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<ACCESSION-NUMBER>0001110396-00-000002
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<FILING-DATE>20001221
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<COMPANY-DATA>
<CONFORMED-NAME>INNOVATIVE COATINGS CORP
<CIK>0001110396
<ASSIGNED-SIC>
<IRS-NUMBER>582337027
<STATE-OF-INCORPORATION>GA
<FISCAL-YEAR-END>1231
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<FILE-NUMBER>000-32161
<FILM-NUMBER>793285
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<BUSINESS-ADDRESS>
<STREET1>1650 AIRPORT ROAD
<STREET2>SUITE 110
<CITY>KENNESAW
<STATE>GA
<ZIP>30144
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1650 AIRPORT DRIVE
<STREET2>SUITE 110
<CITY>KENNESSAW
<STATE>GA
<ZIP>30144
</MAIL-ADDRESS>
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<TEXT>

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<TITLE>UNITED STATES</TITLE>
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<P ALIGN="CENTER">UNITED STATES </P>
<P ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION</P>
<P ALIGN="CENTER">Washington, D. C. 20549</P>
<P ALIGN="CENTER">FORM 10-SB</P>
<P ALIGN="CENTER">GENERAL FORM FOR REGISTRATION OF SECURITIES</P>
<P ALIGN="CENTER">OF SMALL BUSINESS ISSUER</P>
<P ALIGN="CENTER">Under Section 12(b) or (g) of the Securities Exchange Act of 1934</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">(Name of small business issuer in its charter)</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=654>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P ALIGN="CENTER">Georgia</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P ALIGN="CENTER">58-2337027</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P ALIGN="CENTER">(State or other jurisdiction of </P>
<P ALIGN="CENTER">incorporation or organization)</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P ALIGN="CENTER">(I.R.S. Employer </P>
<P ALIGN="CENTER">Identification No.)</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P ALIGN="CENTER">1650 Airport Dr., Suite 110, Kennesaw, Georgia</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P ALIGN="CENTER">30144</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P ALIGN="CENTER">(Address of principal executive offices)</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P ALIGN="CENTER">(Zip Code)</TD>
</TR>
</TABLE>

<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">Issuer's telephone number: (770) 919-0100</P>
<P ALIGN="CENTER">Securities registered under Section 12(b) of the Exchange Act: None</P>
<P ALIGN="CENTER">Securities registered under Section 12(g) of the Exchange Act: </P>
<P ALIGN="CENTER">Common Stock, no par value </P>
<P ALIGN="CENTER">Preferred Stock, par value $0.01</P>
<P ALIGN="CENTER">(Title of class)</P>
<P>ITEM 1. DESCRIPTION OF BUSINESS. </P>
<P>Corporate History</P>
<P>The Company was incorporated in August 1997, as a Georgia corporation and is headquartered in Kennesaw, Georgia. The Company was formed to develop, manufacture and market specially formulated coating systems and related applications equipment utilizing
polyurea-based polymers. The Company's objective is to become a leading producer and licensor of polyurea-based formulation or coating systems and multi-component spray application equipment. </P>
<P>The Company's administrative offices are located at 1650 Airport Rd., Suite 110, Kennesaw, Georgia 30144, and its telephone number is (770) 919-0100. </P>
<B><I><P ALIGN="JUSTIFY"><A NAME="_Toc476636210">Polyurea Polymers</A></P>
</B></I><P>Polyurea polymers create, when cured, either a hard, impermeable substance or a flexible rubbery substance, depending on the formulation used. Because the cure time is so short, typically a few seconds, polyurea polymers avoid many of the
problems associated with the application of polyurethane coatings, especially in high moisture and low temperature environments. However, the coatings industry has been slow to adopt the use of polyurea polymers primarily because of application problems
created
rea polymers. In addition, the lack of in-depth knowledge of the chemistry and formulations for specific applications has prevented many companies from converting to polyurea coatings.</P>
<P>Polyurea is a substitute for polyurethane with the following relative advantages and disadvantages:</P>

<UL><DIR>
<DIR>


<UL>
<LI>Polyurea costs between 10% and 35% more than polyurethane. </LI>
<LI>Polyurea has higher tensile strength than polyurethane. </LI>
<LI>Polyurea has higher abrasion resistance than polyurethane. </LI>
<LI>Unlike polyurethanes, polyurea contains no volatile organic compounds (VOC's), thus causing less harm to the environment. </LI>
<LI>Polyurea can be sprayed in any ambient weather, unlike polyurethane which cannot be sprayed in high humidity or low temperature conditions. </LI>
<LI>Polyurea is not colorfast except in dark (i.e black, blue, grey) colors, whereas polyurethane can be made colorfast in many colors, including white. </LI>
<LI>Innovative's Class A-rated polyurea does not require agitation while spraying, whereas all known Class A-rated polyurethanes require agitation. </LI>
<LI>Polyurea requires heat applied to spray hoses or chemicals in order to increase viscosity so that chemicals will flow freely when reaching spray gun. Polyurethane may require substantially less heat since it contains VOC's or solvents to increase
viscosity. </LI>
<LI>Polyurea cures (tack free) in 5 to 45 seconds (depending on the formula) as opposed to 2 to 24 hours for polyurethane. </LI>
<LI>Polyurea adheres to most substrates without a primer whereas polyurethane usually requires a primer.</LI></UL>
</DIR>
</DIR>
</UL>

<P>Production of polyurea polymers does not require specialized equipment or handling due to the non-volatility of the chemistry. Precision mixing and repackaging are the primary production functions. Production can be easily expanded through the use of
larger tanks, mixers, and materials handling equipment. Products are delivered in 55-gallon drums, one of component A and another of component B and are all premixed before shipment. These materials require no special handling for shipment and can be
shipped
</P>
<P>However, polyurea polymers require specialized spray equipment because the cure time is so short. Polyurea polymers are applied by forcing two compounds to mix under high pressure (i.e., from 2,000 to 3,000 psi) at the tip of specialized spray nozzle.
The forced mixing of the two compounds causes the compounds to react with each other, producing a solid formulation within seconds. Initial formulations were difficult to apply, and resulted in a rough surface, since the cure time was only 2 to 3 seconds.
H
ed proprietary formulations and techniques which have increased the reaction time to as much as 75 seconds, which makes the application easier and the finished surface smoother. </P>
<P>In order to apply the Company's coatings efficiently, the Company has developed a spray system capable of being manufactured at significantly less cost than polyurethane applications equipment currently on the market. The Company expects to have this
equipment available for delivery to its customers in the third quarter of 2000.</P>
<B><I><P ALIGN="JUSTIFY"><A NAME="_Toc476636211">Primary Markets For Polyurea Polymers</A></P>
</B></I><P>Management has identified over 300 possible uses for its polyurea formulations or coatings systems. Of the identified uses to date, the Company has designated and/or developed the following uses for its coating systems:</P>

<UL><DIR>
<DIR>


<UL>
<LI>A three-step exterior insulation finish system (EIFS) that prevents moisture intrusion, provides significant impact resistance, and is termite proof; </LI>
<LI>A direct applied-exterior finish system (DEFS) for commercial properties; </LI>
<LI>Coatings for flotation devices; </LI>
<LI>Coatings for metal rail car parts that come in constant contact with each other; </LI>
<LI>A flexible coating on soft foam that provides a sanitary, seamless coating for athletic and handicap training equipment; </LI>
<LI>Packaging material that meets strength and fire resistant criteria, such as flare packaging materials for the U.S. Military; </LI>
<LI>Pipeline coatings for U.S. and international gas companies; </LI>
<LI>Coatings for pallets and topboards; </LI>
<LI>EPA Super Fund site containment; and </LI>
<LI>Asbestos containment.</LI></UL>
</DIR>
</DIR>
</UL>

<P>Since its inception, management has focused its efforts on several flame and smoke resistant formulations of polyurea. The Company has filed three patent applications for an EIFS coating system that provides a seal against moisture intrusion and
enhances the strength of the EIFS wall structure. Management believes that the EIFS industry, often referred to as the "synthetic stucco industry," is a potential market for its coating systems. In addition to EIFS applications, the Company has designed
and/or de
stems that have been tested and are available for fire resistant military products, flotation devices, athletic and handicap equipment, rail car equipment, commercial buildings, pipeline coatings, speaker boxes, food processing pallets and topboards,
pharmaceutical industry pallets and topboards, EPA SuperFund site containment and asbestos containment. To date, the Company has applied for patents covering its EIFS system and floatation devices, pallets, and pipeline coatings.</P>
<P>The Company has applied for the trademark InstaCoat, the brand name of the Company's ployurea-based coatings. InstaCoat is a 100% "solids" liquid system sprayed through conventional two component equipment. No volatile or evaporative chemicals are used
in the process; therefore, the Company's believes that its coatings do not impose an environmental threat due to VOC emissions. InstaCoat is insensitive to water and reacts regardless of ambient temperature changes. The InstaCoat  system uses amine-termina
mponents, which provide a fast and very consistent reaction with isocyanate (the "A component") without the use of catalysts. Management believes that the Company's coating products offer excellent physical process properties such as adhesion, abrasion
resistance, durability and rapid handling time.</P>
<P>During the remainder of 2000, management also plans to devote the Company's resources towards procuring the required building code and fire rating approvals for its EIFS system for use in residential and commercial construction. In addition, the
Company plans to complete its patent applications currently in process and complete design and arrange for production of its application equipment. For the remainder of the year 2000, and until building code approval is obtained, the Company intends to
pursue sal
FS contractors using the coating for signage, exterior and interior moldings and other ornamental uses that do not require building code approval. </P>
<B><I><P ALIGN="JUSTIFY"><A NAME="_Toc476636212">The EIFS Market</A></P>
</B></I><P>The Company has devoted most of its efforts to developing polyurea polymers for use in synthetic stucco applications. In December 1997, the Company developed several flame resistant formulations of polyurea that led to the filing of a patent
application covering these formulations as an integral part of a two-step exterior insulation finish system (EIFS). This system seals against any moisture intrusion and enhances the strength of the EIFS wall structure.</P>
<P>Other related uses include the use of polyurea polymers to produce stucco-type decorative moldings. Currently, major customers of the Company's products for decorative moldings include Peachtree Signs, and Georgia Foam. In addition, the Company
recently received its first order from Disney, which has identified of applications for polyurea polymers in its amusement park division, and the Company believes that Disney may become a major customer for the Company's products. </P>
<P>The EIFS industry, often referred to as "synthetic stucco," has grown dramatically over the past ten years. Synthetic stucco was developed in Europe after WWII to repair war-damaged buildings. Today, EIFS is a multi-billion dollar industry serving
commercial, retail, and residential construction needs. The recent discovery of moisture intrusion from poorly applied EIFS has limited its desirability and use in the residential market. The EIFS industry has responded with a new ten-step application
process t
creating a "drainable system" in new construction; however, the industry still lacks a solution for previously applied stucco problems. Management believes that the Company's two-step system eliminates the potential moisture problem, is less expensive,
has greater strength, and can be applied to correct problems in existing EIFS-covered structures.</P>
<P>Management believes that the residential EIFS market, including the market for retrofitting existing EIFS-covered structures, is large. Of the 2,160,000 new houses built in the United States in 1995 and 1996, about 300,000 were built with synthetic
stucco as a primary finish. In New Hanover, County, North Carolina, several independent testing concerns have inspected over 300 homes that were built with EIFS and found that 90% to 95% of them have sustained water damage.</P>
<P>Stucco, both "real" and synthetic, has become one of the leading exterior finishes for commercial buildings. Since the Company's system can be installed in less time than traditional stucco or EIFS systems, while vastly increasing the surface's
strength, the Company believes that overtime its products can become a major siding alternative for the commercial construction industry. Based on U.S. Census Bureau data, the Company believes that the U.S. commercial siding market is considerably larger
than the
<P>Management believes the Company's EIFS system, for which it has filed a patent application, will provide a cost-effective solution for existing synthetic stucco moisture problems as well as for new construction. Based on estimates of new construction
and potential repair work, the estimated U.S. residential housing marketplace for the Company's EIFS system exceeds $2.5 billion per year.</P>
<B><I><P ALIGN="JUSTIFY"><A NAME="_Toc476636213">Other Pending Uses of Polyurea Polymers</A></P>
</B></I><P>In addition to EIFS applications, uses of the Company's products are continuously being developed. Other uses which the Company is currently developing include:</P>
<I><P>Military Flares</I> - The Company is in the initial contract stages of submitting a bid with Penske Plastics to become a supplier of flame resistant polyurea polymer coating for military flare boxes. The Company believes that its products provide an
ideal coating for flare boxes because they are light, strong and fire resistant. To date, the Company has met or exceeded the test criteria presently set by the military contractor. The project encompasses up to 1 million boxes, and has the potential to ge
f more than $2.9 million per year.</P>
<I><P>Pallets</I> - The Company is working with Chep, Ltd. to develop a contract to apply the Company's products to pallets and topboards. Chep, Ltd. is one of the world's largest owners and lessors of pallets. Initial testing indicates that spraying
pallets with polyurea polymers substantially increases their lives and renders them far easier to clean and sanitize. Chep, Ltd. has indicated a desire to utilize the Company's products for its pallets and topboards, but actual sales of the Company's
products f
rently dependent on locating a third party to spray the pallets and topboards in the quantities required by Chep, Ltd.</P>
<I><P>Flotation Devices </I>- The Company is working to develop a market for polyurea polymers as coatings for flotation devices used in rough or abrasive environments, such as sewage treatment plants. </P>
<I><P>Pipelines</I> - The Company is working to gain acceptance of polyurea polymers as a coating and sealant for joints on gas, oil and water transmission pipes. The Company believes that polyurea polymers have the potential for significant use in the
piping industry because they provide an effective seal and can be installed in the field much faster than current applications. </P>
<I><P>Speakers</I> - Peavy Speakers has tested polyurea polymers as a sealant and finish coat on speakers, and has recently decided to convert all of its four plants exclusively to the Company's products. Based on the success of the product with Peavy
Speakers, the Company has begun marketed its products to other members of the speaker industry. </P>
<I><P>Roofing </I>- The Company has tested polyurea polymers as a roof coating and sealant. While the polyurea polymers appear to be an effective roof material, the Company's products must be UL tested before it can be used as a roofing material.</P>
<P>Business Strategy</P>
<P>The Company's strategy is to develop specific formulations of polyurea polymers for application in specific markets. Some of the markets are currently being serviced by polyurethane coatings, and others, such as rail car parts, are not currently using
any coating. In most cases, the Company must invest significant time and money prior to generating significant revenue from a market. </P>
<P>The Company formerly relied upon third parties to purchase and apply the coatings. However, the Company has recently constructed in application facility within its existing warehouse facility, and believes that there is a substantial market for the
application of its products on a value-added basis for others. In fact, the Company has begun coating railroad car parts within its existing facility for Norfolk Southern Railroad.</P>
<P>Competition</P>
<P>At this time, the primary competition for the Company's products is suppliers of coating systems and applications equipment utilizing polyurethane-based polymers. The use of polyurethane coatings and the current methods of its application are
well-established and accepted by both consumers and the industry, many of whom may be indifferent to the benefits offered by the Company's products. There are a number of competitors marketing polyurethane coatings and systems competitive with the
Company's polyurea
<P>The Company's polyurea coatings are distinguishable from its competitors in the following manner:</P>

<UL><DIR>
<DIR>


<UL>
<LI>The Company has the only Class A and Class B fire-rated polyurea coatings. </LI>
<LI>The Company has the only "tack free" cure time in excess of 30 seconds, which allows its coatings to be applied on uneven surfaces to generate a smooth, coated surface.<B><I> </LI></UL>
</DIR>
</DIR>
</UL>

</B></I><P>Trademarks and Patents</P>
<P>The Company has applied for a federal trademark registration for InstaCoat, but its application has not been approved yet. </P>
<P>In addition, the Company has filed five patent applications:</P><DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>

<P>(1)&#9;The Company has applied for a patent for a pallet constructed of wood or any composite material coated with the Company's polyurea coating. This coating seals the pallet material allowing the pallet to be easily cleaned and/or sterilized. In
addition, tests confirm the coated pallet is stronger and therefore requires less frequent repairs.</P>
<P>(2)&#9;The Company has applied for a patent for an exterior siding system that consists of polystyrene foam and/or oriented strand board coated with the Company's polyurea coating or any other polymer coating including polyurethane. In addition, the
polyurea or polymer coating may be itself coated with paint, stucco, synthetic stucco, or other materials.</P>
<P>(3)&#9;The Company has been issued a patent for floatation devices, including those constructed of wood, styrene foam, and other materials coated with the Company's polyurea. These devices include billets for docks, sewage and water treatment pond
aeration floatation devices, and other applications.</P>
<P>(4)&#9;The Company has applied for a patent for the process of waterproofing hardboard siding used in residential and commercial construction by applying the Company's polyurea coating during the manufacturing process. </P>
<P>(5)&#9;The Company has applied for a patent for exterior and/or interior ornamental trim constructed of various materials, including polystyrene foam, coated with the Company's polyurea coating.</P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>

