<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                  FORM 10-KSB


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

For the fiscal year ended December 31, 2000

                                      OR

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

For the transition period from            to

Commission file number 0-24053

                             CPC of America, Inc.
                (Name of Small Business Issuer in its charter)


   Nevada                                         11-3320709
---------------------------------------         --------------------------------
   (State or other jurisdiction of                (I.R.S. Employer
   incorporation or organization)                 Identification No.)


   1133 Fourth Street, Suite 200
   Sarasota, Florida                              34236
---------------------------------------         --------------------------------
   (Address of principal executive offices)          (Zip Code)

         Issuer's telephone number, including area code (941) 906-9546
                                                         --------------

Securities to be registered under Section 12(b) of the Act:

   Title of each class                            Name of each exchange on which
   to be so registered                            each class is to be registered

            None                                         N/A
---------------------------------------         --------------------------------

Securities to be registered under Section 12(g) of the Act:

                        Common Stock, $.0005 par value
--------------------------------------------------------------------------------
                               (Title of class)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.  Yes   X     No ___
               ---

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

The market capitalization value of the voting stock held by non-affiliates of
the registrant as of March 26, 2001 was approximately $5,521,808.

The number of shares of the Common Stock outstanding as of March 26, 2001 was
4,943,130.

                  Documents incorporated by reference: None.
<PAGE>

Part I

Item 1.  Description of Business.

     Unless otherwise indicated, all references to the Company include its
wholly-owned subsidiaries, CPCA 2000, Inc., a Nevada Corporation, and HeartMed,
Inc., a Nevada corporation, and its majority-owned subsidiary, Med Enclosure,
LLC, a Nevada limited liability company.

Business Development
--------------------

     CPC of America, Inc. (the "Company") was formed under the laws of the State
of Nevada on April 11, 1996 to develop and acquire cardiology medical devices,
therapeutic devices and disposable products.  To date, the Company has developed
and intends to manufacture and distribute external counterpulsation devices for
the treatment of coronary artery disease.  In addition, the Company acquired a
controlling interest in Med Enclosure, LLC, a development stage company engaged
in the business of developing a patented internal puncture closing device and
technique known as "MedClose."  Both products are in development stage and
neither has been approved for sale by the FDA.  The Company's operations to date
have consisted of the design and development of its counterpulsation units, the
acquisition of its controlling interest in Med Enclosure and the raising of
capital.

     In November 1998, the Company commenced a private placement of 235,294
shares of its Series A Preferred Stock, at a price of $8.50 per share, pursuant
to Rule 506 under the Securities Act of 1933.  The Series A Preferred Stock has
no voting rights.  Each Series A Preferred Share is convertible into Common
Stock at a conversion price of $4.70 per share.  In addition, the holders of the
shares of Series A Preferred Stock are entitled to an annual dividend of 5%,
payable in either cash or shares of Common Stock.  In the private placement, the
Company sold a total of 79,293 shares of Series A Preferred Stock for the gross
proceeds of $674,000.  Proceeds from the sale of the shares were applied towards
the Company's working capital and research and development of the Company's
counterpulsation units.  As of March 31, 2000, a total of 70,469 shares of
Series A Preferred Stock had been converted into a total of 132,921 shares of
Common Stock, including shares issued as payment of the 5% dividend.

     In April 2000, the Company commenced a private placement of 228,571 shares
of its Series B Preferred Stock, at a price of $8.75 per share, pursuant to Rule
506 under the 1933 Act.  Each share of Series B Preferred Stock is convertible
into Common Stock at a conversion price of $8.75 per share; however, on June 30,
2001, the conversion price shall be adjusted to the lower of (i) seventy-five
                                                    ------
percent (75%) of the average last ask price of the Common Stock for the thirty
(30) trading days immediately preceding such date as reported on any stock
exchange or (ii) $6.56 per share.  The Series B Preferred Stock has no voting
rights.  In addition, the holders of the shares of Series B Preferred Stock are
entitled to an annual dividend of 5%, payable in either cash or shares of Common
Stock.  Proceeds from the sale of the shares were applied towards the Company's
working capital and research and development of the Company's two cardiology
products.  As of March 26, 2001, a total of 71,429 shares of Series B Preferred
Stock had been issued for proceeds of $625,000.

     In November 1999, the Company acquired a 73.3% interest in Med Enclosure,
LLC, a limited liability company organized under the laws of the State of
Nevada. Pursuant to the terms of an Operating Agreement dated November 5, 1999,
the Company received a 73.3% interest in Med Enclosure in exchange for the
Company's promissory note in the original principal amount of $250,000. On April
25, 2000 the Company retired the note in full by paying $255,208 to Med
Enclosure LLC. Med Enclosure, LLC used the funds to acquire a patent from Gene
Myers Enterprises, Inc.

     The Company's executive offices are located at 1133 Fourth Street, Suite
200, Sarasota, Florida 34236; telephone number (941) 906-9546.

                                      -1-
<PAGE>

Business of the Issuer
----------------------

General

     CPC of America is engaged in the business of developing and acquiring
cardiology therapeutic and disposable devices and products as well as the
manufacture and distribution of these devices and products for the diagnosis and
treatment of coronary artery disease.  To date, we have developed the CPCA 2000
counterpulsation devices and acquired a controlling interest in the MedClose
internal puncture closing device and technique.

     Our first product, the CPCA 2000 counterpulsation unit, is a non-invasive,
atraumatic and non-toxic method of treating certain coronary disease states.
MedClose is an internal puncture closure device and technique that utilizes a
human glue deployment to close puncture wounds following surgery.  Both the
CPCA 2000 and Medclose are in the development stage and neither has been
approved for sale by the FDA.

Coronary Artery Disease and Treatment

     Coronary artery disease is the most common cause of death in industrial
nations.  The coronary arteries serve the heart with oxygen and other nutrients.
The progressive narrowing of these coronary arteries by increasing layers of
fatty plaque can lead to heart attacks, brain failure and eventually death.  The
direct cost of coronary disease is great in terms of treatment expense, loss of
earnings and productivity while the indirect costs are incalculable in terms of
pain, suffering and limited lifestyles.

     A percentage of these patients undergo invasive surgical procedures such as
angioplasty, artery bypass surgery or cardiac catheterization, all of which are
designed to remedy coronary artery narrowing. Coronary angioplasty is an
invasive process whereby a small balloon attached to a catheter is inserted into
a clogged artery. The balloon is then inflated to compress plaque and to open
the narrowed artery. The estimated cost per successfully treated patient using
the angioplasty method approaches $16,000 and many patients fail multiple
attempts at angioplasty. Coronary artery bypass surgery involves supplementing
the original arteries on the surface of the heart with additional conduits, or
bypasses, which carry the blood around areas of blockage or narrowing. These
bypasses or detours are frequently created by using veins harvested from the
patient's leg or arteries harvested from the chest wall. This invasive procedure
requires more lengthy hospitalization than angioplasty, carries a higher risk of
complications, and can cost up to $50,000 per patient. Many bypass conduits
close in the years following surgery requiring a return to medications,
angioplasty, or repeat bypass attempts. Cardiac catheterization is an invasive
procedure that involves threading a catheter through an artery from a patient's
groin to the heart.  While cardiac catheterization is invaluable in diagnosing
and treating coronary artery blockages, it carries a serious risk of
hemorrhaging following the procedure at the site where the artery is punctured.

Counterpulsation Technology: "CPCA2000"

     We have designed and, subject to FDA approval, intend to manufacture and
market a counterpulsation device under the name CPCA 2000, as well as a mobile
version of our counterpulsation device under the name CPCA 2000M.
Counterpulsation involves the rhythmic inflation and deflation of sets of
balloons or cuffs wrapped around the muscles of the calves, thighs and buttocks.
Inflation and deflation occurs in a sequential manner, progressing from the
calves to the lower and upper thighs and then to the buttocks. The sequence of
cuff inflation and deflation compresses the vascular beds and is timed to the
beating of the patient's own heart through synchronization with the patient's
electrocardiogram. Cuffs inflate sequentially and rapidly at the onset of
diastole to prevent blood from being trapped in vascular beds. Cuffs deflate
just before the heart squeezes, reducing the pressure against which the heart
must pump and allowing the heart to eject blood more efficiently and completely.
Counterpulsation is designed to increase the ease of work during the contraction
phase and to increase blood flow during the relaxation phase of the cardiac
cycle. Counterpulsation is significantly less invasive than angioplasty, artery
bypass surgery and cardiac catheterization and is designed to reduce the need
for these more invasive, complicated and costly procedures.

                                      -2-
<PAGE>

     Patients are typically treated with counterpulsation therapy during 35 one-
hour outpatient visits or sessions, spanning four to seven weeks. During their
treatments, the patients remain outside the hospital and are free to pursue work
and other scheduled activities. Treatment success is observed by relief of
symptoms, possible reduction in medication, increased exercise capacity on the
treadmill, and elimination of areas of poor cardiac circulation. A course of
counterpulsation treatments, with a total global cost of $7,500 or less,
compares favorably with the higher risk, expense, pain and lost productivity
time associated with the invasive angioplasty, coronary bypass or cardiac
catheterization procedures.

     A 1992 study by doctors at Stony Brook University in New York showed that
counterpulsation eliminated or reduced angina in over 80% of the patients
studied. In that study, doctors tested the clinical efficacy and tolerability of
counterpulsation in 18 patients with incapacitating chronic angina. In all
patients, treatment with counterpulsation was associated with a substantial
improvement in symptoms, with more than 80% of the patients in the study
reporting a complete absence of symptoms while performing their usual
activities. In addition, Thalium-201 stress testing (performed for the same
exercise duration before and after counterpulsation treatment) showed complete
resolution of ischemic defects in 12 patients (67%), a decrease in the area of
ischemia in two (11%), and no change in four (22%). Thus, 14 patients (78%) had
a reduction in myocardial ischemia as assessed by Thalium-201 imaging. In
addition, stress test results using a treadmill showed a significant increase in
exercise duration following counterpulsation treatment. We were not involved
with this study.

     Three years following the initial study, data from 17 of the original 18
patients was studied, including 13 of the 14 patients who had previously shown a
reduction in myocardial ischemia. One of these 13 patients suffered a heart
attack and another underwent a revascularization procedure during the
intervening period. The other 12 patients all remained free of limiting angina.

     In 1998, results of a study regarding the effectiveness of counterpulsation
were reported in a section of the official program of the American Heart
Association's 71st Scientific Sessions. The study involved a randomized, sham-
controlled, double-blinded clinical trial of 139 patients with chronic angina.
The study used standardized methodology to determine whether counterpulsation
treatment had an effect on quality-of-life functions up to 12 months after
completion of treatment. Of the 125 patients who entered the study, the group
who received counterpulsation treatment demonstrated a 23% improvement in their
quality-of-life 12 months after the completion of their treatment. The group
that did not receive the counterpulsation treatment showed no improvement.

