws change. Valuation allowances
     are established to reduce deferred tax assets to the amounts expected to be
     realized.




                                       11
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

2.   Summary of Significant Accounting Policies, Continued

     Disclosures about Fair Value of Financial Instruments

     The Company accounts for the value of financial  instruments using the fair
     value method.

     Stock Based Compensation

     Statement of Financial Account Standards  ("SFAS") No. 123,  Accounting for
     Stock-Based  Compensation  ("SFAS No.  123"),  established  accounting  and
     disclosure  requirements  using a fair value based method of accounting for
     stock-based employee  compensation plans. As permitted by SFAS No. 123, the
     Company will  continue to account for  stock-based  compensation  using the
     intrinsic value method as prescribed in Accounting Principles Board Opinion
     ("APB") No. 25,  Accounting  for Stock Issued to Employees  ("APB No. 25").
     Compensation cost from stock options,  if any, is measured as the excess of
     the quoted  market price of the  Company's  stock at the date of grant over
     the amount an employee must pay to acquire the stock.  Compensation cost is
     amortized over the requisite vesting periods.

     Common Shares and Per Share Amounts

     All  common  shares  and per  share  amounts  have  been  adjusted  to give
     retroactive  effect,  where  applicable  to the one for four reverse  stock
     split.

     Earnings per Common Share

     In 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 128,
     Earnings Per Share.  This  pronouncement  replaced the previously  reported
     primary  and fully  diluted  earnings  per  share  with  basic and  diluted
     earnings  per  share  ("EPS"),  respectively.  Loss per share for the years
     ended  December  31,  1999 and 1998,  and for the period from June 12, 1996
     (Inception)  to December 31, 1999 have been  calculated in accordance  with
     this pronouncement.

     Basic  EPS is  computed  by  dividing  income or loss  available  to common
     shareholders  by the weighted  average number of common shares  outstanding
     for the year.  Diluted EPS is similar to basic EPS except that the weighted
     average of common shares  outstanding is increased to include the number of
     additional  common shares that would have been  outstanding  if potentially
     dilutive common shares had been issued.



                                       12
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

2.   Summary of Significant Accounting Policies, Continued

     Management Estimates

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

     Reclassification

     Certain  reclassifications  have been made to the 1998 financial statements
     in order to conform to the 1999 financial statement presentation.

3.   Property and Equipment

     Property  and  equipment  at  December  31,  1999 and 1998  consist  of the
     following:

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

     Computers                                  $ 12,896          $  3,804

     Less: accumulated depreciation               (2,224)             (370)
                                                --------          --------

     Total property and equipment, net          $ 10,672          $  3,434
                                                ========          ========


     Depreciation  expense for the years ended  December  31, 1999 and 1998 were
     $2,546 and $370, respectively.


                                       13
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

4.   Income Taxes

     At December 31, 1999 and 1998,  the  components of the provision for income
     taxes are as follows:

                                                        1999             1998
                                                      --------         --------
     Current tax expense:
          Federal                                         --               --
          State                                           --               --
                                                      --------         --------
                                                          --               --
                                                      --------         --------
     Deferred tax expense:
          Federal                                         --               --
          State                                           --               --
                                                      --------         --------
                                                          --               --
                                                      --------         --------
     Total provision                                      --               --
                                                      ========         ========

     Significant  components  of the  Company's  deferred  income tax assets and
     liabilities at December 31, 1999 and 1998 are as follows:

                                                   1999               1998
                                                ---------          ---------
     Deferred income tax asset:
           Capitalized expenses                 $ 719,707          $ 399,012
           Tax credits                             48,684             15,716
                                                ---------          ---------
      Total deferred income tax asset             768,391            414,728
           Valuation allowance                   (768,391)          (414,728)
                                                ---------          ---------

      Net deferred income tax liability              --                 --
                                                =========          =========

     The Company,  based upon its history of losses during its development stage
     and management's  assessment of when operations are anticipated to generate
     taxable income,  has concluded that it is more likely than not that none of
     the net deferred income tax assets will be realized  through future taxable
     earnings and has established a valuation allowance for them.


