<PAGE>
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                  -----------

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                                   FORM 10-K

    (Mark One)

    /X/    ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
           EXCHANGE ACT OF 1934

    For the fiscal year ended December 31, 1997

                                       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
      Incorporation or Organization)                 Identification No.)

        885 Third Ave., Suite 2900
        New York, New York                                10022-4834
 --------------------------------------  ---------------------------------------
(Address of Principal Executive Offices)                   (Zip Code)

Registrant's Telephone Number, including area code (212) 829-5698
Securities registered pursuant to Section 12(b) of the Act:

                                                      NAME OF EACH EXCHANGE
                TITLE OF EACH CLASS                    ON WHICH REGISTERED
               --------------------                   ---------------------
                       N/A                                     N/A

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

                        Common Stock, par value $.001
                        -----------------------------
                               (Title of Class)

                                     N/A
                        -----------------------------
                               (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 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
   ---     ---
<PAGE>

    Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, 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-K, or any amendment to this Form 10-K. / /

    On March 25, 1998, the aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant was
$1,644,415. Note: The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant on March 25, 1998 was
determined by reference to the latest sale of the registrant's Common Stock
as of that date, which occurred in the context of a sale of securities exempt
from the registration requirements of the Securities Act of 1933, pursuant to
the provisions of Regulation S promulgated by the Securities and Exchange
Commission thereunder, at a price per share of approximately $.96. The
registrant's Common Stock was not traded on the NASD OTC Electronic Bulletin
Board, where its Common Stock is quoted, during the time period covered by
this Form 10-K. As of March 25, 1998, prior to the Regulation S transaction
referred to above, the next most recent sale of the registrant's Common
Stock, which occurred on the NASD OTC Electronic Bulletin Board, was on
February 15, 1996, at $2.4375 per share.

    As of March 25, 1998, there were 4,546,875 shares of the registrant's
Common Stock outstanding.

STATEMENT ON INTERPRETATION OF FORWARD-LOOKING STATEMENTS

    This Annual 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 such
forward-looking statements. Such statements may include, but not be limited
to, projections of revenues, income or loss, capital expenditures,
acquisitions, plans for growth and future operations, financing needs,
sources or potential sources or 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 such
forward-looking statements contained herein.

                           [Cover Page--Continued]

                                       2
<PAGE>
                                 DEOTEXIS, INC.
                                   FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1997

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                                    PAGE
                                                                                                                    -----
<S>                                                                                                         <C>
PART I.....................................................................................................  4

      ITEM 1.     BUSINESS.................................................................................  4
      ITEM 2.     PROPERTIES............................................................................... 11
      ITEM 3.     LEGAL PROCEEDINGS........................................................................ 11
      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................... 11

PART II.................................................................................................... 12

      ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................... 12
      ITEM 6.     SELECTED FINANCIAL DATA.................................................................. 13
      ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATIONS........ 14
      ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.............................. 17
      ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................. 17
      ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..... 17

PART III................................................................................................... 18

      ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....................................... 18
      ITEM 11.    EXECUTIVE COMPENSATION................................................................... 21
      ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................... 23
      ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................... 24

PART IV.................................................................................................... 27

      ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.......................... 27

SIGNATURES................................................................................................. 28

</TABLE>

                                       3
<PAGE>
                                     PART I

ITEM 1. BUSINESS.

GENERAL OVERVIEW

    Deotexis, Inc. (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 its existence has been maintained since 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 creative and technical expertise behind the Company's business is
provided by Mr. Gerold Tebbe, who is a qualified textile designer with over
twenty-five years of experience in the German and international textile
industries. In 1970, Mr. Tebbe took over the management of his family's
privately-held textile company, and refocused its activities on providing
technical services to manufacturers of production machinery for woven and
knitted materials. Thereafter, he rapidly built up an international customer
base with sales in Europe, North America, and Japan. His company became a
leader in the process of transferring complex designs from the artist's
drawing board onto high-volume production machines for the manufacture of
patterned cloths. This proprietary technology gave his company a unique
position in its market. In the 1980s, reacting to the competitive threat to
the European textile industry from low-cost imports from Asia and other low
labor cost regions, Mr. Tebbe began to seek an alternative to his existing
business. After experimenting with textile-based controlled-release delivery
systems, he developed the product line the Company currently intends to
market, which he started to test-market on a preliminary basis in the late
1980s. At that point, a dispute arose over the validity of the patents and
other intellectual property employed to produce the products the Company
currently intends to market. That patent dispute was resolved in Mr. Tebbe's
favor by the European Patent Office in late 1996.

    The Company intends to create an organization staffed by suitably
qualified executives to support Mr. Tebbe. Initially, the Company plans to
generate revenues by (1) using an acquired operating company in Europe or the
United States to supply product to customers who do not have the ability to
license the technology and manufacture the Company's products themselves; and
(2) licensing the technology and processes required to manufacture the
Company's products to consumer products manufacturing and distribution
companies in return for a licensing fee. The Company plans to appoint Senior
Product Managers to take responsibility for sales and licensing agreements
with potential customers. The Company anticipates that the Product Managers
will have experience in the licensing business. In addition, the Company
hopes to acquire an operating company with a management team in place in
Europe or the United States. The Company anticipates that the Product
Managers will either be employees of such an acquired company or members of
the newly-hired management the Company will put in place as it proceeds to
expand its operations. While the Company has had preliminary discussions with
several wholesale distributors and potential licensees, there can be no
assurance that licensing agreements will be reached with those entities, or
any others, on terms advantageous to the Company, if at all. In addition,
though the Company has had preliminary discussions with a few operating
companies that may be potential acquisition candidates, there can be no
assurance that the Company will be able to identify a suitable company for
acquisition in the United States, Europe, or any other location or, if such
an entity is identified, that the Company will be able to complete such an
acquisition on favorable terms. In the event the Company does not succeed in
entering into licensing agreements and consummating an acquisition within its
first six to twelve (6-12) months of operations, the Company's ability to
produce and distribute its products and introduce them into the market in any
significant way will be extremely limited.

                                       4
<PAGE>

    The Company plans to engage in the business of developing and
commercializing certain patented, textile-based controlled-release delivery
systems for consumer products in certain sectors of the toiletries,
cosmetics, apparel, household products and personal care products markets.
The Company's goal is to build on its patented "know-how" in research and
development, and to acquire manufacturing and marketing resources to become a
profitable supplier of textile-based, controlled-release delivery systems to
a wide range of industry sectors. The Company believes that its
controlled-release delivery systems are unique in the way they combine
microencapsulation technology with flexible fleece-type fabrics. 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.

    The Company's technology was developed by Mr. Tebbe in Europe, where
several products are now ready for further test-marketing and commercial
launch by the Company. These products include: (1) the "Deotexis Deodorant
Patch," a small, disposable adhesive patch which is designed for quick and
easy attachment to any type of clothing, for use as a controlled-release
anti-perspirant and deodorant; (2) the "Deotexis Perfume Patch," a small,
disposable adhesive patch designed for easy and unobtrusive attachment to the
inner surface of clothes, for controlled-release of perfume; and (3) the
"Deotexis Cold Scarf," a disposable scarf impregnated with herbal substances
for use by persons seeking relief from the symptoms of colds and congestion.
These three products are collectively referred to herein as the "Products."
The Company anticipates, and its test production and marketing support this
intention, that the Products will be competitively priced in relation to
alternative products employing traditional delivery systems. The Products
will be sold as over-the-counter items and not as prescription medications.
The Company's research and development and marketing strategy will be to
avoid marketing any products requiring resource-intensive Food and Drug
Administration-type approvals.

    The Company believes that the Products address the problem of effectively
maintaining personal freshness for extended time periods. The Products are
intended to serve as substitutes for perfumes, toiletries, cosmetics,
deodorants, emollients, decongestants and other personal care products
marketed with traditional delivery systems. Products employing traditional
delivery systems (powders, roll-ons, creams, sprays, etc.), in the Company's
view, can be inconvenient to use and, after application, rapidly deteriorate
and lose their efficacy. The Company's Products are intended to provide for
the controlled-release of active substances in desired quantities over an
extended period of time, thereby providing a superior delivery system that
avoids the "peak and valley" effect resulting from use of traditional
delivery systems currently on the market. The Company intends to market the
Products as an alternative to similar consumer products employing traditional
delivery systems, with the advantage of extended active substance
effectiveness, and the convenience of a no-mess, no-spill solution to
consumers' personal care needs.

    Potential customers for the Company's products are consumers worldwide.
Test-marketing in Europe has shown significant interest in the Deotexis Cold
Scarf, based on its convenience, versatility and cost-effectiveness. The
Company's marketing and product strategy reflects Mr. Tebbe's considerable
experience with the test-marketing of the Company's Products and is designed
to be responsive to the requirements of consumers and the marketplace. To
reach its target markets, the Company intends to focus on two categories of
sales channels : (1) wholesale distributors to drugstores and pharmacies; and
(2) licensees, which are expected to be large and medium-sized corporations
in the toiletries, cosmetics, apparel, household products and personal care
products markets. The Company has had preliminary discussions with several
major companies in both categories and believes it will be in a position to
conclude sales and licensing agreements promptly after concluding its
corporate organization and staffing, though there can be no assurance that
any such contracts or agreements will be consummated. In addition, the
Company is moving towards execution of a formal agreement with the German
distributor, KuW Hummel Vertriebs GmbH ("Hummel"), that has been
manufacturing and distributing the Deotexis Cold Scarf during the
test-marketing phase of operations, pursuant to which Hummel will continue to
manufacture and distribute the Deotexis Cold Scarf in return for payment of
licensing fees and royalties to the Company. The Company anticipates that it
will be able to conclude such an agreement with Hummel in the next

                                      5
<PAGE>

forty-five to sixty (45-60) days, though there can be no assurance that such
an agreement will be executed in that time frame, or at all.

    The Company's marketing plan anticipates that some potential customers
will require products manufactured by the Company or a Company
sub-contractor. The Company therefore hopes to acquire an operating company
with manufacturing capabilities in Europe or the United States within the
first six to twelve (6-12) months of its operations, and thereafter use the
Company's Products to diversify and expand the acquired company's sales. The
Company's marketing plan further anticipates that other customers will enter
into licensing agreements with the Company, under which, in return for a
sales-based royalty payment to the Company, licensees will be entitled to the
use of the Company's intellectual property to manufacture and distribute the
Products.

STRATEGY

    The Company is engaged in the development and commercialization of
certain patented, textile-based controlled-release delivery systems. The
Company's intention is to build on its patented technology in research and
development, and to acquire manufacturing and marketing resources to become a
profitable supplier of textile-based, controlled-release delivery systems to
a wide range of industry sectors. The Company's strategic objective is to
establish Deotexis, Inc. as the world's leading supplier of textile-based
controlled-release delivery systems and to achieve "institutional" status for
the "Deotexis" brand. The Company believes that highly-recognizable
institutional brand names are perceived as having well-known and recognized
quality, performance, price and product distinctiveness, which is supported
by the perception of permanence founded on a long history of excellence. The
Company believes that, in general, institutional brands, because of the
quality perceptions that attach to their products, are protected to a greater
degree than non-institutional brands from swings in customer tastes and
preferences, competitive developments and economic recessions. The Company
has designed and will implement a competitive and sophisticated marketing
strategy specifically focused on achieving institutional status for the
"Deotexis" brand.