Internal Puncture Closure Devices: "MedClose"

     MedClose is a proprietary technique for use during catheterization
procedures that is designed to reduce the risk of hemorrhage and speed recovery
time for patients following these procedures. MedClose is based on a basic
principle of arterial clotting. When the outer surface of an artery, called the
adventitia, is injured it releases a sticky chemical that serves as an adhesive
for the body's clot-inducing substances, thus initiating the clotting process.
MedClose accelerates the release of this chemical through the use of a special
instrument that surgically debrides the adventitia. To further speed clotting,
this debridement is combined with one of the newly developed forms of "human
glue." These products, a mixture of natural thrombin and fibrinogen, are widely
available and relatively inexpensive. In addition, they can be manufactured to
become adhesive only when exposed to a specific catalyst such as a laser.

     The glue alone is not sufficient to close the artery, however. Debridement
is the key to the effectiveness of this technique, creating a surface area that
allows the glue to adhere and form a solid seal. MedClose includes a patented
instrument and technique to temporarily close the wound, debride the surrounding
adventitia and deliver a form of human glue to the puncture site that can be
activated by laser light. Our majority-owned subsidiary, Med Enclosure, LLC
holds the three patents for both the instrument and the technique used in
connection with MedClose.

     We believe that a major advantage of MedClose is that it requires no
sutures and leaves no foreign matter in the artery thereby reducing the risk of
an embolism resulting from residual material left in the artery.  In addition,
we believe that MedClose will significantly reduce the recovery time of patients
following

                                      -3-
<PAGE>

catheterization procedures. Physicians traditionally have used sutures to close
puncture wounds following catheterization procedures. Using sutures requires
direct pressure to be applied to the wound for up to 45 minutes and for the
patient to remain still for up to 12 hours following the procedure to avoid
hemorrhaging. MedClose, by contrast, eliminates the need for direct pressure to
be applied to the wound and reduces the recovery time following the procedure to
approximately two hours. As a result, MedClose reduces the need for patients to
remain completely immobile following the catheterization procedure and limits
the recovery time and discomfort associated with the catheterization procedures.

Marketing and Distribution

     Counterpulsation Technology "CPCA2000"

     Our marketing strategy is to sell our CPCA2000 counterpulsation units to
physicians, clinics and hospitals, with us receiving revenues from the proceeds
of the sale as well as from service fees and licensing fees.  We intend to
market the CPCA2000 both directly and through third party distributors.  We
currently do not have any distributor agreements in place.

     We anticipate that we will need to employ approximately 10 full-time
employees to conduct our direct sales, marketing and distribution efforts. We
intend to grow our distributorship network and sales to and through:

     .    Major cardiology groups;
     .    HMO groups;
     .    Major payor groups and insurance companies;
     .    Other existing diagnostic and therapeutic companies and centers;
     .    National and international distribution agreements; and
     .    Internet e-commerce.

     Following FDA approval of the CPCA 2000, we intend to initially focus our
marketing efforts on both domestic regions that are high in cardiology disease
demographics and key international markets that meet the criterias of this
clinical application and treatment thereof.

     Internal Puncture Closure Device " MedClose"

     We initially intend to market MedClose to both hospitals and to physicians
through both national and international distribution agreements.  None of these
agreements are currently in place.  We also intend to establish a direct sales
support team to assist the distributors with their customers and to establish
national contracting agreements with major providers of services.

     We intend to offer our products to potential customers through a marketing
campaign consisting of public relations, direct mail and personal selling
efforts by our representatives.  The public relations campaign will be designed
to raise awareness of MedClose and its puncture internal closure device among
both industry leaders and the general public.  We intend to generate publicity
for MedClose through press conferences, television forums,  demonstrations and
press releases to trade and professional publications.

     Although we initially intend to concentrate our marketing efforts on the
U.S. domestic market, once domestic operations have been established, we intend
to expand our marketing efforts in various international markets. We intend to
market our counterpulsation units and puncture closing devices to international
customers through affiliations and agreements with international partners.

                                      -4-
<PAGE>

Government Regulation and Supervision

     FDA Approval Process

     Clinical testing, manufacture and sale of the CPCA 2000/2000M and MedClose
are subject to regulation by numerous governmental authorities, principally the
FDA, and corresponding state and foreign regulatory agencies. Pursuant to the
federal Food, Drug and Cosmetic Act, and the regulations promulgated thereunder,
the FDA regulates the clinical testing, manufacturing, labeling, distribution
and promotion of medical devices.  Under the Medical Device Act of 1976, the FDA
places medical devices into one of three classes called Class I, II, or III, on
the basis of the controls deemed necessary by the FDA to reasonably ensure their
safety and effectiveness. Class I devices are subject only to general controls
(e.g., labeling, premarket notification and adherence to good manufacturing
practices. Class II devices are subject to general controls and performance
standards established by the FDA, including postmarket surveillance, patient
registries and FDA guidelines. Class III devices must receive premarket approval
by the FDA to ensure their safety and effectiveness (e.g., life-sustaining,
life-supporting and implantable devices, or new devices which have been found
to be substantially equivalent to devices currently on the market).  Both the
CPCA 2000 and MedClose are considered by the FDA to be Class III devices.

     Before a new medical device can be introduced to the market, the
manufacturer generally must obtain FDA clearance through either a "510(k)
premarket notification" or through a premarket approval application. Although
Class III devices normally require FDA clearance through the premarket approval
process, because counterpulsation devices and puncture closure devices are
already on the market, newer versions, similar to the CPCA 2000 and MedClose,
have been permitted to be marketed pursuant to the 510(k) premarket notification
procedure. However, there is no assurance that we will continue to be eligible
to utilize the 510(k) premarket notification process in the future or that the
FDA will not in the future require us to submit a premarket application, which
would be a more costly, lengthy and uncertain approval process.

     Generally, 510(k) premarket notification clearance will be granted if the
proposed device is "substantially equivalent" to a legally marketed Class I or
Class II medical device, or to a preamendment Class III medical device for which
the FDA has not called for premarket approval applications. The FDA has recently
been requiring a more rigorous demonstration of substantial equivalence than in
the past, for example, by more frequently requiring clinical data. It generally
can take from 12 to 36 months or longer from submission of the product to obtain
510(k) premarket clearance. The FDA may determine that a proposed device is not
substantially equivalent to a legally marketed device or that additional data is
needed before a substantial equivalence determination can be made. A
determination that a device is not substantially equivalent to a device already
on the market, or a request for additional data, would delay the market
introduction of our products and could have a material adverse effect on our
business, financial condition and results of operations. For any of our devices
that are cleared through the 510(k) process, modifications or enhancements that
could significantly affect the safety or effectiveness of the device or that
constitute a major change to the intended use of the device will require a new
510(k) submission. There can be no assurance that we will obtain 510(k)
premarket clearance within the above time frames, if at all, for any of the
devices for which we may file a 510(k).

     Further, once FDA approval is obtained, our products will be subject to
pervasive and continuing regulation by the FDA, including various record keeping
requirements and the requirement to report adverse experiences with the use of
the device. We are also subject to inspection on a routine basis for compliance
with the FDA's good manufacturing practices regulations. These regulations
impose certain procedural and documentation requirements upon us and the
companies with which we contract to manufacture our products. The FDA has
recently finalized changes to good manufacturing practice requirements that,
among other things, add requirements for design controls and maintenance of
service records.  These changes are expected to increase the cost of compliance.

     On November 12, 1998, we submitted to the FDA our final application for the
CPCA 2000. The FDA responded to the application on February 10, 1999 with
requests for clarification on certain issues and for additional data. The FDA
inspected one of our manufacturing facilities in May 1999. On July 28, 2000, we
responded to the FDA additional requested information. On October 26, 2000, the
FDA requested additional clarification on certain issues and for additional
data. We intend to submit MedClose for animal testing and pre-clinical study
during the third quarter of 2001.

                                      -5-
<PAGE>

     Third-Party Coverage

     The commercial success of the CPCA 2000 is also dependent upon positive
coverage policies by the Health Care Financing Administration, which administers
the Medicare program, as well as by other third-party payors. In February 1999,
the HCFA extended Medicare coverage to external counterpulsation treatment for
patients with disabling angina who, in the opinion of a cardiologist or
cardiothoracic surgeon, are not readily amenable to surgical interventions. In
November 1999, the Health Care Financing Administration created a new code to
describe external counterpulsation technology.  This new code, HCPCS code G0166,
is specific to Medicare beneficiaries and went into effect on January 1, 2000
for angina patients being treated by the counterpulsation.   The allowable
charge under this HCPCS code for 35 one-hour treatments is $4,550.  Certain
patients may require additional services, such as evaluation and management,
which may be billed separately.  We expect third-party insurance companies to
follow the lead of Medicare and to adopt similar coverage policies for
counterpulsation treatment.  Failure by these third-party payors to adopt
coverage policies similar to Medicare's, or the elimination of coverage entirely
for counterpulsation treatment, would seriously impact the demand for our
counterpulsation units.

     Anti-Kickback Statutes

     In addition, there are federal and state laws, which regulate the financial
relationships between manufacturers of medical devices and hospitals, physicians
and other potential purchasers of medical devices. The federal Medicare and
Medicaid anti-kickback statute prohibits financial relationships designed to
induce the purchase, or arranging for or recommending the purchase, of items or
services for which payment may be made under Medicare, Medicaid, or other
federally funded state health care programs. The anti-kickback statute contains
exceptions for, among other things, properly reported discounts and compensation
for bona fide employees. In addition, federal regulations establish certain
"safe harbors" from liability under the anti-kickback statute, including further
refinements of the exceptions for discounts and employee compensation. Our
future practices, in some cases, may not meet all of the criteria for a safe
harbor from anti-kickback law liability. Other provisions of state and federal
law provide civil and/or criminal penalties for presenting or causing to be
presented for payment claims that are fraudulent or for items or services that
were not provided as claimed. Because of the breadth of the statutory provisions
described above, it is possible that some of our business practices could be
subject to scrutiny and challenge under one or more such laws. Such a challenge
could have a material adverse effect on our business, financial condition and
results of operations.

Competition

     Counterpulsation Technology "CPCA2000"

     At present, we are aware of only three other companies that are currently
producing and marketing or intending to market a counterpulsation device similar
to the CPCA 2000 or the CPCA 2000M: Vasomedical, Inc., Cardiomedics, Inc., and
Cardio-Vascular Electronics, Inc.  Two of these companies have already begun to
market their counterpulsation units in the U.S. and, accordingly, have already
obtained some level of market acceptance.  We believe that these competitors
have only a limited presence in the market and that the market in general for
counterpulsation devices is largely untapped.  There can be no assurance,
however, that we will be able to compete initially or on a continual basis with
companies that are currently marketing counterpulsation devices or those that
presently seek to enter into the counterpulsation device market.

