<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)

|X|      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934.

For the quarterly period ended       MARCH 31, 2000
                               ---------------------------

                                       OR

|_|      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934.

For the transition period from _______________ to _______________

                        Commission file number     2844975-1
                                                   ---------


                                 Deotexis, Inc.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


              Nevada                                    13-3666344
----------------------------------------   -------------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

         855 Third Avenue, Suite 2900
         New York, New York                             10022-4082
----------------------------------------   -------------------------------------
(Address of Principal Executive Offices)                (Zip Code)


Registrant's Telephone Number, including area code    (212) 829-5698
                                                   -----------------------------

                                     - N/A -
--------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report



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

Yes   X    No
    ------     ------

         As of May 10, 2000, there were 4,546,875 shares of the registrant's
Common Stock, par value $.001, outstanding.



<PAGE>


STATEMENT ON INTERPRETATION OF FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements relating to future
events or the projected future financial performance of the Company. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act and Section 21E of the Exchange Act. When used herein, the
words "anticipate," "intend," "plan," "believe," "in our opinion," "hope,"
"estimate" and "expect," and any similar words or phrases as they relate to the
Company or its operations, are intended to identify these forward-looking
statements. These statements may include, but not be limited to, projections of
revenues, income or loss, capital expenditures, plans for growth and future
operations, financing needs, sources or potential sources of capital, or plans
or intentions relating to acquisitions by the Company, as well as assumptions
relating to the foregoing. Forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those assumptions and
projections set forth in, contemplated by or underlying the forward-looking
statements. Investors are cautioned not to place undue reliance upon the
forward-looking statements contained herein.


<PAGE>


                                 DEOTEXIS, INC.
                                   FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2000

                                     INDEX

<TABLE>
<CAPTION>

                                                                                                              Page
                                                                                                              ----

<S>               <C>                                                                                           <C>
PART I.           FINANCIAL INFORMATION.........................................................................1

         ITEM 1.  FINANCIAL STATEMENTS..........................................................................1

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........1

         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................1

PART II.          OTHER INFORMATION.............................................................................1

         ITEM 1.  LEGAL PROCEEDINGS.............................................................................1

         ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.....................................................1

         ITEM 3.  DEFAULTS UPON SENIOR SECURITIES...............................................................1

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................1

         ITEM 5.  OTHER INFORMATION.............................................................................1

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K..............................................................8
</TABLE>


<PAGE>



                                    PART I.
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

         See the Index to Financial Statements, and the Financial Statements and
Notes thereto appearing at the end of this Quarterly Report.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         See Part II, Item 5 -- Other Information, below.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Not Applicable.

                                    PART II.
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         Not Applicable.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         Not Applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         Not Applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not Applicable.

ITEM 5.  OTHER INFORMATION.

         The following discussion of the Company's financial condition, results
of operations and plan of operations should be read in conjunction with the
Financial Statements and Notes thereto appearing at the end of this Quarterly
Report.


                                       1
<PAGE>


RESULTS OF OPERATIONS

         Deotexis, Inc., and its subsidiary (the "COMPANY") has not generated
any revenue from operations and is in the development stage. At March 31,
2000, the Company had current assets of $1,237,584, and current liabilities
of $145,263.

PLAN OF OPERATIONS

GENERAL OVERVIEW

         The Company was incorporated in Nevada on March 6, 1992, has no
operating history, has not generated or recognized any revenues, and is in the
development stage. The Company was originally organized with the sole purpose of
identifying a suitable candidate to acquire or with which to merge, and, until
September 1997, its existence had been maintained since its formation with that
objective in mind. On September 30, 1997, the Company, then known by its former
name, Zeron Acquisitions II, Inc. ("ZERON"), and Zeron's two controlling
stockholders at the time, entered into a Stock Purchase Agreement (the "STOCK
PURCHASE AGREEMENT") with Mr. Gerold Tebbe and Overton Holdings Limited, a Turks
& Caicos Islands corporation wholly beneficially owned and controlled by Mr.
Tebbe ("OHL"), pursuant to which OHL agreed to buy 4,183,125 newly-issued and
non-registered shares of Common Stock, $.001 par value per share, of the
Company, in exchange for (i) $4,000,000 in cash from OHL, and (ii) the
contribution to the Company by Mr. Tebbe, or entities owned or controlled by
him, of certain patents, patent applications and associated intellectual
property, in return for nominal consideration and a reservation of a 1% royalty
by Mr. Tebbe on all net income recognized by the Company from the commercial
exploitation of such rights.

         The Company is engaged in the business of developing and
commercializing certain patented controlled-release delivery systems for
consumer products in certain sectors of the toiletries, cosmetics, apparel,
household products, personal care products, medical, paper, industrial or
technical textiles, pharmaceutical, and other markets. The Company's goal is to
expand and build on its patented "know-how," and to acquire access to
manufacturing and marketing resources to become a profitable developer and
supplier of controlled-release delivery systems to a wide range of industry
sectors. Ultimately, the Company plans to become a business owning or holding
the rights to a wide range of products in the area of controlled-release
technology.