                                       14
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

4.   Income Taxes, Continued

     Reconciliation of the effective income tax rate to the U.S.  statutory rate
     is as follows:

                                                             1999      1998
                                                            ------    ------
     Tax expense at the U.S. statutory income tax rate        34.0%     34.0%
     Increase in the valuation allowance                     (36.2)    (34.2)
     Other                                                     2.2      (0.2)
                                                            ------    ------

     Effective income tax rate                                --        (0.4)%
                                                            ======    ======

     As  of  December  31,  1999,  the  Company  has  a  federal   research  and
     experimentation  credit  carryover  of $48,684.  The credits  will begin to
     expire in 2011.

5.   Related Party Transactions

     Licensing Agreement

     In 1996 the Company  entered into a licensing  agreement with an individual
     who is an officer and major  shareholder  whereby the Company  received the
     exclusive right to develop,  manufacture,  and market an allergy detection,
     non-invasive,  medical device (Electronic  Allergo-Sensitivity Test Device,
     U.S. Patent No.  5413113).  The Company issued  3,200,000 shares of Company
     common stock with a value of $800. The licensing agreement does not require
     any royalty payments.  The licensing agreement is for a term of five years,
     with the Company holding options to extend the agreement for two additional
     five-year terms at no additional cost.

     Vehicle Acquisition

     In 1999 the Company  paid $11,000 to an officer and major  shareholder  for
     rental and purchase of a vehicle.  Of the amount paid,  $2,700  represented
     automobile rental and $8,300 represented the purchase price. The automobile
     was used for business  purposes  and  subsequently  sold to an  independent
     party for $5,000. The Company recognized a $2,608 loss from the sale of the
     asset.


                                       15
<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

5.   Related Party Transactions, Continued

     Housing Expenses

     In  1999,  an  officer  was  provided  housing  in a  residence  owned by a
     different officer who is a major shareholder.  The Company paid $15,000 for
     the housing and the cost was included in lessee officer's compensation.

6.   Commitments and Contingencies

     Patent Technology

     In 1996,  the Company  entered into a technology  licensing  agreement that
     provided for its use of certain intellectual property described by a United
     States patent. Since obtaining the license rights, the Company has expended
     significant  research  and  development  efforts  in  conjunction  with the
     intellectual  property that has resulted in significant  modifications  and
     enhancements.  The Company's efforts to date, plus its anticipated  efforts
     in the  future,  raise  doubt  that the final  technology  involved  in the
     medical  device will be  protected by the original  patent.

     Stock Options Dispute

     A dispute  between  the Company and a former  director  exists  relating to
     options to purchase  common stock granted by Elast  Delaware,  prior to its
     merger with the Company.  The former  director  claims the 100,000  options
     granted to him by Elast  Delaware  are  options to  purchase  shares of the
     Company.   The  Company  has   reviewed   this  matter  and  the   relevant
     documentation  and believes the former  director's  claim is without merit,
     and  plans to  vigorously  defend  itself  in the  event  legal  action  is
     commenced.

     Employment Taxes

     The Company,  in its  fiduciary  capacity as an  employer,  has the primary
     responsibility  for deducting and remitting  both the employer and employee
     portions of payroll related taxes to the appropriate governmental agencies.
     Since inception,  the Company paid $548,419 in compensation to three of its
     officers  upon which  taxes were not  withheld  from  these  employees  nor
     remitted to the appropriate  governmental  authorities.  If, as a result of
     not  withholding  employment  taxes,  the  employees  incur an  income  tax
     liability that ultimately



                                       16
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

6.   Commitments and Contingencies, Continued

     Employment Taxes, Continued

     results in a deficiency,  the Company becomes contingently responsible,  if
     the employees cannot or do not satisfy that liability. Since inception, the
     Company is contingently  liable for these taxes,  penalties,  and interest,
     which  approximate  $207,000.  The employer  portion of the payroll related
     taxes has been recorded as a liability by the Company.