     We estimate that counterpulsation therapy is presently used to treat only a
small percentage of all patients with coronary artery diseases.  Accordingly, we
anticipate that the CPCA 2000 and the CPCA 2000M will indirectly compete with
more mainstream cardiology treatment techniques, such as angiography, coronary
angioplasty, coronary artery bypass surgery and medication. While
counterpulsation does not replace the need for these services in all cases, a
percentage of coronary artery disease patients can be successfully treated using
counterpulsation as an alternative to invasive procedures.

                                      -6-
<PAGE>

     Internal Puncture Closure Device  " MedClose"

     We have several competitors that manufacture and market in the puncture
closure devices, including Perclose, Inc., Kensey Nash, Datascope Corp. and
Vascular Solutions, Inc. We believe our devices have competitive advantages over
other products because our product is superior in delivery of arterial site
closures that are safe, variable and cost effective.  However, all of our
competitors have greater marketing and financial resources than we do and,
accordingly, there can be no assurance that we will be able to compete
effectively, if at all.

Patents and Trademarks

     At present, we have submitted domestic and international applications to
patent the CPCA 2000 and our counterpulsation technology and have already
received a trademark on the name "CPCA 2000."  In addition, our subsidiary, Med
Enclosure, LLC holds three patents for the MedClose device and procedure and we
have applied for a trademark for the name MedClose.  Our ability to compete
successfully depends, in part, on our ability to protect the proprietary
technology contained in our products. We will rely upon a combination of patent,
trade secret and trademark laws, together with non-disclosure agreements, to
establish and protect proprietary rights in our counterpulsation devices and
other technology, as well as our trade names and other similar property. We also
intend to enter into confidentiality agreements with our employees,
manufacturers, distributors, customers and suppliers, and will limit access to
and distribution of our proprietary information. If and when implemented, these
measures will only afford us limited protection, as there can be no assurance
that any steps taken by us to protect these proprietary rights will be adequate
to prevent misappropriation of our technology or the independent development by
others of similar technology. In addition, although we believe that there
currently are no infringement claims against us and no grounds for the assertion
of such claims, the cost of responding to any claim could be significant.

Research and Development

     Since inception, our research and development expenses have amounted to
approximately $2,719,000. These expenditures have included the design and
development of both the CPCA 2000 and the CPCA 2000M, as well as the submission
of both of these units to the FDA for approval. At present, none of these
research and development expenses have been borne by customers, as we have not
begun to market or sell our products and services.  We acquired the technology
for MedClose in the 73.3% acquisition of Med Enclosure, LLC in November 1999.

Employees

     As of the date of this report, we employ one person consisting of our one
executive officer.  We contract with various consultants to provide services to
us including engineering, software, testing, regulatory, product development,
medical and clinical affairs on a project by project basis.

                                      -7-
<PAGE>

Item 2.  Description of Property

         Our executive offices are located in Sarasota, Florida and consist of
approximately 1,000 square feet which we rent on a month to month basis.

Item 3.  Legal Proceedings.

         In March 1999, we were named as a defendant in a lawsuit brought by
Nancy Lee, one of our former consultants, in the United States District Court
for the Central District of California. In her complaint, Ms. Lee alleged that
we prohibited Ms. Lee from selling the balance of her shares of stock she
acquired as one of our founders. Ms. Lee seeks a judicial declaration from the
court that she is the rightful owner of the shares. We have filed an answer and
a counterclaim against Ms. Lee seeking the return of the shares of common stock
on the grounds that Ms. Lee failed to provide adequate consideration for the
securities. We intend to vigorously defend against Ms. Lee's allegations and
prosecute our counterclaim. We believe that a determination of the lawsuit
adverse to us will not have a materially adverse effect on our financial
condition or operations.

         In August 1999, we were named and served as a defendant in a lawsuit
brought by Richard E. Rubin, M.D., one of our former officers and directors, in
the United States District Court for the District of Maryland, Southern
Division. Rubin alleges that we breached an employment contract with him and
prevented him from selling his shares of common stock or exercising his options.
Rubin seeks damages in excess of $5,000,000. We have filed an answer denying any
and all liability to Rubin. We have interposed counterclaims against Rubin
seeking recovery of the shares and options we believe are unlawfully held by
him, or in the alternative, monetary damages. We believe that the allegations of
Rubin's complaint are without merit and, accordingly, we intend to vigorously
defend this case. We believe that a determination of the lawsuit adverse to us
will not have a material adverse effect on our financial condition or
operations.

         The Rubin and Lee matters have all been consolidated and transferred
to U.S. District Court for the District of New York.

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

         There were no matters submitted to the security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 2000.

Part II

Item 5.  Market for Common Equity and Related Shareholder Matters.

         The Company's Common Stock has been listed on the OTC Bulletin Board
under the symbol "CPCF" since February 18, 1998. Set forth below are high and
low closing prices for the Company's Common Stock for each quarter during the
two fiscal years ended December 31, 2000. The Company considers its Common Stock
to be thinly traded and that any reported bid or sale prices may not be a true
market-based valuation of the Common Stock.

                                      -8-
<PAGE>

     Quarter Ended                       High    Low
     -------------                       ----    ---

     March 31, 1999                     $11.50  $4.625
     June 30, 1999                      $8.875  $ 5.25
     September 30, 1999                 $10.37  $ 5.25
     December 31, 1999                  $ 8.62  $ 4.75

     March 31, 2000                     $ 8.25  $ 5.00
     June 30, 2000                      $6.125  $ 4.00
     September 30, 2000                 $ 5.50  $ 3.75
     December 31, 2000                  $ 5.00  $2.125

     As of March 26, 2001, there were 58 record holders and approximately 560
beneficial owners of the Company's Common Stock.

     The Company has not paid any cash dividends on its common stock since its
inception and does not contemplate paying dividends in the foreseeable future.
It is anticipated that earnings, if any, will be retained for the operation of
the Company's business. Pursuant to its Certificate of Designations, holders of
shares of Series A Preferred Stock are entitled to dividends at a rate of 5% per
annum, payable at the option of the holders, in either cash or shares of Common
Stock. As of March 31, 2000, the Company has issued 4,551 shares of Common Stock
as payment of dividends on the Series A Preferred Stock. No cash dividends have
been paid on the shares of Series A Preferred Stock.

     During the fiscal year ended December 31, 2000, the Company sold
unregistered shares of its securities in the following transactions:

     During 2000, the Company issued 365,500 shares of Common Stock upon the
exercise of outstanding warrants. The warrants were part of units of securities
previously sold by the Company in 1997. The shares were issued pursuant to Rule
506 under the Securities Act of 1933, as amended (the "Act"). There was no
underwriter involved in this issuance.

     During 2000, the Company issued 127,447 shares of Common Stock upon the
conversion of outstanding shares of Series A Preferred Stock.  The common shares
were issued pursuant to Rule 506 under the Act.  There was no underwriter
involved in this issuance.

     In the first quarter of 2000, the Company agreed to settle outstanding
litigation through its issuance of 33,333 shares of Common Stock to three
parties.  The shares were issued pursuant to Section 4(2) of the Act.  There was
no underwriter involved in this issuance.

     In the second quarter of 2000, the Company issued 47,042 shares of Common
Stock valued at $235,000 and paid $15,000 cash to Gene Myers Enterprises for the
purchase of a patent held by Gene Myers Enterprises.  The shares were issued
pursuant to Section 4(2) of the Act.  There was no underwriter involved in this
issuance.

     In the second quarter of 2000, the Company sold 71,429 shares of Series B
Preferred Stock to one accredited investor for net proceeds of $625,000. The
shares were issued pursuant to Rule 506 under the Act.  There was no underwriter
involved in this issuance.

                                      -9-
<PAGE>

Item 6.  Management's Discussion and Analysis or Plan of Operation.

General
-------

     To date, the Company's activities have included the market analysis and
development of its counterpulsation units, the acquisition of its controlling
interest in Med Enclosures, LLC and the raising of development and working
capital.  The Company has developed and prepared for market its counterpulsation
units, including a stand-alone unit known as the CPCA 2000 and a mobile version
known as the CPCA 2000M.  Both units have been submitted for approval by the
U.S. Food and Drug Administration.  The Company has also acquired a 73.3%
interest in Med Enclosures, LLC, a development stage company engaged in the
business of developing a patented internal puncture closure device and technique
known as "MedClose".  The Company intends to submit the MedClose for pre-
clinical study in the third quarters 2001 and, subject to the favorable outcome
of the pre-clinical studies, clinical trials in fourth quarter of 2001.  The
Company intends to commence revenue producing operations subject to FDA approval
of either the Company's counterpulsation units or MedClose.

     The Company has financed its activities to date through the sale of its
securities.  During the first quarter of 2000, the Company commenced a private
placement offering of shares of its Series B Preferred Stock.  In the private
placement, the Company is offering up to 228,571 shares of Series B Preferred
Stock at a price of $8.75 per share.  As of the date of this report, the Company
has sold 71,429 shares of Series B Preferred Stock for the gross proceeds of
$625,000, all of which were sold during 2000.  During 2000, the Company also
received $898,266 of gross proceeds from the sale of shares of its Common Stock
in connection with the exercise of outstanding options and warrants.

     As of December 31, 2000, the Company had working capital of $51,292.  In
addition to its working capital on hand, as of the date of this report, the
Company believes that it will require, at least, an additional $1,400,000 of
capital in order to fund its plan of operations over the next 12 months as well
as an additional $3,600,000 to fund the FDA approval process for MedClose.  The
Company expects to fund its capital requirements over the next 12 months from
the sale of its securities.  However, the Company has no agreements or
commitments concerning the sale of its securities and there can be no assurance
the Company will be able to obtain sufficient additional capital through the
sale of its securities as needed.  The report of the Company's independent
accountants for the fiscal year ended December 31, 2000 states that due to the
absence of operating revenues and the Company's limited capital resources, there
is doubt about the Company's ability to continue as a going concern.

Forward Looking Statements
--------------------------

     This report contains forward-looking statements that are based on our
beliefs as well as assumptions and information currently available to us. When
used in this prospectus, the words "believe," "expect," "anticipate," "estimate"
and similar expressions are intended to identify forward-looking statements.
These statements are subject to risks, uncertainties and assumptions, including,
without limitation, the risks and uncertainties concerning the Company's recent
commencement of commercial operations; the risks and uncertainties concerning
FDA approval of its products; the risks and uncertainties concerning the
acceptance of the Company's services and products by its potential customers;
the Company's present financial condition and the risks and uncertainties
concerning the availability of additional capital as and when required; the
risks and uncertainties concerning technological changes and the competition for
the Company's services and products; and the risks and uncertainties concerning
general economic conditions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated, or projected. We caution
you not to place undue reliance on any forward-looking statements, all of which
speak only as of the date of this report.