         The Company's first controlled-release delivery system was developed by
Mr. Tebbe in 1987, and he filed a patent application for the technology relating
thereto in that same year. The application was opposed in the European patent
courts by The Procter & Gamble Company, one of the world's largest manufacturers
and distributors of household and consumer products. In late 1996, the European
Patent Office dismissed Procter & Gamble's challenge in favor of Mr. Tebbe's
patent claims. Following the patent ruling in his favor, Mr. Tebbe has commenced
taking steps to capitalize on his patented processes and technology.

         Over the course of the next three (3) years, the Company anticipates
that it will (a) enter into licensing agreements providing for the use by
licensees of the Company's patents and manufacturing technology in exchange for
a sales-based royalty payment to the Company, (b) initiate joint ventures and
strategic alliances with business partners the Company feels can utilize or
promote the Company's products and technology, (c) enter into one or more
distribution


                                       2
<PAGE>


agreements with one or more major drug and pharmaceutical wholesale
distributors, (d) either hire additional senior management necessary to operate
the Company, or acquire an operating company with an existing management team,
or pursue a combination of these strategies, (e) acquire an operating company in
Europe or the United States to manufacture or to oversee the sub-contracted
manufacture and the distribution of its products, and (f) commence an image
building advertising and public relations campaign in the pharmaceutical and
personal care products industries. There can be no assurance that any or all of
these goals will be achieved by the Company.

PRODUCTS

         The Company's core patent covers rate-controlled delivery systems for
chemicals which are microencapsulated and coated onto flexible textiles. In
these systems, the active substances or compounds, including anti-bacterial
compounds, perfumes and emollients, are enclosed in micro-capsules and coated
onto textiles. Depending on the thickness of their walls and the material used
to make them, the tiny capsules can be engineered to rupture and release their
contents at pre-programmed intervals, or in response to changes in specific
conditions (such as heat, humidity, pressure, etc.), enabling the user to
benefit from timely, correctly-dosed applications of personal care,
pharmaceutical or other compounds. Textile-based "controlled-release delivery
systems" have recently come into widespread use in certain female hygiene
products (sanitary pads) and in baby's diapers, where the use of
microencapsulated anti-bacterial compounds has permitted the manufacturers to
reduce the volume and thickness of the material and, most importantly, increase
the flexibility and therefore the comfort and convenience of these products
without reducing their effectiveness.

         Based on its textile-based controlled-release delivery system, the
Company has developed and patented a number of consumer products, including the
"Cold Scarf," a disposable scarf impregnated with herbal substances for use by
people seeking relief from the symptoms of colds and congestion. In addition,
the Company has developed and patented controlled-release systems which can be
integrated with adhesive plasters, latex gloves and other "carriers" to deliver
micro-encapsulated substances in new ways. The Company's business plan envisions
business ventures with other companies which have know-how in mature basic
technologies such as adhesive plaster manufacturing and paper products, and are
seeking new ideas for innovative products that the Company's delivery system
technology may help to provide.

TARGET MARKETS; MANUFACTURING AND DISTRIBUTION STRATEGY

         Potential end-users of the Company's systems are consumers worldwide.
In order to reach these end-users, the Company intends to license its systems to
corporations which manufacture, sell and distribute consumer products to the
personal care, pharmaceutical, medical, paper, industrial or technical textile
and household products markets. The ability to use the Company's technology by
virtue of a license, in the Company's opinion, should offer the licensee a
unique opportunity to diversify and expand its sales.

RETENTION OF SENIOR MANAGEMENT

         The Company's seven member Board of Directors has extensive experience
in a wide array of business sectors. Mr. Gerold Tebbe serves as the President,
Chief Executive Officer and a Director of the Company, with overall
responsibility for operations. Mr. Tebbe


                                       3
<PAGE>


also serves as the Company's Secretary and Treasurer and will do so until
such time as the Board of Directors determines that it is appropriate to hire
suitable personnel to serve in those positions. In addition, Mr. Tebbe has
been appointed Acting Chief Financial Officer, to execute the duties of Chief
Financial Officer until such time as the Board of Directors determines that
the Company's level of operations warrants the retention of a full-time
permanent Chief Financial Officer.

COMPANY STRUCTURE AND SUBSIDIARIES

         The Company formed a wholly-owned subsidiary in Germany in March 1999,
Hecking Deotexis GmbH (formerly D-Tex Technologie Holding GmbH)("Deotexis
Germany"), to establish a local presence and serve as a holding company for
Deotexis's investment in Medisana GmbH, a marketer and distributor of medical
devices and wellness supplies located in Meckenheim, Germany, and any other
joint venture or equity interests which may materialize through cooperation
agreements with additional licensees. Deotexis Germany will initially have an
independent professional manager who will serve as interim CEO of that
subsidiary on a part-time basis while licenses are negotiated and joint ventures
formed. Once the Company's operations have progressed to the joint venture
stage, the Company expects to engage full-time management to monitor its German
relationships and investments, and to identify and negotiate new business
opportunities. Assuming that this approach is successful, the Company intends to
set up additional "technology holding companies" in other countries (including
the United States) and to follow the same strategy. As the volume of activity
increases, to support Mr. Tebbe, the Company expects to appoint a seasoned
financial executive at the parent company level, who will be responsible for
accounting, consolidations, finance, cash management, regulatory and securities
law compliance, and other parent company functions.