LICENSING

    Consumer markets for apparel, cosmetics, toiletries, household products
and personal care products, although very large, are also highly competitive.
Establishing and increasing brand recognition for a product typically
requires a significant expenditure on advertising. Therefore, to avoid
bearing the majority of this advertising outlay, the Company intends to
market its patents and patent rights, especially in the early stages of its
operations, primarily through licensing agreements.

    The Company believes that many of its customers will enter into license
agreements in return for a sales-based royalty payment to the Company. It is the
Company's intention to grant five (5) year licenses, extendable to ten (10)
years by mutual agreement between the Company and the licensee, to large and
mid-sized corporations in the apparel, cosmetics, toiletries, household products
and personal care products industries. The Company will receive sales-based
royalty payments in exchange for the license to use the Company's patents,
patent applications, and related intellectual property necessary to manufacture
and distribute the Company's Products. During the early phase of licensing
activities, the Company may contribute to the promotion and advertising of the
products to be sold by the licensees. Thereafter, the licensees will be
responsible for the continued marketing of the Company's Products, including
product promotions and advertisements. There can be no assurance that the
Company will be able to enter into licensing agreements with any potential
customers on terms advantageous to the Company, if at all. In the event the
Company is unsuccessful in entering into licensing agreements, it will be
required to expend significant funds (an estimated $15-20 million per product in
Germany alone) on advertising sufficient to gain name recognition in the
personal care products industry. Furthermore, the Company lacks the resources
and organizational support structure to mass market its Products, assuming that
there is a demand for the Company's Products, and therefore the Company is
dependent either on an acquisition of an operating company or on securing other
licensee corporations to manufacture and distribute its products.

                                       6
<PAGE>

    The Company intends to attract licensees through (i) attendance and
display of the Company's products at trade fairs and through media exposure;
(ii) test-marketing the Company's products; (iii) Mr. Tebbe's personal
contacts in the apparel, cosmetics, toiletries, pharmaceutical and personal
care products industries; and (iv) word of month among satisfied customers.
The Company has identified, and in some cases has had preliminary meetings
with, a number of German corporations that desire to license the technology
to produce the Company's Products. The Company hopes to enter into a
licensing agreement with one corporation in each of the following market
sectors: men's clothing, women's clothing, sports clothes, shoes, women's
perfumes, men's cosmetics, personal hygiene and pharmaceutical wholesale
distribution. It cannot be assumed, however, that any preliminary discussions
with corporations in these market sectors will result in a definitive
licensing agreement being consummated between the parties.

    The Company has identified potential markets for licensees in North
America, Japan and Southeast Asia; however, the Company plans to introduce
its Products in these countries after it has commenced operations and
marketing in Europe. There can be no assurance, however, that the Company's
Products will ever be sold successfully in the European, North American,
Japanese or Southeast Asian markets.

    The Company has entered into an agreement with the law firm of Drs. Axel
Meyer-Wolden, Unger, Duvinage ("Meyer-Wolden") in Munich, Germany, one of
Germany's leading firms in the areas of entertainment and intellectual
property. The agreement relates only to the worldwide patent for the
Company's Deodorant Patch, and provides that Meyer-Wolden will
introduce the Company and its products to certain potential customers and
will be responsible for negotiation and administration of license agreements
arising from those introductions, in return for a fee equal to 10% of all
income generated by the licensing agreements resulting therefrom. Unless
renewed by the parties thereto, this agreement expires in January 2002. Any
fees paid to Meyer-Wolden are paid regardless of whether the Company is
profitable. The Company hopes this agreement with Meyer-Wolden will provide
significant potential marketing opportunities for the Company's Products.

MANUFACTURING AND DISTRIBUTION

    MANUFACTURING

    The Company's marketing plan anticipates that some potential customers
will require products manufactured by the Company or a Company
sub-contractor. Mr. Gerold Tebbe, President, Chief Executive Officer,
Secretary, Treasurer and a Director of the Company, has developed and tested
a manufacturing process for making the Company's Products in quantity at
competitive cost. Development of the prototype production machines required
very little money because Mr. Tebbe was able to make use of idle equipment
provided to him by business associates in the textile industry. The machines
have performed to specification in production test runs to date. In
anticipation of forecasted future demand, before the Company has received
substantial purchase orders from customers, the Company intends to acquire an
operating company based either in Europe or the United States with
experienced management and production capability. If possible, the Company
plans to seek acquisition candidates in countries which provide favorable tax
and financing structures for such transactions. Though the Company has had
preliminary discussions with a few operating companies that may be potential
acquisition targets, the Company has not entered into any acquisition
agreements with any potential companies, and currently has made no agreement
or commitment to enter into such a transaction, and the Company currently has
no commitments to finance such an acquisition. Ultimately, the Company's
failure to consummate such an acquisition will significantly limit the
Company's ability to fully implement its current sales and marketing plan.

    DISTRIBUTION

    The Company believes it can best affect the distribution of its products
by (i) entering into agreements with drug and pharmaceutical wholesale
distributors to distribute the Company's Products through those
companies' distribution networks, and (ii) licensing the technology and the
processes required to manufacture the Company's products to consumer products
manufacturing and distribution companies, in return for a licensing fee, which
companies would, in turn, manufacture and distribute the Company's

                                       7
<PAGE>

Products. While the Company has had preliminary discussions with several
wholesale distributors and potential licensees, there can be no assurance
that such contemplated agreements will be reached on terms advantageous to
the Company, if at all. In the event the Company does not succeed in entering
into these licensing and distribution agreements within its first six to
twelve (6-12) months of operations, the Company's ability to produce and
distribute its products in the market in any significant way will be
extremely limited.

    INTERNATIONAL DISTRIBUTION AND LICENSING

    The Company may in the future enter into distribution or licensing
agreements with one or more United States, Japanese or Southeast Asian
distributors for distribution of its products outside of Europe. Such
agreements will not be entered into unless the Company believes that one or
more of its products can be sold profitably in such markets, or that such
distribution or licensing positions the Company for future sales in those
markets. The Company has no present plans with respect to these markets, and
there is no assurance that the Company will develop or pursue any such plans
in the future. The Company has identified numerous direct and indirect
competitors in target markets in the United States, Japan and Southeast Asia.
There are no assurances that the Company will in the future expand its
operations into the United States, Japanese or Southeast Asian markets.
Furthermore, there can be no assurance that any attempts by the Company to
expand its operations in these countries will be successful or profitable.

AGREEMENT WITH KUW HUMMEL VERTRIEBS GMBH

    Since 1993, the Company has had an informal oral agreement with KuW
Hummel Vertriebs GmbH ("Hummel"), a small manufacturing and distribution
company in Germany, to produce certain of the Company's Products, primarily
the Deotexis Cold Scarf, in the small quantities that have been required for
test-marketing and promotional purposes. The products have been manufactured
on machinery the development and customization of which has, to date, been
financed by Mr. Tebbe. Mr. Tebbe's wife currently owns a 49.02% interest in
Hummel, and as a substantial stockholder, is able to influence the direction
and affairs of Hummel's business.

    The Company is now moving to formalize its arrangement with Hummel. The
Company anticipates that it will enter into a written License Agreement with
Hummel within the next forty-five to sixty (45-60) days, which the Company
anticipates will provide for the following basic terms. The Company expects
to grant to Hummel a non-exclusive license for Hummel to manufacture and
distribute certain of the Company's Products in the Federal Republic of
Germany. The license will grant to Hummel the right to use Company patents
relating to the Deotexis Cold Scarf and other products based on it, but
licensing arrangements between the Company and Hummel with respect to other
Company Products will be the subject of separate licensing agreements. Hummel
will have the right to use the Deotexis name in its selling efforts, and will
be entitled to receive, without payment of any additional fee, all
improvements on existing products and techniques developed by the Company
that relate to the licensed products. It is anticipated that Hummel will
agree to commit a certain amount of money to promoting sales of the Company's
Products in the fist year of the license term. Deotexis products manufactured
and sold by Hummel will have to meet qualify standards specified by the
Company, and the Company will have the right to verify quality at all times.
In return for the grant of the license to Hummel described above, Hummel will
agree to make the following payments to the Company: (1) DM5,000, due on
execution of the agreement, (2) an annual license maintenance fee of
DM10,000, payable on January 1 of each year, and credited against any
royalties due to the Company under (3) below, and (3) a royalty equal to 8%
of net sales of the licensed products (to be defined), which percentage shall
reduce to 5%, in steps, on sales of the licensed products in excess of
certain specified target amounts. Hummel will not be permitted to assign its
rights under the License Agreement. The Company intends that the duration of
the license shall be for one (1) year, renewable automatically for an
additional year unless either party gives the other ninety (90) days notice
of its intention not to renew, or unless a party has breached its obligations
under the agreement. It is anticipated that the License Agreement will be
governed by German law.

    The Company intends that the License Agreement with Hummel will be
structured so as not to inhibit or restrict any future licensing of its
technology by the Company to other manufacturers, nor

                                       8
<PAGE>

will any such agreement restrict or prevent in any way the acquisition that
the Company hopes to accomplish of a manufacturing and distribution company
located in the United States or Europe. Of course, there can be no assurance
that a licensing or any other type of agreement between Hummel and the
Company will be executed.

POTENTIAL PHARMACEUTICAL APPLICATIONS FOR THE COMPANY'S TECHNOLOGY

    The Company's patented processes and proprietary technology (known as
"sustained," "programmed," "prolonged" or "timed" release systems in the
pharmaceutical industry), may have wide applications for new products in the
pharmaceutical industry, particularly in the areas of diagnostic and drug
delivery systems. Controlled-release drug delivery systems are designed to
reduce the required frequency of effective drug administration, decrease
dosage quantities, and permit concentrated treatment of a specific area or
organ, without the necessity of medicating the entire body. A study published
in the September 1996 issue of Med Pro Month, performed by Medical Data
Internation, Inc., an industry market research group, has forecasted
worldwide sales of controlled-release delivery systems to rise from $7.5
billion in 1995 to $27.6 billion in 2000.

    Since the beginning of the development of the Company's technology, Mr.
Tebbe and the Company have followed developments in the pharmaceutical
industry for controlled-release delivery systems, and based upon informal
consultations with industry specialists in the European pharmaceutical
market, the Company believes its patents may cover areas and applications
which are or may be of considerable interest to several pharmaceutical
companies. If these potential applications appear promising, the Company
intends to license its technology to these companies for use in their
controlled-release and diagnostic systems, in return for a sales-based
royalty payment. The Company continues to closely follow and assess
developments in this field, and intends to capitalize on any opportunities to
incorporate the Company's technology into these systems. There can, however,
be no assurance that any applications for the Company's technology in the
pharmaceutical area will be developed, and if developed, that such products
will gain the necessary regulatory approvals. Moreover, even if any products
developed using the Company's technology gain the required regulatory
approvals, there can be no assurance that any such products will be marketed
by the pharmaceutical companies, and if marketed, will prove to be
profitable.