                                      -10-
<PAGE>

Item 7.  Financial Statements

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                       <C>
Report of Independent Certified Public Accountants....................................    12
Consolidated Balance Sheet at December 31, 2000.......................................    13
Consolidated Statements of Operations for the years ended December 31, 2000 and 1999
  and cumulative from inception (April 11, 1996) to December 31, 2000.................    14
Consolidated Statements of Shareholders' Equity (Deficit)
  from inception (April 11, 1996) to December 31, 2000................................    15
Consolidated Statements of Cash Flows for the years ended December 31, 2000 and 1999
  and cumulative from inception (April 11, 1996) to December 31, 2000.................    17
Notes to Consolidated Financial Statements............................................    18
</TABLE>

                                      -11-
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------


The Board of Directors and Shareholders
CPC of America, Inc.

We have audited the accompanying consolidated balance sheet of CPC of America,
Inc. and subsidiaries (a development stage company) (the "Company") as of
December 31, 2000, and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for each of the years in the two
year period ended December 31, 2000 and for the period from inception (April 11,
1996) to December 31, 2000.  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 audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CPC of
America, Inc. and subsidiaries as of December 31, 2000, and the results of their
consolidated operations and cash flows for each of the years in the two year
period ended December 31, 2000 and for the period from inception (April 11,
1996) to December 31, 2000, in conformity with generally accepted accounting
principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed in Note 6 to
the consolidated financial statements, the Company has incurred losses since its
inception and remains in the development stage.  These conditions raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also described in Note 6.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                             CACCIAMATTA ACCOUNTANCY CORPORATION

Irvine, California
March 16, 2001

                                       12
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                         (A Development Stage Company)
                          Consolidated Balance Sheet

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                             2000
                                                                                       -----------------
<S>                                                                                    <C>
                                        ASSETS
Current assets:
   Cash and equivalents                                                                $         173,230
   Prepaid expenses                                                                                6,079
                                                                                       -----------------

      Total current assets                                                                       179,309

Equipment, net of accumulated depreciation of $9,452                                               5,968

Patents, net of accumulated amortization of $11,421                                              238,579

Trademark, net of accumulated amortization of $1,662                                               4,570
                                                                                       -----------------
                                                                                       $         428,426
                                                                                       =================

                         LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                    $         128,017
                                                                                       -----------------
      Total current liabilities                                                                  128,017
                                                                                       -----------------

Commitments and contingencies                                                                          -

Shareholders' equity:
   Preferred stock, 5,000,000 shares authorized, $.001 par value,
      Series A - 8,824 shares issued and outstanding                                                   9
      Series B - 71,429 shares issued and outstanding                                                 71
   Common stock, 20,000,000 shares authorized, $.0005 par value,
      4,837,687 shares issued and outstanding                                                      2,421
   Additional paid-in capital - preferred                                                        933,045
   Additional paid-in capital - common                                                         4,234,459
   Unamortized stock option costs                                                               (175,000)
   Deficit accumulated during the development stage                                           (4,694,596)
                                                                                       -----------------
      Total shareholders' equity                                                                 300,409
                                                                                       -----------------
                                                                                       $         428,426
                                                                                       =================
</TABLE>

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

                                       13
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                         (A Development Stage Company)
                     Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                                         Cumulative
                                                                                                       from inception
                                                                                                      (April 11, 1996)
                                                                 Year ended December 31,               to December 31,
                                                        -----------------------------------------
                                                               2000                  1999                   2000
                                                        -------------------   -------------------    -------------------
<S>                                                     <C>                   <C>                    <C>
Costs and expenses:

  Research and development                              $           851,732   $           886,127    $         2,718,919

  General and administrative                                        892,720               444,547              1,513,523

  Depreciation and amortization                                      14,023                 3,707                 36,174
                                                        -------------------   -------------------    -------------------

Operating loss                                                   (1,758,475)           (1,334,381)            (4,268,616)
                                                        -------------------   -------------------    -------------------

Other income (expense):

  Interest expense                                                   (1,942)                    -                 (8,942)

  Interest income                                                    10,973                 5,053                 40,178
                                                        -------------------   -------------------    -------------------

                                                                      9,031                 5,053                 31,236
                                                        -------------------   -------------------    -------------------

Loss before minority interest                                    (1,749,444)           (1,329,328)            (4,237,380)

Minority interest                                                         -                     -                  1,120
                                                        -------------------   -------------------    -------------------

Net loss                                                $        (1,749,444)  $        (1,329,328)   $        (4,236,260)
                                                        ===================   ===================    ===================


Basic and diluted net loss per share                    $             (0.42)  $             (0.38)
                                                        ===================   ===================

Basic and diluted weighted average number
  of common shares outstanding                                    4,619,400             4,104,371
                                                        ===================   ===================
</TABLE>

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

                                       14
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                         (A Development Stage Company)
           Consolidated Statements of Shareholders' Equity (Deficit)
             From inception (April 11, 1996) to December 31, 2000

<TABLE>
<CAPTION>

                                                      Preferred  Stock                     Common Stock                 Additional
                                       -------------------------------------------------------------------
                                              Series A               Series B                                Stock       Paid-in
                                       ------------------       ----------------
                                        Number                   Number                Number                Option      Capital-
                                       of Shares    Total       of Shares  Total     of Shares       Total    Costs       Common
                                       ---------    -----       --------- -------    ---------       -----    -----       ------
<S>                                    <C>         <C>          <C>       <C>        <C>            <C>       <C>     <C>
Initial capitalization                       -     $    -           -     $     -    2,400,000      $  1,200  $   -   $        -
Issuance of common stock for a note          -          -           -           -      300,000           150      -            -
Issuance of common stock for cash            -          -           -           -      100,000            50      -        4,950
Issuance of common stock for services        -          -           -           -      764,000           382      -       37,818
Net loss for 1996                            -          -           -           -            -             -      -            -
                                       ---------   ------       --------- -------    ---------       -------  -----   ----------
Balance, December 31, 1996                   -          -           -           -    3,564,000         1,782      -       42,768
Exercise of options                          -          -           -           -       26,666            13      -       29,987
Issuance of common stock for cash and
  conversion of note payable ($77,000)       -          -           -           -      640,000           320      -      927,680
Payment of note receivable
Net loss for 1997                            -          -           -           -            -             -      -            -
                                       ---------   ------       --------- -------    ---------       -------  -----   ----------
Balance, December 31, 1997                   -          -           -           -    4,230,666         2,115      -    1,000,435
Exercise of options                          -          -           -           -       57,000            29      -      114,971
Issuance of common stock for cash            -          -           -           -       40,000            20      -       57,980
Issuance of preferred stock for cash     8,824          9           -           -            -             -      -            -
Valuation of beneficial conversion
  feature on Series A Preferred              -          -           -           -            -             -      -            -
Contribution of officer's salary             -          -           -           -            -             -      -       80,000
Net loss for 1998                            -          -           -           -            -             -      -            -
                                       ---------   ------       --------- -------    ---------       -------  -----   ----------
 Balance, December 31, 1998              8,824          9           -           -    4,327,666         2,164      -    1,253,386
Exercise of warrants                         -          -           -           -      209,490           105      -      366,503
Exercise of options                          -          -           -           -      146,903            73      -      177,289
Issuance of preferred stock for cash    70,469         70           -           -            -             -      -
Preferred stock dividend                     -          -           -           -        5,474             3      -       25,722
Valuation of beneficial conversion
  feature on Series A Preferred              -          -           -           -            -             -      -            -
Repurchase of common shares                  -          -           -           -     (560,000)         (280)     -            -
Net loss for 1999                            -          -           -           -            -             -      -            -
                                       ---------   ------       --------- -------    ---------       -------  -----   ----------
 Balance, December 31, 1999             79,293     $   79           -     $     -    4,129,533      $  2,065  $   -   $1,822,900

<CAPTION>
                                                              Deficit
                                            Additional      Accumulated
                                             Paid-in        During the                Net
                                             Capital-       Development           Shareholders'
                                             Preferred         Stage             Equity(Deficit)
                                             ---------     -------------         --------------
<S>                                         <C>            <C>                   <C>
Initial capitalization                      $        -     $           -         $       1,200
Issuance of common stock for a note                  -                 -                   150
Issuance of common stock for cash                    -                 -                 5,000
Issuance of common stock for services                -                 -                38,200
Net loss for 1996                                    -           (59,079)              (59,079)
                                             ---------     -------------         --------------
Balance, December 31, 1996                           -           (59,079)              (14,529)
Exercise of options                                  -                 -                30,000
Issuance of common stock for cash and
  conversion of note payable ($77,000)               -           928,000
Payment of note receivable
Net loss for 1997                                    -         (457,829)              (457,829)
                                             ---------     -------------         --------------
Balance, December 31, 1997                           -         (516,908)               485,642
Exercise of options                                  -                -                115,000
Issuance of common stock for cash                    -                -                 58,000
Issuance of preferred stock for cash            74,991                -                 75,000
Valuation of beneficial conversion
  feature on Series A Preferred                 25,000          (25,000)                     -
Contribution of officer's salary                     -                -                  80,000
Net loss for 1998                                    -         (640,580)               (640,580)
                                             ---------     -------------         --------------
 Balance, December 31, 1998                     99,991       (1,182,488)                173,062
Exercise of warrants                                 -                -                 366,608
Exercise of options                                  -                -                 177,362
Issuance of preferred stock for cash           598,930                -                 599,000
Preferred stock dividend                             -          (25,725)                      -
Valuation of beneficial conversion
  feature on Series A Preferred                199,486         (199,486)                      -
Repurchase of common shares                          -                                     (280)
Net loss for 1999                                    -       (1,329,328)             (1,329,328)
                                             ---------     -------------         --------------
 Balance, December 31, 1999                 $  898,407     $ (2,737,027)           $    (13,576)
</TABLE>

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

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                         (A Development Stage Company)
                                  (continued)
           Consolidated Statements of Shareholders' Equity (Deficit)
             From inception (April 11, 1996) to December 31, 2000