         As described below, the Company has an option to acquire the assets of
NTW (subject to certain contingencies, including the securing of suitable
financing), and thereafter use products based on the Company's technology to
diversify and expand NTW's existing product offerings and revenue base. In
addition, the Company hopes that, if it is able to consummate an acquisition,
officers and employees of NTW will be able to assist in licensing activities and
new product development, thereby increasing the Company's management depth and
strengthening its product management and marketing skills.

AGREEMENTS WITH NTW

         In January of 2000, Deotexis Germany entered into agreements that, in
essence, give Deotexis Germany an option, until May 31, 2000, to acquire the
assets of Neuenkirchener Textilwerke Hecking GmbH & Co. KG ("NTW"), for
approximately DM 27.5 million (US$ 13.415 million). NTW is a long-established
weaving and textile finishing business based near Munster, Germany. It was
forced into bankruptcy proceedings in 1999 when its parent company became
insolvent. NTW possesses coating and finishing machinery that is well-suited to
performing microencapsulation procedures on a wide range of fabrics.

         Deotexis Germany is in nominal control of the assets and operations of
NTW, and is forwarding orders to NTW for fulfillment. This arrangement was
reached in an attempt to assure NTW's creditors and suppliers that NTW would
remain a going concern. Deotexis Germany receives no compensation for
administering NTW's operations, and is indemnified for all liabilities and costs
that could potentially be associated therewith.


                                       4
<PAGE>


         During this interim period, the Company is continuing due diligence
with respect to NTW, and continuing to study its operations and prospects. In
addition, the Company is evaluating financing alternatives that would enable it
to complete the acquisition. Pursuant to the documentation that is already in
place, the Company is permitted to abandon the acquisition (a) if NTW's results
of operations for the first half of 2000 are below the results for the second
half of 1999, (b) if it is unable to arrange satisfactory financing, (c) upon
unsatisfactory due diligence results, or (d) failure to negotiate final
agreements.

         Assuming a satisfactory resolution of all of the foregoing, the Company
feels that NTW's coating and finishing operations would provide it with
significant microencapsulation capacity to enable the Company to capitalize on
existing and potential business opportunities, and to quickly grow the Company's
revenues.

LICENSING

         To avoid the typically large costs of advertising and promoting new
consumer products (currently estimated at $15-20 million for a single new
product in Germany alone), the Company plans to initially follow a licensing
strategy to market and distribute its delivery systems.

         The Company anticipates that a large portion of its potential customers
will enter into license agreements with the Company, in return for a sales-based
royalty payment to the Company. It is the Company's intention to grant
extendable, multi-year licenses to corporations in the apparel, cosmetics,
toiletries, household products, personal care products, medical, paper,
industrial or technical textile and pharmaceutical industries. In return for the
licensing fee paid to the Company, licensees will be granted the right to use
the Company's patents, patent applications and the related intellectual property
necessary to manufacture and distribute products employing the Company's
delivery systems.

         With respect to any products which it is required to manufacture that
are not manufactured for a specific customer, the Company anticipates that it
will enter into agreements with wholesale distributors to distribute such
products through those companies' distribution networks, specifically to
retailers that purchase their products from wholesale distributors. The Company
anticipates that it will pay these distributors a fee for the use of their
distribution structure, either in the form of a flat fee per unit of the
Company's products sold, or a fee based on a percentage of the product's
wholesale price.

         There can be no assurance that any license or distribution agreements
with the types of companies described above will be consummated on terms
favorable to the Company, if at all. The Company's failure to effect such
arrangements to license and distribute its products and systems will severely
limit the Company's ability to produce and distribute its products and introduce
them into the market in any significant way.

PUBLIC RELATIONS; ADVERTISING

         The Company has begun a public relations campaign to establish the
presence and build the image of the Company, initially in Germany, with the
intention to eventually expand this activity to all its primary target markets
in Europe and the United States. The public relations campaign has been designed
to present the Company as a technology-driven developer


                                       5
<PAGE>


and supplier of quality, innovative, economical controlled-release products.
This campaign currently utilizes the services of an independent public relations
firm selected by the Company.

         The Company's anticipated advertising campaign, which is scheduled to
commence after the first licenses have been signed and the Company has set up
its distribution channels to service the consumer market, will highlight the
convenience and economy of the Company's products. The Company intends to place
its print advertisements in periodicals and newspapers with readership
demographics consistent with the Company's core consumer target markets.

         On an ongoing basis, the Company is also considering ways to enhance
communications with its shareholders and ensure that information on important
Company developments and opportunities continues to reach them on a timely
basis.