<B><I><P ALIGN="JUSTIFY"><A NAME="_Toc476557808">Employees</A></P>
</B></I><P>The Company currently has 12 full-time and 2 part-time employees. Jerry Phillips has been the President, and founder since inception in September 1997. Donald H. Sigler has been the Chairman of the Board since September 1997. C. Wayne Bean has
served as Vice President in charge Research and Development and Chemist since September 1997. David Brown has served as Vice President of Engineering and Production since September 1997.</P>
<P>Item 2. management's discussion and analysis or Plan of operation </P>
<P>Certain statements in this General Form For Registration Of Securities Of Small Business Issuer on Form 10-SB, particularly under this Item 2, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform
Act of 1995 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future
results
<P>Until the Company is subject to the reporting requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, the Company cannot avail itself of the safe harbor protections of Section 27A of the Securities Act of 1933 or Section
21E of the Securities Exchange Act of 1934 with respect to any forward-looking statements contained herein. </P>
<B><P>Results of Operations for the Year ended December 31, 1999</P>
</B><P>Revenues</P>
<P>For the fiscal year ended December 31, 1999, the Company had net sales of $707,809, as compared to net sales in the fiscal year ended December 31, 1998 of $248,688, an increase of $459,121, or 184%. The Company's increased sales are the result of sales
of the Company's products in a greater number of markets.</P>
<P>Cost of Goods Sold</P>
<P>For the fiscal year ended December 31, 1999, cost of goods sold were $458,982, as compared to cost of goods sold in the fiscal year ended December 31, 1998 of $184,968, an increase of $274,014, or 148%. As a percentage of net sales, cost of goods sold
decreased from 74.3% to 64.8% from 1998 to 1999. Cost of goods sold remained relatively stable as a percentage of net sales as the result of a stable pricing environment for the raw materials that are converted into the Company's products.</P>
<P>Gross Profit</P>
<P>Gross profit for the fiscal year ended December 31, 1999 increased to $248,827 from $63,720 in the fiscal year ended December 31, 1998. As a percentage of sales, gross profit increased to 35.1% in 1999 from 25.6% in 1998. The increase in gross profit
in 1999 was primarily attributable to the decrease in cost of goods sold as described above.</P>
<P>General &amp; Administrative Expenses</P>
<P>For the fiscal year ended December 31, 1999, general and administrative expenses were $853,215, as compared to $486,198 in the fiscal year ended December 31, 1998, an increase $367,017, or 75%. As a percentage of net sales, general and administrative
expenses decreased from 195.5% to 120.05% from 1998 to 1999. The increase in general and administrative expenses was primarily the result of additional expenses incurred by the Company in testing and developing its products for different applications, and
in
<P>Income Taxes</P>
<P>In the fiscal years ended December 31, 1999 and 1998, the Company did not incur any income tax expense as the result of operating losses in both years. </P>
<P>Net Income (Loss)</P>
<P>In the fiscal year ended December 31, 1999, the Company had a net loss of ($695,784), compared to a net loss of ($451,431) in the fiscal year ended December 31, 1998, an increase of $244,353, or 54%. Even though net sales and gross profit increased
significantly in fiscal 1999, the Company's net loss increased as the result of higher general and administrative expenses. </P>
<B><P>Results of Operations for the Nine Months ended September 30, 2000</P>
</B><P>Revenues</P>
<P>For the nine months ended September 30, 2000, the Company had revenues of $431,453, as compared to net sales in the nine months ended September 30, 1999 of $589,995, a decrease of $158,542, or 26.9%. The Company's decreased sales are the result of the
business failure of three customers. The Company believes that it has already replaced the lost sales from sales to new markets, and sales generated by its new application facility, and expects to record its highest revenues for the quarter ended December
3
<P>Cost of Goods Sold</P>
<P>For the nine months ended September 30, 2000, cost of goods sold were $250,353, as compared to cost of goods sold in the nine months ended September 30, 1999 of $390,652, a decrease of $140,299, or 35.9%. As a percentage of revenues, cost of goods sold
decreased from 66.2% in 1999 to 58% in 2000. Cost of goods sold decreased as a percentage of revenues as the result of the Company's negotiation of lower costs of raw materials and the purchase of raw materials in bulk.</P>
<P>Gross Profit</P>
<P>Gross profit for the nine months ended September 30, 2000 decreased to $181,100 from $199,343 in the nine months ended September 30, 1999. As a percentage of revenues, gross profit increased to 42%% in 2000 from 33.8% in 1999. The increase in gross
profit in 2000 was primarily attributable to the decrease in cost of goods sold as described above.</P>
<P>Selling, General &amp; Administrative Expenses</P>
<P>For the nine months ended September 30, 2000, selling, general and administrative expenses were $896,008, as compared to $617,244 in the nine months ended September 30, 1999, an increase of $278,764, or 45%. The increase in general and administrative
expenses was primarily the result of an increase in personnel costs, as the Company doubled the number of full-time employees; rent, as the Company moved to a larger facility; and increased sales expenses, as the Company performed increased testing,
product
<P>Income Taxes</P>
<P>In the nine months ended September 30, 2000 and 1999, the Company did not incur any income tax expense as the result of operating losses in both years. </P>
<P>Net Income (Loss)</P>
<P>In the nine months ended September 30, 2000, the Company had a net loss of $(538,433), compared to a net loss of $(304,553) in the nine months ended September 30, 1999, an increase in losses of $233,880, or 76.7%. The increase in losses were due to
primarily to the increase in selling, general and administrative expenses as a result of an increase in personnel, rent, and sales expenses. </P>
<P>Liquidity and Capital Resources</P>
<P>As of December 31, 1999, the Company had net working capital of ($217,741), compared to net working capital of ($429,763) (unaudited) as of December 31, 1998, an increase of $212,022. The increase in working capital was primarily attributable the
conversion of convertible notes by the holders into shares of the Company's Common Stock, offset by increases in accrued expenses and accounts payable resulting from the Company's operating losses in fiscal 1999.</P>
<P>As of September 30, 2000, the Company had net working capital of $15,090, as compared to net working capital of ($217,741) as of December 31, 1999, an increase of $ 232,831. The increase in working capital was primarily the result of the sale of common
stock during the first quarter in an offering conducted pursuant to Rule 504, offset by the Company's operating losses during the period ended September 30, 2000 and the Company's investment in an application facility. </P>
<P>The Company's operations to date have been concentrated on the development of its coatings and initial marketing expenses, as well as costs associated with the refinement of its business plan. Through 1999, the Company funded its short-term working
capital needs primarily through the issuance of convertible notes in private placements. In each case, investors received a convertible note bearing interest at the rate of ten percent per annum which was convertible into Common Stock at the rate of one
share
<P>As a part of its growth strategy, however, the Company requires greater working capital to fund the costs of product approvals and marketing expenses. If certain marketing initiatives result in orders, the Company projects that it will become
profitable in the first half of fiscal 2001. However, the Company is currently exploring other avenues for additional financing in order to enable the Company to expedite the implementation of its business plan and achieve profitability.</P>
<B><P>Going Concern Qualification</P>
</B><P>The Company's independent auditors have included an explanatory paragraph in their report on the December 31, 1999 financial statements discussing issues which raise substantial doubt about the Company's ability to continue as a "going concern."
The Company anticipates that for the year ending December 31, 2000 there will be a negative cash flow from operations, and that it will need additional capital to enable it to continue operations at its current level past December 31, 2000.</P>
<P>ITEM 3. DESCRIPTION OF PROPERTY.</P>
<P>The Company does not own any property. The Company leases a facility that is 20,000 square feet, of which 6,000 square feet is used as office space and the remaining 14,000 square feet is used as warehouse/manufacturing space. The lease agreement
expires on November 30, 2002, although the Company has an option to renew the lease for an additional two years. The current lease payments are $7,881 per month. The Company believes that it has sufficient space to meet its needs for the foreseeable future.
 </P>
<P>ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.</P>
<P>The following table sets forth certain information, as of October 31, 2000, with respect to the beneficial ownership of the Company's Common Stock by all officers and directors and by each person known to the Company to be the beneficial owner of more
than five percent (5%) of any class of the Company's voting securities.</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=589>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P ALIGN="CENTER">Name and Address of Beneficial Owner</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">Amount of Beneficial Ownership</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">Percent of Class (1)</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P>Greyfield Consultants, Inc. (2)</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">1,456,875</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">17.4%</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Jerry S. Phillips (3)</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">1,250,000</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">18</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Donald Sigler (4)</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">1,250,000</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">18</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Wayne Bean (5)</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">1,250,000</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">18</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P ALIGN="JUSTIFY">David Brown </TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">1,250,000</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">18</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P>John C. Thomas, Jr. (6)</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">250,000</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">3.6</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P>Osman Altikulac</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">362,500</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">5</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P>All Officers and Directors as a Group</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER">5,250,000</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">75.8</TD>
</TR>
</TABLE>

<P>(1) Based on 6,929,001 shares of Common Stock issued and outstanding. In addition, the Company has 2,300,000 shares of Preferred Stock issued and outstanding, each of which is convertible at any time into one share of Common Stock. </P>
<P>(2) Includes 1,306,875 shares of Preferred Stock held by Greyfield Consultants, Inc. and 150,000 shares of Preferred Stock held by Edison Holdings, Inc., which is owned by the shareholders of Greyfield Consultants, Inc. </P>
<P>(3) Includes 875,000 shares of Common Stock owned by Mr. Phillips and 375,000 shares of Common Stock owned by the Phillips Family Limited Liability Company.</P>
<P>(4) Includes 750,000 shares of Common Stock owned by Mr. Sigler and 500,000 shares of Common Stock owned by the Sigler Family Limited Company.</P>
<P>(5) Includes 937,500 shares of Common Stock owned by Mr. Bean and 312,500 shares owned by the Bean Family Limited Liability Company. The share totals from Mr. Bean do not include 25,000 shares held by other relatives of Mr. Bean who acquired their
shares as the result of conversion of notes issued by the Company in one or more private placements. </P>
<P>(6) Includes 125,000 shares of Common Stock owned by Mr. Thomas and 125,000 shares of Common Stock owned by John C. Thomas, Jr. IRA.</P>
<P>Messrs. Sigler, Phillips, Bean, Brown and Thomas are the founding shareholders of the Company. Messrs. Sigler, Phillips, Bean and Brown each acquired 625,000 shares of Common Stock in 1997 for $0.002 per share. At the same time, Mr. Thomas acquired
275,000 shares of our Common Stock for $0.002 per share. Mr. Thomas subsequently transferred 25,000 shares to third parties.</P>
<P>In July 1998, the Company executed employment agreements with Messrs. Sigler, Phillips, Bean and Brown, and also issued each person a warrant to purchase an additional 625,000 shares of Common Stock for $0.002 per share. Messrs. Sigler, Phillips, Bean
and Brown each exercised his warrant in full in 1999. </P>
<P>On February 4, 2000, the Company effected a one for two reverse split of its Common Stock. All share amounts herein are after giving effect to the reverse split. </P>
<P>ITEM 5. DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS</P>
<P>Listed below are the directors and executive officers of the Company.</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="CENTER"><U>Name</U></TD>
<TD WIDTH="13%" VALIGN="TOP">
<U><P ALIGN="CENTER">Age</U></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><P ALIGN="CENTER">First Year as Director</U></TD>
<TD WIDTH="36%" VALIGN="TOP">
<U><P ALIGN="CENTER">Position</U></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Jerry Phillips</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="CENTER">53</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="CENTER">1997</TD>
<TD WIDTH="36%" VALIGN="TOP">
<P>President and Director</TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Donald H. Sigler, Jr.</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="CENTER">54</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="CENTER">1997</TD>
<TD WIDTH="36%" VALIGN="TOP">
<P>Chairman of the Board</TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="JUSTIFY">C. Wayne Bean</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="CENTER">42</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="CENTER">1997</TD>
<TD WIDTH="36%" VALIGN="TOP">
<P>Vice President of Research &amp; Development, Chemist, and Director</TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="JUSTIFY">David Brown</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="CENTER">33</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="CENTER">1997</TD>
<TD WIDTH="36%" VALIGN="TOP">
<P>Vice President of Engineering &amp; Development and Director</TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<P ALIGN="JUSTIFY">John C. Thomas, Jr.</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P ALIGN="CENTER">46</TD>
<TD WIDTH="20%" VALIGN="TOP">
<P ALIGN="CENTER">1997</TD>
<TD WIDTH="36%" VALIGN="TOP">
<P>Director</TD>
</TR>
</TABLE>

<P>The term of office of each director of the Company ends at the next annual meeting of the Company's stockholders or when such director's successor is elected and qualifies. No date for the next annual meeting of stockholders is specified in the
Company's bylaws or has been fixed by the Board of Directors. The term of office of each officer of the Company ends at the next annual meeting of the Company's Board of Directors, expected to take place immediately after the next annual meeting of
stockholders, o
<P>Directors are entitled to reimbursement for expenses in attending meetings but receive no other compensation for services as directors. Directors who are employees may receive compensation for services other than as director. No compensation was paid
during the fiscal years ended December 31, 1999 and 1998 to directors for services in their capacity as director.</P>
<P>The following information sets forth the backgrounds and business experience of the directors and executive officers.</P>
<P>Jerry Phillips joined the Company at its inception in 1997. From 1983 to January 1993, Mr. Phillips was the founder and Chairman of North American E &amp; S Brokers, Inc., a firm specializing in financial guarantees for asset backed lenders. From
January 1993 to August 1997, Mr. Phillips were Senior Vice President of EPG, Inc., a firm specializing in financial guarantees and extended warranties through international insurers. Mr. Phillips is a cum laude graduate of the University of Memphis, with
a Bache
<P>Donald H. Sigler, Jr. joined the Company at its inception in 1997. From 1986 to 1997, Mr. Sigler was the founder and Chairman of Credit Depot Corporation, (NASDAQ: "LEND"), a publicly traded company, which engaged in the subprime mortgage finance
business. From 1980 to 1987, Mr. Sigler served as Vice President of Gulf States Mortgage Corporation, a national mortgage lender based in Atlanta, Georgia, until its sale to the Royal Bank of Scotland in 1987. Mr. Sigler is a graduate of the Georgia
Institute of
<P>C. Wayne Bean joined the Company at its inception in 1997. From 1989 to August 1997, Mr. Bean served as a Manager of the Polyurea Coatings Division and Senior Chemist for Flexible Products Company. From 1984 to 1989, Mr. Bean served as the Senior
Chemist for Imperial Coatings, Inc. Mr. Bean has a Bachelor of Science degree in Chemistry from the University of Georgia, 1981.</P>
<P>David Brown joined the Company at its inception in 1997. From December 1995 to August 1997, Mr. Brown was a sales manager for the Polyurea Coatings Division of Flexible Products Company. Mr. Brown attended Roane State Community College in Oak Ridge,
Tennessee, where he majored in Mechanical Engineering.</P>
<P>John C. Thomas, Jr. joined the Company at its inception in 1997. Mr. Thomas serves as part-time Chief Financial Officer of several start-up entities including Surgi-Vision, Inc., a privately held development-stage company formed around magnetic
resonance imaging technology developed at Johns Hopkins, and has been the Chief Financial Officer of Biomechanics, Inc. since 1992 and the various entities that have been formed utilizing biomechanics technology. Mr. Thomas has also served as Chief
Financial Offic
<P>The Company is actively searching for additional directors who have credentials, experience, and contacts, which will assist us in the fulfillment of our business plan. The Company currently does not have an audit or compensation committee, but
anticipates forming such committees once it has appointed more outside directors.</P>
<P>ITEM 6. EXECUTIVE COMPENSATION.</P>
<P>The following table sets forth the compensation earned by the Company's Chief Executive Officers during the last three fiscal years and other officers who received compensation in excess of $100,000 during any of the last three fiscal years. </P>
<P ALIGN="CENTER">Summary Compensation Table</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=637>
<TR><TD WIDTH="30%" VALIGN="TOP">
<P>Name</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="CENTER">Position</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER">Years</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">Aggregate Compensation</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Jerry Phillips (1)</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P>President and Director</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER">2000 </P>
<P ALIGN="CENTER">1999</P>
<P ALIGN="CENTER">1998</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">$80,000</P>
<P ALIGN="CENTER">$80,000</P>
<P ALIGN="CENTER">--</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Donald H. Sigler, Jr. (1)(2)</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P>Chairman of the Board</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER">2000</P>
<P ALIGN="CENTER">1999</P>
<P ALIGN="CENTER">1998</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">$70,000</P>
<P ALIGN="CENTER">--</P>
<P ALIGN="CENTER">--</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<P ALIGN="JUSTIFY">C. Wayne Bean</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P>Vice President of Research &amp; Development, Chemist, and Director</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER">2000</P>
<P ALIGN="CENTER">1999</P>
<P ALIGN="CENTER">1998</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">$80,000</P>
<P ALIGN="CENTER">$80,000</P>
<P ALIGN="CENTER">--</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<P ALIGN="JUSTIFY">David Brown</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P>Vice President of Engineering &amp; Development and Director</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER">2000</P>
<P ALIGN="CENTER">1999</P>
<P ALIGN="CENTER">1998</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">$80,000</P>
<P ALIGN="CENTER">$70,000</P>
<P ALIGN="CENTER">--</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<P ALIGN="JUSTIFY">John C. Thomas, Jr.</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Director</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER">2000</P>
<P ALIGN="CENTER">1999</P>
<P ALIGN="CENTER">1998</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P ALIGN="CENTER">--</P>
<P ALIGN="CENTER">--</P>
<P ALIGN="CENTER">--</TD>
</TR>
</TABLE>

<P>(1) Messrs. Phillips and Sigler are each entitled to a non-accountable expense allowance of $20,000 per year. </P>
<P>(2) Mr. Sigler and the Company have entered into an employment agreement dated June 1, 1998, under which Mr. Sigler is entitled to compensation of $70,000 per year. By agreement between Mr. Sigler and Company, Mr. Sigler did not begin receiving his
compensation until July 1, 2000. </P>
<P>In accordance with Item 402 of Regulation S-B of the Securities and Exchange Commission, certain columns of the table required by Item 402(b) of Regulation S-B have been omitted where there has been no compensation paid or awarded to any of the named
executives in any fiscal year covered by the table. </P>
<P>On July 1, 1998, the Company granted the following options to purchase shares of Common Stock to Messrs. Phillips, Sigler, Bean and Brown: </P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=474>
<TR><TD WIDTH="37%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Name</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">Number of Options</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">Exercise Price</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Jerry S. Phillips </TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">625,000</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">$0.002</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Donald Sigler</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">625,000</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">$0.002</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Wayne Bean</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">625,000</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">$0.002</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<P ALIGN="JUSTIFY">David Brown</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">625,000</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P ALIGN="CENTER">$0.002</TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER">&nbsp;</P>
<P>All of the above options were exercised during the fiscal year ended December 31, 1999. All option amounts are after giving effect to a one for two reverse split of the Company's Common Stock effected on February 4, 2000.</P>
<P>ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</P>
<P>None of the Company's officers, directors, key personnel or principal stockholders is related by blood or marriage.</P>
<P>The Company has loaned three employees a total of $60,000 pursuant to notes which bear interest at the rate of 10% per annum, and are due and payable on June 30, 2001. As of June 30, 2000, the amount outstanding under the loans was: </P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD WIDTH="33%" VALIGN="TOP">
<P ALIGN="CENTER"><U>Employee</U></TD>
<TD WIDTH="33%" VALIGN="TOP">
<U><P ALIGN="CENTER">Due Date</U></TD>
<TD WIDTH="33%" VALIGN="TOP">
<U><P ALIGN="CENTER">Total Due</U></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<P>Jerry S. Phillips</TD>
<TD WIDTH="33%" VALIGN="TOP">
<P ALIGN="CENTER">June 30, 2001</TD>
<TD WIDTH="33%" VALIGN="TOP">
<P ALIGN="CENTER">$23,823.30</TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<P>David W. Brown</TD>
<TD WIDTH="33%" VALIGN="TOP">
<P ALIGN="CENTER">June 30, 2001</TD>
<TD WIDTH="33%" VALIGN="TOP">
<P ALIGN="CENTER">$32,231.50</TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<P>Clinton W. Bean</TD>
<TD WIDTH="33%" VALIGN="TOP">
<P ALIGN="CENTER">June 30, 2001</TD>
<TD WIDTH="33%" VALIGN="TOP">
<P ALIGN="CENTER">$11,210.95</TD>
</TR>
</TABLE>