     Termination Dispute

     A dispute  exists  between  the  Company  and  another  former  officer and
     director of the Company. In December 1999, this former officer and director
     was removed from the Board of Directors and  terminated as an officer.  The
     Company  anticipates legal action may result from this matter.  The Company
     intends to  vigorously  oppose any such  action.  The Company is engaged in
     discussions with this individual and may consider settlement of this matter
     provided  the  terms  of such  settlement  are  reasonable  and in the best
     interests of the Company.  However, an estimate of any settlement or amount
     of loss, if any, from an unfavorable outcome from litigation cannot be made
     at this time.

     Operating Leases

     The Company leases an automobile under an operating lease with a fixed term
     through June 2002.  Future  minimum lease payments at December 31, 1999 are
     as follows:

         2000                                           $ 8,396
         2001                                             8,396
         2002                                             4,198
                                                        -------
         Total minimum lease payments                   $20,990
                                                        =======

7.   Stock Based Compensation

     During 1999, the Company's  Board of Directors  granted options to purchase
     150,000 shares of the Company's common stock to two members of the Board of
     Directors. The options



                                       17
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

7.   Stock Based Compensation, Continued

     were issued with an exercise price of $1.50 with 100,000  expiring in March
     2003 and 50,000  expiring in July 2002.  As the  directors are employees of
     the Company,  the options were accounted for under APB No. 25. The exercise
     price of the options  equaled or exceeded  the fair value of the  Company's
     common stock at the date of grant.  Consequently,  no compensation  expense
     was recognized in connection with the issuance of these options.

     On February 13, 1998,  the Board of  Directors  of Elast  Delaware  granted
     100,000  options to purchase  common stock to each of the three  members of
     the Board of Directors of Elast Delaware in recognition of their service to
     it. The 300,000 options have a three year term are exercisable at $2.00 per
     share.  Two of the Directors  were employees of Elast  Delaware,  and their
     options  were  accounted  for under APB No. 25. The options were granted at
     prices which equaled or exceeded the fair value of Elast Delaware's  common
     stock at the date of  grant.  Consequently,  no  compensation  expense  was
     recognized in connection  with the issuance of these 200,000  options.  The
     100,000  options  issued  to  the  nonemployee   director  were  valued  in
     accordance  with the  provision of SFAS No. 123 and  determined  to have no
     value, therefore no compensation expense was recognized.

     The  following  summarizes  information  about stock options of the Company
     granted and  outstanding  at December 31, 1999 and 1998, and changes during
     the years then ended:

<TABLE>
<CAPTION>
                                                1999                         1998
                                       ----------------------        ---------------------
                                                     Exercise                     Exercise
                                       Options         Price         Options        Price
                                       -------       --------        -------      --------
<S>                                     <C>             <C>            <C>           <C>
     Outstanding at beginning
        of year                            --            --            --            --
     Granted                            150,000         $1.50          --            --
     Exercised                             --            --            --            --
     Forfeited                             --            --            --            --
                                        -------         -----         -----         -----
     Outstanding at end of year         150,000         $1.50          --            --
                                        =======         =====         =====         =====
</TABLE>



                                       18
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

7.   Stock Based Compensation, Continued

     The  following  summarizes  information  about the stock  options  of Elast
     Delaware granted and outstanding at December 31, 1999 and 1998, and changes
     during the years then ended:

<TABLE>
<CAPTION>
                                                 1999                          1998
                                        ------------------------      ------------------------
                                                        Exercise                      Exercise
                                        Options          Price        Options          Price
                                        -------         --------      -------         --------
<S>                                     <C>             <C>           <C>             <C>
     Outstanding at beginning
        of year                         300,000         $  2.00          --              --
     Granted                               --              --         300,000         $  2.00
     Exercised                             --              --            --              --
     Forfeited                             --              --            --              --
                                        -------         -------       -------         -------
     Outstanding at end of year         300,000         $  2.00       300,000         $  2.00
                                        =======         =======       =======         =======
</TABLE>

     The Company continues to account for stock-based  compensation to employees
     using the intrinsic value method as prescribed in APB No. 25 under which no
     compensation cost for options is recognized for options granted at or above
     fair market value of the Company's  common stock at the date of grant.  Had
     the compensation expense for options awards been determined based upon fair
     values at the grant dates in  accordance  with SFAS No. 123, the  Company's
     pro forma net loss and net loss per share for the year ended  December  31,
     1999 would have been the amount indicated in the following schedule.  There
     was no  effect on the  Company's  pro forma net loss and net loss per share
     for the year ended December 31, 1998.