PATENTS

         The Company currently owns the patents and patent rights that were
previously owned by Mr. Tebbe, and/or entities owned and controlled by him, and
were transferred to the Company in connection with the consummation of the
transactions contemplated by the Stock Purchase Agreement. Such patents and
related intellectual property constitute all of the technology necessary to
manufacture the Company's textile-based controlled-release delivery systems. It
is the Company's intention to commercially exploit the patents for its
controlled-release delivery systems technology through the introduction and
licensing of the Company's systems, initially in the European market. In
exchange for the transfer to the Company of the patents, patent rights and
related intellectual property, the Company has agreed to pay Mr. Tebbe a 1%
royalty per annum of all net income recognized by the Company in connection with
the commercial exploitation of these patents and patent rights. There are no
assurances that the Company will ever achieve net income as a result of the
commercial exploitation of these intellectual property rights. Furthermore, if
the occasion arises, the Company will have to defend against and/or institute
patent infringement suits in order to protect its proprietary rights to the
patents. Prosecution of any type of patent litigation or dispute may result in
significant expenses for the Company.

LIQUIDITY

         Since its incorporation on March 6, 1992, the Company has had no
business activity other than its capital raising activities, negotiations
relating to potential joint ventures, strategic alliances and potential
acquisitions, activities relating to its corporate organization, and
activities relating to the transfer to the Company by Mr. Tebbe and/or
entities owned and controlled by him of the patents and other intellectual
property necessary to produce the Company's products and develop its delivery
systems. On March 31, 2000, the Company and its subsidiary had $959,099 of
liquid assets, working capital of $1,092,321 and shareholders' equity of
$1,068,744. The Company has not manufactured or licensed any of its delivery
systems since inception, except that the Company's investment in Medisana
GmbH contemplates the grant of a license to Medisana by the Company to enable
Medisana to study the integration of the Company's technology into its
existing products, and to explore the development of new products utilizing
the Company's technology. The terms of the Medisana license, and the
compensation the Company is to receive with respect thereto, have not yet
been finalized.

         During the period ended March 31, 2000, Mr. Tebbe, the President,
Chief Executive Officer, Secretary, Treasurer and Acting Chief Financial
Officer, and a Director of the Company, loaned 450,000 Euro (approximately
$450,000) to Deotexis. Deotexis invested these funds in Hecking Deotexis
GmbH, its German subsidiary.

                                       6
<PAGE>


CAPITAL RESOURCES

         Following commencement of its operations, the Company's cash
requirements will be significant. While the Company currently has cash on hand
sufficient to finance its proposed business during the first twelve to eighteen
(12-18) months of its operations, excluding the costs of any potential
acquisitions, the Company is dependent on internally generated cash flow and
upon securing a working capital line of credit to implement its business plan
thereafter. There can be no assurance that the Company will be able to maintain
its business and operations without additional financing after the first twelve
to eighteen (12-18) months of operations or that, thereafter, it will be able to
generate sufficient cash flow and/or secure sufficient borrowings to meet the
Company's working capital requirements.



                                       7
<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

    EXHIBITS.

          27.     Financial Data Schedule.

    REPORTS ON FORM 8-K

         The Company filed no reports on Form 8-K during the period covered by
this Quarterly Report on Form 10-Q.



                                       8
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                   DEOTEXIS, INC.

                                   By: /S/ GEROLD TEBBE
                                      -----------------------------------------
                                      President, Chief Executive Officer, Acting
                                      Chief Financial Officer, Secretary and
                                      Treasurer

Dated:  May 15, 2000




<PAGE>


                          DEOTEXIS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                                    INDEX TO
                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                 Page
                                                                                                 ----

<S>                                                                                              <C>
Condensed Consolidated Balance Sheets at December 31, 1999 and March 31, 2000 (unaudited)        F-2

Condensed Consolidated Statements of Operations for the three months ended March
   31, 1999 and 2000 (unaudited) and cumulative since March 6, 1992 (inception)
   to March 31, 2000 (unaudited)                                                                 F-3

Consolidated Statement of Stockholders' Equity for the period March 6, 1992
   (inception) to December 31, 1995, and for the years ended December 31, 1996,
   1997, 1998 and 1999 and for the three months ended March 31, 2000 (unaudited)                 F-4

Condensed Consolidated Statements of Cash Flows for the three months ended March
   31, 1999 and 2000 (unaudited) and cumulative since March 6, 1992 (inception)
   to March 31, 2000 (unaudited)                                                                 F-6

Notes to Condensed Consolidated Financial Statements                                             F-8
</TABLE>



                                      F-1
<PAGE>


                          DEOTEXIS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>

                                                                     DECEMBER 31, 1999            MARCH 31, 2000
                                                                     -----------------            --------------
                                                                                                   (Unaudited)

<S>                                                                     <C>                       <C>
Current assets:
   Cash and cash equivalents                                            $  936,339                $   959,099
   Restricted cash                                                                                    151,354
   Prepaid taxes                                                             7,016                      6,016
   Prepaid expenses                                                                                   121,115
                                                                    --------------                -----------
           Total current assets                                            943,355                  1,237,584