<P>ITEM 8. DESCRIPTION OF SECURITIES.</P>
<P>General</P>
<P>Under the Company's Articles of Incorporation, the Company is we are authorized to issue 15,000,000 shares of common stock, no par value, of which 6,929,001 shares are issued and outstanding, and 5,000,000 shares of preferred stock, par value $0.01 per
share, of which 2,300,000 shares are issued and outstanding. </P>
<P>Common Stock</P>
<P>The holders of shares of common stock are entitled to dividends when and as declared by the Board of Directors from funds legally available therefore and, upon liquidation, are entitled to share pro rata in any distribution to common shareholders.
Holders of the common stock have one non-cumulative vote for each share held. There are no preemptive, conversion or redemption privileges, nor sinking fund provisions, with respect to the common stock. All of the Company's outstanding shares of common
stock ar
<P>Preferred Stock </P>
<P>The Company is authorized to issue up to 5,000,000 shares of preferred stock containing such rights, privileges and limitations that the Board of Directors may determine. The Board of Directors has authorized the issuance of one series of preferred
stock, of which 2,300,000 shares are issued and outstanding. Each of share of such series is convertible into one share of common stock, is not entitled to receive any dividends, has no preemptive rights, and is entitled to a liquidation preference of
$0.01 pe
<U><P ALIGN="CENTER">PART II</P><DIR>
<DIR>

</U><P>ITEM I. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.</P></DIR>
</DIR>

<P>The Company's common stock is not registered with the United States Securities and Exchange Commission under Section 12(g) of the Securities Exchange Act of 1934. Since August 2, 2000, the Company's common stock has been traded on the Pink Sheets,
operated by Pink Sheets, LLC, under the symbol "IVGC". The following table summarizes the low and high prices for the Company's common stock for each of the calendar quarters prior to the filing of this registration statement.</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=366>
<TR><TD WIDTH="46%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="54%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">2000</TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="28%" VALIGN="TOP">
<U><P ALIGN="CENTER">High</U></TD>
<TD WIDTH="26%" VALIGN="TOP">
<U><P ALIGN="CENTER">Low</U></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP">
<P>First Quarter</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="CENTER">--</TD>
<TD WIDTH="26%" VALIGN="TOP">
<P ALIGN="CENTER">--</TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP">
<P>Second Quarter</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="CENTER">--</TD>
<TD WIDTH="26%" VALIGN="TOP">
<P ALIGN="CENTER">--</TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP">
<P>Third Quarter</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="CENTER">4.00</TD>
<TD WIDTH="26%" VALIGN="TOP">
<P ALIGN="CENTER">1.063</TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP">
<P>Fourth Quarter (to date)</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="CENTER">2.250</TD>
<TD WIDTH="26%" VALIGN="TOP">
<P ALIGN="CENTER">1.10</TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER">&nbsp;</P>
<P>There were 151 holders of record of the common stock as of December 4, 2000. This number does not include an indeterminate number of shareholders whose shares are held by brokers in "street name." The above quotations reflect inter-dealer prices,
without mark-up, mark-down or commission and may not represent actual transactions. The Company has not declared any cash dividends on its Common Stock during its fiscal years ended on December 31, 1999 or 1998. The Board of Directors of the Company has
made no
<P>ITEM 2. LEGAL PROCEEDINGS.</P>
<P>The Company is not a party to any pending litigation or government investigation, nor is there any threatened litigation, or investigation, involving the Company or its business or assets of which management is aware.</P>
<P>ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.</P>
<P>Not applicable.</P>
<P>ITEM 4.RECENT SALES OF UNREGISTERED SECURITIES.</P>
<U><P>Shares Issued on Formation</P>
</U><P>At or about the time of the Company's formation in 1997, the Company issued shares of its common stock for nominal consideration to the following persons involved in the formation in reliance on the exemption from registration provided by Section
4(2) of the Securities Act of 1933 ("Section 4(2)"):</P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=626>
<TR><TD WIDTH="43%" VALIGN="TOP" HEIGHT=19>
<P><U>Name of Purchaser</U></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=19>
<U><P ALIGN="CENTER">Date of Purchase</U></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=19>
<U><P ALIGN="CENTER">No. of Shares</U></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=19>
<U><P ALIGN="CENTER">Amount Invested</U></TD>
</TR>
<TR><TD WIDTH="43%" VALIGN="BOTTOM" HEIGHT=19>
<P>Robert &amp; Elizabeth Whitmer</TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">9/30/97</TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$50</TD>
</TR>
<TR><TD WIDTH="43%" VALIGN="BOTTOM" HEIGHT=19>
<P>Katherine &amp; Vic Workman</TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">9/30/97</TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">10,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$200</TD>
</TR>
<TR><TD WIDTH="43%" VALIGN="BOTTOM" HEIGHT=19>
<P>Donald H. Sigler</TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">9/30/97</TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">625,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$1,250</TD>
</TR>
<TR><TD WIDTH="43%" VALIGN="BOTTOM" HEIGHT=19>
<P>Jerry S. Phillips </TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">9/30/97</TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">625,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$1,250</TD>
</TR>
<TR><TD WIDTH="43%" VALIGN="BOTTOM" HEIGHT=19>
<P>Wayne Bean</TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">9/30/97</TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">625,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$1,250</TD>
</TR>
<TR><TD WIDTH="43%" VALIGN="BOTTOM" HEIGHT=19>
<P>David Brown</TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">9/30/97</TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">625,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$1,250</TD>
</TR>
<TR><TD WIDTH="43%" VALIGN="BOTTOM" HEIGHT=19>
<P>John C. Thomas, Jr.</TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">9/30/97</TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">275,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$550</TD>
</TR>
</TABLE>

<U><P>Convertible Note Offering</P>
</U><P>Within the last three years, the Company sold convertible promissory notes and warrants to certain investors in unregistered transactions (the "Convertible Note Offering"). Each promissory note bore interest at 10% per annum, matured one year after
the date of issuance, and the principal and interest due thereunder was convertible into common stock at the rate of one share of common stock for each $2 of indebtedness. Each purchaser of a convertible note also received a warrant to purchase one share o
<TABLE CELLSPACING=0 BORDER=0 WIDTH=552>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P><U>Note Purchaser</U></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<U><P ALIGN="CENTER">Date</U></TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<U><P ALIGN="CENTER">Original Principal Amount </U></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Poe, James</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">6/3/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$75,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Witkin, Eugene N.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">6/6/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$50,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Wolbe, Daniel H.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">6/6/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$50,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Shields, Kevin A.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">6/6/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Cross, Steven R.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">6/12/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$50,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Havrilla, John L.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">6/12/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Havrilla, Edward J.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">6/16/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Carroll, Robert E.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">6/29/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Havrilla, Edward J.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">7/3/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$50,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Bean, John P.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">7/12/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Workman, Victor &amp; Catherine</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">7/15/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Staufer, Hermann</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">8/6/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Bean, Steve A.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">8/11/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$5,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Bean, Steve A.</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">8/11/98</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$20,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Staufer, Hermann</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">3/23/99</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$100,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<P>Poe, James</TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">4/5/99</TD>
<TD WIDTH="27%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="RIGHT">$50,000.00 </TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Sam Pierce</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">4/8/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Art Glaser</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">4/8/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$75,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>James McIntyre</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">4/8/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Daniel Grzeskowiak</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">5/28/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Daniel Grzeskowiak</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">5/31/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$7,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>D. Mark Mosher</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">5/31/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$2,500.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Diane P. &amp; Pierre Belanger</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">5/31/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$8,500.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Massimiliano &amp; Gail Carone</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">5/31/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$50,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Steven A. Bean</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">5/31/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$7,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Steven K. Craig</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">6/29/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$5,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Catherine Swearingen</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">6/29/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$10,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Linda J. Vore</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">6/29/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$10,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Bobby J. Peaks</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">7/15/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Ray Moses</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">7/15/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$50,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Ronald &amp; Annette Harlow</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">7/23/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Russell Friedman</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">9/16/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$25,000.00</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Andrea-Lee Friedman</TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">9/16/99</TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<U><P ALIGN="RIGHT">$25,000.00</U></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=17>
<P>Total: </TD>
<TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="27%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="RIGHT">$1,025,000</TD>
</TR>
</TABLE>

<U><P>Shares issued upon Conversion of Warrants</P>
</U><P>In reliance on Rule 701, the Company issued shares of its common stock upon the conversion of warrants issued to employees, directors and consultants in the following transactions:</P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=576>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER"><U>Stockholder</U></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<U><P ALIGN="CENTER">Date Issued</U></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<U><P ALIGN="CENTER">Amount Paid </U></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<U><P ALIGN="CENTER">Shares</U></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=17>
<P>Jerry S. Phillips</TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">12/31/99</TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">$1,250</TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">625,000</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=17>
<P>Donald H. Sigler</TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">12/31/99</TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">$1,250</TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">625,000</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=17>
<P>C. Wayne Bean</TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">12/31/99</TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">$1,250</TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">625,000</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=17>
<P>David W. Brown</TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">12/31/99</TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">$1,250</TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">625,000</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=17>
<P>Barry Beamish</TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">12/31/99</TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">$500</TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">25,000</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=17>
<P>John Shepherd</TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">12/31/99</TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">$250</TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">12,500</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=17>
<P>Michael Havrilla</TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">12/31/99</TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">$2,500</TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">125,000</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=17>
<P>Larry Carter</TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<P ALIGN="CENTER">12/31/99</TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">$500</TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">25,000</TD>
</TR>
</TABLE>

<U><P>Shares issued upon Conversion of Notes and Exercise of Warrants </P>
</U><P>On December 31, 1999, the Company issued shares of its Common Stock in the following transactions as a result of the conversion of notes and the exercise of warrants issued in the Convertible Note Offering. The number of shares issued equals in the
amount principle and interest due under the convertible note at the time of conversion, plus the number of shares issuable upon exercise of the warrant (except that those investors with an asterisk by their name paid the exercise price under the warrant by
<TABLE CELLSPACING=0 BORDER=0 WIDTH=414>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P><U>Name</U></TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<U><P ALIGN="CENTER">No. of Shares</U></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>James &amp; Laura Poe</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">132,767</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Steven &amp; Elaine Cross</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">53,884</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>John &amp; Donna Havrilla</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">26,942</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Edward J. Havrilla</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">80,668</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Daniel H. Wolbe*</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">53,675</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Kevin A. Shields*</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">26,837</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>John &amp; Lois Bean</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">26,839</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Steven A. Bean* </TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">23,764</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Robert E. Carroll*</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">14,259</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Herman Stauffer*</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">130,005</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>James McIntyre</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">13,414</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Daniel Grzeskowiak</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">25,743</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Daniel Grzeskowiak</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">7,205</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>D. Mark Mosher</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">2,573</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM" HEIGHT=17>
<P>Diane P. &amp; Blair Belanger</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">8,749</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM" HEIGHT=17>
<P>Massimiliano &amp; Gail Carone</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">51,466</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Steven K. Craig</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">5,127</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Bobby J. Peaks</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">25,579</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Russell Friedman</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">25,363</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Andrea-Lee Friedman</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">25,363</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Ronald &amp; Annette Harlow</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">25,551</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Steven A. Bean</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">7,170</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Sam Pierce*</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">24,875</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Art Glaser*</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">77,368</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Ray Moses*</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">50,908</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Catherine Swearingen</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">10,253</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="TOP" HEIGHT=17>
<P>Linda J. Vore</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<U><P ALIGN="CENTER">10,253</U></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM" HEIGHT=17>
<P>Totals</TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">966,600</TD>
</TR>
</TABLE>

<P>In addition, on December 31, 1999, the Company issued shares of common stock upon exercise of warrants to two investors who elected not to convert their notes into common stock: </P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=516>
<TR><TD WIDTH="66%" VALIGN="BOTTOM" HEIGHT=17>
<P><U>Name</U></TD>
<TD WIDTH="34%" VALIGN="TOP" HEIGHT=17>
<U><P ALIGN="CENTER">No. of Shares</U></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="BOTTOM" HEIGHT=17>
<P>Katherine &amp; Vic Workman</TD>
<TD WIDTH="34%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">12,500</TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=17>
<P>Eugene N. Witkin</TD>
<TD WIDTH="34%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="CENTER">25,000</TD>
</TR>
</TABLE>

<P>The shares issued upon conversion of notes and the exercise of warrants issued in the Convertible Note Offering were issued in reliance on Section 4(2). </P>
<U><P>2000 Convertible Note Offering</P>
</U><P>In January 2000, the Company issued promissory notes to three individuals for a total of $121,000 in reliance on Section 4(2). Each note bears interest at the rate of 10% per annum, and is due and payable in one year. The principal amount due
thereunder is convertible into 2.5 shares of common stock for each $1.00 of indebtedness, and any interest due thereunder is convertible into one share of common stock for each $1.00 of interest owed. The three individuals who purchased notes were:</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=463>
<TR><TD WIDTH="72%" VALIGN="TOP">
<P><U>Name</U></TD>
<TD WIDTH="28%" VALIGN="TOP">
<U><P ALIGN="CENTER">Amount</U></TD>
</TR>
<TR><TD WIDTH="72%" VALIGN="TOP">
<P>Mark A. Porter</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="RIGHT">$75,000</TD>
</TR>
<TR><TD WIDTH="72%" VALIGN="TOP">
<P>Buford Salmon</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="RIGHT">$21,000</TD>
</TR>
<TR><TD WIDTH="72%" VALIGN="TOP">
<P>Steven Mills</TD>
<TD WIDTH="28%" VALIGN="TOP">
<P ALIGN="RIGHT">$25,000</TD>
</TR>
</TABLE>

<P>In April 2000, Mr. Salmon and Mr. Mills converted their notes, including $1,724 of interest, into 116,724 shares of common stock.</P>
<U><P>Rule 504 Offering</P>
</U><P>During February and March 2000, the Company sold 425,000 shares of its common stock in an offering conducted pursuant to Rule 504(b)(1)(iii) at $2.00 per share. The Company filed a Form D with the Securities and Exchange Commission and utilized
offering materials that had been approved by the Georgia Securities Commission pursuant to O.C.G.A. Section 10-5-5(e). Set for the below are the investors in the offering:</P>
<TABLE CELLSPACING=0 BORDER=0 WIDTH=577>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=19>
<P><U>Name of Purchaser</U></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=19>
<U><P ALIGN="CENTER">Date of Sale</U></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=19>
<U><P ALIGN="CENTER">No. of Shares</U></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=19>
<U><P ALIGN="CENTER">Amount Invested</U></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>McAdoo, Carol Young</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">324/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">1,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$3,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Meyer, Stuart &amp; Denise</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">2/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Boland, William F</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/7/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Lantham, William F</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/10/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">1,250</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$2,500</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Gage, Richard Allen</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/13/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Mandel, Larry</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/13/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Werksman, Alan J</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/13/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">10,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$20,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Wolf, M.D.</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/13/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">5,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$10,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Wolf, Roger</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/13/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Albertini, Anthony</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/14/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">3,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$7,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Disney, Ronald W &amp; Jeannine V</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/14/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">5,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$10,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Mottern, Robert</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/14/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">12,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$25,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Gadberry,Donald</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/15/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$4,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Gadberry,Patricia A</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/15/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">1,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$2,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Mills, Steven</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/15/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">9,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$19,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Norton, Gene</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/15/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Bobby, Steve</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/16/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">1,250</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$2,500</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Lee, Ginny &amp; Supan, David</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/16/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">7,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$15,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Sapp, David</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/16/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Saunders, James</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/16/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">3,750</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$7,500</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Wesley, Mark</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/16/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Willis, Karon</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/16/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Hartsfield, Jeff</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/17/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Nalls, Thomas</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/17/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Sims, John S</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/17/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Weaver,Billy</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/17/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Dion, Sedef S.</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/20/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">17,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$35,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Kaufman, Richard</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/20/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">10,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$20,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Lyell, Nathan</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/20/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">1,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$3,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Young, Steven G</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/20/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">50,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$100,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Anderson, Robert G.</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/21/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Altikulac, Can</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/22/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">7,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$15,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Corneli, Glenda</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/22/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">12,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$25,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Prentis, John</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/22/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Solomonic, Robert</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/22/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">5,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$10,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Varney, Michael</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/22/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">3,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$6,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Wheeler, Mark</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/22/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Wood, M.A.E.E.</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/22/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">7,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$14,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Bishop, Bruce</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/23/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">5,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$10,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Cooley, Joseph &amp; Joyce</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/23/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Holloway, Theodore &amp; Revonda</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/23/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">6,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$12,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Mathis, Donald &amp; Sheri</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/23/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">25,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$50,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Smallwood, James </TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/23/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">3,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$7,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>ACI Investments LTD</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">20,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$40,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Banks, H. Rodney</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$4,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Baxter, Peter</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">20,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$40,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Cagle, Pattie &amp; Robert</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">7,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$15,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Ellis, Ernest</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">1,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$2,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Menter, Beverly J</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">3,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$6,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Menter, Gerald Alan</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">20,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$40,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Menter, Gerald Alan</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/24/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">20,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$40,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Barfield, James T.</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/27/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Bell, Keith</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/27/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Kavanaugh, Tammy</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/27/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">14,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$29,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Mills, Harris</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/27/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Kirkland, Kim Andrew Cameron</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/28/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">5,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$10,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Shiver, Ann M</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/28/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">3,750</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$7,500</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Beamish, Barry </TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/29/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">9,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$19,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Hughs, Sarah</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/29/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">4,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$8,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Johnson, Andrew Leonard</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/29/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Lamas, Jane</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/29/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">7,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$15,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Bell, G. F.</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/30/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Butler, Daniel Mark</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/30/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Hardwick , Lucy</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/30/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Sabine, Particia A</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/30/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">2,500</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Wilkinson, Neal S</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/30/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">4,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$8,000</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Unland, Robert</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="CENTER">3/31/00</TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<U><P ALIGN="RIGHT">3,500</U></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<U><P ALIGN="RIGHT">$7,000</U></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM" HEIGHT=19>
<P>Total:</TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=19><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">425,000</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=19>
<P ALIGN="RIGHT">$850,000</TD>
</TR>
</TABLE>