     The Black-Scholes  Option Pricing Model was developed for use in estimating
     the fair value of traded options. The Company's employee stock options have
     characteristics  significantly different from those of traded options, such
     as vesting restriction and extremely limited transferability.  In addition,
     the  assumptions  used in option  valuation  models are highly  subjective,
     particularly the expected stock price  volatility of the underlying  stock.
     Because changes in these subjective input assumptions can materially affect
     the fair value estimate,  in management's  opinion,  the existing models do
     not  provide a reliable  single  measure of the fair value of its  employee
     stock options.


                                       19
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

7.   Stock Based Compensation, Continued

     The pro forma  effect on net loss for the year ended  December 31, 1999 may
     not be  representative  of the actual results had the Company accounted for
     the stock options using the fair value method.

     Net loss, as reported                                   $    (976,928)
     Pro forma net loss                                      $  (1,134,928)
     Basic loss per share                                    $       (0.13)
     Pro forma net loss per share                            $       (0.15)

     For purposes of the above pro forma calculation,  the fair value of options
     granted in 1999 and 1998 is  estimated  using the BSOPM  with the  weighted
     average assumptions listed below.

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

     Risk-free interest rate                          4.850%            5.000%
     Expected stock dividend yield                     --                --

     Expected stock price volatility 0.834            0.834              --

     Expected life in years                           1.000             3.000

     Summary  information about the Company's options outstanding at October 31,
     1999:

<TABLE>
<CAPTION>
                                                             The             Subsidiary
                                                           Company        (Elast Delaware)
                                                           -------        ----------------
<S>                                                      <C>                 <C>
     Exercise price                                      $      1.50         $      2.00
     Options outstanding, December 31, 1999                  150,000             300,000
     Weighted average remaining contractual life           1.1 years           1.1 years
     Weighted average exercise price                     $      1.50         $      2.00
     Options exercisable, December 31, 1999                  150,000             300,000
     Weighted average exercise price                     $      1.50         $      2.00
</TABLE>


                                       20
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

8.   Stock Purchase Warrants

     The Company's private placement  offering of stock in 1999 was accomplished
     with the sale of 500,000  units  comprised of one share of common stock and
     one stock purchase  warrants The stock purchase  warrants were  immediately
     exercisable  upon  issuance.  The stock  purchase  warrants  provide for an
     exercise price of $2.40 and expire in July 2004. To date, none of the stock
     purchase warrants have been exercised.

     At December  31, 1999 and 1998,  the  Company had  outstanding  warrants to
     purchase 500,000 and 40,032 shares of the Company's common stock, at prices
     of $2.40 and $.38 per share,  respectively.  Warrants  to  purchase  40,032
     shares  expired on  September  30,  1999.  At  December  31, 1999 and 1998,
     500,000 and 40,032 shares of common stock, respectively,  were reserved for
     this purpose.

9.   Loss Per Common Share

     In the year ended  December  31,  1997,  the Company  adopted SFAS No. 128,
     Earnings per Share. Loss per common share has been calculated in accordance
     with this statement.

     Basic and diluted loss per common share have been  computed by dividing the
     loss available to common  shareholders  by the  weighted-average  number of
     common shares for the period.

     The  computations  of basic and diluted loss per common share for the years
     ended December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                                                 Period from
                                                            For the              For the         June 12, 1996
                                                          Year Ended           Year Ended       (Inception) to
                                                       December 31, 1999    December 31, 1998  December 31, 1999
                                                       -----------------    -----------------  -----------------
<S>                                                     <C>                  <C>                <C>
     Net loss available to common stockholders          $      (976,928)     $    (1,102,374)   $    (2,185,333)

     Weighted-average shares, basic and diluted               7,711,880            5,798,194          5,446,490
                                                        ---------------      ---------------    ---------------
     Loss per common share, basic and diluted           $         (0.13)     $         (0.19)   $         (0.40)
                                                        ===============      ===============    ===============
</TABLE>


                                       21
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

9.    Loss Per Common Share, Continued

      The effect of the  potentially  dilutive  securities  listed below was not
      included in the  computation  of diluted  loss per share  because to do so
      would have been antidilutive for the periods presented.