Investment in a company                                                    810,926                    810,926
                                                                       -----------                -----------

           Total assets                                                 $1,754,281                 $2,048,510
                                                                        ==========                 ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses                              $     77,167               $    145,263
                                                                      ------------               ------------
              Total current liabilities                                     77,167                    145,263
                                                                      ------------               ------------
Due to officer                                                             291,765                    834,503
                                                                      ------------               ------------
Commitments and other matters

Stockholders' equity:
   Preferred stock, par value $.001; authorized 15,000,000
   shares, none issued and outstanding
   Common stock, par value $.001; authorized 75,000,000 shares,
   issued and outstanding 4,546,875 shares                                   4,547                      4,547
   Additional paid-in capital                                            4,156,685                  4,156,685
   Deficit accumulated during the development stage                     (2,775,883)                (3,053,712)

   Accumulated other comprehensive loss - foreign currency
   translation adjustment                                                                             (38,776)
                                                                      ------------               ------------
           Total stockholders' equity                                    1,385,349                  1,068,744
                                                                       -----------                -----------

           Total liabilities and stockholders' equity                   $1,754,281                $ 2,048,510
                                                                        ==========                ===========
</TABLE>


                             SEE ACCOMPANYING NOTES



                                      F-2
<PAGE>


                          DEOTEXIS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                  Three Months
                                                 Ended March 31,                    March 6, 1992
                                        ---------------------------------       (Date of Inception) to
                                               1999                  2000           March 31, 2000
                                        -----------           -----------           -----------
<S>                                             <C>                   <C>                   <C>
Interest and other income               $    28,448           $     6,497           $   348,040
                                        -----------           -----------           -----------

Expenses:
   Directors fees                            35,000                35,000               315,000
   Interest                                   6,400                11,500                50,100
   Consulting                                                                            38,125
   Rent                                         970                 1,165                52,680
   Corporation franchise taxes                2,034                 1,000                35,063
   Filing fees                               15,969                 5,946               142,947
   Amortization                                                                             500
   Bank charges                                                                           2,329
   Insurance                                 34,705                34,705               314,595
   Office                                    11,295                23,386               238,469
   Professional fees                        214,290               171,624             2,211,944
                                        -----------           -----------           -----------
         Total expenses                     320,663               284,326             3,401,752
                                        -----------           -----------           -----------

Net loss                                $  (292,215)          $  (277,829)          $(3,053,712)
                                        ===========           ===========           ===========

Basic loss per share                    $      (.06)          $      (.06)
                                        ===========           ===========
Weighted average number of
   shares outstanding                     4,546,875             4,546,875
                                        ===========           ===========
</TABLE>


                             SEE ACCOMPANYING NOTES



                                      F-3
<PAGE>


                          DEOTEXIS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>



                                                                                                          Additional
                                                        Comprehensive           Common Stock             Paid-In
                                                            Loss            Shares         Amount          Capital
                                                     -------------------  ---------        ------        -----------
<S>                                                      <C>                <C>               <C>            <C>
Issuance of 160,000 common shares on
   September 4, 1992 at par value ($.001 per
   share) for cash ($.01 per share)                                         160,000           $ 160          $ 1,440

Sale of 18,750 shares for
   cash in July 1992 ($1.60
   per share)                                                                18,750              19           29,981

Net loss inception to
   December 31, 1992

Net loss - December 31, 1993

Sale of 100,000 shares  -
   January 31, 1994 ($6.25
   per share)                                                               100,000             100          624,900

Deferred offering costs
   charged to paid-in capital                                                                                (31,461)

Net loss - December 31, 1994

Net loss - December 31, 1995
                                                                                            -------     ------------

Balance - December 31, 1995                                                                     279          624,860

Net loss
                                                                                            -------     ------------

Balance - December 31, 1996                                                                     279          624,860

Distributions                                                                                               (475,750)
</TABLE>


                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                        Deficit
                                                     Accumulated
                                                      During the          Accumulated          Total
                                                      Development        Comprehensive     Stockholders'
                                                         Stage                Loss            Equity
                                                    ---------------   -------------------  ------------
<S>                                                   <C>                    <C>              <C>
Issuance of 160,000 common shares on
   September 4, 1992 at par value ($.001 per
   share) for cash ($.01 per share)                                                           $1,600

Sale of 18,750 shares for
   cash in July 1992 ($1.60
   per share)                                                                                 30,000

Net loss inception to
   December 31, 1992                                  $   (62)                                   (62)

Net loss - December 31, 1993                           (1,766)                                (1,766)

Sale of 100,000 shares  -
   January 31, 1994 ($6.25
   per share)                                                                                625,000

Deferred offering costs
   charged to paid-in capital                                                                (31,461)

Net loss - December 31, 1994                          (27,184)                               (27,184)

Net loss - December 31, 1995                          (35,005)                               (35,005)
                                                   ----------                             ----------

Balance - December 31, 1995                           (64,017)                               561,122

Net loss                                              (43,737)                               (43,737)
                                                   ----------                             ----------