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 Products. It is the Company's intention to
commercially exploit the patents through the introduction and sale of the
Company's Products, primarily into the European (and potentially American,
Japanese and Southeast Asian) 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
revenues recognized by the Company in connection with the commercial
exploitation of the patents and patent rights. There are no assurances that
the Company will ever achieve net revenues as a result of such commercial
exploitation. 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. In an attempt to mitigate the costs that may be associated with
defending its intellectual property, the Company intends to secure patent
infringement insurance in the future, in an as yet undetermined amount. The
approximate annual cost to the Company for such coverage is not known at this
time.

INDUSTRY OVERVIEW

    Controlled-release microencapsulation has been a known technology for a
number of years in the pharmaceutical, biomedical, chemical, carbonless paper,
agricultural, pesticide and food industries. In these areas, 1996 sales of
products employing this technology were over $3 billion. In the form invented by
Mr. Tebbe, and in the industries targeted by the Company, it is, however, still
in its infancy.

                                       9
<PAGE>

    In Europe, according to an article in the January 1994 edition of the
scientific journal Textile Technology Digest, published by the Institute of
Textile Technology, Britain, research is taking place in the areas of
controlled-release wound dressings and insect repellents, with commercial
products expected in the near future.

    Textile-based controlled-release delivery systems are an emerging market.
According to an independent study entitled "Advanced Controlled Delivery
Technology in the U.S.," published by Business Communications Company, Inc.
of Norwalk, Connecticut, in March 1994, sales of microencapsulated products,
including cosmetics, toiletries and personal hygiene products, aggregated
less than $40 million in the United States in 1993. In the area of enhanced
textiles, sales were practically non-existent. Nevertheless, the study noted
that in order to remain viable, the stagnant textiles industry was
experimenting with new areas of fabric enhancement, and that: "one of the
most promising areas is microencapsulation, where tiny capsules bound onto
textiles break and release chemicals, including anti-bacterial compounds,
insecticides, perfumes and emollients. Some fragrances reportedly last for
years, even after washing the fabric 30 or more times."

    The Company's existing Products, and products in development, seek to fill a
market niche in most of the "promising areas" identified in the independent
report.

COMPETITION

    On a broad scale, the Company believes that products utilizing the
Company's delivery system compete with cosmetics, toiletries and personal
care products utilizing conventional delivery systems (including sprays,
creams, powders and roll-on mechanisms). The Company believes that products
within these markets compete for selection and purchase by consumers who are
making largely non-discretionary expenditures. The Company further believes
that products purchased on a largely non-discretionary basis can
differentiate themselves with respect to, and produce sales as a result of,
novelty, brand image, convenience of use, effectiveness of the distribution
channel utilized, and price considerations. The Products, in the Company's
opinion, will have a strong consumer attraction in each of these categories.

    On a more narrow scale, the Company's controlled-release technology
competes against other, traditional delivery systems (all of them
non-controlled-release) in the perfume, deodorant, hygiene, decongestant,
emollient, bandage, and insect repellent markets. Though the delivery system
employed by the Company's Products will compete with established brand-name
products employing traditional delivery systems, the novelty and convenience
advantages possessed by the Company's products because of their delivery
methodology will enable potential licensees with established product brands
to market the Company's Products as a complementary form of the successful
brand name products, eliminating the need to invest large sums in generating
new brand recognition, while at the same time appealing to consumers'
appetite for novelty.

    On an even narrower scale, the Company's Products compete against the
products of other companies having proprietary textile-based
controlled-release delivery systems. To the best of the Company's knowledge,
and in keeping with the current small size of the market for "Deotexis-type"
controlled-release delivery systems, there appear to be few other
corporations offering commercially viable controlled-release systems in the
market sectors targeted by the Company. To date, the Company knows of only
two such competitors, both of which are based in Japan. Due to the Company's
relative lack of experience in the business, its limited financial and other
resources, and other factors relating to competition that may develop from
well-established companies and delivery system alternatives, however, the
Company may not be able to compete successfully, if at all, with other
existing or new competitors in the controlled-release technology field.

EMPLOYEES

    As of March 25, 1998, the Company has no paid employees. Mr. Gerold Tebbe is
serving as President, Chief Executive Officer, Secretary and Treasurer of the
Company, and providing his services and expertise to the Company, without
compensation.

                                      10
<PAGE>

ITEM 2.   PROPERTIES.

    The Company maintains temporary offices in New York, New York, as its
corporate headquarters, at an annual cost of approximately $5,100. A search
for suitable office space, to serve as the Company's United States
headquarters, in Westchester County, New York, New Jersey or Connecticut is
currently underway. The Company does not own or lease any other real property.

ITEM 3.   LEGAL PROCEEDINGS.

    There are no legal proceedings to which the Company is a party.

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

    On October 13, 1997, by action by written consent without a meeting, OHL,
as majority stockholder of the Company, acted to amend the Company's Articles
of Incorporation to change the Company's corporate name to "Deotexis, Inc."
An Amendment to the Company's Articles of Incorporation was prepared and
filed with the Secretary of State of Nevada on October 15, 1997. On October
22, 1997, all of the non-consenting stockholders of the Company were sent
written notification of the action taken by the majority stockholder to
change the Company's name.

                                      11
<PAGE>

                                    PART II

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

    The Common Stock of the Company was initially registered and began
trading on the close of the Company's initial public offering on January 31,
1994.

    The Common Stock is traded on the NASD OTC Electronic Board. The high and
low bid quotations for the Common Stock for the fiscal quarters of the
Company ended March 31, 1997, June 30, 1997, September 30, 1997 and December
31, 1997, are listed below:

<TABLE>
<CAPTION>

                                                                        COMMON STOCK*
                                                                        --------------
                                                                        QUOTED BID PRICE
                                                                        ----------------
QUARTER ENDED                                                           HIGH        LOW
--------------------------------------------------------------------  ---------  ---------
<S>                                                                                                       <C>        <C>
March 31, 1997......................................................        N/A(1)     N/A
June 30, 1997.......................................................        N/A        N/A
September 30, 1997..................................................        N/A        N/A
December 31, 1997...................................................        N/A        N/A
</TABLE>

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

     *   Source: The Nasdaq Stock Market. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.

(1)  There was no trading or quotation activity with respect to the Company's
     Common Stock on the NASD OTC Electronic Bulletin Board for the periods
     indicated.

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

    On March 25, 1998, there were approximately 35 holders of record of
Common Stock. As of the same date, there were approximately 525 beneficial
owners of the Common Stock.

    No cash dividends have been paid by the Company on its Common Stock and
management does not anticipate paying cash dividends any time in the
foreseeable future.

                                      12
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

    The Company is currently in the development stage. The selected financial
data presented below as of and for the year ended December 31, 1997 is
derived from the financial statements audited by M.R. Weiser & Co. LLP and
December 31, 1996 is derived from the financial statements audited by Mayer
Rispler & Company, P.C. The selected financial data for the period from
inception (March 6, 1992) to December 31, 1992 and for the years ended
December 31, 1993, 1994 and 1995 are derived from the financial statements
audited by Nachum Blumenfrucht, CPA. The selected financial data should be
read in conjunction with "Plan of Operations" and the financial statements of
the Company, for the years 1995, 1996 and 1997, and for the period from
inception, March 6, 1992 to December 31, 1997, including the notes thereto,
appearing elsewhere in this Annual Report.

<TABLE>
<CAPTION>
                                                                                                               MARCH 6, 1992
                                   MARCH 6, 1992                                                                 (DATE OF
                                (DATE OF INCEPTION)                     YEAR ENDED DECEMBER 31,                 INCEPTION)
                                  TO DECEMBER 31,    ------------------------------------------------------   TO DECEMBER 31,
                                       1992            1993      1994       1995        1996          1997         1997
                                -------------------  -------  ---------  ---------  -----------  ------------ ---------------
<S>                             <C>                  <C>       <C>       <C>        <C>          <C>          <C>
Statement of Operations
Data:
Revenue-interest income.....       $    190          $   147   $ 12,614   $ 16,268   $   23,426   $   38,753     $  91,398
Expenses:
General and administrative..            252            1,913     39,798     51,273       67,163      278,654       439,053
                                       -----         --------  ---------  ---------  -----------  -----------    ----------
Net Loss....................       $    (62)         $(1,766)  $(27,184)  $(35,005)  $  (43,737)  $ (239,901)    $(347,655)
                                       -----         --------  ---------  ---------  -----------  -----------    ----------
                                       -----         --------  ---------  ---------  -----------  -----------    ----------
Basic Loss per common
  stock.....................       $   (.35)         $ (9.87)  $   (.10)  $   (.13)  $     (.16)  $     (.19)
                                       -----         --------  ---------  ---------  -----------  -----------
                                       -----         --------  ---------  ---------  -----------  -----------
Weighted average number of
  shares outstanding.........           179             179     278,750    278,750      278,750    1,237,618
                                       -----         --------  ---------  ---------  -----------  -----------
                                       -----         --------  ---------  ---------  -----------  -----------


</TABLE>

<TABLE>
<CAPTION>
                                                                                             AS OF DECEMBER 31,
                                                                                          ------------------------
<S>                                                                                       <C>         <C>
                                                                                             1996         1997
                                                                                          ----------  ------------
Balance Sheet Data:
Current Assets..........................................................................  $  532,668  $  4,036,261
Working Capital.........................................................................     517,368     3,812,377
Total Assets............................................................................     532,685     4,036,261
Total Liabilities.......................................................................      15,300       223,884
Stockholders' Equity....................................................................     517,385     3,812,377
</TABLE>

                                      13
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION OR PLAN OF OPERATIONS.

    The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Financial Statements and Notes
thereto appearing elsewhere in this Annual Report.

RESULTS OF OPERATIONS

    The Company has not generated any revenue from operations and is in the
development stage.

PLAN OF OPERATIONS

GENERAL OVERVIEW

    The Company is in the initial stages of developing and commercializing
certain patented, textile-based controlled-release delivery systems for
consumer products in certain sectors of the toiletries, cosmetics, apparel,
household products and personal care products markets. The Company's goal is
to build on its patented "know-how" in research and development, and to
acquire manufacturing and marketing resources to become a profitable supplier
of textile-based controlled-release delivery systems to a wide range of
industry sectors. The Company currently has cash on hand sufficient to
finance the operation of its proposed personal care products business, based
on the Company's current business plan and excluding the costs of any planned
acquisitions, for the next one to three (1-3) years. Thereafter, the Company
anticipates meeting its working capital needs through internally-generated
cash flow and a working capital line of credit to finance its operations.
There can be no assurance that the Company will be able to maintain its
business and operations without additional financing during the first one to
three (1-3) years of operations, or that, thereafter, the Company will be
able to generate sufficient cash flow, or secure a working capital line of
credit, in an amount sufficient to finance its anticipated needs or on
acceptable terms.