 <TABLE>
 <CAPTION>
                                                            Preferred Stock                     Common Stock
                                            ---------------------------------------------   --------------------
                                                   Series A                Series B                                   Stock
                                            ---------------------   ---------------------
                                               Number                  Number                  Number                Option
                                             of Shares     Total     of Shares     Total     of Shares    Total       Costs
                                            -----------   -------   -----------   -------   -----------  -------  -----------
 <S>                                        <C>           <C>       <C>           <C>       <C>          <C>      <C>
 Balance, December 31, 1999                    79,293      $  79            -      $   -     4,129,533   $ 2,065   $        -
    Exercise of warrants                            -          -            -          -       365,500       183            -
    Exercise of options                             -          -            -          -       223,832       113            -
    Issuance of preferred stock for cash            -          -       71,429         71             -         -            -
    Valuation of beneficial conversion
        feature on Series B Preferred               -          -            -          -             -         -            -
    Conversion of Series A Preferred                -          -            -          -             -         -            -
        into common shares                    (70,469)       (70)           -          -       127,447        64            -
    Beneficial conversion feature on
        Series A Preferred shares                   -          -            -          -             -         -            -
    Settlement of lawsuit                           -          -            -          -        33,333        17            -
    Purchase of patent                              -          -            -          -        47,042        24            -
    Stock option costs                              -          -            -          -             -         -     (280,000)
    Amortization of stock option costs              -          -            -          -             -         -      105,000
    Cancellation of common shares                   -          -            -          -       (89,000)      (45)           -
    Net loss for 2000                               -          -            -          -             -         -            -

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

 Balance, December 31, 2000                     8,824      $   9       71,429      $  71     4,837,687   $ 2,421   $ (175,000)

                                              =======      =====   ==========  =========    ==========  ========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                                 Deficit
                                              Additional       Additional      Accumulated
                                                Paid-in          Paid-in        During the            Net
                                               Capital-          Capital-      Development       Shareholders'
                                                Common          Preferred         Stage         Equity(Deficit)
                                             ------------     ------------    -------------    -----------------
 <S>                                         <C>              <C>             <C>              <C>
 Balance, December 31, 1999                   $ 1,822,900       $ 898,407     $ (2,737,027)      $     (13,576)
    Exercise of warrants                          639,442               -                -             639,625
    Exercise of options                           258,528               -                -             258,641
    Issuance of preferred stock for cash                -         624,929                -             625,000
    Valuation of beneficial conversion
        feature on Series B Preferred                   -         208,125         (208,125)                  -
    Conversion of Series A Preferred                    -               -                -                   -
        into common shares                        598,936        (598,930)               -                   -
    Beneficial conversion feature on
        Series A Preferred shares                 199,486        (199,486)               -                   -
    Settlement of lawsuit                         199,983               -                -             200,000
    Purchase of patent                            235,184               -                -             235,208
    Stock option costs                            280,000               -                -                   -
    Amortization of stock option costs                  -               -                -             105,000
    Cancellation of common shares                       -               -                -                 (45)
    Net loss for 2000                                   -               -       (1,749,444)         (1,749,444)

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

 Balance, December 31, 2000                   $ 4,234,459       $ 933,045     $ (4,694,596)      $     300,409
                                              ===========       =========     ============       =============
</TABLE>

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

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                         (A Development Stage Company)
                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                            Cumulative
                                                                                                          from inception
                                                                                                         (April 11, 1996)
                                                                      Year ended December 31,             to December 31,
                                                              ---------------------------------------
                                                                    2000                 1999                  2000
                                                              -----------------   -------------------   -------------------
<S>                                                           <C>                 <C>                   <C>
Cash flows from operating activities:
  Net loss                                                    $      (1,749,444)  $        (1,329,328)  $        (4,236,260)
  Adjustments to reconcile net loss to net cash
    used by operating activities:
    Depreciation and amortization                                        14,023                 3,707                36,174
    Amortization of stock option costs                                  105,000                     -               105,000
    Contribution of officer's salary                                          -                     -                80,000
    Issuance of common stock for services                                     -                     -                38,200
    Other - net                                                               -                     -                38,879
    Decrease (increase) in other assets                                 180,066               (39,050)               47,690
    Increase in accounts payable                                         60,197                27,079               128,500
    (Decrease) increase in accrued expenses                             (50,000)              250,000               216,000
    Increase in accrued interest                                              -                     -                 7,000
                                                              -----------------   -------------------   -------------------
    Net cash used by operating activities                            (1,440,158)           (1,087,592)           (3,538,817)
                                                              -----------------   -------------------   -------------------

Cash flows from investing activities:
  Acquisition of subsidiaries                                                 -                     -              (128,999)
  Purchase of patent                                                    (14,795)                    -               (14,795)
  Capital expenditures                                                        -                     -               (15,420)
                                                              -----------------   -------------------   -------------------
    Net cash used by investing activities                               (14,795)                    -              (159,214)
                                                              -----------------   -------------------   -------------------

Cash flows from financing activities:
  Proceeds from notes to shareholders                                         -                     -                73,000
  Proceeds from note receivable from shareholder                              -                     -                   150
  Payments on note payable to shareholder                                     -                     -                (3,000)
  Exercise of options and warrants                                      898,266               543,970             1,587,236
  Issuance of preferred stock                                           625,000               599,000             1,299,000
  Issuance of common stock                                                    -                     -               915,200
  Repurchase of common stock                                                (45)                 (280)                 (325)
                                                              -----------------   -------------------   -------------------
    Net cash provided by financing activities                         1,523,221             1,142,690             3,871,261
                                                              -----------------   -------------------   -------------------

Net increase (decrease) in cash                                          68,268                55,098               173,230
Cash, beginning of period                                               104,962                49,864                     -
                                                              -----------------   -------------------   -------------------
Cash, end of period                                           $         173,230   $           104,962   $           173,230
                                                              =================   ===================   ===================

Non-cash investing and financing activities:
  Issuance of common stock for note receivable                $               -   $                 -   $               150
  Debt to equity conversion                                   $               -   $                 -   $            77,000
  Acquisition of minority interest                                                $                 -   $            33,250
  Sale of Tercero - elimination of goodwill                   $               -   $                 -   $           (40,000)
  Preferred dividends paid through issuance of common stock   $               -   $            25,725   $            25,725
  Acquisition of Med Enclosures for note payable              $               -   $           250,000   $           250,000
  Acquisition of patent paid by issuance of common stock      $         235,208   $                 -   $           235,208
  Settlement of lawsuit by issuance of common stock           $         200,000   $                 -   $           200,000
</TABLE>

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

                                       17
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)
                               December 31, 2000


1. Organization and summary of significant accounting policies
---------------------------------------------------------------

   Organization
   ------------

   CPC of America, Inc., a Nevada corporation ("CPC" or the "Company"), was
   formed on April 11, 1996 to manufacture and distribute external
   counterpulsation medical devices and own controlling interests in various
   management service organizations ("MSO"s) and medical services companies.
   The Company is classified as a development stage company because its
   principal activities involve obtaining capital and rights to certain
   technology, and conducting research and development activities.

   On July 25, 1997, the Company acquired 80% of DSDS Group, Inc. ("DSDS").  The
   sole owner of DSDS, John P. Colonna, served as a technical and engineering
   consultant to the Company.  DSDS had no operating history and its only assets
   consisted of two patents relating to a self-destructing single-use syringe.
   The patents had approximately 16 years remaining before expiration, and were
   deemed to have a fair value of $76,250.  The Company purchased its interest
   in DSDS for a total price of $61,000, of which $25,000 was paid in cash at
   the closing, and $36,000 was to be paid by the Company in 18 equal monthly
   installments.  The transaction was accounted for as a purchase of DSDS by the
   Company and, accordingly, the accompanying financial statements include the
   amounts and operations of the Company from its inception and of DSDS from
   July 25, 1997.  In September 1998, the Company purchased the remaining 20%
   interest of DSDS for $18,000 cash.  On December 1, 1998, the Company sold
   DSDS for its book value of $60,000 to a consulting firm that has been
   providing research and development activities to the Company since early
   1998.  In consideration for the acquisition of DSDS, this R & D consulting
   firm provided $60,000 worth of consulting services to the Company through May
   1999.

   In June 1998 CPC formed CPCA 2000, Inc., a Nevada corporation ("CPCA") to
   serve as the Company's wholly-owned operating subsidiary.  The Company
   transferred all of its assets and liabilities to CPCA.

   On February 1, 1999, the Company filed a lawsuit against Partner Provider
   Health, Inc. (PPH) alleging breach of contract, misrepresentation and fraud
   relating to its joint venture with HeartMed LLC.  Under terms of a November
   1999 settlement, CPC dropped its lawsuit and received the remaining interest
   in HeartMed LLC making it a wholly owned subsidiary of CPC.  HeartMed LLC had
   no operations or assets during 1999 or 2000.

   On November 22, 1999, CPC formed Med Enclosures, LLC, a Nevada Limited
   Liability Corporation, (MED) with Gene Myers Enterprises, Inc., (GME) a
   minority shareholder of CPC.  CPC received a 73.3% interest in MED for a
   $250,000 promissory note, which was retired in April 2000.  GME contributed
   two patents it developed that are recorded at

                                       18
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)

   GME's carrying value of zero. MED had no operations from November 22, 1999
   through December 31, 2000.

1. Organization and summary of significant accounting policies (continued)
---------------------------------------------------------------------------

   Principles of consolidation
   ---------------------------

   The accompanying consolidated financial statements include the amounts of the
   Company and its subsidiaries, DSDS, from July 1997 through November 1998,
   CPCA, from June 1998, and MED and HeartMed LLC from November 1999.  All
   significant intercompany transactions and balances have been eliminated in
   consolidation.

   Cash and equivalents
   --------------------

   The Company considers all liquid investments with a maturity of three months
   or less from the date of purchase that are readily convertible into cash to
   be cash equivalents.  Balances in bank accounts may, from time to time,
   exceed federally insured limits.  The Company believes that its loss exposure
   is limited.

   Patents and trademarks
   ----------------------

   Patents and trademarks are stated at cost and amortized using the straight-
   line method over their economic useful life, which is estimated at seventeen
   and fifteen years, respectively.

   Equipment
   ---------

   Depreciation expense is provided over the estimated useful life of 5 years
   using the straight-line method.

   Use of estimates
   ----------------

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

   Intangibles and long-lived assets
   ---------------------------------

   Long-lived assets are reviewed annually for impairment whenever events or
   changes in circumstances indicate that carrying amount of an asset may not be
   recoverable.  Impairment is necessary when the undiscounted cash flows
   estimated to be generated by the asset are less than the carrying amount of
   the asset.

                                       19
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)

   Income taxes
   ------------

   The Company reports certain expenses differently for financial and tax
   reporting purposes and, accordingly, provides for the related deferred taxes.
   Income taxes are accounted for under the liability method in accordance with
   SFAS 109.


1. Organization and summary of significant accounting policies (continued)
---------------------------------------------------------------------------

   Research and development costs
   ------------------------------

   Costs and expenses that can be clearly identified as research and development
   are charged to expense as incurred in accordance with FASB Statement No. 2,
   "Accounting for Research and Development Costs".