Balance - December 31, 1996                          (107,754)                               517,385

Distributions                                                                               (475,750)
</TABLE>



                                      F-4
<PAGE>


                          DEOTEXIS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>



                                                                                                          Additional
                                                      Comprehensive             Common Stock               Paid-In
                                                          Loss             Shares          Amount          Capital
                                                  --------------------  ------------       ------        -----------
<S>                                                    <C>                 <C>               <C>           <C>
Sale of 4,183,125 shares for
   cash ($.96 per share)                                                   4,183,125         4,183         3,995,817

Issuance of 85,000 shares
   for services rendered
   ($.48 per share)                                                           85,000            85               (85)

Capital contributed by
   principal stockholder                                                                                      10,643

Net loss
                                                                           ---------     ---------   ---------------

Balance - December 31, 1997                                                4,546,875         4,547         4,155,485

Capital contributed by principal
   stockholder                                                                                                 1,200

Net loss                                                                   ---------     ---------   ---------------


Balance - December 31, 1998                                                4,546,875         4,547         4,156,685

Net loss
                                                                     ---------------      --------   ---------------

Balance - December 31, 1999                                                4,546,875         4,547         4,156,685

Net loss (unaudited)                                      $(277,829)
                                                                   -

Other comprehensive loss:
   Foreign currency
   translation adjustment
   (unaudited)                                              (38,776)
                                                         ---------- ----------------     ---------   ---------------

Comprehensive loss
   (unaudited)                                            $(316,605)
                                                          ==========

Balance  -  March 31, 2000
   (unaudited)                                                             4,546,875        $4,547        $4,156,685
                                                                           =========        ======        ==========
</TABLE>


<TABLE>
<CAPTION>

                                                    Deficit
                                                 Accumulated
                                                  During the          Accumulated          Total
                                                  Development        Comprehensive     Stockholders'
                                                     Stage                Loss            Equity
                                                ---------------   -------------------  ------------
<S>                                                  <C>                <C>               <C>
Sale of 4,183,125 shares for
   cash ($.96 per share)                                                                  4,000,000

Issuance of 85,000 shares
   for services rendered
   ($.48 per share)                                                                         --

Capital contributed by
   principal stockholder                                                                     10,643

Net loss                                              (239,901)                            (239,901)
                                                  ------------                  -------------------

Balance - December 31, 1997                           (347,655)                           3,812,377

Capital contributed by principal
   stockholder                                                                                1,200

Net loss                                            (1,367,161)                          (1,367,161)
                                                  ------------                          -----------

Balance - December 31, 1998                         (1,714,816)                           2,446,416

Net loss                                            (1,061,067)                          (1,061,067)
                                                  ------------                         ------------

Balance - December 31, 1999                         (2,775,883)                           1,385,349

Net loss (unaudited)                                  (277,829)                            (277,829)


Other comprehensive loss:
   Foreign currency
   translation adjustment
   (unaudited)                                                           $(38,776)          (38,776)
                                              ----------------           --------      ------------

Comprehensive loss
   (unaudited)

Balance  -  March 31, 2000
   (unaudited)                                     $(3,053,712)          $(38,776)       $1,068,744
                                                   ===========           ========        ==========
</TABLE>



                                      F-5
<PAGE>

                          DEOTEXIS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    Three Months
                                                                   Ended March 31,                     March 6, 1992
                                                          -------------------------------          (Inception) through
                                                               1999              2000                 March 31, 2000
                                                          -------------      ------------          ---------------------
<S>                                                        <C>                  <C>                      <C>
Cash flows from operating activities:
   Net loss                                                $  (292,215)         $(277,829)               $(3,053,712)
   Adjustments to reconcile net
     loss to net cash used in
       operating activities:
        Amortization                                                                                             500
        Services paid for by principal stockholder                                                             1,200
   Changes in operating assets and liabilities:
     Restricted cash                                                             (151,354)                  (151,354)
     Prepaid taxes                                              (4,008)             1,000                     (6,016)
     Prepaid expenses                                         (104,115)          (121,115)                  (121,115)
     Accounts payable and accrued expenses                      80,924             73,076                    144,763
     Due to officer, net                                      (376,069)            72,663                    369,408
                                                          ------------        -----------                -----------
Cash used in operating activities                             (695,483)          (403,559)                (2,816,326)
                                                          ------------        -----------                -----------

Cash flows from investing activities:
   Purchase of investment                                                                                   (810,926)
                                                                                                         -----------
Cash flows from financing activities:
   Issuance of common stock - net of costs                                                                 4,625,139
   Capital contributed by principal stockholder                                                               10,643
   Distributions                                                                                            (475,750)
   Borrowings from Officer                                                        465,095                    465,095
                                                                             ------------               ------------
Cash provided by financing activities                                             465,095                  4,625,127
                                                                             ------------               ------------
Effect of foreign exchange rate changes on cash                                   (38,776)                   (38,776)
                                                          ------------       ------------               ------------

Net (decrease) increase in cash
   and cash equivalents                                       (695,483)            22,760                    959,099