    During its first three (3) years of operations, the Company anticipates
that it will (a) 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, (b) 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; (c)
enter into one or more distribution agreements with one or more major drug
and pharmaceutical wholesale distributors, (d) 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, and (e) commence an image building advertising and public relations
campaign in the personal care industry. There can be no assurance that any or
all of these goals will be achieved by the Company.

RETENTION OF SENIOR MANAGEMENT

    At the present time, seven directors have been appointed to the Company's
Board of Directors. Mr. Gerold Tebbe will serve as the President, Chief
Executive Officer and a Director of the Company, with overall responsibility
for operations. Mr. Tebbe will also serve as the Company's Secretary and
Treasurer until such time as suitable personnel can be retained to serve in
those positions. Additional senior management of the Company to be recruited
over the course of the next six to twelve (6-12) months as the Company
finalizes its corporate organization and structure, are:

    Holding Company Staff.  To support Mr. Tebbe, the Company expects to
appoint a seasoned financial executive who will be responsible at the holding
company level for accounting, consolidations, finance, cash management,
regulatory and securities law compliance, and other holding company functions.

    Management of to-be Acquired Operating Company. It is the Company's
intention, within the first six to twelve (6-12) months of its operations, to
acquire an operating company in Europe or the

                                       14
<PAGE>

United States and employ the management of that operating company. The
Company anticipates that it will employ most, if not all, of the members of
the operating company's management team. If such an acquisition is
consummated, however, the Company reserves the right to replace some or all
of the personnel of the acquired company if, in the Company's opinion, better
qualified or differently qualified individuals are necessary or desirable to
manage the Company's operations.

    Product Managers.  As stated above, the Company intends to acquire an
operating company with manufacturing capabilities in Europe or the United
States within the first six to twelve (6-12) months of its operations, and
thereafter use the Company's Products to diversify and expand the acquired
company's sales. To manage sales of the Company's Products, the Company may
either employ the existing product and sales managers of the acquired
company's management, or hire new Product Managers, or both. It is
anticipated that initially there will be two (2) Senior Product Managers,
based in Europe and the United States, respectively, with responsibility for
negotiating and completing sales and licensing agreements with potential
customers. The Product Managers will be selected based on their experience in
the areas of sales of consumer and personal care products, and the licensing
of technology and patents. The initial salary range (including benefits) for
these positions is expected to be competitive with prevailing salaries for
similar positions in the European and the United States labor markets,
respectively.

MANUFACTURING AND DISTRIBUTION

    The Company's target markets are different and independent, and will
require separate licensing and distribution strategies. The Company believes
it can most effectively manufacture and distribute its controlled-release
Products (including products in development, which currently consist of
consumer insect repellent, treatment gloves and field dressings) by (i)
acquiring an operating company in Europe or the United States with a suitable
production facility and management, and transferring the Company's
manufacturing technology and intellectual property to this acquired entity,
(ii) entering into agreements with drug and pharmaceutical wholesale
distributors to distribute the Company's Products through those companies'
distribution networks, specifically to pharmacies and drugstores that
purchase their over-the-counter products from the wholesale distributors; and
(iii) licensing the technology and the processes required to manufacture the
Company's Products to consumer products manufacturing and distribution
companies, in return for a licensing fee, which companies would, in turn,
manufacture and distribute the Company's Products. The Company anticipates
that it will be able to negotiate both an acquisition agreement and at least
one licensing or distribution agreement during its first six to twelve (6-12)
months of operations. While the Company has had preliminary discussions with
several wholesale distributors and potential licensees, and a few operating
companies that may be potential acquisition candidates, there can be no
assurance that such an acquisition will occur or such contemplated agreements
will be reached on terms advantageous to the Company, if at all. In the event
the Company does not succeed in entering into these licensing and
distribution agreements, and consummating an acquisition, within the
time-frame referred to above, the Company's ability to produce, distribute
and market its Products in any significant way will be extremely limited.

LICENSING

    Until the Company is able to acquire an operating concern in Europe or
the United States, and for the foreseeable future if the Company is unable to
consummate such an acquisition, and to avoid the typically large costs of
advertising and promoting new consumer products, the Company plans to
primarily follow a licensing strategy to market and distribute its Products.

    The Company anticipates that many of its 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 five (5) year licenses
(extendable to ten (10) years), to large and mid-sized corporations in the
apparel, cosmetics, toiletries, household products and personal care products
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 related intellectual property necessary to manufacture and distribute the
Company's Products.

                                      15
<PAGE>

    To provide the Company's Products with efficient and effective
distribution channels, and also to open up additional market penetration
possibilities, the Company anticipates that it will enter into agreements
with drug and pharmaceutical wholesale distributors to distribute the
Company's Products through those companies' distribution networks,
specifically to pharmacies and drugstores that purchase their
over-the-counter products from the 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
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 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

    Following the employment of senior management and other staff and the
finalization of its corporate organization, the Company intends to begin a
public relations campaign to build the image of the Company in a number of
its markets in Europe. The public relations campaign will be designed to
present the Company as a developer and supplier of quality, innovative,
economical controlled-release products. This campaign, which the Company
anticipates will utilize the services of independent public relations firms
selected by the Company, may include (i) the offering of free introductory
samples or gifts of the Company's Products through television, radio and
print ads; (ii) participation in trade fairs in a number of markets in
Europe; and (iii) placement of news articles and coverage in the media. The
Company estimates that the cost of this initial public relations campaign
could amount to a significant percentage of the Company's initial revenues.

    The Company's advertising strategy includes corporate advertising,
advertorials, and tactical advertising efforts. The Company's advertisements
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.

RESULTS OF OPERATIONS; LIQUIDITY AND CAPITAL RESOURCES

    Since its incorporation on March 6, 1992, the Company has had no business
activity other than its capital raising activities, 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 Products. On
December 31, 1997, the Company had $4,034,700 of liquid assets, working
capital of $3,812,377 and shareholders' equity of $3,812,377. The Company has
not manufactured or licensed any of its Products since inception; however,
the Company has arranged for a manufacturing and distribution company based
in Germany, KuW Hummel Vertriebs GmbH ("Hummel"), to manufacture and
distribute small quantities of the Company's Products in connection with
test-marketing and promotional activities, and the Company is currently in
the process of negotiating a formal written agreement with Hummel to continue
producing Products for the Company to meet anticipated demand over the next
six to twelve (6-12) months. Prior to the acquisition of control of the
Company by Mr. Tebbe, the Company had an agreement with Mr. Gary Takata, a
former officer and Director of the Company, to use office space provided by
Mr. Takata for Company business. In return for providing office space to the
Company, Mr. Takata was paid $15,000 annually by the Company. This Agreement
was terminated in October 1997, when Mr. Tebbe acquired control of the
Company. The Company currently maintains temporary offices in New York City,
the annual cost of which is approximately $5,100. With the exception
of the foregoing, the Company has paid no rent since its inception and has
paid no salaries. Within the next thirty to sixty (30-60) days, the Company
expects to have secured permanent office space in New Jersey, Connecticut or
Westchester County, New York, to serve as its United States headquarters. The
annual cost of such office space is not expected to be material.

    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 one to three (1-3) years of
its operations, excluding the costs of any potential acquisitions,

                                      16
<PAGE>

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 one to
three (1-3) years 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.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

          Not applicable.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    See financial statements following Item 14 of this Annual Report on Form
10-K.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE.

    (a)  On January 21, 1998, the Company formally dismissed Mayer Rispler &
Company, P.C., Certified Public Accountants (the "Former Accountants"), as
the Company's certified public accountants and auditors. The Former
Accountants' report on the financial statements of the Company for the fiscal
year ending December 31, 1996 did not contain an adverse opinion or
disclaimer of opinion, nor was such report qualified or modified as to
uncertainty, audit scope, or accounting principles. In connection with the
Former Accountants' audit of the Company for the fiscal year ending December
31, 1996, and for the interim period through January 21, 1998, there were
no disagreements between the Company and the Former Accountants with
respect to any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. The decision to dismiss
the Former Accountants was approved by the Company's Board of Directors on
January 19, 1998.

    (b)  On January 21, 1998, the Company engaged M.R. Weiser & Co., LLP,
Certified Public Accountants ("M.R. Weiser"), as the Company's certified
public accountants and auditors. Prior to its engagement, the Company had not
consulted M.R. Weiser regarding the application of accounting principles to
any transaction in which the Company was engaged or proposed to engage, or
the type of audit opinion that might be rendered on the Company's financial
statements. The decision to engage M.R. Weiser was approved by the Company's
Board of Directors on January 19, 1998.

                                       17
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    The names and ages of the Company's directors and executive officers are set
forth below.

<TABLE>
<CAPTION>
NAME                             AGE   POSITION HELD
------------------------------   ---   ------------------------------------
<S>                              <C>   <C>
Robert F. Wright                  72   Chairman of the Board;
                                       Chairman, Executive Committee;
                                       Member, Nominating Committee

Gerold Tebbe                      48   Vice Chairman of the Board;
                                       Chief Executive Officer;
                                       President, Secretary and Treasurer;
                                       Member, Executive Committee;
                                       Member, Compensation Committee;
                                       Member, Nominating Committee

David F. Bolger                   65   Director;
                                       Member, Audit Committee

Aubrey L. Cole                    74   Director;
                                       Chairman, Audit Committee

Michael J. Rosenberg              69   Director;
                                       Member, Audit Committee

Ira T. Wender                     71   Director;
                                       Chairman, Compensation Committee

Tony Kirk                         54   Director;
                                       Chairman, Nominating Committee;
                                       Member, Executive Committee;
                                       Member, Compensation Committee
</TABLE>

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

   Pursuant to the Company's By-laws, the following individuals (other than
Gerold Tebbe) were appointed by Gerold Tebbe, as sole director of the
Company, to serve on the Board of Directors until the next Annual Meeting of
Stockholders (currently scheduled for some time in May or June of 1998), at
which time all Directors will stand for re-election. There is currently only
one executive officer of the Company, Mr. Tebbe, who is President and Chief
Executive Officer. Mr. Tebbe will also serve as the Company's Secretary and
Treasurer until such time as suitable personnel can be retained to serve in
those positions.

-------------------
BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICERS

    Robert F. Wright. Mr. Wright has been Chairman of the Company since
January 1998. Mr. Wright is currently a Director or Chairman of several
national and international financial and industrial companies, including
Hanover Direct, Inc., The Navigators Group, Inc., Norweb North America
Corporation, Reliance Standard Life Insurance Co., Rose Technology Group
Limited, U.S. Timberlands, L.P., and Williams Real Estate Co., Inc. Mr.
Wright is also a member of several charitable Boards, including New York
University, Town Hall Foundation, Greenwich House Settlement, and the Council
of Governing Boards (of which he is Chairman). Since 1988, Mr. Wright has
managed his own investment

                                       18
<PAGE>

and consulting firm, Robert F. Wright Associates, Inc. From 1948 to 1988, Mr.
Wright was employed by Arthur Andersen LLP, with the position of Partner when
he retired. He was educated at Michigan State University and New York
University.