   Basic and diluted net loss per share
   ------------------------------------

   Net loss per share is calculated in accordance with Statement of Financial
   Accounting Standards 128, Earnings Per Share ("SFAS 128").  Basic net loss
   per share is based upon the weighted average number of common shares
   outstanding.  Diluted net loss per share is based on the assumption that all
   dilutive convertible shares and stock options were converted or exercised.
   Dilution is computed by applying the treasury stock method.  Under this
   method, options and warrants are assumed to be exercised at the beginning of
   the period (or at the time of issuance, if later), and as if funds obtained
   thereby were used to purchase common stock at the average market price during
   the period.  For 2000 and 1999 all common stock equivalents were anti-
   dilutive.

   Stock-based compensation
   ------------------------

   The Company has elected to adopt the disclosure provisions only of SFAS 123
   and continues to measure compensation cost related to stock and stock options
   issued to employees using the intrinsic method of accounting prescribed by
   Accounting Principles Board Opinion No. 25 ("APB25"), "Accounting for Stock
   Issued to Employees," and related interpretations.

2. Shareholders' equity (deficit)
---------------------------------

   Series A Preferred stock
   ------------------------

   In November 1998, the Company offered in a private placement memorandum
   Series A preferred stock at $8.50 per share.  As of November 15, 1999, the
   Company sold  79,293 shares for proceeds of $674,000.  The Series A Preferred
   stock has no voting rights and has a 5% annual dividend which may be payable
   in cash or common stock.  Each Series A share was convertible into one common
   share until December 31, 1999, when the conversion price was adjusted to the
   lower of $6.38 or 75% of the average last sale price of the common stock for
   the 30 trading days immediately preceding such date as reported

                                       20
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)

   on any stock exchange, according to the terms of the original agreement. At
   December 31, 1999 the conversion price was calculated at $4.70 per share. On
   December 31, 1999, a dividend of $25,725 was paid by issuing 5,474 shares of
   the Company's common stock. In January 2000, 70,469 Series A shares were
   converted into 127,447 common shares.



2. Shareholders' equity (deficit) (continued)
----------------------------------------------

   Series B Preferred stock
   ------------------------

   In April 2000, the Company offered in a private placement memorandum Series B
   preferred stock at $8.75 per share.  As of December 31, 2000, the Company
   sold 71,429 shares for proceeds of $625,000.  The Series B Preferred stock
   has no voting rights and has a 5% annual dividend which may be payable in
   cash or common stock.  Each Series B share is convertible into one common
   share until June 30, 2001, when the conversion price will be adjusted to the
   lower of $6.56 or 75% of the average last sale price of the common stock for
   the 30 trading days immediately preceding such date as reported on any stock
   exchange, according to the terms of the original agreement.

   Common stock
   ------------

   In January and February 2000, 70,469 Series A preferred shares were converted
   into 127,447 common shares.

   In February 2000, 33,333 common shares valued at $200,000 were issued as part
   of a settlement of a lawsuit against the Company.

   In April 2000, the Company purchased a patent for 47,042 common shares valued
   at $235,208 and $14,795 cash.

   In December 2000, 89,000 common shares were canceled as part of the
   settlement with a former consultant to the Company.

   In the second quarter of 1999, the Company reached an agreement with one of
   its shareholders to repurchase 560,000 shares at par.  These shares were
   originally issued for services and the Company claimed that the services had
   not been provided.  In addition, options to purchase 490,000 common shares
   held by the shareholder were canceled.

   In June 1998, the Company effected a two-for-one stock split, decreasing the
   par value to $.0005 per share.  The number of authorized shares remained at
   20,000,000.  All share

                                       21
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)

   information reported in these financial statements has been adjusted to
   reflect the two-for-one stock split.



2. Shareholders' equity (deficit) (continued)
-- ------------------------------------------

   Common stock (continued)
   ------------------------

   In March 1997, the Company offered in a private placement memorandum 35 units
   at $29,000 per unit.  Each unit consists of 20,000 shares of common stock and
   warrants to purchase 40,000 shares of common stock exercisable at $1.75 per
   share from February 10, 1999 until December 31, 2000.  As of December 31,
   1998, the Company had sold 34 units, including 3 units in conversion of a
   note payable.  An investor converted a note with a balance of $70,000 and
   related accrued interest of $7,000 into 3 units, and the Company received
   $10,000 cash for the balance.  No value was allocated to the warrants because
   the exercise price was above market price at the time of issuance. During
   1999, warrants to purchase 209,490 common shares were exercised.  During
   2000, warrants to purchase 365,500 common shares were exercised and the
   remaining balance of 785,010 at December 31, 2000 were not converted and
   therefore expired.

   In December 1996, the Company issued 4,000 shares of common stock to its
   attorney for payment of $200 in legal fees.

   In October 1996, the Company issued 760,000 shares of common stock to related
   parties in payment of $38,000 in consulting fees rendered in 1996.

   In May 1996, the Company sold to its founders 2,400,000 shares of common
   stock for $.0005 cash per share and 300,000 shares for a $150 note
   receivable.  In September 1996, the Company sold 100,000 shares of common
   stock for $.05 cash per share to one of its founders.

                                       22
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)




2. Shareholders' equity (deficit) (continued)
----------------------------------------------

   Stock options
   -------------

   The Company has granted options to purchase its common stock.  The option
   prices at the time of grant were at or above the fair value of the Company's
   common stock.  A summary of stock option activity follows:

                                       23
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)

<TABLE>
<CAPTION>
                                                 Number of              Price
                                                  Options             Per Share             Expiration
                                            -------------------     -------------          ------------
<S>                                         <C>                     <C>                    <C>
Inception (April 11, 1996)                                    -                 -                     -
Granted                                               4,420,000     $1.125 - 1.25           1997 - 2006
                                            -------------------     -------------
Outstanding at December 31, 1996                      4,420,000     $1.125 - 1.25           1997 - 2006

Exercised                                               (26,666)        $1.125
Expired                                                (200,000)         $1.18
                                            -------------------     -------------
Outstanding at December 31, 1997                      4,193,334     $1.125 - 1.25              2006

Granted                                               4,152,000     $1.25 - 9.00               2008
Exercised                                               (57,000)    $1.125 - 2.50
Canceled                                             (1,173,334)        $1.125
                                            -------------------     -------------
Outstanding at December 31, 1998                      7,115,000     $1.125 - 9.00           2003 - 2008

Granted                                                  25,000          $5.50                 2004
Exercised                                              (146,903)    $1.125 - 2.50
Canceled                                               (490,000)        $1.125
                                            -------------------     -------------
Outstanding at December 31, 1999                      6,503,097     $1.125 - 9.00           2003 - 2008

Granted                                                 175,000     $5.00 - $5.75
Exercised                                              (223,832)    $1.125 - 2.50
Canceled                                                      -                 -
                                            -------------------     -------------
Outstanding at December 31, 2000                      6,454,265     $1.125 - 9.00           2003 - 2008
                                            ===================

Exercisable at December 31, 2000                      3,522,265     $1.125 - 9.00           2003 - 2008
                                            ===================     =============          ============
</TABLE>

2.   Shareholders' equity (deficit) (continued)
-----------------------------------------------

     Stock options (continued)
     -------------------------

     The following information applies to all options outstanding at December
31, 2000:

                                       24
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)

<TABLE>
<CAPTION>
                                                                Weighted                          Weighted
                                                Average         average                            average
        Exercise              Options          remaining        exercise          Number          exercise
          Price             Outstanding      life (years)        price         exercisable          price
     ---------------      ---------------   --------------   --------------  ---------------   --------------
     <S>                  <C>               <C>              <C>             <C>               <C>
      $        1.125          2,151,265            5            $ 1.125         2,151,265           $ 1.125
      $         2.50          4,088,000            7            $  2.50         1,256,000           $  2.50
      $  4.63 - 5.75            205,000            3            $  5.33           105,000           $  5.33
      $         9.00             10,000            3            $  9.00            10,000           $  9.00
</TABLE>

     Included in options granted in 1998 and 1996 are 4,080,000 and 4,200,000
     options, respectively, granted to employees. SFAS 123 encourages but does
     not require companies to record compensation cost for stock-based employee
     compensation plans at fair value. The Company has chosen to account for
     stock-based compensation using the intrinsic value method prescribed in
     APB Opinion 25, and related interpretations. Accordingly, compensation
     cost for stock options is measured as the excess, if any, 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.

     The following information applies to employee options outstanding at
     December 31, 2000:

<TABLE>
<CAPTION>
                                                                Weighted                          Weighted
                                                Average         average                            average
        Exercise              Options          remaining        exercise          Number          exercise
          Price             Outstanding      life (years)        price         exercisable          price
     ---------------      ---------------   --------------   --------------  ---------------   --------------
     <S>                  <C>               <C>              <C>             <C>               <C>
      $    1.125              2,151,265           5             $ 1.125          2,151,265         $ 1.125
      $     2.50              4,078,000           7             $  2.50          1,246,000         $  2.50
</TABLE>

     The fair value of these options was estimated at the date of grant using
     the Black-Scholes option-pricing model with the following weighted average
     assumptions for 1998 and 1996, respectively: risk-free interest rate of 6%
     and 9%; volatility of 50% and 200%; and a weighted fair value of $1.26 and
     $.001.

2.   Shareholders' equity (deficit) (continued)
-----------------------------------------------

     Stock options (continued)
     -------------------------

                                       25
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)

     Had compensation cost been determined based on the fair value of the
     options at the grant dates consistent with the method of SFAS 123, the
     Company's net loss and loss per share would have been:

<TABLE>
<CAPTION>
                                                                  2000                      1999
                                                              ------------              ------------
     <S>                                                      <C>                       <C>
     Net loss
            As reported                                       $ (1,749,444)             $ (1,329,328)
            Pro forma                                         $ (2,486,540)             $ (2,397,391)

     Basic and fully diluted loss per share
            As reported                                       $       0.42              $      (0.38)
            Pro forma                                         $      (0.60)             $      (0.64)
</TABLE>

     During 2000, 175,000 options were granted to two consultants at exercise
     prices of $5.00 and $5.75. The fair value of these options was calculated
     using the Black-Scholes option-pricing model and was determined to be
     $280,000. The services provided by these consultants are to be performed
     over two years. The cost of $280,000 is being amortized over two years and
     the balance of $175,000 at December 31, 2000 is recorded on the balance
     sheet as unamortized stock option costs. During 2000 $105,000 was charged
     to expense and recorded in the statement of operations. The fair value of
     the options issued to non-employees during 1999 and 1998 was determined to
     be minimal.