<TABLE>
<CAPTION>
                                                                                                              Period from
                                                                For the                 For the              June 12, 1996
                                                              Year Ended              Year Ended            (Inception) to
                                                           December 31, 1999       December 31, 1998       December 31, 1999
                                                           -----------------       -----------------       -----------------
<S>                                                             <C>                     <C>                      <C>
     Shares of common stock issuable under:
          Stock options of the Company                          150,000                    --                    150,000
          Stock options of  consolidated subsidiary             300,000                 300,000                  300,000
          Stock purchase warrants of the Company                500,000                  40,032                  500,000
                                                                -------                 -------                  -------

                                                                950,000                 340,032                  950,000
                                                                =======                 =======                  =======
</TABLE>

10.  Stock Transactions

     Shares Issued to Acquire a License Agreement

     In 1996,  the  Company  issued  3,200,000  shares  of its stock for $800 to
     obtain a licensing  agreement from an individual,  who is an officer of the
     Company (Note 5).

     Shares Issued for Services

     In 1996,  the Company  issued 21,332 shares for legal  services  related to
     corporate  formation and  preparation  of the Company's  private  placement
     memorandum.  The shares of Company  stock  were  issued for legal  services
     valued at $6,719.  In 1998 the Company issued 270,000 shares for consulting
     and engineering services and employee compensation as follows:

          Consultants  were issued 115,000  shares as additional  recognition of
          their  services to the  Company.  The shares were valued at their fair
          value at the time of issuance, $1.50 per share.



                                       22
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

10.  Stock Transactions, Continued

     Shares Issued for Services, Continued

          An outside engineer was issued 55,000 shares as additional recognition
          of his services to the  Company.  The shares were valued at fair value
          at the date of their issuance, $1.54 per share.

          An  officer  and  major  shareholder  was  issued  100,000  shares  as
          additional  recognition  of  his  continuing  efforts  related  to the
          development  of the  technology.  The shares were valued at their fair
          value at the date of issuance, $1.50 per share.

     In 1999 the Company  issued 76,133 shares for  consulting  and research and
     development services as follows:


          Consultants  were issued 26,133 shares as  additional  recognition  of
          their  services to the  Company.  The shares were valued at their fair
          value at the time of issuance, $1.54 per share.

          Research  and  development  engineers  were  issued  50,000  shares as
          additional  recognition of their  services to the Company.  The shares
          were valued at fair value at the time of issuance, $1.48 per share.

     Private Placement Offerings

     In 1996, the Company, in a private placement  offering,  sold 546,672 units
     consisting of one share of common stock and one stock purchase warrant (the
     "warrants")  at an exercise  price of $0.38 per share.  The  warrants  were
     redeemable at $0.38 per warrant  immediately upon issuance,  and expired on
     September 30, 1999.

     In 1998, the Company, in a private placement offering,  sold 394,000 shares
     of common stock at $0.50 per share.


                                       23
<PAGE>


                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

10.  Stock Transactions, Continued

     Private Placement Offerings, Continued

     In 1999, the Company, in a private placement  offering,  sold 500,000 units
     at $1.00 per unit  consisting  of one  share of common  stock and one stock
     purchase warrant  ("warrants") at an exercise price of $2.40 per share. The
     warrants are exercisable immediately and they will expire in July 2004. The
     proceeds  of from the sale of the units were  allocated  between the common
     stock and warrants based on their relative market values.

     In 1999, the Company, in a private placement offering,  sold 205,900 shares
     of common stock at $1.50 per share.

     Common Shares Issued for Warrants Exercised

     During 1997,  506,640 warrants were exercised  resulting in the issuance of
     506,640 shares of common stock.