<U><P>Issuance of Preferred Stock</P>
</U><P>On July 1, 1999, the Company issued 2,300,000 shares of its Preferred Stock to Michael D. Dion for services rendered pursuant to Section 4(2) and Rule 701. The services and the stock issued in payment thereof were valued at $0.01 per share, or
$46,000, which was the par value of the Preferred Stock, and the price of the most recent sales of common stock.</P>
<U><P>Offering under Rule 506</P>
</U><P>During August and September 2000, the Company sold 34,900 shares of its common stock in a private offering under Rule 506 at $2.00 per share, for a total of $69,800. With respect to the offering, the Company filed a Form D with the Securities and
Exchange Commission, utilized a private placement memorandum which contained substantially the same information as this Form 10-SB, and obtained representations from each investor that he/she was suitable to purchase shares of Common Stock in the
offering. A
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=625>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P><U>Name of Purchaser</U></TD>
<TD WIDTH="18%" VALIGN="TOP">
<U><P ALIGN="CENTER">Date of Sale</U></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="CENTER">No. of Shares</U></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="CENTER">Amount Invested</U></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Helen M. Spryn</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">8/1/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">5,000</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$10,000</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Nanon and Melinda Sonnett</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">8/1/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">2,500</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">5,000</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Theresa L. Stabura</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">8/1/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">5,000</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">10,000</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Fred Friesen</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">8/2/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">2,500</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">5,000</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Carole S. Frasure</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">8/4/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">2,600</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">5,200</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Linda J. Vore</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">8/9/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">3,300</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">6,600</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Catherine Swearingen</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">8/9/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">2,500</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">5,000</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Malcolm L. Cox</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">8/12/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">4,000</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">8,000</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Harold C. Grzeskowiak</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">9/7/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">2,500</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">5,000</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Daniel M. Grzeskowiak</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">9/8/00</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="CENTER">5,000</U></TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">10,000</U></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>Totals: </TD>
<TD WIDTH="18%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="CENTER">34,900</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$69,800</TD>
</TR>
</TABLE>

<P>All share amounts herein have been adjusted to give effect to a one for two reverse stock split effected by the Company on February 4, 2000.</P>
<P>Item 5. indemnification of directors and officers.</P>
<P>The Company' s Articles of Incorporation and Bylaws do not contain any provision that limits the personal liability of directors to the Company and its stockholders.</P>
<P>The Company Bylaws provide that the Company's officers, directors, employees and agents are entitled to indemnification from the Company for any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that the person was or is a director, officer, employee or agent of the Company or served in another enterprise at the request of the Company, provided that the person indemnified acted in good faith and in a manner
which he
<P>The Company believes that the indemnification provisions of its Bylaws covers at least negligence and gross negligence by such directors and officers, and requires the Company to advance litigation expenses in case of actions, including shareholder
derivative actions, against an undertaking by the officer or director to repay such advances if it is ultimately determined that the officer or director is not entitled to indemnification. These provisions do not affect a director's responsibilities under
any
<P>Insofar as indemnification for liabilities under the 1933 Act may be permitted to directors, officers or persons controlling the Company, we has been informed that in the opinion of the Securities an Exchange Commission, such indemnification is against
public policy as expressed in the 1933 Act and unenforceable.</P>
<P>At the present, there is no pending litigation or proceeding involving a director or officer of the Company as to which indemnification is being sought nor are aware of any threatened litigation that may result in claims for indemnification by any
officer or director. The Company does not currently maintain directors and officers liability insurance.</P>
<U><P ALIGN="CENTER">PART F/S</P>
</U><P>Audited financial statements for the fiscal years December 31, 1999 and 1998 are located at Exhibit A herein.</P>
<P>Unaudited financial statements for the nine months ended September 30, 2000 are located at Exhibit B herein.</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">EXIHIBIT A</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">TABLE OF CONTENTS</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=589>
<TR><TD VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Independent Auditors' Report</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Balance Sheet as of December 1999 </TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Statements of Operations for Year Ended December 1999 and 1998</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Statements of Shareholders' Equity (Deficit) for Year Ended December 1999 and 1998</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Statements of Cash Flows for Year Ended December 1999 and 1998</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Notes to Financial Statements for Year Ended December 1999 and 1998</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INDEPENDENT AUDITORS' REPORT</P>
<P ALIGN="JUSTIFY">To the Shareholders</P>
<P ALIGN="JUSTIFY">Innovative Coatings Corporation</P>
<P ALIGN="JUSTIFY">Kennesaw, Georgia</P>
<P ALIGN="JUSTIFY">We have audited the accompanying balance sheet of Innovative Coatings Corporation as of December 31, 1999, and the related statements of operations, shareholders' equity (deficit), and cash flows for the years ended December 31, 1999
and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.</P>
<P ALIGN="JUSTIFY">We conducted our audits 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 eva
<P ALIGN="JUSTIFY">In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Innovative Coatings Corporation as of December&nbsp;31, 1999, and the results of its operations and its cash
flows for the years ended December 31, 1999 and 1998 in conformity with generally accepted accounting principles.</P>
<P ALIGN="JUSTIFY">The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note G of the financial statements, the Company has had losses in operations since its inception and
had a net capital deficiency at December&nbsp;31, 1999 and 1998, which raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note G. The financial statements do not
include a
<P ALIGN="JUSTIFY">/s/ Tauber &amp; Balser, P.C.</P>
<P ALIGN="JUSTIFY">Atlanta, Georgia</P>
<P ALIGN="JUSTIFY">May 15, 2000</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">BALANCE SHEET</P>
<P ALIGN="CENTER">DECEMBER 31, 1999</P>
<P ALIGN="CENTER">&nbsp;</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=607>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&nbsp;ASSETS</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Current Assets</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Cash</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$23,243</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Accounts receivable, net of allowance of $73,352</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">28,726</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Inventories</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">74,192</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Deposits</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">14,137</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Employee advances</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">16,275</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Other</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">3,680</U></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Total Current Assets</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">160,253</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Property and Equipment</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Equipment</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">66,818</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Furniture and fixtures</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">15,179</U></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">81,997</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Less accumulated depreciation</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">14,023</U></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">67,974</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">TOTAL ASSETS</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$228,227</U></TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">&nbsp;</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=606>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="CENTER">LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Current Liabilities</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Notes payable</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">$106,638</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Accounts payable</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">142,048</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Accrued expenses</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">37,112</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Payroll taxes payable</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">82,518</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Interest payable</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">9,678</U></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Total Current Liabilities</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">377,994</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Shareholders' Equity (Deficit)</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Preferred stock, no par value; 5,000,000 shares authorized, 4,600,000 shares outstanding</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">46,000</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Common stock, no par value; 15,000,000 shares authorized, 12,938,201 shares outstanding</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">1,007,756</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Accumulated deficit</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(1,203,523)</U></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Total Shareholders' Equity (Deficit)</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P ALIGN="RIGHT">(146,767)</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;&#9;TOTAL LIABILITIES AND SHAREHOLDERS' </TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;&#9;EQUITY (DEFICIT)&#9;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$228,227</U></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<P ALIGN="CENTER">The accompanying notes are an integral part of these financial statements.</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">STATEMENTS OF OPERATIONS</P>
<P ALIGN="CENTER">YEARS ENDED DECEMBER 31, 1999 AND 1998</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER">1999</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="CENTER">1998</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Revenues</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 707,809</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 248,688</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Expenses</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Cost of goods sold</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">458,982</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">184,968</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Selling, general and administrative</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">853,215</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">486,198</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Interest expense</TD>
<TD WIDTH="18%" VALIGN="TOP">
<U><P ALIGN="RIGHT">91,396</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">28,953</U></TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Total expenses</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">1,403,593</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">700,119</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Loss before income taxes</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">$ (695,784)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ (451,431)</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Income tax benefit</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">-</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net loss</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">$ (695,784)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ (451,431)</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Basic loss per common share</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">$ (.12)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ (.08)</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Diluted loss per common share</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">$ (.12)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ (.08)</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="67%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Weighted average common shares outstanding</TD>
<TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="RIGHT">5,584,269</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">5,555,000</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">&nbsp;</P>
<P>The accompanying notes are an integral part of these financial statements.</P>
<P>&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)</P>
<P ALIGN="CENTER">FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=5 WIDTH=565>
<TR><TD WIDTH="24%" VALIGN="TOP" ROWSPAN=2 HEIGHT=9>
<P></TD>
<TD WIDTH="27%" VALIGN="TOP" COLSPAN=2 HEIGHT=9>
<P ALIGN="CENTER">Common Stock</TD>
<TD WIDTH="23%" VALIGN="TOP" COLSPAN=2 HEIGHT=9>
<P ALIGN="CENTER">Preferred Stock</TD>
<TD WIDTH="14%" VALIGN="TOP" ROWSPAN=2 HEIGHT=9>
<U><P ALIGN="CENTER">Accumulated Deficit</U></TD>
<TD WIDTH="14%" VALIGN="TOP" ROWSPAN=2 HEIGHT=9>
<U><P ALIGN="CENTER">Total Stockholders' Equity</U></TD>
</TR>
<TR><TD WIDTH="13%" VALIGN="TOP" HEIGHT=9>
<U><P ALIGN="CENTER">Shares</U></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=9>
<U><P ALIGN="CENTER">Amount</U></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=9>
<U><P ALIGN="CENTER">Shares</U></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=9>
<U><P ALIGN="CENTER">Amount</U></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Balance, December 31, 1997</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">5,555,040</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$ 5,555</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$ -</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$(56,308)</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$ (50,753)</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Net loss</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(451,431)</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(451,431)</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Balance, December 31, 1998</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">5,555,000</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">5,555</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(507,739)</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(502,184)</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Issuance of preferred shares for services performed at value of services</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">4,600,000</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">46,000</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">46,000</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Common Stock issued for:</P>
<P>Conversion of convertible debt to equity</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">895,000</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">895,000</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">895,000</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Interest on convertible debt</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">88,201</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">88,201</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">88,201</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Warrants exercised</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">6,4000,000</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">19,000</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">19,000</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Net loss</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(695,784)</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(695,784)</TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP">
<P>Balance, December 31, 1999</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">12,938,201</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$ 1,007,756</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">4,600,000</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$46,000</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$(1,203,523)</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$ (149,767)</TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">The accompanying notes are an integral part of these financial statements.</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">STATEMENTS OF CASH FLOWS</P>
<P ALIGN="CENTER">YEARS ENDED DECEMBER 31, 1999 AND 1998</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=667>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="CENTER">1999</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">1998</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">CASH FLOWS FROM OPERATING ACTIVITIES:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Net loss</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (695,784)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (451,431)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Adjustments:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Depreciation</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">7,291</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">1,657</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Preferred stock issued for services</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">46,000</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">-</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Common stock issued in payment of interest</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">88,201</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">-</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Changes in:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Accounts receivable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(10,446)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">2,317</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Inventories</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(49,070)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(14,752)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Other assets</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(867)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(2,815)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Deposits</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(11,320)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">3,477</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Accounts payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">95,453</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">39,533</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Accrued expenses</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">28,333</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">10,815</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Payroll taxes payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">61,653</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">20,865</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Interest payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(12,197)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">21,875</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;&#9;Total Adjustments</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">243,031</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">82,972</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Net cash used by operating activities</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(452,753)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(368,459)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">CASH FLOWS FROM INVESTING ACTIVITIES:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Capital expenditures</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(47,941)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(9,768)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Employee advances</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(13,275)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(3,000)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Net cash used by investing activities</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(61,216)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(12,768)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">CASH FLOWS FROM FINANCING ACTIVITIES:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Proceeds from warrants exercised</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">19,000</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">-</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Principal repayments of notes payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(146,800)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(18,400)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Proceeds from issuance of convertible</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">550,000</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">475,000</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Net cash provided by financing activities</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">422,200</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">456,600</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">NET (DECREASE) INCREASE IN CASH</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(91,769)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">75,373</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">CASH, BEGINNING OF YEAR</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">115,012</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">39,639</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>CASH, END OF YEAR</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 23,243</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 115,012</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>CASH PAID FOR INTEREST</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 3,185</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 7,078</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>NONCASH ACTIVITIES:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>Notes converted to equity</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$895,000</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">--</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">The accompanying notes are an integral part of these financial statements.</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">NOTES TO FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</P>
<U><P ALIGN="JUSTIFY">NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</P>
</U><P ALIGN="JUSTIFY">Innovative Coatings Corporation (the "Company") was established in 1997 and manufactures and distributes InstaCoat, a polyurea elastomeric coating used for protection and strengthening on a variety of substrates including extruded
foams, wood, metal and concrete. The Company is also developing various types of equipment to be used in the application of InstaCoat. The accounting principles followed by the Company and the methods of applying those principles, which materially affect th
e
<B><P>Inventories</P>
</B><P ALIGN="JUSTIFY">Inventories are stated at the lower of cost (first-in, first-out basis) or market. </P>
<B><P>Income Taxes</P>
</B><P ALIGN="JUSTIFY">Deferred income tax assets and liabilities are determined for the effect of net operating loss carryforwards and the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse. </P>
<B><P>Property and Equipment</P>
</B><P ALIGN="JUSTIFY">Equipment and furniture and fixtures are stated at cost. Depreciation is provided on the straight-line method over the estimated lives of the various assets, generally 5 to 7 years.</P>
<B><P>Use of Estimates</P>
</B><P ALIGN="JUSTIFY">The timely preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual
results could differ from those estimated.</P>
<B><P>Loss Per Share</P>
</B><P ALIGN="JUSTIFY">Basic loss per share is computed by dividing loss applicable to common shareholders by the weighted average number of common shares outstanding. Diluted loss per share is similar to basic loss per share except that the weighted
average of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. There were no dilutive potential common shares in 1999 or 1998
because
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">NOTES TO FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</P>
<U><P ALIGN="JUSTIFY">NOTE B - INVENTORIES</P>
</U><P ALIGN="JUSTIFY">Inventories consist of raw materials.</P>
<U><P ALIGN="JUSTIFY">NOTE C - LEASES</P>
</U><P ALIGN="JUSTIFY">Included in 1999 and 1998 operating lease expense is the expense for the prior building lease which expired in 1999, a new building lease which commenced December 1, 1999 for a period of 36 months ending November 30, 2002, and a
corporate apartment lease which commenced September 30, 1998 for a 12 month period. Future minimum rentals under the operating leases are as follows:</P>
<P ALIGN="JUSTIFY">Rent expense under the building leases was $34,795 and $26,665, respectively, for the years ended December 31, 1999 and 1998.</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=564>
<TR><TD WIDTH="38%" VALIGN="TOP">
<P ALIGN="JUSTIFY">2000</TD>
<TD WIDTH="62%" VALIGN="TOP">
<P ALIGN="JUSTIFY">$ 86,310</TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP">
<P ALIGN="JUSTIFY">2001</TD>
<TD WIDTH="62%" VALIGN="TOP">
<P ALIGN="JUSTIFY">88,848</TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP">
<P ALIGN="JUSTIFY">2002</TD>
<TD WIDTH="62%" VALIGN="TOP">
<P ALIGN="JUSTIFY">83,738</TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="62%" VALIGN="TOP">
<P ALIGN="JUSTIFY">$258,896</TD>
</TR>
</TABLE>