3.   Basic and diluted net loss per share
-----------------------------------------

                                       26
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)

     The following table illustrates the required disclosure of the
     reconciliation of the numerators and denominators of the basic and diluted
     earnings per share computations.

<TABLE>
<CAPTION>
                                                                                      2000              1999
                                                                                 ------------         -----------
     <S>                                                                         <C>                  <C>
     Basic and diluted loss per share:

       Numerator
           Net loss                                                              $ (1,749,444)        $(1,329,328)
           Preferred dividend                                                               -             (25,725)
           Beneficial conversion feature preferred stock                             (208,125)           (199,486)
                                                                                 ------------         -----------

                                                                                 $ (1,957,569)        $(1,554,539)
                                                                                 ============         ===========
       Denominator
           Basic and diluted weighted average number of
           common shares outstanding during the period                              4,619,400           4,104,371
                                                                                 ============         ===========

     Basic and diluted loss per share                                            $      (0.42)        $     (0.38)
                                                                                 ============         ===========

     Incremental common shares (not included in denominator of diluted earnings
     per share calculation due to their antidilutive nature) attributable to
     exercise of:

           Outstanding options                                                      6,454,265           6,503,097
           Outstanding warrants                                                             -           1,150,510
           Preferred stock                                                            426,829             143,404
                                                                                 ------------         -----------

                                                                                    6,881,094           7,797,011
                                                                                 ============         ===========
</TABLE>

4.   Income taxes
-----------------

     The Company recognizes deferred tax assets and liabilities for temporary
     differences between the financial reporting and tax bases of its assets and
     liabilities. Deferred tax assets are reduced by a valuation allowance when
     deemed appropriate. For 2000 and 1999 there is no difference between income
     tax expense and the amount computed by applying the federal statutory
     income tax rate.

     At December 31, 2000, the Company has a net operating loss carryforward for
     federal tax purposes of $4,424,000 which, if unused to offset future
     taxable income, will begin to expire in 2012.

     The Company had deferred tax assets of $1,548,000 and $930,000 at December
     31, 2000 and 1999, respectively, relating to its net operating loss. A
     valuation allowance has been recognized to offset all of the related
     deferred tax asset due to the uncertainty of realizing the benefit.

5.   Commitments and contingencies
----------------------------------

                                       27
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)


   Lease
   -----

   The Company leases office space on a month-to-month basis at $125 per month.
   Actual rent expense was $1,500 in 2000 and $1,649 in 1999.

   Consulting agreements
   ---------------------

   In January 1997, the Company entered into a consulting agreement with its
   strategic consultant, a related party, for five years at $5,000 per month.
   The agreement was revised in November 1997 to $8,000 per month, in April 1998
   to $10,000 per month and for an additional five years and in April 1999 to
   $18,333 per month.  Options to purchase 2,000,000 shares of common stock at
   an exercise price of $2.50 per share were also granted under the April 1998
   revision agreement.  The options vest and become exercisable in ten equal
   installments of 200,000 shares each year starting on the grant date and are
   exercisable for ten years.

   In April 1998, the Company entered into an employment agreement with its
   President and CEO for ten years. The agreement provides for a base salary of
   $10,000 per month beginning May 1998, to be paid when the Company begins
   recording revenues.  In December 1998, the Company's president elected to
   contribute his accrued salary of $80,000 to the Company.  Options to purchase
   2,000,000 shares of common stock at an exercise price of $2.50 per share were
   granted under the agreement.  The options vest and become exercisable in ten
   equal installments of 200,000 shares each year starting on the grant date and
   are exercisable for ten years.  The employment agreement was revised in April
   1999 to $18,333 per month.

   Royalty agreements
   ------------------

   In July 2000, the Company entered into royalty agreements with its CEO and
   its strategic consultant granting each of them royalties equal to .0075% on
   net sales of certain MED products as defined.  To date, MED has not had any
   net sales.

   Litigation
   ----------

   In settlement of its lawsuit with Carepoint Networks, Inc., in February 2000
   the Company agreed to pay $50,000 cash and to issue 33,333 common shares
   valued at the then current market price of $6.00 per share.  The total
   settlement amount of $250,000 is included in the 1999 consolidated statement
   of operations under general and administrative expenses.

                                       28
<PAGE>

                     CPC OF AMERICA, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                         (A Development Stage Company)


5. Commitments and contingencies (continued)
---------------------------------------------

   Litigation (continued)
   ----------------------

   The Company has been named in a lawsuit brought by Nancy Lee, a former
   consultant to the Company.  Ms. Lee alleges that the Company prohibited her
   from selling the balance of her shares of stock she acquired as one of the
   Company's founders.  She seeks a judicial declaration from the court that she
   is the rightful owner of the shares.  The Company has filed an answer and a
   counterclaim seeking return of the shares on the grounds that Ms. Lee failed
   to provide adequate consideration for the securities.  The Company intends to
   vigorously defend against the allegations and prosecute the counterclaim.
   Management believes that an adverse determination to the lawsuit will not
   have a material effect on the Company's financial condition or operations.

   The Company has been named in a lawsuit brought by Richard E. Rubin, M.D., a
   former officer and director of the Company.  Rubin alleges that the Company
   breached an employment contract with him and prohibited him from selling his
   shares of stock or exercising his stock options.  He seeks damages in excess
   of $5,000,000.  The Company has filed an answer denying any and all liability
   to Rubin.  The Company has interposed counterclaims against Rubin seeking
   recovery of the shares and options, or in the alternative, monetary damages.
   Management believes that the allegations of Rubin's complaint are without
   merit and, accordingly, intends to vigorously defend this case.  Management
   believes that an adverse determination to the lawsuit will not have a
   material effect on the Company's financial condition or operations.

   The Lee and Rubin matters have been consolidated and transferred to U.S.
   District Court for the District of New York.

6. Going concern
-----------------

   The accompanying consolidated financial statements have been prepared
   assuming the Company will continue as a going concern.  The Company has
   reported losses from its inception, is still in the development stage and
   does not have sufficient cash to cover its current operating needs.
   Management anticipates that it will need to raise an additional $1,400,000 in
   order to fund its operations over the next 12 months as well as an additional
   $3,600,000 to fund the FDA approval process for MED's product.

   The Company expects to fund its capital requirements over the next 12 months
   from the sale of its securities.  However, the Company has no agreements or
   commitments concerning the sale of its securities and there can be no
   assurance the Company will be able to obtain sufficient additional capital
   through the sale of its securities as needed.

                                       29
<PAGE>

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

         None.

Part III

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

Set forth below are the directors and officers of the Company.


        Name                Age    Position
        ----                ---    --------

Rod A. Shipman              50     President, Secretary, Treasurer and Director
Rafe Cohen                  53     Director
William C. Lievense         53     Director

         Mr. Shipman has been the President, Chief Executive Officer of the
Company since January 1997, became Secretary in July 1997 and Treasurer in
September 2000 and has been a director of the Company since its inception in May
1996. Mr. Shipman has over 20 years of experience in the medical industry. From
August 1994 to September 1999, Mr. Shipman was President and Chief Executive
Officer of R.A. Shipman & Associates, L.L.C., a health care consulting firm.
From January 1993 to July 1994 he served as Senior Vice President and Chief
Operating Officer of MRI Medical Diagnostics, a Colorado corporation that
provided imaging and nuclear medical services and operated a senior retirement
facility. Mr. Shipman also served as a director of that company from May 1993 to
June 1994. From January 1991 to September 1992, Mr. Shipman served as the
President and Chief Operating Officer of Southern California Imaging Services, a
private mobile diagnostic imaging and service company. From 1978 to 1990 he
served in various positions including Business Manager, Controller, Account
Executive and District General Manager with Philips Medical Systems, CGR Medical
Systems, ADAC Laboratories and Picker, all medical imaging companies. Mr.
Shipman received a Bachelor of Science degree in Business Administration from
Pepperdine University in Malibu, California and a Masters degree in Public and
Health Care Administration from the University of San Francisco in San
Francisco, California. He currently serves as a director on several small
privately held companies in real estate and environmental companies

         Mr. Cohen has served as a director of the Company since July 1998. Mr.
Cohen previously served as a director of the Company in 1996. Mr. Cohen served
as Treasurer from July 1998 to September 2000. Mr. Cohen is a certified public
accountant and has owned and managed his own accounting practice since 1974. Mr.
Cohen also currently serves as President of Galaxy Theaters. Mr. Cohen received
a Masters Degree in Business Taxation from the University of Southern California
in 1976 and a Masters Degree in Finance from the University of California, Los
Angeles in 1972.

         Mr. Lievense has served as a director of the Company since October
1996. He has approximately 26 years of experience in the medical industry. Mr.
Lievense was the President and Chief Executive Officer of Columbia/Doctors
Hospital of Sarasota, Florida, and its predecessor, Galen Health Care
Corporation from 1993 to his recent retirement in January 2000. Mr. Lievense has
worked for Humana, Inc., a nationwide owner and operator of hospitals and
healthcare facilities, for 20 years, serving as its Vice President and Assistant
Regional Manager from 1988 to 1993. He also worked for American Inhalation
Representatives, Inc., a respiratory services company in Birmingham, Alabama.
Mr. Lievense received a Bachelor of Arts degree in Sociology from Alma College
in Alma, Michigan and received a Masters degree in Business Administration from
the University of Louisville, Kentucky.

         All directors serve for a one-year term and until their successors are
duly elected and qualified. All officers serve at the discretion of the Board of
Directors.

                                      -30-
<PAGE>

Key Consultants to the Company

     The CTM Group, Inc., has a consulting contract to provide strategic
planning services to the Company. Mr. Paul Shabty is the key consultant from the
CTM Group, Inc. who provides these consulting services. Mr. Shabty is a former
founder of the Company and served as its President, Treasurer and Chairman of
the Board from April 1996 to January 1997. Mr. Shabty was a member of the Board
of Trustees of Columbia/Doctors Hospital of Sarasota, Florida. He is a former
director of TD Technologies, Inc., a private engineering and software company,
and Advanced Technologies Management Corporation, a medical software and
management company. Mr. Shabty has been involved in the medical and
manufacturing industries since 1970. He was the Founder, Chairman of the Board
and Chief Executive Officer of Medical Clinic Unlimited, Inc., which specialized
in both the provision of outpatient dialysis services and the manufacturing of
medical devices, equipment and supplies. From October 1993 to September 1994,
Mr. Shabty served as Executive Vice President of U.S. Diagnostic Labs, Inc., a
physician practice management provider specializing in diagnostic imaging
centers. Mr. Shabty received a Bachelor of Arts degree in Accounting from the
University of Tel Aviv.