     Shares Issued for Raising Capital

     In 1998,  the  Company  issued  1,007,472  shares of stock  for  consulting
     services  related to the acquisition of Med Mark, Inc. (a reverse  merger).
     One  of   the   individuals   who   received   200,000   shares   for   the
     acquisition-related  consulting services is an officer of the Company.  The
     shares were valued at $0.38 per share.

     Acquisition of Med Mark, Inc. (Reverse Merger)

     On June 10, 1998, the Company acquired all of the outstanding  common stock
     of Elast  Delaware in a business  combination  accounted for as a purchase.
     For  accounting   purposes,   the  acquisition  has  been  treated  as  the
     acquisition  of the Company by Elast  Delaware  with Elast  Delaware as the
     acquiror (reverse acquisition).  The effective purchase price was 1,220,000
     shares of the Company's  common stock.  The Company,  formerly known as Med
     Mark,  had no operations as of the  acquisition  date. No goodwill has been
     recorded as a result of this transaction. As this transaction is treated as
     a reverse merger acquisition,  the historical financial statements prior to
     June 10, 1998 are those of Elast Delaware.


                                       24
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

10.  Stock Transactions, Continued

     Stock Issued to Correct a Stock Issuance Error

     In 1998, the Company issued 13,332 shares to correct an error on a previous
     stock issuance.

11.  Management's Plan, (Unaudited)

     The Company is presently  continuing  research and  development  activities
     relating to a non-invasive, patented allergy-testing device (the "device"),
     which the Company owns the rights to develop, test, manufacture and market.
     To further  advance the  research  and  development  of the device,  and to
     validate the scientific principle of bio-voltage measurement,  an extensive
     period of testing  will  commence in  conjunction  with the  University  of
     California at San Diego.

     Once the initial testing of the device is completed, the Company intends to
     have  approximately  10 units of the  device  manufactured,  which  will be
     provided to a selected  group of physicians and  scientists.  The operating
     plan  is  to  develop  the  device  on  a  stand-alone   basis,   which  is
     user-friendly and fully self-contained. Once the device gains acceptance in
     the medical community,  the Company anticipates that a patient home-testing
     unit may be developed.

     The Company plans to negotiate  and enter into  marketing  agreements  with
     appropriate  distributors and marketing agents. In addition, it may acquire
     the right to sell or distribute  existing  products,  or obtain  licensing,
     marketing,  distribution or other rights to compatible  products.  However,
     other than costs related to the continued  development  of the device,  the
     Company does no  anticipate  significant  expenditures  on  acquisition  or
     development of other products  during the next year. The Company will focus
     its  initial   marketing  and  distribution   efforts  on  development  and
     commercial  exploitation  of the device.  The  present  plan is to lease or
     license  the device to minimize  costs and create an  informed  and updated
     client base.


     It may be  necessary  to  raise  additional  funds  to  complete  prototype
     development  and limited  clinical  trials of the device.  However,  if the
     device performs as anticipated, the Company's management believes that they
     will be able to  raise  the  funds  necessary  to begin  production  of the
     devices for clinical trials and the Food and Drug  Administration  approval
     process by the sale of the Company's capital stock,  debt, and/or licensing
     certain proprietary rights.


                                       25
<PAGE>

                            Elast Technologies, Inc.
                      (A Company in the Development Stage)

              Notes to Consolidated Financial Statements, Continued

         For Each of the Two Years in the Period Ended December 31, 1999
     And for the Period from June 12, 1996 (Inception) to December 31, 1999

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

11.  Management's Plan, (Unaudited), Continued

     Should  the  development  of  the  prototype  or  clinical  testing  of the
     prototype  take more time than  anticipated,  or if the  results of testing
     require significant  modifications to the device,  sufficient funds may not
     be available to enable the device to be completed and brought to market.

12.  Subsequent Events (Unaudited)

     Subsequent  to year  end,  the  Company  initiated  a  public  offering  of
     1,000,000  shares  of its  common  stock  on a best  efforts  basis.  As of
     February 25, 2000, the Company believes that  approximately  575,000 shares
     had been sold and that  approximately  $850,000  had been  raised from this
     offering.


                                       26