    Gerold Tebbe.  Mr. Tebbe has been a Director, President, Treasurer and
Secretary of the Company since October 1997, and has been Chief Executive
Officer of the Company since January 1998. Mr. Tebbe was born in
Langenenslingen, Germany, and has been self-employed as an inventor for the
past ten years, specializing in inventing, patenting and developing products
combining his controlled-release technology with textiles and other
applications. From 1970 to the late-1980s, Mr. Tebbe was President of Textil
Atelier K. Tebbe in Germany, a textile concern owned by his family
specializing in textile design for woven and knitted materials, and the
servicing of certain textile production equipment. Mr. Tebbe studied
tailoring and passed the examinations of the Chamber of Industry and Commerce
(IHK) in Reutlingen, Germany; subsequently, he qualified as master craftsman
in textile design while employed in Albstadt-Tailfingen, Germany.

    David F. Bolger. Mr. Bolger has been a Director of the Company since
January 1998. Mr. Bolger is the President of Bolger & Co., Inc. Mr. Bolger
received his B.B.A. degree from the University of Pittsburgh in 1954. After
serving as a Contracting Officer in the U.S. Air Force, Mr. Bolger relocated
to New York, where he was employed as Executive Assistant to Thomas Mellon
Evans (H.K. Porter Co., Crane Co. and Evans & Company) from 1956 to 1961.
From 1961 to 1963, Mr. Bolger served as Vice President and Director of
Broadstone Realty Corporation (a wholly-owned subsidiary of Stone & Webster
Securities, Inc.) in New York City. From 1963 to 1966, he was employed by New
York Securities Co. and its affiliate, New York Securities Co., Inc., serving
as director, officer and partner. In 1966, Mr. Bolger founded Bolger & Co.,
Inc., which for the past 32 years has been active in the financing of fixed
assets for major corporations and in various corporate activities, including
leveraged buy-outs, Employee Stock Option Plans, and investing in
under-valued industrial corporations, financial institutions and retail
enterprises. He is a Director of Universal Holdings Corp. (its affiliates
include American Progressive Life and Health Insurance Company of New York
and American Pioneer Life Insurance Company of Florida), and Chairman and
Chief Executive Officer of FMB Holding Co., Inc. (Farmers & Merchant State
Bank, Boise, Idaho). In addition to his business activities, Mr. Bolger is
active in numerous charitable, philanthropic and professional organizations.

    Aubrey L. Cole. Mr. Cole has been a Director of the Company since January
1998. Since 1989, Mr. Cole has been a consultant for Aubrey Cole Associates,
a management consulting services and investment concern. From 1986 to 1989,
Mr. Cole was the Vice Chairman of the Board of Directors of Champion
International Corporation (a publicly-traded forest products company), and
from 1983 to 1993, Mr. Cole was Chairman of Champion Realty Corporation (the
land sales subsidiary of Champion International). Mr. Cole holds a B.B.A.
from the University of Texas and serves on the Advisory Board of the
University of Texas Business School.

    Michael J. Rosenberg. Mr. Rosenberg has been a Director of the Company
since January 1998. From 1961 to 1996, Mr. Rosenberg was employed in various
capacities by Rosenthal & Rosenthal, Inc., New York City, where he ultimately
became Executive Vice President. Prior to this, from 1959 to 1961, Mr.
Rosenberg was employed by Sterling National Bank, New York, and, from 1958 to
1959, he worked for A.J. Armstrong & Co., New York. From 1953 to 1958, Mr.
Rosenberg was employed by Meinhard & Co., New York. He is a member of the
Board of Directors of DVL, Inc. and Magna-Labs, Inc., both NASDAQ-listed
public companies. He has been, and continues to be, active in numerous
charitable, philanthropic and professional organizations, including serving
on the Boards of New York University and the Town Hall Foundation. From 1951
to 1953, Mr. Rosenberg served as a First Lieutenant in the U.S. Army in
Korea, where he was decorated with the Silver Star and the Bronze Star. He
received his B.S. from Upsala College in 1951 and his MBA from New York
University in 1955.

    Ira T. Wender. Mr. Wender has been a Director of the Company since
January 1998. Mr. Wender has been of counsel to, or a partner with, the New
York law firm of Patterson, Belknap, Webb and Tyler from 1986 to date. From
1971 to 1986, he was a partner with the law firm of Wender, Murasc and White,
New York, and from 1959 to 1971, he was a partner with the law firm of Baker
& McKenzie, New York. From 1949 to 1952, and from 1954 to 1959, he was an
associate at the law firm

                                      19
<PAGE>

of Lord Day & Lord, New York. In the years 1952 to 1954, he was Assistant
Director of the Harvard Law School International Program in Taxation. During
the years 1954 to 1958, Mr. Wender was a Lecturer in Taxation at the NYU
School of Law and co-authored "Foreign Investment and Taxation," which was
published in 1955 by Prentice Hall. Mr. Wender received a B.A. degree from
Swathmore College in 1945, a J.D. degree from the University of Chicago Law
School in 1948, and an L.L.M. in Taxation from the New York University School
of Law in 1951. From 1969 to 1974, Mr. Wender was Chairman of C. Brewer &
Company Ltd., Honolulu, Hawaii (sugar production and international
agriculture), and from 1978 to 1982, he was President and Chief Executive
Officer of A.G. Becker--Warburg Paribas Becker, Inc. (investment banking).
From 1982 to 1986, he was Chairman of The Sussex Organization, Inc.
(investment banking), and from January 1994 to September 1994, he was
Chairman of Perry Ellis, Inc. Mr. Wender is currently a Director of The Dime
Savings Bank, New York, Refac Technology, Inc. and United Investors Realty
Trust.

    Tony Kirk.  Mr. Kirk has been a Director of the Company since January
1998. Since August 1990, Mr. Kirk has been a partner in Kirk & Maeder, a
management consulting firm in Switzerland, providing advice on management
buy-outs, turn-arounds, acquisitions, divestitures, public offerings of stock
and other forms of venture capital primarily to family-owned industrial and
financial corporations. From 1987 to August 1990, Mr. Kirk was managing
director of Societe Financiere de Geneve, Geneva, Switzerland ("Sofigen"), a
listed finance company investing in privately-owned, medium-sized businesses
in Europe and the United States. From 1982 to 1987, Mr. Kirk served in
several positions for Thyssen Bornemisza N.V., a diversified family-owned
industrial group of companies based in Monaco and Amsterdam, including, from
1983, head of Corporate Development, and from 1985, Senior Vice President and
head of Mergers and Acquisitions. In these capacities, Mr. Kirk was
responsible for numerous transactions with industrial companies. From 1978 to
1981, Mr. Kirk was a manager of the Boston Consulting Group, an international
consulting firm based in Munich, Germany, where Mr. Kirk served as a
management consultant to several large German public corporations and
privately-owned companies. Mr. Kirk received a Ph.D. from Oxford University
in 1973. He has been a Director or advisory board member of companies in
Germany, Switzerland, Austria, Holland and the United States. Mr. Kirk speaks
fluent German, French and English.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

    The Company's directors and executive officers are required under the
Securities Exchange Act of 1934 to file reports of ownership and changes in
beneficial ownership of the Company's equity securities with the SEC. Copies
of those reports must also be furnished to the Company. Based solely on a
review of the copies of reports furnished to the Company, the Company
believes that during the fiscal year ended January 31, 1997, all filing
requirements applicable to directors and executive officers were complied
with, except that Forms 3 for all the Directors of the Company will be filed
in April 1998.

                                      20
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

    From its incorporation on March 6, 1992 until the present, except for (1)
certain payments to a former officer and director of the Company for the use
of office space provided to the Company by that former officer and director,
and (2) certain payments to another former officer and director of the
Company for consulting services rendered to the Company by a firm affiliated
with that former officer and director, both of which agreements were
terminated in October 1997, the Company has not paid any salary or other
compensation to Mr. Tebbe, any other officer or Director, or any other
person. Currently, other than as described below, involving contingent
compensation to be paid to Mr. Tebbe in connection with his contribution to
the Company of patents, patent applications, and related intellectual
property, there is no agreement between the Company and Mr. Tebbe to
compensate Mr. Tebbe for his services to the Company.

CONTINGENT COMPENSATION

    The Company has an agreement with Gerold Tebbe, the President, Chief
Executive Officer, Secretary, Treasurer and a Director of the Company, to pay
Mr. Tebbe 1% per annum of all net revenues recognized by the Company in
connection with the commercial exploitation of the Company's patents and
patent rights. The Company made this agreement with Mr. Tebbe when Mr. Tebbe,
prior to becoming a director and officer of the Company, agreed to contribute
his patents, patent rights and related intellectual property to the Company
in connection with the sale of 4,183,125 shares of the Company's common stock
to Overton Holdings Limited, a Turks and Caicos Islands corporation ("OHL"),
of which Mr. Tebbe is the 100% beneficial owner. The Company has agreed with
Mr. Tebbe that royalty payments under this agreement will not accrue and be
payable to Mr. Tebbe unless and until the Company has recognized net income
from that patent or patent right during such year, as determined in
accordance with generally accepted accounting principles, as applied in the
United States. The Company expects to formalize this royalty agreement with
Mr. Tebbe in the next forty-five to sixty (45-60) days. The Company has
agreed further that Mr. Tebbe may renegotiate the terms of such royalty
compensation, in the event the current stockholders of the Company (other
than OHL and other than those stockholders of the Company that received their
shares of stock by gift from OHL; see Item 13: "Certain Relationships and
Related Transactions--Gift of Shares by OHL," below) transfer a majority of
their shares of the Company's Common Stock to persons other than the current
shareholders. There can be no assurances that, in the event such transfers of
the Common Stock of the Company occur, the Company will be able to
renegotiate the payment of the royalty compensation to Mr. Tebbe on terms
that are favorable to the Company. Currently, the Company's agreement with
Mr. Tebbe is independent of his remaining in any of his positions as a
Director, President, Chief Executive Officer, Secretary and Treasurer of the
Company.

DIRECTORS COMPENSATION

    Cash Compensation. Each member of the Board of Directors will receive
$20,000 annually in cash compensation for his services to the Company as a
Director. In addition, the Company will reimburse its directors for
reasonable out-of-pocket expenses incurred in connection with attendance by
the directors at meetings of the Board or any committee thereof.

    Stock Compensation. Pursuant to the Director Stock Option Plan the
Company intends to adopt, subject to shareholder approval, in the next
forty-five to sixty (45-60) days, the Company has agreed to grant options for
$20,000 worth of the Company's Common Stock (valuation formula to be
determined) annually to each director. The Company anticipates that the
Director Stock Option Plan will provide for the annual grant of options to
each director to be doubled to $40,000 worth of the Company's Common Stock,
provided the Company meets or exceeds certain performance targets (to be
determined). The amount of Common Stock of the Company to be reserved for
issuance pursuant to the Director Stock Option Plan, and the vesting
provisions thereof, have not yet been determined.