     Gene Myers, M.D. has been the Medical and Clinical Affairs Director of the
Company's wholly-owned subsidiary, CPCA2000, Inc., since July 1998 and majority-
owned subsidiary, Med Enclosure, LLC, since November 1999. Dr. Myers has
performed medical internships at the University of Michigan's Department of
Internal Medicine and at the University Health Center of Pittsburgh. Dr Myers
was also an Assistant Resident, Research Cardiology Fellow and Chief Medical
Resident at Duke University Hospital, and has published or presented more than
two dozen scientific studies. He received a Bachelor's degree in Chemistry and
Physics from Pennsylvania State University and his M.D. from the Pennsylvania
School of Medicine at the University of Pennsylvania. Dr. Myers is licensed in
three states, and has a cardiology practice in Sarasota, Florida. He is a member
of numerous professional organizations including the American College of
Cardiology, the American Heart Association, the American College of Nuclear
Cardiology and the American Board of Quality Assurance and Utilization Review.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers, directors and persons who beneficially own more than 10% of a
registered class of our equity securities to file reports of securities
ownership and changes in such ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10% beneficial
owners are also required by rules promulgated by the SEC to furnish us with
copies of all Section 16(a) forms they file.

     Based solely upon a review of the copies of such forms furnished to us, or
written representations that no Form 5 filings were required, we believe that
during the fiscal year ended December 31, 2000, all Section 16(a) filing
requirements applicable to our officers, directors and greater than 10%
beneficial owners were complied with.

                                      -31-
<PAGE>

Item 10.  Executive Compensation.

     Cash Compensation of Executive Officers. The following table sets forth the
cash compensation paid by the Company to its Chief Executive Officer for
services rendered during the fiscal years ended December 31, 2000, 1999 and
1998.

<TABLE>
<CAPTION>
                                       Annual Compensation              Long-Term Compensation
                                ---------------------------------  ---------------------------------
       Name and Position        Year  Salary  Bonus  Other Annual   Restricted      Common Shares      All Other
                                                     Compensation  Stock Awards   Underlying Options  Compensation
                                                                       ($)             Granted
                                                                                      (# Shares)
-----------------------------   ---- -------- -----  ------------  ------------   ------------------  ------------
<S>                             <C>  <C>      <C>    <C>            <C>            <C>                <C>
Rod A. Shipman, President and   2000 $220,000  -0-      9,000          -0-                  -0-          -0-
Chief Executive Officer         1999 $195,000  -0-        -0-          -0-                  -0-          -0-
                                1998 $    -0-  -0-        -0-          -0-            2,000,000          -0-
</TABLE>


              Aggregated Option/SAR Exercises in Last Fiscal Year
                          and FY-End Option/SAR Values


<TABLE>
<CAPTION>
                Name                 Shares Acquired on       Value Realized ($)     Number of Securities      Value of Unexercised
                                        Exercise (#)                                      Underlying               In-the-Money
                                                                                          Unexercised            Options/SARs at
                                                                                        Options/SARs at             FY-End ($)
                                                                                          FY-End (#)               Exercisable/
                                                                                         Exercisable/             Unexercisable
                                                                                         Unexercisable
-----------------------------------  ------------------       ------------------     --------------------      --------------------

<S>                                    <C>                    <C>                    <C>                      <C>
Rod A. Shipman, President and Chief          190,345             $404,483(1)          1,488,885/1,200,000           -0-/-0-
Executive Officer
</TABLE>

(1) Based on a price of $2.125 per share for the Common Stock as quoted on the
    OTC Bulletin Board on December 31, 2000.


     Compensation of Directors. At the present time, directors receive no
compensation for serving as directors of the Company, however the Company may in
the future begin to compensate its non-officer directors. All directors receive
reimbursement for out-of-pocket expenses in attending Board of Directors
meetings. From time to time the Company may engage certain members of the Board
of Directors to perform services on behalf of the Company and will compensate
such persons for the services which they perform.

     Employment Agreements. On April 23, 1998, the Company entered into an
Employment Agreement with Rod A. Shipman to serve as President and Chief
Executive Officer of the Company. Pursuant to the terms of that employment
agreement, Mr. Shipman received an annual salary of $120,000. Effective April 1,
1999, the Company and Mr. Shipman amended the terms of his employment agreement
to increase annual compensation to $220,000 and to permit Mr. Shipman to use his
accrued salary to pay the exercise price on his outstanding options. Pursuant to
his employment agreement with the Company, Mr. Shipman received options to
purchase 2,000,000 shares of Common Stock at an exercise price of $2.50 per
share, of which options to purchase 200,000 were immediately exercisable and
options to purchase 200,000 shares vest and first become exercisable on April 23
on each of the next nine anniversaries of the date of grant. The options expire
on April 22, 2008. The Employment Agreement is for a term of ten years.

                                      -32-
<PAGE>

     In July 2000, the Board of Directors of the Company approved, and caused
its 73.3% subsidiary, Med Enclosure LLC, to award, a bonus to Mr. Shipman in the
form of a royalty on the net sale of products of Med Enclosure LLC derived from
two of its three patents. Mr. Shipman will receive a royalty in the amount of
three-quarters of one percent (.0075%) on all net sales of products subject to
the royalty agreement.

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

          The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock as of March 25, 2001 by (i)
each person who is known by the Company to be the beneficial owner of more than
five percent (5%) of the issued and outstanding shares of Common Stock, (ii)
each of the Company's directors and executive officers and (iii) all directors
and executive officers as a group.


      Name and Address          Number of Shares  Percentage Owned
                                ----------------  ----------------

Rod A. Shipman(1) (2)              1,855,230           28.8%
Rafe Cohen(1)                         62,000            1.3%
Dr. Richard E. Rubin(3)              456,666            9.2%
William C. Lievense(1)                75,000            1.5%
CTM Group, Inc.(4)(5)              2,506,354           37.3%
Leslie J. Kessler(6)(7)              950,000           17.5%
All officers and directors
as a group (three persons)         1,992,230           31.0%

_______________
(1) Address is 1133 Fourth Street, Suite 200, Sarasota, Florida 34236.

(2) Includes options granted to Mr. Shipman to purchase 1,488,885 shares of
    Common Stock.  Does not include options to purchase 1,200,000 shares of
    Common Stock, which are subject to vesting.

(3) Address is 5530 Wisconsin Avenue, Suite 750, Chevy Chase, Maryland 20815.

(4) Address is 1350 East Flamingo, #800, Las Vegas, Nevada  89119.

(5) Includes options granted to the CTM Group to purchase 1,771,513 shares of
    Common Stock.  Does not include options to purchase 1,200,000 shares of
    Common Stock, which are subject to vesting.

(6) Address is 11 Hedgerow Lane, Jericho, New York 11753.

(7) Includes an option granted to Ms. Kessler to purchase 490,000 shares of
    Common Stock.

                                      -33-
<PAGE>

Item 12.  Certain Relationships and Related Transactions.

     In July 2000, the Board of Directors of the Company approved, and caused
its 73.3% subsidiary, Med Enclosure LLC, to award, bonuses to the Company's
Chief Executive Officer, Rod A. Shipman, and its strategic consultant, CTM
Group, Inc., in the form of royalties on the net sale of products of Med
Enclosure LLC derived from two of its three patents. Mr. Shipman and CTM Group
each will receive a royalty in the amount of three-quarters of one percent
(.0075%) on all net sales of products subject to the royalty agreement.

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

(a)   Index To Exhibits                                                Page
                                                                       ----

   3.1    Articles of Incorporation of the Company (1)

   3.2    Bylaws of the Company (1)

   4.1    Specimen of Common Stock Certificate (1)

   4.2    Certificate of Designations of the Company (4)

   10.1   Consulting Agreement between the Company and CTM Group, Inc (1)

   10.2   Stock Purchase Agreement between the Company and DSDS Group, Inc.
          dated July 25, 1997 (1)

   10.3   Employment Agreement dated April 23, 1998 between the Company and Rod
          A. Shipman (2)

   10.4   Operating Agreement dated August 21, 1998 between the Company and
          Partner Provider Health, Inc. (2)

   10.5   Consulting Agreement dated April 23, 1998 between the Company and CTM
          Consulting Group, Inc. (2)

   10.6   Agreement dated November 17, 1998 between the Company and Automated
          Specialties Enterprises, Inc. (3)

   10.7   Agreement dated November 17, 1998 (3)

   10.8   Amendment to Employment Agreement dated April 1, 1999 between the
          Company and Rod A. Shipman (4)

   10.9   Amendment to Consulting Agreement dated April 1, 1999 between the
          Company and CTM Group, Inc. (4)

   10.10  Letter Agreement between the Company and Leslie J. Kessler dated May
          18, 1999 (5)

   10.11  Amended and Restated Operating Agreement for Med Enclosures LLC

   10.12  Royalty Agreement dated July 28, 2000 between Med Enclosures LLC and
          Rod A. Shipman

   10.13  Royalty Agreement dated July 28, 2000 between Med Enclosures LLC and
          CTM Group, Inc.

   21.1   List of Subsidiaries

   23.1   Consent of Independent Certified Public Accountants
_______________

                                      -34-
<PAGE>

(1) Previously filed as part of the Company's registration statement on Form 10-
    SB (SEC File No. 0-24053) filed with the Securities and Exchange Commission
    on April 20, 1998.

(2) Previously filed as part of the Company's registration statement on Form 10-
    SB/A (SEC File No. 0-24053) filed with the Securities and Exchange
    Commission on August 14, 1998.

(3) Previously filed as part of the Company's annual report on Form 10-KSB (SEC
    File No. 0-24053) for the year ended December 31, 1998 filed with the
    Securities and Exchange Commission on March 31, 1999.

(4) Previously filed as part of the Company's quarterly report on Form 10-QSB
    (SEC File No. 0-24053) for the quarter ended March 31, 1999 filed with the
    Securities and Exchange Commission on May 17, 1999.

(5) Previously filed as part of the Company's quarterly report on Form 10-QSB
    (SEC File No. 0-24053) for the quarter ended June 30, 1999 filed with the
    Securities and Exchange Commission on August 9, 1999.

(b)    Reports on Form 8-K.

       None.

                                      -35-
<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, thereunto
duly authorized.

                                  CPC OF AMERICA, INC.

Date:  April 16, 2001             By: /s/ ROD A. SHIPMAN
                                      -----------------------------------
                                      Rod A. Shipman, President and Chief
                                      Executive Officer

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

Signature                              Title                        Date
---------                              -----                        ----

/s/ ROD A. SHIPMAN       President, Chief Financial Officer,    April 16, 2001
---------------------    Secretary, Treasurer and Principal
ROD A. SHIPMAN           Accounting Officer and Director

/s/ RAFE COHEN           Director                               April 16, 2001
---------------------
RAFE COHEN

/s/ WILLIAM LIEVENSE     Director                               April 16, 2001
---------------------
WILLIAM LIEVENSE

                                      -36-