Cash and cash equivalents -
   beginning of year/period                                  2,956,090            936,339
                                                           -----------        -----------            ---------------

Cash and cash equivalents -
   end of period                                           $ 2,260,607          $ 959,099                $   959,099
                                                           ===========         ==========                ===========


Supplemental disclosure of cash flow
   information: Cash paid during the period
   for:
     Interest                                              $    22,000                                   $    22,000
                                                           ===========                                   ===========

     Income taxes                                                                                        $    41,079
                                                                                                         -----------
</TABLE>

                                   (CONTINUED)



                                      F-6
<PAGE>


                          DEOTEXIS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                   (CONCLUDED)

<TABLE>
<CAPTION>

                                                                    Three Months
                                                                   Ended March 31,                      March 6, 1992
                                                           ------------------------------           (Inception) through
                                                               1999               2000                  March 31, 2000
                                                           ------------       -----------             ------------------
<S>                                                                                                         <C>

Noncash financing activities:
   The Company issued 85,000 shares to a consultant
   for services rendered. The Company recorded the fair
   market value of those securities at $.48 per share.                                                      $40,800
                                                                                                            =======

   The principal stockholder of the Company transferred
   2,500 shares of common stock owned by him to two consultants
   for services rendered to the Company. The Company
   recorded the fair market value of those securities at $.48 per share                                     $ 1,200
                                                                                                            =======
</TABLE>



                             SEE ACCOMPANYING NOTES



                                      F-7
<PAGE>



                          DEOTEXIS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.     THE COMPANY AND STOCKHOLDERS' EQUITY:

       Background:

       Deotexis, Inc. (the "Company") was organized under the laws of the
       State of Nevada on March 6, 1992. Its purpose is the development of a
       consumer products company focusing on the marketing of personal care
       consumer products. Since the Company has not yet begun operations, it
       is considered to be in the development stage.

       On October 10, 1997, the Stock Purchase Agreement dated September 30,
       1997 among Overton Holdings Limited, a corporation formed under the laws
       of the Turks & Caicos Islands, British West Indies ("OHL"), Gary Takata,
       Shigeru Masuda and Gerold Tebbe, closed. Pursuant to the terms of the
       Stock Purchase Agreement, the Company issued 4,183,125 newly-issued and
       nonregistered shares of common stock, $.001 par value (the "New Shares")
       to OHL, in return for a cash payment to the Company of $4 million from
       OHL, and the transfer to the Company for nominal consideration, plus
       future royalties tied to the revenues recognized by the Company from the
       commercial exploitation thereof, of certain patents, patent applications
       and related intellectual property owned by Gerold Tebbe or entities owned
       and controlled by him. OHL is 100% beneficially owned by Gerold Tebbe.
       The Company intends to develop and market these patents and the products
       produced utilizing this intellectual property.

       The Company organized a wholly-owned subsidiary, Hecking Deotexis GmbH
       (formerly, D-Tex Technologie Holding GmbH), under the laws of Germany, in
       March 1999.

       Basis of Presentation:

       The condensed consolidated financial statements included herein have been
       prepared by the Company, without audit, pursuant to the rules and
       regulations of the Securities and Exchange Commission. Certain
       information and footnote disclosures normally included in financial
       statements prepared in accordance with generally accepted accounting
       principles have been condensed or omitted pursuant to such rules and
       regulations, although management of the Company believes that the
       disclosures are adequate to make the information presented not
       misleading. These condensed consolidated financial statements should be
       read in conjunction with the condensed notes thereto. In the opinion of
       management of the Company, the accompanying unaudited condensed
       consolidated financial statements include all adjustments, consisting of
       only normal recurring adjustments, necessary to fairly present the
       results for the interim periods to which these financial statements
       relate.

       These financial statements should be read in conjunction with the Annual
       Report filed with the Securities and Exchange Commission on Form 10-K.



                                      F-8
<PAGE>


2.     SIGNIFICANT ACCOUNTING POLICIES:

       Principles of Consolidation:

       The consolidated financial statements include the accounts of the Company
       and its subsidiary. All material intercompany accounts and transactions
       have been eliminated.

       Foreign Currency Translation:

       Assets and liabilities of the foreign subsidiary are translated into U.S.
       dollars at period-end exchange rates, and statement of operations items
       are translated at average exchange rates for the period. Translation
       gains or losses are recorded in stockholders' equity and transaction
       gains and loses are reflected in operations.

       Cash and Cash Equivalents:

       Cash and cash equivalents are stated at cost plus accrued interest. Cash
       equivalents consist of short-term treasury bills. The Company considers
       all highly liquid investments with a maturity of three months or less
       when purchased to be cash equivalents.

       Concentration of Credit Risk:

       At March 31, 2000, the Company maintained its cash in certain financial
       institutions. Certain institutions are insured by the Federal Deposit
       Insurance Corporation up to $100,000.

       Investment in a Company:

       The investment referred to in Note 5 is recorded at cost.