STOCK OPTIONS

    To provide additional compensation to senior executives upon their
retention, and possibly at specific times, or at regular intervals,
thereafter, the Company anticipates adopting, at the appropriate

                                      21
<PAGE>

time and subject to shareholder approval, an Incentive Stock Option Plan. The
exact terms of the Incentive Stock Option Plan have yet to be determined, but
the Company expects the plan to provide for the grant of some or all of the
following: incentive stock options, nonstatutory stock options, performance
shares, stock appreciation rights, and restricted stock awards. The vesting
provisions of the equity compensation granted pursuant to the plan will be
governed by separate Option Agreements to be executed by the Company and the
optionee at the time of grant. The amount of Common Stock of the Company to
be reserved for issuance pursuant to the Incentive Stock Option Plan has yet
to be determined.

MANAGEMENT EMPLOYMENT AGREEMENTS; KEY EMPLOYEES

    Management Employment Agreements. The Company expects to offer employment
agreements to members of senior management at the time such members are
recruited. The terms of such employment agreements will be subject of
negotiation at the time senior management is retained.

    Key Man Life Insurance.  The Company intends to secure a "Key Man" life
insurance policy on the life of Mr. Tebbe in the amount of at least
$1,000,000 and with an initial term of five (5) years. The Company
anticipates that it will be the sole beneficiary of this policy and the
Company expects to arrange for the policy to be issued in the next forty-five
to sixty (45-60) days.

INDEMNIFICATION AGREEMENTS

    The Company intends, within the next sixty (60) days, to enter into
Indemnification Agreements with each of its directors and executive officers.
Though the exact provisions of the Indemnification Agreements are still under
discussion, the Company anticipates the inclusion of provisions pursuant to
which it will be obligated to indemnify those persons to the fullest extent
authorized by the Nevada General Corporation Law (the "Nevada Act"), and to
advance payments to cover defense costs against an unsecured obligation to
repay such advances if it is ultimately determined that the recipient of the
advance is not entitled to indemnification. Pursuant to these Agreements, the
Company will not be required to indemnify a director or executive officer if
the indemnified loss results from any of the following: (a) a violation of
Section 16(b) of the Securities and Exchange Act of 1934, as amended; (b) a
violation of criminal law; (c) a transaction from which the executive officer
or director received an improper personal benefit; (d) willful misconduct or
a conscious disregard for the Company's best interests; or (e) a transaction
for which the director is liable pursuant to Section 78.300.2 of the Nevada
Act for certain distributions from the corporation to its shareholders.

                                      22
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

VOTING SECURITIES OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The management of the Company has been informed that, as of March 25,
1998, the persons identified in the table below, including all directors,
nominees for director, executive officers and all owners known to the Company
of more than 5% of any class of the Company's voting securities, owned
beneficially, within the meaning of Securities and Exchange Commission
("SEC") Rule 13d-3, the securities of the Company reflected in such table.
Except as otherwise specified, the named beneficial owner claims sole
investment and voting power as to the securities reflected in the table.


BENEFICIAL OWNERSHIP OF THE COMPANY STOCK

<TABLE>
<CAPTION>
                                                 NUMBER OF SHARES
BENEFICIAL OWNER (1)                             OF COMMON STOCK        PERCENT OF CLASS
--------------------                             -----------------      ----------------
<S>                                              <C>                    <C>
Overton Holdings Limited, a
     Turks and Caicos
     Islands corporation,
     100% beneficially
     owned by Gerold
     Tebbe (2)...............................    2,733,943              60.13%
Address:
     c/o The Chartered Trust
     Company
     Towne Centre Mall
     Butterfield Square
     Providenciales, Turks &
     Caicos Islands
     British West Indies

Deotexis AG, a Swiss
     corporation 100%
     beneficially owned by
     Gerold Tebbe(2).........................    50,000                 1.01%
Address:
     Poststrasse 9
     CH-6300
     Zug, Switzerland

Tony Kirk....................................    50,000                 1.01%
Address:
     Kirk & Maeder
     Sagenstrasse 14
     6318 Walchwil
     Switzerland

</TABLE>

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

(1) Currently, other than Gerold Tebbe and Tony Kirk, none of the Company's
directors or executive officers is the beneficial owner of any Company Common
Stock.

(2) The aggregate beneficial ownership of Company Common Stock by Gerold Tebbe,
President, Chief Executive Officer, Secretary, Treasurer and a Director of
the Company, through Overton Holdings Limited and Deotexis AG, is as follows:
(a) shares beneficiary owned: 2,783,943; (b) percentage beneficiary owned:
61.23%.

                                      23
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

STOCK PURCHASE AGREEMENT

    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 has agreed with Mr. Tebbe
that royalty payments under this agreement will not accrue and be payable to
Mr. Tebbe unless and until the Company has recognized net income from that
patent or patent right during such year, as determined in accordance with
generally accepted accounting principles, as applied in the United States.
The Company expects to formalize this royalty agreement with Mr. Tebbe in the
next forty-five to sixty (45-60) days. The Company has agreed further that
Mr. Tebbe may renegotiate the terms of such royalty compensation, in the
event the current shareholders of the Company (other than OHL and other than
those stockholders of the Company that received their shares of stock by gift
from OHL) transfer a majority of their shares of the Company's Common Stock
to persons other than the current shareholders. There can be no assurance
that, in the event such transfers of the Common Stock of the Company occur,
the Company will be able to renegotiate the payment of the royalty
compensation to Mr. Tebbe on terms that are favorable to the Company.

GIFT OF SHARES BY OHL

    On February 24, 1998, Gerold Tebbe, the President, Chief Executive
Officer, Secretary, Treasurer and a Director of the Company, to satisfy a
commitment he made to a group of 486 individuals and entities (the "Giftees")
prior to his acquiring beneficial majority control of the Company through
OHL, caused OHL to gift 1,449,182 shares of the Common Stock of the Company
to the Giftees. The gift of shares by OHL included a gift of (i) 50,000
shares to Deotexis AG, a Swiss corporation 100% owned and controlled by
Gerold Tebbe, and (ii) 50,000 shares to Tony Kirk, a Director of the Company.
The 1,449,182 shares of Common Stock of the Company gifted by OHL to the
Giftees represented, at the time of the gift, 34.64% of the common Stock of
the Company held by OHL, and 31.87% of the total outstanding shares of Common
Stock of the Company. Following the gift of shares described above, OHL
continues to own 2,733,943 shares of Company Common Stock, or 60.13% of the
total outstanding shares of Common Stock of the Company. Following the gift
of shares described above, Gerold Tebbe continues to beneficially own,
through OHL and Deotexis AG, 2,783,943 shares of Company Common Stock, or
61.23% of the total outstanding shares of Common Stock of the Company.

PUT OPTION

    All the holders of the Company's Common Stock of record as of just prior
to the closing of the Stock Purchase Agreement (excluding Mr. Mark Meller),
which excludes OHL and the Giftees, have the right to cause Mr. Tebbe to
purchase, at $3 per share, which price will be adjusted to give effect to
stock splits, stock dividends, recapitalizations, capital distributions, and
similar events, of some or all of their Common Stock (the "Put") for the six
(6) month period following the Measuring Period (defined below), if the
Company's Common Stock does not have a daily average closing bid price of $3
per share for 20 consecutive trading days during the six (6) month period
following October 10, 1997, the closing date of the Stock Purchase Agreement
(the "Measuring Period"). Certain changes in the ownership of the Company's
Common Stock from the ownership thereof just prior to the closing of the
Stock Purchase Agreement will void the Put as to that Common Stock so
transferred. The sum of $836,250 has been deposited in escrow by Mr. Tebbe,
who is the 100% beneficial owner of OHL, as a fund to support exercise of the
Put. The Put will fail to become effective, or will terminate, as applicable,
upon the earlier to occur of (i) the Company's Common Stock having a daily
average closing bid price of $3 per share for

                                      24
<PAGE>

twenty (20) consecutive trading days, or (ii) the one (1) year anniversary of
the date of closing of the Stock Purchase Agreement.

CALL OPTION

    All of the shares of the Company's Common Stock issued and outstanding
just prior to the date of closing of the Stock Purchase Agreement held or
controlled by Mr. Gary Takata and Mr. Shigeru Masuda, or their respective
affiliates, shall be subject to a call option (the "Call") whereby the
Company will have the right, for a period of one (1) year following the date
of closing of the Stock Purchase Agreement, to purchase such shares at a
price of $30 per share, which price shall be adjusted to give effect to stock
splits, stock dividends, recapitalizations, capital distributions, and
similar events, if the closing bid price of a share of the Company's Common
Stock rises to $30 or more.

RELATED PARTY TRANSACTIONS

    Tebbe Royalty.  As discussed above, the Company has an agreement in
principle with Gerold Tebbe, President, Chief Executive Officer, Secretary,
Treasurer and a Director of the Company, to pay Mr. Tebbe one percent (1%)
per annum of all net revenues recognized by the Company in connection with
the commercial exploitation of the Company's patents, patent rights and
related intellectual property. The Company entered into this arrangement with
Mr. Tebbe in connection with his contribution of those patents, patent rights
and related intellectual property pursuant to the closing of the Stock
Purchase Agreement, whereby OHL, wholly beneficially owned and controlled by
Mr. Tebbe, purchased 4,183,125 shares of the Company's Common Stock, which
shares represented, prior to the gift by OHL to the Giftees, described above,
ninety-two (92%) percent of the issued and outstanding Common Stock of the
Company. The Company has agreed that Mr. Tebbe may renegotiate the terms of
such royalty compensation, in the event the current shareholders of the
Company (other than OHL and other than the Giftees) transfer a majority of
their shares of the Company's Common Stock to persons other than the current
shareholders. Because Mr. Tebbe is the President and Chief Executive Officer
of the Company, and because he beneficially owns and controls OHL, the
majority shareholder of the Company, he effectively controls and can dictate
the affairs of the Company, and it should be recognized that any
renegotiation of Mr. Tebbe's royalty arrangement with the Company will not be
on an arms-length basis and may be more or less favorable to the Company than
the agreement the Company could have negotiated had Mr. Tebbe not been the
Company's beneficial majority shareholder.

    The royalty compensation arrangement between the Company and Mr. Tebbe
provides that no payments shall accrue and be payable to Mr. Tebbe unless and
until the Company has recognized net income from that specific patent or
patent right during a given fiscal year, as determined in accordance with
generally accepted accounting principles, as applied in the United States. To
date, the Company has not recognized any net income from any patent, patent
right or related intellectual property contributed to the Company by Mr.
Tebbe, and Mr. Tebbe has not received any royalty payments from the Company.

    Consulting Agreement with Tony Kirk.  Within the next sixty to ninety
(60-90) days, the Company expects to enter into a consulting agreement with
Tony Kirk, a Director of the Company, pursuant to which Mr. Kirk will consult
with and advise the Company with respect to the potential acquisition of an
operating company in the United States or Europe. The exact provisions of
this agreement have yet to be negotiated, but the Company anticipates that
Mr. Kirk will be paid a fee for his consulting services, the majority of
which would be payable upon the successful consummation of such an
acquisition. Because of Mr. Kirk's relationship to the Company, the terms of
his consulting agreement to be negotiated with the Company may be more or
less favorable to the Company than the agreement the Company could have
negotiated with a consultant who is not a Director of the Company.