<U><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">NOTE D - NOTES PAYABLE</P>
</U><P ALIGN="JUSTIFY">Notes payable consist of notes that are convertible to common stock of the Company at $1 of debt per common share. The notes bear interest at 10% per annum and are secured by the Company's assets.</P>
<U><P ALIGN="JUSTIFY">NOTE E - INCOME TAXES</P>
</U><P ALIGN="JUSTIFY">Significant components of the Company's deferred income tax assets as of December 31, 1999 and 1998 are as follows:</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="CENTER">1999</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">1998</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Deferred tax assets:</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net operating loss/carryforwards</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 242,731</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 45,067</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Bad debt reserve</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">24,940</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">-</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Compensation paid with preferred stock</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">15,640</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">-</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Deferred tax liability</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Depreciation</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">(1,677)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(1,617)</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net deferred tax asset</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">281,634</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">43,450</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Valuation allowance</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">(281,634)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(43,450)</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net deferred tax asset reported</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">$ -</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$ -</TD>
</TR>
<TR><TD WIDTH="65%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">The valuation allowance at December 31, 1997 was $20,821.</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">NOTES TO FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</P>
<U><P ALIGN="JUSTIFY">NOTE E - INCOME TAXES - continued</P>
</U><P ALIGN="JUSTIFY">At December 31, 1999 and 1998, the Company had available for carryforward net operating losses for Federal and state tax purposes of approximately $581,364 and $132,551, respectively. At December 31, 1999, the net operating losses
expire in 2018 and 2019. Future recognition of the deferred tax assets will be recorded when it is more likely than not that they will be utilized. Income tax benefit was not recorded because of the increase in the valuation allowance.</P>
<U><P ALIGN="JUSTIFY">NOTE F - PAYROLL TAXES</P>
</U><P ALIGN="JUSTIFY">The Company did not make any of the required quarterly payroll tax payments in 1999. The estimated penalties and interest related to the nonpayment of these items was $20,700. This amount was included in accrued expenses at December
31, 1999. The Company has been making payments in the subsequent period and is making efforts to come to a compromise settlement for the penalties with the IRS and the Department of Labor.</P>
<U><P ALIGN="JUSTIFY">NOTE G - GOING CONCERN</P>
</U><P ALIGN="JUSTIFY">The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.</P>
<P ALIGN="JUSTIFY">As shown in the financial statements, the Company incurred a net loss of $695,784 for 1999 and has incurred net losses for each of the past two years. At December 31, 1999, current liabilities exceed current assets by $217,741 and its
net capital deficiency amounted to $149,767. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.</P>
<P ALIGN="JUSTIFY">The Company is in the process of raising additional capital to satisfy the operating needs for its continued development. Subsequent to December 31, 1999 the Company received gross proceeds of $850,000 from a private placement of common
stock.</P>
<U><P ALIGN="JUSTIFY">NOTE H - RESEARCH AND DEVELOPMENT COSTS</P>
</U><P ALIGN="JUSTIFY">Research and development costs of $32,205 and $13,785, respectively, were charged to expense in 1999 and 1998.</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">NOTES TO FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</P>
<U><P ALIGN="JUSTIFY">NOTE I - WARRANTS</P>
</U><P ALIGN="JUSTIFY">The Company issued warrants in 1998 to purchase 6,500,000 shares of the Company's common stock at prices ranging from $.001 to $.01 per share. The warrants exercised in 1999 are analyzed as follows:</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=511>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="CENTER">Warrants Exercised</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="CENTER">Exercise Price</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="CENTER">Total</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>Founders</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="CENTER">5,000,000</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="CENTER">$.001</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">$5,000</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>Employees</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="CENTER">300,000</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="CENTER">.01</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">3,000</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>Consultants</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="CENTER">75,000</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="CENTER">.01</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">750</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>Issued with convertible debt</TD>
<TD WIDTH="21%" VALIGN="TOP">
<U><P ALIGN="CENTER">1,025,000</U></TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="CENTER">.01</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><P ALIGN="RIGHT">10,250</U></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="21%" VALIGN="TOP">
<P ALIGN="CENTER">6,400,000</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P ALIGN="RIGHT">$19,000</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">No compensation was recognized for warrants issued to founders, employees and consultants. In addition, no allocation was made between the debt and common stock at the time of issuance of warrants with convertible debt. 100,000 warrants
and 475,000 warrants which were convertible to common stock at one warrant per share at an exercise price of $.01 per share were outstanding at December 31, 1999 and 1998, respectively. Because the convertible debt was repaid April 11, 2000, the warrants e
<U><P ALIGN="JUSTIFY">NOTE J - PREFERRED STOCK</P>
</U><P ALIGN="JUSTIFY">The Company issued 4,600,000 shares of preferred stock for services rendered. The cost of the services in the amount of $46,000 represents the value of the services that have been charged to operations.</P>
<P ALIGN="JUSTIFY">Preferred stock is fully participating and is convertible into shares of common stock on a share for share basis. The preferred stock is also redeemable if certain conditions set forth in the agreement are satisfied.</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">EXIHIBIT B</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">September 30, 2000</P>
<P ALIGN="CENTER">(Unaudited)</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">TABLE OF CONTENTS</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=583>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Balance Sheet as of September 30, 2000</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Statements of Operations for the Period Ended September 30, 2000</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Statements of Shareholders' Equity (Deficit) for the Period Ended September 30, 2000</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Statements of Cash Flows for the Period Ended September 30, 2000</TD>
</TR>
<TR><TD VALIGN="TOP">
<P ALIGN="JUSTIFY">Notes to Financial Statements for the Period Ended September 30, 2000</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">BALANCE SHEET</P>
<P ALIGN="CENTER">September 30, 2000</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=644>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">ASSETS</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="CENTER">September 30, 2000 (Unaudited)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="CENTER">December 31, 1999 (Audited)</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Current Assets</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Cash</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 52,876</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 23,243</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Trade accounts receivable, net of allowance of $73,352</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">84,744</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">28,726</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Inventories</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">123,395</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">74,192</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Deposits</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">37,456</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">14,137</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Employee advances</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">73,675</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">16,275</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Other</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">1,865</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">3,680</U></TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Total Current Assets</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">374,010</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">160,253</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Property and Equipment</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Equipment</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">81,780</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">66,818</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Furniture and fixtures</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">21,140</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">15,179</U></TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Less accumulated depreciation</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(23,388)</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(14,023)</U></TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">79,532</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">67,974</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;TOTAL ASSETS</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 453,542</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 228,227</U></TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P>LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Current Liabilities</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Notes payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 75,000</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$106,638</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Accounts payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">139,715</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">142,048</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Accrued expenses</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">42,828</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">37,112</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Payroll taxes payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">97,617</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">82,518</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Interest payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">3,760</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">9,678</U></TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Total Current Liabilities</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 358,920</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">377,994</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Shareholders' Equity (Deficit)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P>&#9;Preferred stock, no par value; 5,000,000 shares authorized, 2,300,000 shares outstanding</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">46,000</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">46,000</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P>&#9;Common stock, no par value; 15,000,000 shares authorized, 7,045,725 shares outstanding</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">0</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Paid-in capital</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">1,975,280</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">1,007,756</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Accumulated deficit</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(1,203,523)</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(1,203,523)</U></TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Earnings/Losses</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(723,135)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">--</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Total Shareholders' Equity (Deficit)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">94,622</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(149,767)</TD>
</TR>
<TR><TD WIDTH="70%" VALIGN="TOP">
<P ALIGN="JUSTIFY">TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$453,542</U></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$228,227</U></TD>
</TR>
</TABLE>

<P ALIGN="CENTER">The accompanying notes are an integral part of these financial statements.</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">STATEMENTS OF OPERATIONS</P>
<P ALIGN="CENTER">September 30, 2000</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=740>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">Three Months Ended 9/30/2000</P>
<P ALIGN="CENTER">(Unaudited)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">Three Months Ended 9/30/1999</P>
<P ALIGN="CENTER">(Unaudited)</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER">Nine Months Ended 9/30/2000</P>
<P ALIGN="CENTER">(Unaudited)</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="CENTER">Nine Months Ended 9/30/99</P>
<P ALIGN="CENTER">(Unaudited)</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Revenues</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 160,126</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 263,991</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 431,453</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">$ 589,995</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Cost of Goods Sold</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">70,398</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">160,288</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">250,353</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">390,652</U></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Gross Profit</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">89,728</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">103,703</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">181,100</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">199,343</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Expenses</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Selling, general and administrative</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">268,946</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">251,517</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">896,008</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">617,244</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Interest expense</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">5,483</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">24,510</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">8,317</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">58,977</U></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Total expenses</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">274,429</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">276,027</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">904,325</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">676,221</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Loss from Operations</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(184,702)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(172,325)</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(723,135)</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(476,878)</U></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net loss before income</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(184,702)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(172,325)</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">(723,135)</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">(476,878)</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Income tax expense (benefit)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">--</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">--</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">--</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">--</U></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net loss</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (184,702)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (172,325)</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (723,135)</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (476,878)</U></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net loss per common share - Basic</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (0.03)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (0.03)</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (0.10)</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (0.07)</U></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP">
<P>Net loss per common share - Effect of Convertible Preferred Stock&#9;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (0.02)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (0.02)</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (0.08)</U></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (0.05)</U></TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">The accompanying notes are an integral part of these financial statements.</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)</P>
<P ALIGN="CENTER">For the Nine Months Ended September 30, 2000</P>
<P ALIGN="CENTER">(Unaudited)</P>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=5 WIDTH=565>
<TR><TD WIDTH="23%" VALIGN="TOP" ROWSPAN=2 HEIGHT=9>
<P></TD>
<TD WIDTH="25%" VALIGN="TOP" COLSPAN=2 HEIGHT=9>
<P ALIGN="CENTER">Common Stock</TD>
<TD WIDTH="23%" VALIGN="TOP" COLSPAN=2 HEIGHT=9>
<P ALIGN="CENTER">Preferred Stock</TD>
<TD WIDTH="14%" VALIGN="TOP" ROWSPAN=2 HEIGHT=9>
<U><P ALIGN="CENTER">Accumulated Deficit</U></TD>
<TD WIDTH="15%" VALIGN="TOP" ROWSPAN=2 HEIGHT=9>
<U><P ALIGN="CENTER">Total Stockholders' Equity</U></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=9>
<U><P ALIGN="CENTER">Shares</U></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=9>
<U><P ALIGN="CENTER">Amount</U></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=9>
<U><P ALIGN="CENTER">Shares</U></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=9>
<U><P ALIGN="CENTER">Amount</U></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Balance, December 31, 1999</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">12,938,201</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$1,007,756</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">4,600,000</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$46,000</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$(1,203,523)</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$ (149,767</TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Net loss for period</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">-</U></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">-</U></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">-</U></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">-</U></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">(538,433)</U></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">(538,433)</U></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Adjustment for Reverse Stock Split</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">6,469,101</U></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">2,300,000</U></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Private Placement Sale of Common Shares in Period</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">425,000</U></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">850,000</U></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">-</U></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">-</U></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">850,000</U></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Balance June 30, 2000</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">6,894,101</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">1,857,756</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">2,300,000</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">46,000</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(1,741,956)</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">161,800</TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Net loss for period</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(184,702)</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(184,702)</TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Private Placement Sale of Common Shares in Period</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">34,900</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">69,800</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">69,800</TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Conversion of Convertible Notes to Common Shares in Period</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">116,724</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">47,724</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">47,724</TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>Balance, September 30, 2000</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">7,045,725</U></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">$1,975,280</U></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">2,300,000</U></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">$46,000</U></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">$(1,926,658)</U></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><P ALIGN="RIGHT">$ 94,622</U></TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">The accompanying notes are an integral part of these financial statements.</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INNOVATIVE COATINGS CORPORATION</P>
<P ALIGN="CENTER">STATEMENTS OF CASH FLOWS</P>
<P ALIGN="CENTER">For the Period Ended September 30, 2000</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=667>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY"></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="CENTER">Nine Months Ended September 30, 2000 (Unaudited)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">Nine Months Ended September 30, 1999 (Unaudited)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">CASH FLOWS FROM OPERATING ACTIVITIES:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net loss</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (723,135)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ (476,878)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Adjustments to reconcile net loss to net cash provided by (used in) operating activities:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Depreciation and amortization</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">9,365</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">17,015</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Preferred stock issued for services</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">-</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">46,000</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Changes in:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Accounts receivable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(56,018)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(105,122)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Inventories</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(49,203)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(74,700)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Trade accounts payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(2,333)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">65,531</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Accrued expenses</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">5,716</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">19,503</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Payroll taxes payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">15,099</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">34,222</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Interest payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(5,918)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">51,412</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Deposits</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(23,319)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(1,220)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Other assets</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">1,815</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(1,398)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Notes payable</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(31,638)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">403,200</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Total Adjustments</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(136,434)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">406,533</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Net cash (used in) provided by operating activities</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(859,569)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(24,345)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">CASH FLOWS FROM INVESTING ACTIVITIES:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Purchase of property, equipment</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">(20,923)</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(32,131)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Employee advances</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(57,400)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(8,200)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Net cash used by investing activities</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(78,323)</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">(40,331)</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">CASH FLOWS FROM FINANCING ACTIVITIES:</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;Proceeds from sale of common shares</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">967,524</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">5,555</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">&#9;&#9;Net cash provided by financing activities</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">967,524</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">5,555</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Net (decrease) increase in cash and short-term investments</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P ALIGN="RIGHT">29,633</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="RIGHT">(59,121)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Cash and short-term investments at beginning of year</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">23,243</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">115,012</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>Cash and short-term investments at end of year</TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 52,876</U></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><P ALIGN="RIGHT">$ 55,891</U></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">The accompanying notes are an integral part of these financial statements.</P>
<B><P ALIGN="CENTER">&nbsp;</P>
</B><P ALIGN="CENTER">Innovative Coatings Corporation</P>
<P ALIGN="CENTER">NOTES TO FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">Unaudited</P>
<P ALIGN="CENTER">Nine Months Ending September 30, 2000</P>
<U><P>NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS</P>
</U><P>Innovative Coatings Corporation (the "Company") was incorporated in Georgia in August 1997 and commenced operations on September 1, 1997. The Company manufactures and distributes InstaCoat<FONT FACE="Symbol">&auml;</FONT> , a polyurea elastomeric
coating used for protection and strengthening on various substrates including extruded foams, wood, metal, and concrete. The Company's principal business office is located at 1650 Airport Rd., Suite 110, Kennesaw, Georgia 30144, and its telephone number
is (
<P>The financial statements as of September 30, 2000 have been prepared by the Company without audit. These statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of
operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The Company believes that the financial statements and disclosures are adequate to make the information not misleading.</P>
<U><P>NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</P>
</U><P>A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:</P>
<B><I><P>1. Use of Estimates</P>
</B></I><P>In preparing financial statements in conformity with generally accepted accounting principles ("GAAP"), management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.</P>
<B><I><P>2. Revenue Recognition</P>
</B></I><P>Revenue from product sales of coating chemicals and spray equipment related hardware is recognized upon invoice of the customer.</P>
<B><I><P>3. Cash and Short-Term Investment</B></I>s</P>
<P>For purposes of reporting cash flows, cash and short-term investments include cash on hand, cash in banks and short-term investments with original maturities of less than 90 days.</P>
<B><I><P>4. Inventories</P>
</B></I><P>Inventories are stated at the lower of cost (first-in, first-out basis). Inventories consist primarily of raw material chemicals.</P>
<B><I><P>5. Furniture, Equipment, and Depreciation</P>
</B></I><P>Furniture and equipment are recorded at historical cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives on utilizing the straight-line method.
Depreciation expense related to furniture and equipment charged to operations was $542 and $2,580 for respectively. Estimated services life of property and equipment is generally 5 to 7 years. </P>
<B><I><P>6. Income Taxes</P>
</B></I><P>The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income. The effect on deferred tax assets and liabilities of a change in tax
rates is r
<B><I><P>7. Loss Per Share</P>
</B></I><P>Basic net loss per common share is based upon the weighted average number of common shares outstanding during the period. Diluted net loss per common share is based upon the weighted average number of common shares outstanding plus dilutive
potential common shares, including options and warrants outstanding during the period.</P>
<B><I><P>8. Fair Value of Financial Instruments</P>
</B></I><P>The Company's financial instruments include cash and cash equivalents and long-term debt. The carrying value of cash and cash equivalents approximates fair value due to the relatively short period to maturity of the instruments. The carrying
amount of the Company's long-term debt approximates fair value based on borrowing rates currently available to the Company for borrowings with comparable terms and conditions.</P>
<U><P>NOTE C - REALIZATION OF ASSETS</P>
</U><P>The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has sustained a net loss of $723,135 for
the nine months ending September 30, 2000 and $695,784 for the year ending December 31, 1999, respectively. In addition, at December 31, 1999, the Company's current liabilities exceeded its current assets by $217,741, although at September 30, 2000, the
Compa
<P>In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon
the Company's ability to meet its financing requirements on a continuing basis, to maintain present financing, and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and
classification
<P>In response to the matters described in the preceding paragraphs, the Company completed a private placement of its common stock in April, 2000, and received $825,000 and an additional private placement of its common stock in August and September, 2000
and received $69,800. Management believes that this additional financing will allow the Company to rigorously pursue its expansion efforts in the upcoming year and that this expansion will strengthen the Company's cash flow position to provide the Company
w
<U><P>NOTE D - INCOME TAXES</P>
</U><P>At December 31, 1999 the Company had operating loss carryforwards for income tax purposes of approximately $151,673. The net operating losses expire in 2018 and 2019. Future recognition of these carryforwards will be reflected when it is more
likely than not that they will be utilized.</P>
<U><P>NOTE E - COMMITMENTS AND CONTINGENCIES</P>
</U><B><I><P>Lease Commitments</P>
</B></I><P>The Company leases space and office equipment under a noncancelable lease which expires November 30, 2002. Lease payments of $7,175 plus proration of certain building expenses of $706 per month are due monthly and are fixed for the period
December 1, 1999 to November 30, 2000. From December 1, 2000 to November 30, 2001 the monthly rent is $7,385 plus lessees proration of certain building expenses. From December 1, 2001 to the expiration of the lease on November 30, 2002 the monthly rent is
$7,612
<B><I><P>Litigation</P>
</B></I><P>The Company is not involved in any litigation. </P>
<U><P>NOTE F - PRIVATE PLACEMENT OF COVERTIBLE NOTES</P>
</U><P>In January 2000, the Company sold $121,000 of convertible debt to three individuals. The debt is due in January 2001 and is convertible into 2.5 shares for each $1.00 of principal converted and 1 share for each $1.00 of interest paid (adjusted for
a subsequent one for two reversed stock split). In April 2000, $47,724 of the convertible debt converted (including interest of $1,724) into 116,724 shares of common stock.</P>
<U><P>NOTE G - PRIVATE PLACEMENT OF COMMON SHARES </P>
</U><P>During March and April 2000, the Company sold 425,000 shares of its common stock under Rule 504 at $2.00 per share for a total of $850,000. The Company completed the offering and received $608,000 in March and $242,000 in April 2000. In August and
September 2000 the Company sold 34,900 shares at $2.00 per share for a total of $69,800 by private placement under Rule 506.</P>
<U><P>NOTE H - CAPITAL STOCK</P>
</U><B><I><P>Reverse Stock Split</P>
</B></I><P>On February 4, 2000, the Company declared a reverse stock split of its common shares. Each holder of common shares received one new share for each two old shares. </P>
<B><I><P>Common Shares Outstanding</P>
</B></I><P>At September 30, 2000 the Company has the following classes of capital stock:</P>
<P>Common stock - authorized 15,000,000 shares of no par value with 7,045,725 outstanding on September 30, 2000.</P>
<P>Convertible Preferred stock - authorized 5,000,000 shares of $.01 par value with 2,300,000 shares issued and outstanding on September 30, 2000.</P>
<U><P ALIGN="CENTER">PART III</P>
</U><P>ITEMS 1 AND 2. INDEX TO AND DESCRIPTION OF EXHIBITS</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">Exhibit No. </TD>
<TD WIDTH="84%" VALIGN="TOP">
<P ALIGN="CENTER">Description</TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">3</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Bylaws </TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">4.1</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Articles of Incorporation dated August 4, 1997 </TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">4.2</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Articles of Amendment dated June 1, 1998 </TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">4.3</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Articles of Amendment dated June 8, 1998 </TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">4.4</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Articles of Amendment dated August 31, 1998 </TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">10</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Form Employment Agreement for Officers</TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">11.1</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Statement re: computation of earnings per share (1)</TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">22</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Subsidiaries of the Registrant</TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">23</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Consent of Tauber &amp; Balser, P.C.</TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="TOP">
<P ALIGN="CENTER">27</TD>
<TD WIDTH="84%" VALIGN="TOP">
<P>Financial Data Schedule</TD>
</TR>
</TABLE>

<P>(1)&#9;The information required by this Exhibit can be determined from the Financial Statements included in Part F/S.</P>
<P ALIGN="CENTER">SIGNATURES</P>
<P>In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>INNOVATIVE COATINGS CORPORATION</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>Dated: December 20, 2000</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>/s/ Jerry Phillips</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>By: Jerry Phillips, President, Chief Executive Officer and Director</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>Dated: December 20, 2000</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>/s/ Donald H. Sigler</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P>By: Donald H. Sigler, Chairman</TD>
</TR>
</TABLE>

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</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>2
<FILENAME>0002.txt
<TEXT>