       Estimates:

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

       Patents:

       In accordance with the Stock Purchase Agreement, the majority
       shareholder sold certain patents, patent applications and associated
       intellectual property to the Company for nominal consideration.
       The cost of patents acquired are not being amortized as the
       consideration was nominal. These patents are for the textile-based
       controlled-release delivery systems for consumer products in certain
       sectors of the toiletries, cosmetics, apparel, household products and
       personal care products markets, and applications in the pharmaceutical
       industry.

       Earnings (loss) per common share:

       Basic earnings (loss) per share excludes dilution and is computed by
       dividing earnings available to common stockholders by the
       weighted-average number of common shares outstanding for the period.
       Diluted earnings (loss) per share is computed by dividing earnings (loss)
       available to common shareholders by the weighted average number of common
       shares outstanding for the period, adjusted to reflect potentially
       dilutive securities. Due to the loss from operations, options granted to
       the Board of Directors were not included in the computation of diluted
       earnings per share because the result of the exercise of such securities
       would be to reduce the loss per share.

3.     COMPREHENSIVE INCOME:

       The Company reports comprehensive income in accordance with Statement of
       Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"
       which requires the components of comprehensive income to be disclosed in
       the financial statements. Comprehensive income consists of net income
       (loss) and foreign currency translation adjustments and is presented in
       the consolidated statement of stockholders' equity. The adoption of
       Statement No. 130 had no impact on total stockholders' equity.



                                      F-9
<PAGE>


4.     RESTRICTED CASH:

       Knorr Capital Partner AG, a former consultant and advisor to the Company,
       has made a claim against the Company for DM 307,869.55 in connection with
       a Consulting Agreement between the parties, which has since been
       terminated. Knorr claims it is owed this amount for consulting services,
       and a contingency fee for brokering the Company's investment in Medisana
       (see Note 5 below). The Company maintains that Knorr is owed only a
       fraction of the contingency fee it is claiming, and is owed nothing
       under the Consulting Agreement because it ultimately provided no services
       to the Company with respect thereto. The Company therefore has
       counterclaims against Knorr in excess of the amounts Knorr has claimed
       from the Company. To attempt to resolve the dispute, the Company has
       paid into escrow, with Knorr's attorneys, the sum of DM 307,869.55
       (approximately $151,000 at March 31, 2000). The Company strongly
       feels Knorr's claims are without merit, and that the dispute will be
       resolved in the Company's favor without material cost to the Company.

5.     INVESTMENT IN A COMPANY:

       On October 28, 1999, the Company purchased a 7.4% interest in Medisana,
       Medizinalbedarfsgesellschaft mit beschrankter Haftung ("Medisana").
       Medisana is a German corporation, which develops, manufactures and sells
       home health care products. Pursuant to the agreement, if an initial
       public offering of Medisana does not take place by December 31, 2004,
       then the original investors of Medisana have a call option to buy from
       the Company and the Company has a put option to sell to the original
       investors of Medisana, the shares held by the Company. The call and put
       option are for the acquisition price plus interest at 10% per annum, less
       any dividends received. In addition, the Company has agreed to grant to
       Medisana a license to use and exploit the Company's controlled-release
       delivery system. The terms of this license have yet to be negotiated.

6.     DUE TO OFFICER:

       Amounts due to officer of approximately $292,000 and $835,000 at December
       31, 1999 and March 31, 2000, respectively, bear interest at 8% per
       annum, and are due from April 1, 2001 or earlier if other sources of
       financing are obtained. During the three month period ending March 31,
       2000, approximately $465,000 was advanced to the Company by the officer.
       This amount was subsequently invested in the Subsidiary. Included in
       due to officer at December 31, 1999 and March 31, 2000 is approximately
       $16,600 and $28,100, respectively, relating to interest expense on the
       debt.

7.     RELATED PARTY TRANSACTIONS:

       The Company engages the services of a professional consulting firm; a
       director of the Company is a partner in the consulting firm. During the
       three months ended March 31, 1999 and 2000, the Company incurred expenses
       of approximately $55,000 and $62,000. As of March 31, 1999 and 2000,
       approximately $32,000 and $30,000 was due to this related party.

8.     OTHER MATTERS:

       During January 2000, the Company entered into a letter of intent to
       purchase the principal operating assets of Neuenkirchener Textilwerke
       Hecking GmbH & Co. KG ("NTW") for approximately DM 27.5 million (US
       $13.415 million). The operating assets include, among other assets, all
       land and buildings, other fixed assets, inventory, customer lists, and
       sales agreements of NTW. The Company is permitted to



                                      F-10
<PAGE>


       abandon the acquisition (a) if NTW's results of operations for the
       first half of 2000 are below the results for the second half of 1999,
       (b) if it is unable to arrange satisfactory financing, (c) upon
       unsatisfactory due diligence results, or (d) failure to negotiate a
       final agreement.

       Furthermore, the Company entered into an agreement with NTW.
       The Company is in nominal control of the assets and operations of NTW
       until the asset purchase is finalized. Under the terms of the
       agreement, the purchase is to be completed by May 31, 2000.



                                      F-11