    Consulting Fees Paid to Tony Kirk.  During the period from approximately
October 10, 1997, the date on which OHL and Gerold Tebbe acquired majority
control of the Company, to December 31, 1997, Tony Kirk, who became a
Director of the Company on January 19, 1998, performed consulting and other
services for the Company, for which the Company paid him $103,124. In
addition, Mr. Kirk continues to perform such services for the Company and may
be paid additional amounts for consulting and other services rendered to the
Company for periods subsequent to the time period described above,

                                      25
<PAGE>

until the negotiation and execution of the Consulting Agreement referred to
above, at which time the Consulting Agreement will control the relationship
between Mr. Kirk and the Company.

    Agreement with Hummel.  Since 1993, the Company has had an informal oral
agreement with KuW Hummel Vertriebs GmbH ("Hummel"), a small manufacturing
and distribution company in Germany, to produce certain of the Company's
Products, primarily the Deotexis Cold Scarf, in the small quantities that
have been required for test-marketing and promotional purposes. The Company
is now moving to formalize its relationship with Hummel, and anticipates that
it will enter into a License Agreement with Hummel within the next forty-five
to sixty (45-60) days, to enable the Company to secure a larger quantity of
the Deotexis Cold Scarf to be able to meet the forecasted increase in demand
for that product. The Company anticipates that the License Agreement will
grant to Hummel the rights to use the Company's patents relating to the
Deotexis Cold Scarf to manufacture and distribute that product on behalf of
the Company, in return for certain annual payments, and a sales-based
royalty, to be paid to the Company by Hummel. Mr. Tebbe's wife owns a 49.02%
interest in Hummel, and as a substantial stockholder, is able to influence
the direction and affairs of Hummel's business. Because of this relationship,
the terms of the License Agreement to be executed between the Company and
Hummel may be more or less favorable to the Company than could be negotiated
by the Company at arms-length with other manufacturers and distributors.

    Agreement with Gary Takata.  Prior to the closing of the Stock Purchase
Agreement, the Company utilized the offices of its then President and
Director, Mr. Gary Takata, for which Mr. Takata received an annual payment of
$15,000. This arrangement with Mr. Takata was terminated upon the closing of
the Stock Purchase Agreement in October 1997.

    Agreement With The Zeron Group, Inc. Prior to the closing of the Stock
Purchase Agreement, the Company was party to a Consulting Agreement with The
Zeron Group, Inc. ("Zeron Group"), pursuant to which the Company paid Zeron
Group $15,000 annually for consulting services. The former Chairman of the
Board of Directors of the Company, Mr. Shigeru Masuda, is also the Chairman
of Zeron Group. The Consulting Agreement between the Company and Zeron Group
was terminated upon the closing of the Stock Purchase Agreement in October
1997.

                                      26
<PAGE>

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
          ON FORM 8-K.

(a) Exhibits.
        Articles of Incorporation.(1)
        By-Laws of the Company.(1)
        Specimen certificate for shares of Common Stock.(1)
        Stock Purchase Agreement, dated September 30, 1997.(1)
        Financial Data Schedule.(2)
        Information Statement pursuant to Section 14(f) of the Securities
        Exchange Act of 1934 and Rule 14f-1 thereunder.(1)

(b) Reports on Form 8-K

    The Company filed the following reports on Form 8-K during the last
quarter of the period covered by this Annual Report on Form 10-K.

        1.  Form 8-K of the Company dated October 10, 1997.
        2.  Form 8-K of the Company dated January 28, 1998.
        3.  Form 8-K/A of the Company dated February 5, 1998, amending the Form
            8-K dated January 28, 1998.
        4.  Form 8-K of the Company dated March 26, 1998.

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

(1) Previously filed as an Exhibit to the Company's Registration Statement on
    Form S-1 (file number not yet assigned) filed with the Commission on
    March 3, 1998.

(2) Filed herewith.

                                      27
<PAGE>


                                   SIGNATURES

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

                                   DEOTEXIS


                                   By: /s/ Gerold Tebbe
                                      -----------------------------------
                                      President, Chief Executive Officer,
                                      Secretary and Treasurer

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

          SIGNATURE                        TITLE                    DATE
------------------------------  ---------------------------  -----------------
     /s/ ROBERT F. WRIGHT        Chairman of the Board          March 30, 1998
------------------------------
       Robert F. Wright

       /s/ GEROLD TEBBE           President, Chief Executive    March 30, 1998
------------------------------    Officer, Secretary Treasurer
         Gerold Tebbe             (principal executive officer,
                                  principal financial and
                                  accounting officer)

     /s/ DAVID F. BOLGER          Director                       March 30, 1998
------------------------------
       David F. Bolger

      /s/ AUBREY L. COLE          Director                       March 30, 1998
------------------------------
        Aubrey L. Cole

        /s/ TONY KIRK             Director                       March 30, 1998
------------------------------
          Tony Kirk

   /s/ MICHAEL J. ROSENBERG       Director                       March 30, 1998
------------------------------
     Michael J. Rosenberg

      /s/ IRA T. WENDER           Director                       March 30, 1998
------------------------------
        Ira T. Wender


<PAGE>
                                 DEOTEXIS, INC.
                (FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>

Independent Auditors' Reports..............................................................................         F-2

Balance Sheets at December 31, 1996 and 1997...............................................................         F-5

Statements of Operations for the years ended December 31, 1995, 1996 and 1997 and cumulative since March 6,
  1992 (inception) to December 31, 1997....................................................................         F-6

Statement of Stockholders' Equity for the period March 6, 1992 (inception) to December 31, 1994, and for
  the years ended December 31, 1995, 1996 and 1997.........................................................         F-7

Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997 and cumulative since March 6,
  1992 (inception) to December 31, 1997....................................................................         F-8

Notes to Financial Statements..............................................................................         F-9
</TABLE>

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.)
New York, New York

We have audited the accompanying balance sheet of Deotexis, Inc. (formerly Zeron
Acquisitions II, Inc.) as of December 31, 1997 and the related statements of
operations, stockholders' equity and cash flows for the year then ended and the
1997 amounts included in the cumulative period March 6, 1992 (inception) through
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Deotexis, Inc. (formerly Zeron
Acquisitions II, Inc.) as of December 31, 1997, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.

                                          M.R. Weiser & Co. LLP
                                          Certified Public Accountants

New York, New York
February 24, 1998

                                      F-2
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.)
New York, New York

We have audited the accompanying balance sheet of Deotexis, Inc. (formerly Zeron
Acquisitions II, Inc.) as of December 31, 1996 and the related statements of
operations, stockholders' equity and cash flows for the year then ended and the
1996 amounts included in the cumulative period March 6, 1992 (inception) through
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The balance sheet of Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.) as of December 31, 1995 and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1995 and 1994 and the March 6, 1992 (inception) through
December 31, 1995 amounts included in the cumulative period March 6, 1992
(inception) through December 31, 1996 were audited by another auditor whose
report dated February 27, 1996 expressed an unqualified opinion on those
statements.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Deotexis, Inc. (formerly Zeron
Acquisitions II, Inc.) as of December 31, 1996, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.

                                          Mayer Rispler & Company, P.C.
                                          Certified Public Accountants

Brooklyn, New York
March 18, 1997

                                      F-3
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT

To the Board of Directors
Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.)
New York, New York

I have audited the accompanying statements of operations, stockholders' equity
and cash flows of Deotexis, Inc. (formerly Zeron Acquisitions II, Inc.) for the
year ended December 31, 1995 and the cumulative period March 6, 1992 (Inception)
through December 31, 1995. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows of Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.) for the year ended December 31, 1995, and
the cumulative period March 6, 1992 (Inception) through December 31, 1995, in
conformity with generally accepted accounting principles.

                                          Nachum Blumenfrucht
                                          Certified Public Accountant

Brooklyn, New York
February 27, 1996

                                      F-4
<PAGE>
                                 DEOTEXIS, INC.
                (FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                               DECEMBER 31,
                                                                                         -------------------------
                                                                                            1996          1997
                                                                                         -----------  ------------
<S>                                                                                      <C>          <C>
                                                      ASSETS
Current assets:
  Cash and equivalents.................................................................  $   530,337  $  4,034,700
  Loan receivable......................................................................        2,331
  Prepaid taxes........................................................................                      1,561
                                                                                         -----------  ------------
      Total current assets.............................................................      532,668     4,036,261
Organization costs, net of amortization................................................           17
                                                                                         -----------  ------------
      Total assets.....................................................................  $   532,685  $  4,036,261
                                                                                         -----------  ------------
                                                                                         -----------  ------------

                                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses................................................  $    15,300  $     73,097
  Due to officer.......................................................................                    150,787
                                                                                         -----------  ------------
      Total current liabilities........................................................       15,300       223,884
                                                                                         -----------  ------------
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
    278,750 and 4,546,875 shares in December 31, 1996 and 1997.........................          279         4,547
  Additional paid-in capital...........................................................      624,860     4,155,485
  Deficit accumulated during the development stage.....................................     (107,754)     (347,655)
                                                                                         -----------  ------------
      Total stockholders' equity.......................................................      517,385     3,812,377
                                                                                         -----------  ------------
      Total liabilities and stockholders' equity.......................................  $   532,685  $  4,036,261
                                                                                         -----------  ------------
                                                                                         -----------  ------------
</TABLE>

                             See accompanying notes

                                      F-5
<PAGE>
                                 DEOTEXIS, INC.
                (FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                 MARCH 6, 1992
                                                              YEARS ENDED DECEMBER 31,        (DATE OF INCEPTION)
                                                         -----------------------------------           TO
                                                            1995        1996        1997        DECEMBER 31,1997
                                                         ----------  ----------  -----------  --------------------
<S>                                                      <C>         <C>         <C>          <C>
Interest and other income..............................  $   16,268  $   23,426  $    38,753      $     91,398
                                                         ----------  ----------  -----------        ----------
Expenses:
  Consulting...........................................      15,000      15,000       (6,250)           38,125
  Rent.................................................      15,000      15,000       (6,250)           38,125
  Corporation franchise taxes..........................       3,291       2,467          300             7,536
  Filing fees..........................................       3,996       4,244       10,164            21,283
  Amortization.........................................         100         100           17               500
  Bank charges.........................................         405         447          375             2,310
  Office...............................................         500                   16,312            18,152
  Professional fees....................................      12,981      29,905      263,986           313,022
                                                         ----------  ----------  -----------        ----------
      Total expenses...................................      51,273      67,163      278,654           439,053
                                                         ----------  ----------  -----------        ----------
Net loss...............................................  $  (35,005) $  (43,737) $  (239,901)     $   (347,655)
                                                         ----------  ----------  -----------        ----------
                                                         ----------  ----------  -----------        ----------
Basic loss per share...................................  $     (.13) $     (.16) $      (.19)
                                                         ----------  ----------  -----------
                                                         ----------  ----------  -----------
Weighted average number of shares outstanding..........     278,750     278,750    1,237,618
                                                         ----------  ----------  -----------
                                                         ----------  ----------  -----------
</TABLE>