                                   BYLAWS
                                     OF
                       INNOVATIVE COATINGS CORPORATION
                            ARTICLE  I.  OFFICES
     Section 1.01.  Registered Office and Agent.   The Corporation shall
have and continuously maintain a registered office and registered agent
in accordance with the provisions of Section 14-2-501 of the Georgia
Business Corporation Code.
     Section 1.02  Other Offices.   The Corporation may have offices at
such place or places within or without the State of Georgia as the Board
of Directors may from time to time appoint or the business of the
Corporation may require or make desirable.
                     ARTICLE II.  SHAREHOLDERS MEETINGS
     Section 2.01.  Place of Meetings.   All meetings of the Shareholders
shall be held at such place as may fixed from time to time by the Board
of Directors.
     Section 2.02.  Annual Meetings.  An annual meeting of the
Shareholders shall be held on the last business day of the fifth month
following the close of each fiscal year or at such other time and sate
prior thereto and following the close of the fiscal year as shall be
determined by the Board of Directors for the purpose of electing
Directors and transacting such other business as may properly be brought
before the meeting.
     Section 2.03.  Special Meetings.  Special meetings of the
shareholders, for any purpose or purposes, unless otherwise prescribed by
statute or the Articles of Incorporation, may be called by the Chairman
of the Board or the President; and shall be called by the Chairman of the
Board, the President, or the Secretary: (i) when so directed by the Board
of Directors, (ii) at the request in writing of any two or more
Directors, or (iii) at the written request of shareholders owning at
least twenty-five percent of the capital stock of the Corporation issued,
outstanding, and entitled to vote.  Such request shall state the purpose
or purposes of the proposed meeting.
     Section 2.04.  Notice of Meetings.   Except as otherwise required by
statute or the Articles of Incorporation, written notice of each meeting
of the shareholders, whether annual or special, shall be served either
personally or by mail, upon each shareholder of record entitled to vote
at such meeting, not less than 10 nor more than 60 days before such
meeting.  If mailed, such notice shall be directed to a shareholder at
his post office address last shown on the records of the Corporation.
Notice of any special meeting of shareholders shall state the purpose or
purposes for which the meeting is called.  Notice of any meeting of
shareholders shall not be required to be given to any shareholder who, in
person or by his attorney thereunto authorized, either before or after
such meeting, shall waive such notice by means of  a signed writing.
Attendance of a shareholder at a meeting, either in person or by proxy,
shall of itself constitute waiver of notice and waiver of any and all
objections to the place of the meeting, the time of the meeting, and the
manner in which it has been called or convened, except when a shareholder
attends a meeting solely for the purpose of stating, at the beginning of
the meeting, any such objection or objections to the transaction of
business.  Notice of any adjourned meeting need not be given otherwise
than by announcement at the meeting at which the adjournment is taken.
     Section 2.05.  Quorum.   The holders of a majority of the stock
issued, outstanding, and entitled to vote, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise
provided by law, by the Articles of Incorporation, or by these Bylaws.
If, however, such majority shall not be present or represented at any
meeting of the shareholders, the shareholders entitled to vote thereat,
present in person or by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until the requisite amount of voting stock shall be present.  At such
adjourned meeting at which a quorum shall be present in person or by
proxy, any business may be transacted that might have been transacted at
the meeting as originally called.
     Section 2.06.  Voting. At every meeting of the shareholders,
including meetings of shareholders for the election of Directors, any
shareholder having the right to vote shall be entitled to vote in person
or by proxy, but no proxy shall be voted after eleven months from its
date, unless said proxy provides for a longer period. Each shareholder
shall have one vote for each share of stock having voting power,
registered in his name on the books of the Corporation. If a quorum
exists, action on a matter (other than the election of Directors) by the
Shareholders is approved if the votes cast favoring the action exceed the
votes cast opposing the action, unless a greater number of affirmative
votes. Unless otherwise provided in the Articles of Incorporation, these
Bylaws, or the Georgia Business Corporation requires a greater number of
affirmative votes.  Unless otherwise provided in the Articles of
Incorporation, Directors are elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which a
quorum is present.
     Section 2.07. Conduct of Meetings. The Chairman of the Board of
Directors, or in his absence the President, or in their absence a person
appointed by the Board of Directors, shall preside at meetings of the
shareholders. The Secretary of the Corporation, or in the Secretary's
absence, any person appointed by the presiding Officer shall act as
Secretary for meetings of the shareholders. Meetings shall be governed by
the most recent edition of Roberts Rules of Order, or in accordance with
procedures prescribed by the Board, except to the extent that these
Bylaws are inconsistent therewith.
     Section 2.08. Written Consents. Any action required or permitted to
be taken at a meeting of the shareholders of the Corporation may be taken
without a meeting if written consent, selling forth the action so taken,
shall be signed by persons who would be entitled to vote at a meeting
those shares having voting power to cast not less than ft minimum number
(or numbers, in the case of voting by classes) of votes that would be
necessary to authorize or take such action at a meeting at which all
shares entitled to vote were present and voted. The rights set forth
herein shall be governed by and subject to the provisions of Section 14-
2-704 of the Georgia Business Corporation Code.
                    ARTICLE III. BOARD OF DIRECTORS
     Section 3.01. Authority. Except as may be otherwise provided by any
legal agreements among shareholders, the property and business of the
Corporation shall be managed by its Board of Directors. In addition to
the powers and authority expressly conferred by these Bylaws, the Board
of Directors may exercise all powers of the Corporation and do all such
lawful acts and things as are not by law, by any legal agreement among
shareholders, by the Articles of Incorporation, or by these Bylaws
directed or required to be exercised or done by the shareholders.
     Section 3.02. Number and Term. The Board of Directors shall consist
of that number of members to be fixed by resolution of the shareholders
from time to time. Each Director (whether elected at an annual meeting of
shareholders or otherwise) shall hold office until the annual meeting of
shareholders held next after this election, and until a successor shall
be elected and qualified, or until his earlier death, resignation,
incapacity to serve, or removal. Directors need not be shareholders.
     Section 3.03. Vacancies. A vacancy on the Board of Directors shall
exist upon the death, resignation, removal, or incapacity to serve of any
Director; upon the increase in the number of authorized Directors; and
upon the failure of the shareholders to elect the full number of
Directors authorized.  The remaining Directors shall continue to act, and
such vacancies may be filled by prior action of the Directors, may be
filled by the shareholders at any meeting held during the existence of
such vacancy.
     Section 3.04. Place of Meetings. The Board of Directors may hold its
meetings at such place or places within or without the State of Georgia
as it may from time to time determine.
     Section 3.05. Compensation of Directors. Directors may be allowed
such compensation for attendance at regular or special meetings of the
Board of Directors and of any special or standing committees thereof as
may from time to time determined by resolution of the Board of Directors.
     Section 3.06. Resignation. Any Director may resign by giving written
notice to the Board of Directors.  The resignation shall be effective on
receipt, unless the notice specifies a later time for the effective date
of such resignation, in which event the resignation shall be effective
upon the election and qualification of a successor.  If the resignation
is effective at a future time, a successor may be elected before that
time to take office when the resignation becomes effective.
     Section 3.07. Removal. The Shareholders may declare the position of
a Director vacant, and may remove such Director for cause at a special
meeting of the Shareholders called for such purpose, on the occurrence of
any of the following events: the Director has been declared of unsound
mind by a final order of court; the Director has been convicted of a
felony; the Director has failed to attend any meeting of the Board for at
least a year and a half; or the Director has been presented with one or
more written charges, has been given at least ten days' notice of a
hearing at which he may have legal counsel present, and has been given
opportunity for such a hearing at a meeting of the Shareholders. The
Shareholders may also declare the position of a Director vacant, and may
remove such Director without cause, by a vote of two-thirds of the votes
cast by the shares entitled to vote at a meeting at which a quorum is
present.
     Section 3.08. Time of Meetings. Each newly elected Board of
Directors shall meet (i) at the place and time which shall have been
determined, in accordance with the provisions of these Bylaws, for the
holding of the regular meeting of the Board of Directors scheduled to be
held full following the annual meeting of the shareholders at which the
newly elected Board of Directors shaft have been elected, or (ii) if no
place and time shall have been fixed for the holding of such meeting of
the Board of Directors, then immediately following the close of such
annual meeting of shareholders and   at the place thereof, or (iii) at
such time and place as shall be fixed by the written consent of all the
Directors of such newly elected Board of Directors. In any event no
notice of such meeting to the newly elected Directors shall be necessary
in order legally to constitute the meeting.
     Section 3.09. Notice of Meetings. Regular meetings of the Board of
Directors may be held at such time and place within or without the State
of Georgia as shall from time to time be determined by the Board of
Directors by resolution, and such resolution shall constitute notice
thereof. No further notice shall be required in order legally to
constitute such regular meeting.
     Section 3.10. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President on
not less than two days' notice by mail, telegram, cablegram, or personal
delivery to each Director and shall be called by the Chairman of the
Board, the President, or the Secretary in like manner and on like notice
on the written request of any two or more Directors delivered to such
Officer of the Corporation. Any such special meeting shall be held at
such time and place within or without the State of Georgia as shall be
stated in the notice of meeting.
     Section 3.11. Notice - Purpose of Meeting. No notice of any special
meeting of the Board of Directors need state the purposes thereof, and
such notice shall be sufficient if it states the time and place of such
meeting and the person or persons calling such meeting, provided it is
received not less than two days prior to such meeting.
     Section 3.12. Quorum. At all meetings of the Board of Directors, the
presence of a majority of the authorized number of Directors shall be
necessary and sufficient to constitute a quorum for the transaction of
business. The act of a majority of the Directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by law, by the Articles
of Incorporation or by these Bylaws. In the absence of a quorum, a
majority of the Directors present at any meeting may adjourn the meeting
from time to time until a quorum be had. Notice of my adjourned meeting
need only be given by announcement at the meeting at which the
adjournment is taken.
          Section 3.13. Telephonic Participation. Directors may
participate in meetings of the Board of Directors through use of
conference telephone or similar communications equipment, provided all
Directors participating in the meeting can bear one another, Such
participation shall constitute personal presence at the meeting, and
consequently shall be counted toward the required quorum and in any vote.
     Section 3.14. Conduct of Meetings. The Chairman of the Board, or in
his absence the President, and in their absence the Vice President, if
any, named by the Board of Directors, shall preside at meetings of the
Board of Directors. The Secretary of the Corporation, or in the
Secretary's absence any person appointed by the presiding Officer, shall
art as Secretary for meetings of the Board of Directors. Meetings shall
be governed by the most recent edition of Robert's Rules of Order, or in
accordance with procedures prescribed by the Board, except to the extent
that these Bylaws are inconsistent therewith.
     Section 3.15. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if, prior to such
action, a written consent thereto is signed by all members of the Board
or of such committee, as the case may be, and such written consent is
filed with the minutes of the proceedings of the Board or committee.
                          ARTICLE IV. COMMITTEES
     Section 4.01. Executive Committee. The Board of Directors may by
resolution adopted by a majority of the entire Board, designate an
Executive Committee of three or more Directors. Each member of the
Executive Committee shall hold office until the first meeting of the
Board of Directors after the annual meeting of the shareholders next
following his election and until his successor member of the Executive
Committee is elected, or until his death, resignation, removal, or until
he shall cease to be a Director.
     Section 4.02. Executive Committee-Powers. During the intervals
between the meetings of the Board of Directors, the Executive Committee
may exercise all the powers of the Board of Directors in the management
of the business affairs of the Corporation, including all powers
specifically granted to the Board of Directors by these Bylaws or by the
Articles of Incorporation, and may authorize the seal of the Corporation
to be affixed to all papers which may require it; provided, however, that
the Executive Committee shall not have the power to amend or repeal any
resolution of the Board of Directors that by its terms shall not be
subject to amendment or repeal by the Executive Committee, and the
Executive Committee shall not have the authority of the Board of
Directors in reference to (1) amending the Articles of Incorporation; (2)
adopting or approving a plan of merger or consolidation; (3) adopting,
amending, or repealing the Bylaws of the Corporation; (4) the filling of
vacancies on the Board of Directors or on any Committees; (5) approving
or proposing to Shareholders action that the Georgia Business Corporation
Code requires to be approved by Shareholders; (6) the sale, lease,
exchange or other disposition of all or substantially all the property
and assets of the Corporation or a revocation of any such dissolution.
     Section 4.03. Executive Committee-Meetings. The Executive Committee
shall meet from time to time on call of the Chairman of the Board, the
President, or of any two or more members of the Executive Committee.
Meetings of the Executive Committee may be held at such place or places,
within or without the State of Georgia, as the Executive Committee shall
determine or as may be specified or fixed in the respective notices of
such meetings. The executive Committee may fix its own rules of
procedure, including provision for notice of its meetings, shall keep a
record of its proceedings, and shall report these proceedings to the
Board of Directors at the meeting thereof held next after such meeting of
the Executive Committee. All such proceedings shall be subject to
revision or alteration by the Board of Directors except to the extent
that action shall have been taken pursuant to or in reliance upon such
proceedings prior to any such revision or alteration. The Executive
Committee shall act by majority vote of its members.
     Section 4.04. Executive Committee-Alternate Members. The Board of
Directors, by resolution adopted in accordance with Section 4.01, may
designate one or more Directors as alternate members of any such
committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.
     Section 4.05. Other Committees. The Board of Directors, by
resolution adopted by a majority of the entire Board, may designate one
or more additional committees, each committee to consist of three or more
of the Directors of the Corporation, which shall have such name or names
and shall have and may exercise such powers of the Board of Directors in
the management of the business and affairs of the Corporation, except the
powers denied to the Executive Committee, as may be determined from time
to time by the Board of Directors.
     Section 4.06. Removal of Committee Members. The Board of Directors
shall have power at any time to remove any or all of the members of any
committee, with or without cause, and to fill vacancies in and to
dissolve any such committee.
                         ARTICLE V.  OFFICERS
     Section 5.01.  Election of Officers.  The Board of Directors, at its
first meeting after each annual meeting of shareholders, shall elect a
President and may elect such other of the following Officers:  a Chairman
of the Board, on or more Vice Presidents (one of whom may be designated
Executive Vice President), a Secretary, and a Treasurer.  The Board of
Directors at any time and from time to time may appoint such other
Officers as it shall deem necessary, including one or more Assistant Vice
Presidents, one or more Assistant Treasurers, and one or more Assistant
Secretaries, who shall hold their offices for such terms as shall be
determined by the Board of Directors, and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board
of Directors or the Chairman of the Board.
     Section 5.02.  Compensation.  The salaries of the Officers of the
Corporation shall be fixed by the Board of Directors, except that the
Board of Directors may delegate to any Officer or Officers the power to
fix the compensation of any Officer appointed in accordance with the
second sentence of Section 5.01 of these Bylaws.
     Section 5.03.  Term.  Removal.  Resignation.  Each Officer of the
Corporation shall hold office until his successor is chosen or until his
earlier resignation, death, removal, or termination of his office.  Any
Officer may be removed with or without cause by a majority vote of the
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby.  Any Officer may resign by giving
written notice to the Board of Directors.  The resignation shall be
effective upon receipt, or at such time as may be specified in such
notice.
     Section 5.04.  Chairman of the Board.  The Chairman of the Board,
when one is elected, may be declared by the Board to be the Chief
Executive Officer of the Corporation and if so, shall have general and
active management of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into
effect.  He shall be ex officio a member of all standing committees,
unless otherwise provided in the resolution appointing the same.  The
Chairman of the Board shall call meetings of the shareholders, the Board
of Directors, and the Executive Committee to order and shall act as
chairman of such meetings.
     Section 5.05.  President.  When no Chairman of the Board has been
elected, or if a Chairman has been elected and not declared to be the
Chief Executive Officer, or in the event of the death or disability of
the Chairman of the Board or at his request, the President shall have all
of the powers and perform the duties of the Chairman of the Board.  The
President shall also have such powers and perform such duties as are
specifically imposed upon him by law and as may be assigned to him by the
Board of Directors or the Chairman of the Board.  The President shall be
ex officio a member of all standing committees, unless otherwise provided
in the resolution appointing such committees.  In the absence of a
Chairman of the Board serving as Chief Executive Officer, the President
shall call meetings of the shareholders, the Board of Directors, and the
Executive Committee to order and shall act as chairman of such meetings.
If no other Officers are elected, the President shall also have all of
the powers and perform the duties of Secretary and Treasurer.
     Section 5.06.  Vice Presidents.  The Vice Presidents shall perform
such duties as are generally performed by vice presidents.  The Vice
Presidents shall perform such other duties and exercise such other powers
as the Board of Directors, the Chairman of the Board, or the President
shall request or delegate.  The Assistant Vice Presidents shall have such
powers, and shall perform such duties, as may be prescribed from time to
time by the Board of Directors, the Chairman of the Board, or the
President.
     Section 5.07.  Secretary.  The Secretary shall attend all meetings
of the Board of Directors, all meetings of the shareholders, and record
all votes and the minutes of all proceedings in books to be kept for that
purpose, and shall perform like duties for the standing committees when
required.  He shall give, or cause to be given, any notice required to be
given of any meetings of the shareholders and of the Board of Directors,
the Chairman of the Board, or the President, under whose supervision he
shall be.  The Assistant Secretary or Assistant Secretaries shall, in the
absence or disability of the Secretary, or at the Secretary's request,
perform the duties and exercise the powers and authority herein granted
to the Secretary.
     Section 5.08.  Treasurer.  The Treasurer shall have charge and be
responsible for all funds, securities, receipts, and disbursements of the
Corporation, and shall deposit or cause to be deposited, in the name of
the Corporation, all monies or other valuable effects in such banks,
trust companies, or other depositories as shall from time to time be
selected by the Board of Directors; he shall render to the Chairman of
the Board, the President, and to the Board of Directors, whenever
requested, an account of the financial condition of the Corporation, and
in general, he shall perform all the duties incident to the office of a
treasurer of a Corporation, and such other duties as may be assigned to
him by the Board of Directors, the Chairman of the Board, or the
President.
     Section 5.09.  Vacancy in Office.  In case of the absence of any
Officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may delegate, for
the time being, any or all of the powers or duties of such Officer to any
Officer or to any Director.
                     ARTICLE VI.  CAPITAL STOCK
     Section 6.01.  Share Certificates.  The interest of each shareholder
shall be evidenced by a certificate or certificates representing shares
of stock of the Corporation which shall be in such form as the Board of
Directors may from time to time adopt.  The certificates shall be
consecutively numbered, and the issuance of shares shall be duly recorded
in the books of the Corporation as they are issued.  Each certificate
shall indicate the holder's name, the number of shares, the class of
shares and series, if any, represented thereby, a statement that the
Corporation is organized under the laws of the State of Georgia, and the
par value of each share or a statement that the shares are without par
value.  Each certificate shall be signed by (i) the Chairman of the
Board, the President, or a Vice President and (ii) the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary, if such officer or
officers have been elected or appointed by the Corporation, and shall be
sealed with the seal of the Corporation; provided, however, that if such
certificate is signed by a transfer agent, or by a transfer clerk acting
on behalf of the Corporation, and a registrar, the signature of any
Officer of the Corporation, whether because of death, resignation, or
otherwise, prior to the delivery of such share certificate by the
Corporation, such certificate may nevertheless be delivered as though the
person who signed whose facsimile signatures shall have been used thereon
had not ceased to be such Officer or Officers.
     Section 6.02.  Shareholder Records.  The Corporation shall keep a
record of the shareholders of the Corporation which readily indicates in
alphabetical order or by alphabetical index, and by classes of stock, the
names of the shareholders entitled to vote, the addresses of such
shareholders, and the number of shares held by such shareholder.  Said
records shall be presented at all meetings of the shareholders.
     Section 6.03.  Stock Transfer Books.  Transfers of stock shall be
made on the books of the Corporation only by the person named in the
certificate, or by attorney lawfully constituted in writing, and upon
surrender of the certificate therefore, or in the case of a certificate
alleged to have been lost, stolen or destroyed, upon compliance with the
provisions of Section 6.07 of these Bylaws.
    Section 6.04.  Determination of Shareholders.
       (a)  For the purpose of determining shareholders entitled to
notice of or to vote at any meetings of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend, or in order to
make a determination of shareholders for any other proper purpose, the
Board of Directors may provide that stock transfer books shall be closed
for a stated period not to exceed fifty days.  If the stock transfer
books shall be closed for the purpose of determining shareholders
entitled to notice or to vote at a meeting of shareholders, such books
shall be closed for at least ten days immediately preceding such meeting.
      (b)  In lieu of closing stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date to be not more than fifty days
and, in case of a meeting of shareholders, not less than ten days, prior
to the date on which the particular action requiring such determination
of shareholders is to be taken.
     Section 6.05.  Shareholder Rights.  The Corporation shall be
entitled to treat the holder of any share of stock of the Corporation as
the person entitled to vote such share and to receive any dividend or
other distribution with respect to such share, and for all other purposes
and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
      Section 6.06.  Transfer Agent.  The Board of Directors may appoint
one or more transfer agents and one or more registrars and may require
each stock certificate to bear the signature or signatures of a transfer
agent or a registrar or both.
      Section 6.07.  Replacement Certificates.  Any person claiming a
certificate of stock to be lost, stolen, or destroyed shall make an
affidavit or affirmation of the fact in such manner as the Board of
Directors may require and shall, if the Directors so require, give the
Corporation a bond of indemnity.  Such bond shall be in form and amount
satisfactory to the Board of Directors, and shall be with one or more
sureties, whereupon an appropriate new certificate may be issued in lieu
of the one alleged to have been lost, stolen or destroyed.
                   ARTICLE VII.  MISCELLANEOUS
     Section 7.01.  Inspection of Books.  The Board of Directors shall
have power to determine which accounts and books of the Corporation, if
any, shall be open to the inspection of the shareholders, execept with
respect to such accounts, books, and records as may by law be
specifically open to inspection by the shareholders, and shall have power
to fix reasonable rules and regulations not in conflict with the
applicable law, if any, for the inspection of records, accounts, and
books which by law or by determination of the Board of Directors shall be
open to inspection, and the shareholders' rights to this respect are and
shall be restricted and limited accordingly.
     Section 7.02.  Fiscal Year.  The fiscal year of the Corporation
shall be fixed from time to time by resolution of the Board of Directors.
     Section 7.03.  Seal.  The corporate seal shall be in such form as
the Board of Directors may from time to time determine.  In the event it
is inconvenient to use such seal at any time, the signature of the
Corporation followed by the word "SEAL" or "CORPORATE SEAL" enclosed in
parenthesis or scroll, shall be deemed to be the seal of the Corporation.
      Section 7.04.  Annual Statements.  Not later than four months after
the close of each fiscal year, and in any case prior to the next annual
meeting of shareholders, the Corporation shall prepare:
      (1)  a balance sheet showing in reasonable detail the financial
condition of the Corporation as of the close of its fiscal year, and
      (2)  a profit and loss statement showing the results of its
operation during its fiscal year.
Upon written request, the Corporation promptly shall mail to any
shareholder of record a copy of the most recent such balance sheet and
profit and loss statement.
     Section 7.05.  Appointment of Agents.  The Chairman of the Board,
the President, or any Vice President shall be authorized and empowered in
the name of and as the act and deed of the Corporation to name and
appoint general and special agents, representatives, and attorneys to
represent the Corporation in the United States or in any foreign country
or countries; to name and appoint attorneys and proxies to vote any
shares of stock in any other Corporation at any time owned or held of
record by the Corporation; to prescribe, limit, and define the powers and
duties of such agents, representatives, attorneys, and proxies; and to
make substitution, revocation, or cancellation in whole or in part of any
power or authority conferred on any such agent, representative, attorney,
or proxy.  All powers of attorney or other instruments under which such
agents, representatives, attorneys, or proxies shall be so named and
appointed shall be signed and executed by the Chairman of the Board, the
President, or a Vice President, and the corporate seal shall be affixed
thereto.  Any substitution, revocation, or cancellation shall be signed
in like manner, provided always that any agent, representative, attorney,
or proxy, when so authorized by the instrument appointing him, may
substitute or delegate his powers in whole or in part and revoke and
cancel such substitutions or delegations.  No special authorization by
the Board of Directors shall be necessary in connection with the
foregoing, but this Bylaw shall be deemed to constitute full and complete
authority to the Officers above designated to do all the acts and things
as they deem necessary or incidental thereto or in connection therewith.
    Section 7.06.  Indemnification.
      (a)  Under the circumstances prescribed in this Section 7.06, the
Corporation shall indemnify and hold harmless any person who was or is a
party or is threatened to be made a party of any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and whether formal or informal (a
"Proceeding"), by reason of the fact that he is or was a Director or
Officer of the Corporation, or, while a Director or Officer, is or was
serving at the request of the Corporation as an officer, director,
partner, joint venturer, trustee, employee, or agent of another foreign
or domestic Corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against the obligation to pay a
judgment, settlement, penalty, fine or reasonable expenses (including
attorney's fees) actually and reasonably incurred by him in connection
with such Proceeding, if he had no reasonable cause to believe his
conduct was unlawful.  Notwithstanding the above, the indemnification
permitted hereunder in connection with a Proceeding by or in the right of
the Corporation is limited to reasonable expenses (including attorney's
fees) incurred in connection with the Proceeding.
       (b) The termination of any Proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contender or its
equivalent shall not, of itself, create a presumption that the person did
not meet the standard of conduct set forth in Section 7.06(a).
       (c) Notwithstanding the foregoing, the Corporation shall not
indemnify any Director or Officer in connection with any Proceeding (i)
by or in the right of the Corporation in which said person was adjudged
liable to the Corporation, or (ii) in which he was adjudged liable on the
basis that personal benefit was improperly received by him.
       (d) To the extent that a Director or Officer has been successful,
on the merits or otherwise, in the defense of any Proceeding to which he
was a party because he is or was a Director or Officer, or in the defense
of any claim, issue or matter therein, the Corporation shall indemnify
him against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
      (e) Except as provided in paragraph (d) of this Section 7.06 and
except as may be ordered by a court, the Corporation shall not indemnify
any Director or Officer unless authorized hereunder and a determination
has been made that indemnification of the Director or Officer is proper
in the circumstances because he has met the applicable standard of
conduct set forth in Section 7.06(a).  Such determination shall be made
in accordance with Section 14-2-855 of the Georgia Business Corporation
Code, as amended.
      (f) Reasonable expenses (including attorney's fees) incurred by a
Director or Officer who is a party to a Proceeding shall be paid by the
Corporation in advance of the final disposition of such Proceeding if (i)
the Director or Officer furnishes the Corporation a written affirmation
of his good faith belief that he has met the standard of conduct set
forth in Section 7.06(a), and (ii) the Director or Officer furnishes the
Corporation a written undertaking to repay any advances if it is
ultimately determined that he is not entitled to indemnification.
      (g) The indemnification provided by this Section 7.06 shall not be
deemed exclusive of any other right to which the persons indemnified
hereunder shall be entitled and shall inure to the benefit of the heirs,
executors, or administrators of such persons.
       (h) The Corporation may purchase and maintain insurance on behalf
of any person who is or was a Director or Officer of the Corporation, or
is or was serving at the request of the Corporation as a director,
officer, partner, joint venturer, trustee, employee benefit plan or other
enterprise, against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether
or not the Corporation would have the power to indemnify him against such
liability under the provisions of this Section 7.06.
      (i) If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or by an insurance carrier
pursuant to insurance maintained by the Corporation, the Corporation
shall, not later than the next annual meeting of the shareholders, unless
such meeting is held within three months from the date of such payment,
and, in any event, within fifteen months from the date of such payment,
send by first class mail to its shareholders of record at the time
entitled to vote for the election of Directors, a statement specifying
the persons paid, the amounts paid, and the nature and status at the time
of such payment of the litigation or threatened litigation.
     Section 7.07.  Reimbursement from Officers.  Any payments made to an
Officer of the Corporation such as salary, commission, bonus, interest,
rent, or entertainment expense incurred by him, which shall be disallowed
in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such Officer to the Corporation to the
full extent of such disallowance.  In lieu of payment by the Officer,
subject to the determination of the Board of Directors, proportionate
amounts may be withheld from his future compensation payments until the
amount owed to the Corporation has been recovered.
      Section 7.08.  Reimbursement of Personal Expenses.  Each Officer
and Director of the Corporation shall be required from time to time to
bear personally incidental expenses related to his responsibilities as an
officer an director which expenses unless specifically authorized shall
not be subject to reimbursement by the Company.
                      ARTICLE VIII.  AMENDMENTS
     Section 8.01.  Amendment.  The Bylaws of the Corporation may be
altered or amended and new Bylaws may be adopted by the shareholders at
any annual or special meeting of the shareholders or by the Board of
Directors at any regular or special meeting of the Board of Directors;
provided, however, that, if such action is to be taken at a meeting of
the shareholders, notice of the general nature of the proposed change in
the Bylaws shall have been given in the notice of the meeting.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>0003.txt
<TEXT>

                             ARTICLES OF INCORPORATION
                                      OF
                         INNOVATIVE COATINGS CORPORATION
                                      I.
The name of the Corporation is Innovative Coatings Corporation.
                                     II.
The Corporation is organized pursuant to the provisions of the Georgia
Business Corporation
                                     III.
The Corporation has perpetual duration
                                     IV.
The Corporation is organized for profit and for all lawful purpose or
purposes not specifically prohibited to corporations under the laws of
the State of Georgia
                                     V.
The Corporation has authority to issue not more than 10,000,000 shares of
common stock having a par value of $.01 per share
                                    VI.
Except as otherwise provided in these Articles of Incorporation and the
Corporation Bylaws, the holder of Company common shares shall have
exclusive ??? and power??? Shareholder meetings.
                                   VII.
The Board of Directors of the Corporation may, from time to time at its
discretion distribute a portion of its assets to the shareholders out of
the capital surplus of the Corporation.
                                   VIII.
The Corporation may upon consent or resolution by the Board of Directors
?? shares ?? to the extent of unreserved and ?? capital surplus ??????
                                    IX.
The Corporation shall not commence ??? it has received not less than ??
shares.
                                    X.
The shareholders of the Corporation shall have preemptive rights ???
shares of the Corporation.
                                     XI.
The street address of the mutual registered office of the corporation is
3064 Intrepid Wake, Marietta, Cobb County, Georgia 30062, and the mutual
registered agent of the corporation at such address is Jerry Phillips.
                                    XII.
The mutual address of the incorporator is Jerry Phillips, 3064 Intrepid
Wake, Marietta, Georgia 30062
                                   XIII.
The mailing address  of the initial principal office of the corporation
is 3OO64 Intrepid Wake, Marietta, Georgia 30062.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation
          This 4th day of August, 1997.
                                                 Incorporator
                                                 /s/ Jerry Phillips
                                                     Jerry Phillips

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>4
<FILENAME>0004.txt
<TEXT>

                                  ARTICLES OF AMENDMENT
                                           OF
                            INNOVATIVE COATINGS CORPORATION
                                          I.
     The name of the corporation is INNOVATIVE COATINGS CORPORATION.
                                          II.
         "Series A. Preferred Stock
     Shall have the designation, rights, preferences, powers,
restrictions and limitations set forth in a supplement of Article V as
follows:
    1.    Dividends.
          The holders of the Series A Preferred Stock shall not be
entitled to receive dividends.
    2.     Liquidation, Dissolution or Winding Up.
     (a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of shares of Series
A Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Company available for distribution to its stockholders,
after and subject to the payment in full of all amounts required to be
distributed to the holders of any other class or series of stock of the
Company ranking on liquidation prior and in preference to the Series A
Preferred Stock (collectively referred to as "Senior Preferred Stock"),
but before any payment shall be made to the holders of Junior Stock by
reason of their ownership thereof, an amount equal to $.0001 per share of
Series A Preferred Stock.  If upon any such liquidation, dissolution or
winding up of the Company the remaining assets of the Company available
for distribution to its stockholders shall be insufficient to pay the
holders of shares of Series A Preferred Stock the full amount to which
they shall be entitled, the holders of shares of Series A Preferred Stock
and any class or series of stock (the "Preferred Stock") ranking on
liquidation on a parity with the Series A Preferred Stock shall share
ratably in any distribution of the remaining assets and funds of the
Company in proportion to the respective amounts which would otherwise be
payable in respect of the shares held by them upon such distribution if
all amounts payable on or with respect to such shares were paid in full.
     (b) After the payment of all preferential amounts required to be
paid to the holders of Senior Preferred Stock upon the dissolution,
liquidation, or winding up of the Company, all the remaining assets and
funds of the Company available for distribution to its stockholders shall
be distributed ratably among the holders of the Series A Preferred Stock,
such other series of Preferred Stock as are constituted as similarly
participating, and the Common Stock, with each share of Series A
Preferred Stock being deemed, for such purpose, to be equal to the number
of shares of Common Stock, including fractions of a share, into which
such share of Series A Preferred Stock is convertible immediately prior
to the close of business on the business day fixed for such distribution.
    3.     Non-Voting.
     (a) No holder of outstanding shares of Series A Preferred Stock
shall be entitled to vote at each meeting of stockholders of the Company
(and written actions of stockholders in lieu of meetings) with respect to
any and all matters presented to the stockholders of the Company for
their action or consideration.
    4.     Optional Conversion.
     The holders of the Series A Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
      (a) Right to Convert.  Each share of Series A Preferred Stock shall
be convertible (the "Conversion"), the holder thereof, at any time and
from time to time, into an equal number of fully paid and nonassessable
shares of the Common Stock.
     (b) Fractional Shares.  No fractional shares of Common Stock shall
be issued upon conversion of the Series A Preferred Stock.
     (c) Mechanics of Conversion.
        (i) In order to convert shares of Series A Preferred Stock into
shares of Common Stock, the holder shall surrender the certificate or
certificates for such shares of Series A Preferred Stock at the office of
the transfer agent (or at the principal office of the Company if the
Company serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of shares
represented by such certificate or certificates.  Such notice shall state
such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be
issued.  If required by the Company, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Company, duly
executed by the registered holder or his or its attorney duly authorized
in writing.  The date of receipt of such certificates and notice by the
transfer agent or the Company shall be the conversion date ("Conversion
Date").  The Company shall, as soon as practicable after the Conversion
Date, issue and deliver at such office to such holder, or to his
nominees, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled.
      (ii) All shares of Series A Preferred Stock, which shall have been
surrendered for conversion as herein provided shall no longer be deemed
to be outstanding and all rights with respect to such shares shall
immediately cease and terminate on the Conversion Date, except only the
right of the holders thereof to receive shares of Common Stock in
exchange therefor.  Any shares of Series A Preferred Stock so converted
shall be retired and cancelled and shall not be reissued, and the Company
may from time to time take such appropriate action as may be necessary to
reduce the number of shares of authorized Series A Preferred Stock
accordingly.
     (d) Adjustment for Stock Splits and Combinations.  If the Company
shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion then
in effect immediately before that subdivision shall be proportionately
decreased.  If the Company shall at any time or from time to time after
the Original Issue date combine the outstanding shares of Common Stock,
the Conversion then in effect immediately before the combination shall be
proportionately increased.  Any adjustment under this paragraph shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
     (e) Notice of Record Date.  In the event that the Company subdivides
or combines its outstanding shares of Common Stock; then the Company
shall cause to be filed at its principal office or at the office of the
transfer agent of the Series A Preferred Stock, and shall cause to be
mailed to the holders of the Series A Preferred Stock at their last
addresses as shown on the records of the Company or such transfer agent,
at least ten days prior to the record date specified in the record date
of such subdivision or combination,
    5.     Mandatory Conversion.
      (a) The Company may, at its option, require all (and not less than
all) holders of shares of Series A Preferred Stock then outstanding to
convert their shares of Series A Preferred Stock into shares of Common
Stock, at the then effective Conversion pursuant to Section 4, at any
time on or after December 31, 1999, or (2), the conversion into Common
Stock of a majority of the outstanding shares of Series A Preferred
Stock; on such date as less than 4,600,000 shares of Series A Preferred
Stock shall be outstanding.
      (b) All holders of record shares of Series A Preferred Stock then
outstanding will be given at leas 10 days' prior written notice of the
date fixed and the place designated for mandatory or special conversion
of all such shares of Series A Preferred Stock pursuant to this Section
5.  Such notice will be sent by first class or registered mail, postage
prepaid, to each record holder of Series A Preferred Stock at such
holder's address last shown on the records of the transfer agent for the
Series A Preferred Stock (or the records of the Company, if it serves as
its own transfer agent).
                                   III.
     This Amendment was duly adopted and approved by the Directors of the
Corporation in accordance with the provisions of section 14-2-602 and 14-
2-1002 of the Georgia Business Corporation Code on June 1, 1998.
Shareholder approval was not required.  The amendment does not provide
for the exchange, reclassification or cancellation of issued shares.
     IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be made under the seal of the Corporation and signed and
attested by its duly authorized officers this 1st day of June, 1998.
                                      INNOVATIVE COATINGS CORPORATION
                                      By: /s/ Jerry S. Phillips
                                      Name:  Jerry S. Phillips
                                      Title: President
(Corporate Seal)
Attest:
/s/ C. Wayne Bean
Name: C. Wayne Bean
Title: Vice President

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>5
<FILENAME>0005.txt
<TEXT>