                             See accompanying notes

                                      F-6
<PAGE>
                                 DEOTEXIS, INC.
                (FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                         DEFICIT
                                                         COMMON                        ACCUMULATED
                                                          STOCK           ADDITIONAL    DURING THE      TOTAL
                                                  ---------------------    PAID-IN     DEVELOPMENT   STOCKHOLDERS'
                                                    SHARES     AMOUNT      CAPITAL        STAGE         EQUITY
                                                  ----------  ---------  ------------  ------------  ------------
<S>                                               <C>         <C>        <C>           <C>           <C>
Issuance of 160,000 common shares on June 4,
  1992 at par value ($.001 per share) for cash
  ($.01 per share)..............................     160,000  $     160  $      1,440                 $    1,600
Sale of 18,750 shares for cash in July 1992
  ($1.60 per share).............................      18,750         19        29,981                     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 ($6.25
  per share)....................................     100,000        100       624,900                    625,000
Deferred offering costs charged to paid-in
  capital.......................................                              (31,461)                   (31,461)
Net loss--December 31, 1994.....................                                            (27,184)     (27,184)
                                                              ---------  ------------  ------------  ------------
Balance--December 31, 1994......................                    279       624,860       (29,012)     596,127
Net loss........................................                                            (35,005)     (35,005)
                                                              ---------  ------------  ------------  ------------
Balance--December 31, 1995......................                    279       624,860       (64,017)     561,122
Net loss........................................                                            (43,737)     (43,737)
                                                              ---------  ------------  ------------  ------------
Balance--December 31, 1996......................                    279       624,860      (107,754)     517,385
Distributions...................................                             (475,750)                  (475,750)
Sale of 4,183,125 shares for cash ($.96 per
  share)........................................   4,183,125      4,183     3,995,817                  4,000,000
Issuance of 85,000 shares for services rendered
  ($.48 per share)..............................      85,000         85           (85)                    --
Capital contributed by principal stockholder....                               10,643                     10,643
Net loss........................................                                           (239,901)    (239,901)
                                                  ----------  ---------  ------------  ------------  ------------
Balance--December 31, 1997......................   4,546,875  $   4,547  $  4,155,485  $   (347,655)  $3,812,377
                                                  ----------  ---------  ------------  ------------  ------------
                                                  ----------  ---------  ------------  ------------  ------------
</TABLE>

                             See accompanying notes

                                      F-7
<PAGE>
                                 DEOTEXIS, INC.
                (FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                 MARCH 6, 1992
                                                               YEARS ENDED DECEMBER 31,           (INCEPTION)
                                                         ------------------------------------       THROUGH
                                                            1995        1996         1997      DECEMBER 31, 1997
                                                         ----------  ----------  ------------  ------------------
<S>                                                      <C>         <C>         <C>           <C>
Cash flows from operating activities:
  Net loss.............................................  $  (35,005) $  (43,737) $   (239,901)    $   (347,655)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
      Amortization.....................................         100         100            17              500
  Changes in operating assets and liabilities:
      Loan receivable..................................                  (2,331)        2,331
      Prepaid taxes....................................                                (1,561)          (2,061)
      Accounts payable and accrued expenses............      (1,650)      8,200        57,797           73,097
      Due to officer...................................                               150,787          150,787
                                                         ----------  ----------  ------------  ------------------
Cash (used in) operations..............................     (36,555)    (37,768)      (30,530)        (125,332)
                                                         ----------  ----------  ------------  ------------------
Cash flows from financing activities:
Issuance of common stock--net of costs.................                             4,000,000        4,625,139
Capital contributed by principal stockholder...........                                10,643           10,643
Distributions..........................................                              (475,750)        (475,750)
                                                         ----------  ----------  ------------  ------------------
Net increase (decrease) in cash and cash equivalents...     (36,555)    (37,768)    3,534,893        4,160,032
                                                         ----------  ----------  ------------  ------------------
Cash and cash equivalents--beginning of year /
  period...............................................     604,660     568,105       530,337          --
                                                         ----------  ----------  ------------  ------------------
Cash and cash equivalents--end of year / period........  $  568,105  $  530,337  $  4,034,700     $  4,034,700
                                                         ----------  ----------  ------------  ------------------
                                                         ----------  ----------  ------------  ------------------
Non-cash 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     $     40,800
                                                                                 ------------  ------------------
                                                                                 ------------  ------------------
</TABLE>

                             See accompanying notes

                                      F-8
<PAGE>
                                 DEOTEXIS, INC.
                (FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS

1. THE COMPANY AND STOCKHOLDERS' EQUITY:

    Background:

    Deotexis, Inc. (formerly Zeron Acquisitions II, Inc.) (the "Company") was
organized under the laws of the State of Nevada on March 6, 1992. Its purpose is
to provide a vehicle to acquire or merge with another entity. 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
with 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.

    The New Shares account for 92% of the issued and outstanding common stock of
the Company and, accordingly, the Company is a subsidiary of OHL. Prior to the
closing of the Stock Purchase Agreement, Gary Takata, then President, Secretary
and a Director of the Company, and Shigeru Masuda, then Chairman of the Board of
Directors of the Company, together beneficially owned 55.2% of the common stock
of the Company and controlled the Company. Upon the closing of the Stock
Purchase Agreement and in accordance with the provisions thereof, Mr. Masuda
resigned as a Director of the Company, and Mr. Takata resigned his officerships
and directorship with the Company and appointed Gerold Tebbe sole director, who
then appointed himself President, Treasurer and Secretary of the Company.

    On October 13, 1997, by action by written consent without a meeting, OHL, as
majority stockholder and parent of the Company, acted to amend the Company's
Articles of Incorporation to change the Company's corporate name to "Deotexis,
Inc." An amendment to the Company's Articles of Incorporation was prepared and
filed with the Secretary of State of Nevada on October 15, 1997.

2. SIGNIFICANT ACCOUNTING POLICIES:

    Cash and Equivalents:

    Cash and 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 date of three months or less to be
cash equivalents.

    Concentration of Credit Risk:

    At December 31, 1997 and 1996, the Company maintained all its cash in one
commercial bank. The institution is insured by the Federal Deposit Insurance
Corporation up to $100,000. The uninsured balance amounted to approximately
$150,000 at December 31, 1997.

    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

                                      F-9
<PAGE>
                                 DEOTEXIS, INC.
                (FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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.

    Organization Costs:

    Organization costs are being amortized on the straight-line method over a
period of five years.

    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 toiletries, cosmetics,
apparel, household products and personal care products, and applications in the
pharmaceutical industry.

    Earnings (loss) per common share:

    Effective for financial statements for the year ended December 31, 1997, the
Company adopted SFAS No. 128, "Earnings per Share," which replaces the
presentation of primary earnings per share ("EPS") and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common stockholders
by the weighted-average number of common shares outstanding for the period. The
adoption of this new accounting standard did not have any effect on the
Company's reported loss per share amounts, because there were no dilutive
securities outstanding during any of the periods.

3. STOCKHOLDERS' EQUITY:

    The Company is authorized to issue 75,000,000 common shares with a par value
of $.001, and 15,000,000 blank check preferred shares with a par value of $.001.
On June 4, 1992, the Company issued a total of 160,000 shares of its common
stock to its officers for a total consideration of $1,600 ($.01 per share).

    On June 4, 1992, the Board of Directors authorized the sale, through a self
underwriting, of a minimum of 100,000 common shares and a maximum of 200,000
common shares at $6.25 per share.

    During the period of July 1, 1992 through July 15, 1992, the Company issued
a total of 18,750 shares of its common stock ($.001 par value) to various
individuals for a total consideration of $30,000 ($1.60 per share).

    On January 14, 1994, the Company closed on the minimum of 100,000 shares for
a total consideration of $625,000.

    In October 1997, the Company distributed $475,750 of which $454,000 or $4.54
per share was distributed to the holders of 100,000 common shares issued in
connection with the initial public offering, and $21,750 or $1.16 per share was
distributed to holders of 18,750 common shares issued prior to the initial
public offering.

    On October 10, 1997, pursuant to the Stock Purchase Agreement dated
September 30, 1997, the Company issued 4,183,125 newly-issued and nonregistered
shares of common stock, $.001 par value, in exchange for a cash payment of $4
million and the transfer to the Company for nominal consideration, plus

                                      F-10
<PAGE>
                                 DEOTEXIS, INC.
                (FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. STOCKHOLDERS' EQUITY: (CONTINUED)
future royalties tied to the revenues of certain patents, patent applications
and related intellectual property. In addition, the principal stockholder
contributed capital in the amount of $10,643.

    On October 10, 1997, the Company issued 85,000 shares of Common Stock to a
consultant, in connection with his work on behalf of the Company, in arranging
and facilitating the consummation of the Stock Purchase Agreement. The Company
recorded the estimated fair market value of those securities at $.48 per share
by a charge to additional paid-in capital.

4. DUE TO OFFICER:

    An officer of the Company expended approximately $150,000 for professional
fees and travel expenses on behalf of the Company, which have been recorded as
expenses and amounts due to officer. The amounts due to officer have no
specified repayment terms or interest rate.

5. NET INCOME TAXES:

    The Company has available at December 31, 1997 approximately $377,000 of
unused operating loss carryforwards that may be applied against future taxable
income, if any, and that expire in various years from 2007 to 2012.

6. COMMITMENTS AND OTHER MATTERS:

    a.  At December 31, 1997, the Company maintains an office facility on an
       annual basis for $5,100 per annum.

    b.  Prior to occupying its new facility in October 1997, the Company
       utilized the offices of its former President. Pursuant to an oral
       agreement, these facilities were provided on an annual basis for $15,000
       per year.

    c.  In prior years, the Company entered into a consulting agreement with the
       Zeron Group, Inc., a New York corporation. The Company's former Chairman
       of the Board of Directors, has been chairman of the Zeron Group, Inc.
       since May 1989. The annual fee pursuant to the agreement was $15,000
       commencing January 14, 1994, the closing of the Company's public
       offering. Pursuant to the consulting agreement, the Zeron Group, Inc. was
       to devote up to five hours per month in the search for and evaluation of
       potential acquisitions.

    d.  In connection with the Stock Purchase Agreement, the agreements
       regarding rent and consulting services rendered to the Company discussed
       above have been terminated and all outstanding amounts payable for rent
       and consulting have been canceled.

    e.  During the period from approximately October 10, 1997, the date on which
       OHL and Gerold Tebbe acquired majority control of the Company, to
       December 31, 1997, the Company paid Mr. Tony Kirk $103,124 for consulting
       services. On January 19, 1998, Mr. Kirk was appointed a director of the
       Company.

    f.  In connection with the Stock Purchase Agreement, the Company has the
       right to call, for a period of one year from October 10, 1997, the
       closing date thereof, all shares of Common Stock held or controlled by
       Mr. Takata and Mr. Masuda, 160,000 shares, at a price of $30 per share.


                                      F-11
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT                               PAGE NUMBER
-------------------------------       -----------
<S>                                    <C>
27. Financial Data Schedule....

</TABLE>