                              ARTICLES OF AMENDMENT
                                       OF
                          INNOVATIVE COATINGS CORPORATION
     The Articles of Incorporation of INNOVATIVE COATINGS CORPORATION,
originally flied with the Secretary Of State, State of Georgia, on August
6,1997, are hereby amended as follows:
1.
     The Amendment adopted by the Corporation is as follows:
     Article V of the Articles of Incorporation is hereby deleted in its
entirety and replaced in its entirety with a new Article V as follows:
     The total number of shares of stock which the Corporation is
authorized to issue is 20,000,000 shares of capital stock, of which
15,000,000 shares shall be designated as Common Stock, at $.01 par value
per share and 5,000,O00 shares shall be designated as Preferred Stock, at
$.01 par value per share.
     The designations and the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications,
and terms and conditions of redemption of the shares of preferred stock
are as follows:
     Preferred Stock.
     The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. The description of shares of
each series of Preferred Stock, including any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and term conditions of redemption shall be as set forth
in resolutions adopted by the Board of Directors, and articles of
amendment shall be filed with the Georgia Secretary of State as required
by law to be filed with respect to issuance of such Preferred Stock prior
to the issuance of any shares of such series.
     The Board of Directors is expressly authorized, at any time, by
adopting resolutions providing for the issuance of, or providing for a
change in the number of, shares of any particular series of Preferred
Stock and, if and to the extent from time to time required by law, by
filing articles of amendment which are effective without Shareholder
action to increase or decrease the number of shares included in each
series of Preferred Stock, but not below the number of shares then
issued, and to set or change in any one or more respects the
designations, preferences, conversion or other, voting powers,
restrictions, limitations as to dividends. qualifications or terms and
conditions of redemption relating to the shares of  such series.
Notwithstanding the foregoing, the Board of Directors shall not be
authorized to change the right of holders of the Common Stock of the
Corporation to vote one vote per share, on all matters submitted for
shareholder action. The authority Of the Board of Directors with respect
to each series of Preferred Stock shall include, but not be limited to,
setting or changing the following:
     i.   The annual dividend rate, if any, on shares of such Series the
times                   of payment and the date from which dividends
shall be accumulated, if dividends are to be cumulative;
    ii.   whether the shares of such series shall be redeemable and, if
so, the redemption price and the terms and conditions of such redemption;
   iii.   the obligation, if any, of the Corporation to redeem shares of
such series pursuant to a sinking fund;
    iv.   whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and, if
so, the terms and conditions of such conversion or exchange, including
the price or prices or the rate or rates of conversion or exchange and
the terms of adjustment, if any;
     v.   whether the shares of such series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the extent of
such voting rights;
    vi.   the rights of the shares of stock series in the event of
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation; and
   vii.   any other relative rights, powers, preferences, qualifications,
limitations or restrictions thereof relating to such series.
   The shares of Preferred Stock of any one series shall be identical
with each other in all respects except as to the dates from and after
which dividends thereon shall cumulate, if cumulative.
II.
     Article X regarding preemptive rights as deleted in its entirety.
III.
     The aforesaid Amendment was adopted by the Board of
Directors/Shareholders on June 8, 1998, in accordance with Section 14-2-
1003 of the Georgia Business Corporation Code.
IV.
     The remainder of the Articles of Incorporation shall remain
unchanged and in full force and effect.
     IN WITNESS THEREOF, INNOVATIVE COATINGS CORPORATION has caused these
Articles of Amendment to be executed and its corporate seal to be affixed
and has caused the foregoing to be attested effective on June 8, 1998.
                                          INNOVATE COATINGS CORPORATION
                                          BY:  /s/ Jerry S. Phillips
                                               JERRY S. PHILLIPS, CEO
ATTEST:
/s/ John C. Thomas, Jr.
JOHN C. THOMAS, JR.,
Assistant Secretary
(CORPORATE SEAL)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>6
<FILENAME>0006.txt
<TEXT>

                             ARTICLES OF AMENDMENT
                                      OF
                       INNOVATIVE COATINGS CORPORATION
     The Articles of Incorporation of INNOVATIVE COATINGS CORPORATION,
originally filed with the Secretary of State, State of Georgia, on July 1,
1998, are hereby amended as follows:
                                     I.
     The Amendment adopted by the Corporation is as follows:
     Article V of the Articles of Incorporation is hereby amended as
follows:
     The par value of the shares designated as Common stock shall be no
par value per share.
                                    II.
     The aforesaid Amendment was adopted by the Board of Directors,
without necessitating approval by the shareholders of the Corporation, in
accordance with Section 14-2-1002 of the Georgia Business Corporation
Code, on July 30, 1998.
                                   III.
     The remainder of the Articles of Incorporation shall remain unchanged
and in full force and effect.
     IN WITNESS WHEREOF, INNOVATIVE COATINGS CORPORATION has caused these
Articles of Amendment to be executed and its corporate seal to be affixed
and has caused the foregoing to be attested effective on the 31st day of
August, 1998.
                                   INNOVATIVE COATINGS CORPORATION
                                   By: /s/ Jerry S. Phillips
                                   Name: Jerry S. Phillips
                                   Title: President
Attest
/s/ John C. Thomas, Jr.
JOHN C. THOMAS, JR.
Assistant Secretary
(CORPORATE SEAL)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>0007.txt
<TEXT>

                          EMPLOYMENT and CONSULTING AGREEMENT

THIS EMPLOYMENT AND CONSULTING AGREEMENT ("Agreement") is made this
___ day of _________, 200_ by and between Innovative Coatings
Corporation, a Georgia corporation having its principal office at
1650 Airport Rd., Suite 110, Kennesaw, Georgia 30144 (the "Company");
and ________________, an individual residing at ____________________,
("Employee").

FOR AND IN CONSIDERATION of the mutual promises, agreements and
covenants contained herein, the parties hereto, intending to be
legally bound, do hereby agree as follows:

	1. Employment: Position and Duties. The Company hereby agrees
to employ Employee to act as, and to exercise all of the powers and
functions of, its ________________________ during the term hereof
(as set forth in paragraph 4 herein) and to perform such acts and
duties and to generally furnish such services to the Company and its
subsidiaries (if any) as is customary for a senior management person
with a similar position in like companies; and he shall have such
specific powers, duties and responsibilities as the Board of Directors
of the Company shall from time to time reasonably prescribe, provided
that such duties and responsibilities are consistent with Employee's
senior management position. Employee hereby agrees to accept such
employment and shall perform and discharge faithfully, diligently, and
to the best of his abilities such duties and responsibilities and shall
devote most of his working time and efforts to the business and affairs
of the Company and its subsidiaries; provided however, that, to the
extent consistent with the needs of the Company, Employee shall be
entitled to expend a reasonable amount of time on civic, public,
industry, and philanthropic activities and on the management of his own
investments and assets. Employee recognizes that as a matter of law the
election of a person to a board of directors is performed by the
shareholders of a corporation and that such election cannot generally
be the subject of a contractual agreement, however, as long as Employee
is elected to the board as a director, Employee shall perform all those
duties of a Director.

2. Place of Employment. During his employment hereunder, Employee's
principal place of employment shall be as required to conduct his duties
and responsibilities hereunder (except for routine and customary business
travel).

3. Compensation.
	(a) Base Salary. The Company shall pay to Employee an annual base
salary ("Base Salary") of $_________, payable in accordance with the
Company's customary payroll policy for its executives, and subject to
applicable tax and payroll deductions; and an annual non-accountable
expense allowance of $________ payable monthly. Employee's Base Salary
shall be reviewed annually by the Company's Board of Directors which
may make upward adjustments as within its discretion and it deems
appropriate.
	(b) Incentive Compensation. Employee's incentive compensation,
if any, shall be determined annually by the Company's Board of Directors.
	(c) Certain Other Benefits. During the term of this Agreement,
Employee shall be entitled to equity participate in any and all employee
benefit plans and arrangements which are available to senior executive
officers of the Company, including without limitation, group medical and
life insurance plans, accidental death benefit plans, disability
insurance plans, pension plans, and automobile expense reimbursement
allowances or Company-provided automobiles.

4. Term. The term of Employee's employment with the Company shall be for
a one-year period commencing ___________ or earlier and continuing
through __________ (the "initial term"); provided, however, that this
Agreement shall be automatically renewed for successive one-year periods
(each a "successor term"; and together with the initial term, generally
'the term') unless either party hereto gives written notice of
termination to the other party at least twelve months prior to the
expiration of the initial term or of any successor term. By way of
illustration, if neither party gives to the other party a written notice
of termination by ____________ this Agreement shall be automatically
renewed for a one-year period ending on ___________.

5. Stock Options. Periodic stock and incentive stock option grants to
Employee, if any, shall be determined by the Board of Directors.

6. Unauthorized Disclosure and Employee's Right of Ownership. For a
period of two years after termination of employment, Employee shall not
without the written consent of the Company, disclose to any person, other
than person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by Employee of his duties as an executive
officer of the Company, any material confidential information obtained by
Employee while in the employ of the Company with respect to the
businesses of the Company or any of its subsidiaries, including by not
limited to, operations, pricing, contractual or personnel date, products,
discoveries, improvements, trade secrets, license agreements, marketing
information, suppliers, dealers, principals, customers, or methods of
distribution, or any other confidential information the disclosure of
which Employee knows or in the exercise of reasonable care should know
will be damaging to the Company; provided, however, that confidential
information shall not include any information known generally to the
public (other than as a result of unauthorized disclosure by Employee)
or any information not otherwise considered by the Company to be
confidential. Furthermore, all inventions conceived or developed by
Employee in which the equipment, supplies, facilities, or trade secret
information of the Company was used, or that relate to the business of
the Company or to the Company's actual or demonstrably anticipated
research and development, or that result from any work performed by
Employee for the Company will remain the property of the Company. All
other inventions conceived or developed by Employee during the term of
this Agreement will remain the property of Employee.

7. Indemnification of Employee. The Company shall indemnify Employee if
Employee is made a party, or threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, or investigative, because Employee is
or was an officer or director of the Company or any of its subsidiaries,
affiliates, or successors, against expenses (including reasonable
attorneys fees and disbursements), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding to the fullest extent and in the manner
set forth in and permitted by the General Corporation Law of the State
of Georgia and any other applicable law in effort from time to time.

8. Termination.
(a) Termination Upon Death. If Employee dies during the term of
this Agreement, Employee's legal representatives shall be entitled to
receive the Base Salary through the last day of the first month
following the month in which Employee's death occurred. If in respect
of the fiscal year in which Employee dies he would otherwise have been
entitled to receive incentive compensation under paragraph 3(c) by
reason of the operations of the Company during such fiscal year,
Employee's legal representatives shall be entitled to receive a pro
rata portion of such incentive compensation determined by multiplying
the dollar amount of the incentive compensation involved by a fraction,
the numerator of which shall be the number of complete calendar months
that elapsed during the fisc4d year through the end of the month in
which Employee died and denominator of which shall be twelve.
(b) Termination Upon Disability or Incapacity. The Company may
terminate Employee's employment hereunder at the end of any calendar
month by giving written notice of termination to Employee in the event
of Employee's incapacity due to physical or mental illness which
prevents the proper performance of the duties of Employee set forth
herein or established pursuant hereto for a substantial portion of any
six-month period of Employee's term of employment hereunder. Any
questions as to the existence or extent of illness or incapacity of
Employee upon which the Company and Employee cannot agree shall be
determined by a qualified independent physician selected by the Company
and approved by Employee (or, if Employee is unable to give such
approval, by any adult member of the immediate family or the duly
appointed guardian of Employee). The determination of such physician
certified in writing to the Company and to Employee shall be final and
conclusive for all purposes of this Agreement. In the event of any such
termination pursuant to this subparagraph 8(b), Employee shaft be
entitled to receive his Base Wary through the last day of the month in
which this Agreement is terminated. If in respect of the fiscal year in
which Employee's employment terminates pursuant to this subparagraph 8(b)
he would otherwise have been entitled to receive incentive compensation
under paragraph 3(c) by reason of the operations of the Company during
such fiscal year, Employee shall be entitled to receive a pro rata
portion of such incentive compensation determined by multiplying the
dollar amount of the incentive compensation by a fraction, the numerator
of which shall be the number of complete calendar months that elapsed
during the fiscal year through the end of the month in which Employee's
employment terminated pursuant to subparagraph 8(b) and the denominator
of which shall be twelve.
(c)Termination for Cause. The Company may terminate Employee's
employment hereunder for "cause" (as hereinafter defined) by giving
written notice of termination of this Agreement to Employee. For the
purpose of this Agreement, the Company shall have "cause" to terminate
Employee's employment hereunder upon Employee's(l) habitual drunkenness
or drug addiction or willful failure materially to perform and discharge
his duties and responsibilities hereunder, or (ii) misconduct that is
materially and significantly injurious to the Company, or (iii)
conviction of a felony involving the personal dishonesty of Employee or
moral turpitude, or (iv) conviction of Employee of any crime or offense
involving the property of the Company. Upon any such termination for
cause under this subparagraph 8(c), the Company shall pay Employee his
Base Salary through the date of termination, and the Company shall have
no further obligations under this Agreement.
(d) Termination Without Cause. The Company shall have the right to
terminate Employee's employment under this Agreement at any time, without
cause, by giving Employee not less than sixty (60) days prior written
notice of such termination. Until the effective date of any such
termination, the Company shall continue to pay to Employee the full
compensation specified in this Agreement. In addition, on the effective
date of termination the Company shad pay to Employee the full amount of
all Base Salary to which Employee would otherwise have been paid
throughout the remaining term (including any successor term, if
applicable) of this Agreement.

9. Reimbursement of Legal Fees. The Company agrees to reimburse Employee
for reasonable attorneys fees, if any, incurred in connection with the
negotiation, preparation, and execution of this Agreement.

10. Application for Insurance. The Company at its option has the right to
obtain a "key-man" life insurance policy, at the Company's expense, with
the Company being the sole beneficiary of such policy. Employee hereby
agrees to undergo the necessary physical examinations and disclose any
pertinent disclaimers and information to obtain said policy.

11. Miscellaneous.
(a) Assignment and Binding Effect. The respective rights and
obligations of the parties under this Agreement shall be binding upon
the parties hereto and their heirs, executors, administrators,
successors, and assigns, including, in the case of the Company, any
other corporation or entity with which the Company may be merged or
otherwise combined or which may acquire all or substantially all of the
Company's assets and, in the case of Employee, his estate or other
legal representatives; provided that Employee may not assign his rights
hereunder without the prior written consent of the Company.
(b) Governing Law. This Agreement shall be governed as to its
validity, interpretation and effect by the laws of the State of Georgia.
(c) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid, illegal, or
unenforceable for any reason, the remaining provisions and portions of
this Agreement shall remain in full force and effect to the fullest
extent permitted by law. Such invalid, illegal, or unenforceable
provision(s) shall be deemed modified to the extent necessary to make it
(them) valid, legal and enforceable.
(d) Entire Agreement; Amendments. This Agreement constitutes the
entire agreement and understanding of the Company and Employee with
respect to the terms of Employee's employment with the Company and
supersedes all prior discussions, understandings, and agreements with
respect thereto.
(e) Captions. All captions and headings used herein are for
convenient reference only and do not form part of this Agreement.
(f) Waiver. The waiver of a breach of any term or provision of this
Agreement shall not operate as or be construed to be a waiver of any
other or subsequent breach or this Agreement.
(g)Notice. Any notice or communication required or permitted under
this Agreement shall be made in writing and shall be delivered by hand,
or mailed by registered or certified mail, return receipt requested,
first class postage prepaid, addressed as follows:

If to Employee:




If to the Company:

Innovative Coatings Corporation
1650 Airport Rd., Suite 110
Kennesaw, Georgia 30144
Attn: Chief Executive Officer

(h) Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute one and the same Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.

Employee				Innovative Coatings Corporation

----------------------		-------------------------------
	(Signature)				(Signature)

	----------------------		By: ---------------------------
(Printed Name)			Its: --------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-22
<SEQUENCE>8
<FILENAME>0008.txt
<TEXT>

                               Exhibit 22

                   Subsidiaries of the Registrant



None

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>9
<FILENAME>0009.txt
<TEXT>

                                Tauber and Balser, P.C.
                            3340 Peachtree Road, Suite 250
                               Atlanta, Georgia 30326

                   CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


We consent to the incorporation be reference of our report dated May 15,
2000 included in the December 20, 2000 Form 10-SB of Innovative Coatings
Corporation.


/s/ Tauber and Balser, P.C.

Tauber and Balser, P.C.
Atlanta, Georgia
December 20, 2000

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>10
<FILENAME>0010.txt
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1

<S>                             <C>                <C>

<PERIOD-TYPE>                   12-MOS             9-MOS
<FISCAL-YEAR-END>               DEC-31-1999        DEC-31-2000
<PERIOD-END>                    DEC-31-1999        SEP-30-2000
<CASH>                          23,243             52,876
<SECURITIES>                    0                  0
<RECEIVABLES>                   102,078            158,096
<ALLOWANCES>                    73,352             73,352
<INVENTORY>                     74,192             123,395
<CURRENT-ASSETS>                160,253            374,010
<PP&E>                          81,997             79,532
<DEPRECIATION>                  14,023             23,388
<TOTAL-ASSETS>                  228,227            453,542
<CURRENT-LIABILITIES>           106,638            358,920
<BONDS>                         0                  0
<PREFERRED-MANDATORY>           0                  0
<PREFERRED>                     46,000             46,000
<COMMON>                        1,007,756          1,975,280
<OTHER-SE>                      (1,203,523)        (1,926,658)
<TOTAL-LIABILITY-AND-EQUITY>    228,227            453,542
<SALES>                         707,809            431,453
<TOTAL-REVENUES>                707,809            431,453
<CGS>                           458,982            250,353
<TOTAL-COSTS>                   853,215            896,008
<OTHER-EXPENSES>                0                  0
<LOSS-PROVISION>                0                  0
<INTEREST-EXPENSE>              91,396             8,317
<INCOME-PRETAX>                 (695,784)          (723,135)
<INCOME-TAX>                    0                  0
<INCOME-CONTINUING>             (695,784)          (723,135)
<DISCONTINUED>                  0                  0
<EXTRAORDINARY>                 0                  0
<CHANGES>                       0                  0
<NET-INCOME>                    (695,784)          (723,135)
<EPS-BASIC>                   (0.12)             (0.01)
<EPS-DILUTED>                   (0.12)             (0.08)




</TABLE>
</TEXT>
</DOCUMENT>
</SUBMISSION>
