INTERNATIONAL SMART SOURCING INC, SB-2/A, 1999-03-23

INTERNATIONAL SMART SOURCING INC
SB-2/A, 1999-03-23
PLASTICS PRODUCTS, NEC

Previous: CHAPMAN CAPITAL MANAGEMENT HOLDINGS INC, 424B3, 1999-03-23

Next: AMRESCO RESIDENTIAL SECURITIES CORP MORTGAGE LOAN TR 1998-2, 10-K, 1999-03-23

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 1999.

REGISTRATION NO. 333-48701
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 6
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

INTERNATIONAL SMART SOURCING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3089 11-3423157
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>

INTERNATIONAL SMART SOURCING, INC.
320 BROAD HOLLOW ROAD
FARMINGDALE, NEW YORK 11735
(516) 293-0750
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------

ANDREW FRANZONE, CHIEF EXECUTIVE OFFICER
INTERNATIONAL SMART SOURCING, INC.
320 BROAD HOLLOW ROAD
FARMINGDALE, NEW YORK 11735
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------

Copies to:

<TABLE>
<S> <C>
CARL SELDIN KOERNER, ESQ. ROBERT H. COHEN, ESQ.
GUIDO A. PANZERA, ESQ. PHILIP MAGRI, ESQ.
KOERNER SILBERBERG & WEINER, LLP MORRISON COHEN SINGER & WEINSTEIN, LLP
112 MADISON AVENUE 750 LEXINGTON AVENUE
NEW YORK, NEW YORK 10016 NEW YORK, NEW YORK 10022
TELEPHONE: (212) 689-4400 TELEPHONE:(212) 735-8600
FACSIMILE: (212) 689-3077 FACSIMILE:(212) 735-8708
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement is declared effective.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of offer to buy nor shall there be any sale of these securities in
any State in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION DATED MARCH 23, 1999

PROSPECTUS

International Smart Sourcing, Inc.

1,250,000 SHARES OF COMMON STOCK [LOGO]

1,250,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS

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

This Prospectus relates to an offering (the "Offering") by International
Smart Sourcing, Inc., a Delaware corporation (the "Company"), of 1,250,000
shares of common stock of the Company, par value $.001 per share (the "Common
Stock"), and 1,250,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") (collectively, the "Securities"). The shares of Common Stock and the
Warrants may be purchased separately. Each Warrant entitles the registered
holder thereof to purchase one share of Common Stock at a price of $5.00,
subject to adjustment under certain circumstances, for a five-year period
commencing 12 months from the date of this Prospectus. The Warrants are
redeemable by the Company at any time, commencing 12 months from the date of the
Prospectus, upon notice of not less than 30 days, at a price of $.10 per
Warrant, provided that the average closing bid quotation of the Common Stock as
reported on the Nasdaq SmallCap Market ("Nasdaq SmallCap") or the Boston Stock
Exchange ("BSE"), if traded thereon, or if not traded thereon, the average
closing sale price if listed on a national or regional securities exchange, for
any 20 trading days within a period of 30 consecutive trading days ending on the
15th day prior to the day on which the Company gives notice equals or exceeds
150% of the then current Warrant exercise price, subject to the right of the
holder to exercise such Warrants prior to redemption. See "Description of
Securities."

Prior to the Offering, there has been no public market for the Common Stock
or Warrants and there can be no assurance that any such market will develop, or
if developed, be sustained. It is anticipated that the Common Stock and Warrants
will be quoted on Nasdaq SmallCap under the symbols "ISMT" and "ISMTW,"
respectively, and on the BSE as "ISM" and "ISMW," respectively. The respective
offering prices of the Common Stock and Warrants, and the exercise price of the
Warrants, were determined pursuant to negotiations between the Company and
Network 1 Financial Securities, Inc. (the "Underwriter") and do not necessarily
relate to the Company's book value or any other established criteria of value.
For a discussion of the factors considered in determining the Offering prices,
see "Underwriting."
------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS
WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" COMMENCING ON PAGE 8.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

[CAPTION]
<TABLE>
UNDERWRITING DISCOUNTS
PRICE TO PUBLIC AND COMMISSIONS(1) PROCEEDS TO COMPANY(2)
<S> <C> <C> <C>
Per Share......................................... $4.50 $.45 $4.05
Per Warrant....................................... $.10 $.01 $.09
Total(3).......................................... $5,750,000 $575,000 $5,175,000
</TABLE>

(1) In addition, the Company has agreed to pay to the Underwriter a 3%
nonaccountable expense allowance and to sell to the Underwriter, for nominal
consideration, warrants to purchase up to 125,000 shares of Common Stock
and/or up to 125,000 Warrants. The Company has agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses, estimated at $1,450,000, payable by the Company,
including the Underwriter's nonaccountable expense allowance.

(3) The Company has granted the Underwriter an option, exercisable within
45 days from the date of this Prospectus, to purchase up to 187,500
additional shares of Common Stock and/or 187,500 additional Warrants on the
same terms and conditions as set forth above, solely for the purpose of
covering over-allotments, if any. If such option is exercised in full, the
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $6,612,500, $661,250 and $5,951,250, respectively.
------------------------

The Common Stock and Warrants are being offered, subject to prior sale,
when, as and if delivered and accepted by the Underwriter and subject to the
approval of certain legal matters by counsel and to certain other conditions.
The Underwriter reserves the right to withdraw, cancel or modify the Offering
and to reject any order in whole or in part. It is expected that delivery of
certificates representing the Common Stock and Warrants contained therein, will
be made against payment therefor at the offices of Network 1 Financial
Securities, Inc. on or about , 1999.

NETWORK 1 FINANCIAL
SECURITIES, INC.

THE DATE OF THIS PROSPECTUS IS , 1999

<PAGE>

INTERNATIONAL SMART SOURCING, INC.
---------------------------------------------------------------------------

[LOGO]

The Company intends to expand its operations through (i) the
acquisition and development of injection molded plastic products and
assemblies manufactured in the United States having niche markets, (ii)
the redesigning of such products and assemblies, if necessary, to
improve their function and appearance and (iii) the manufacturing of
such products and assemblies in the The People's Republic of China
("China") at lower prices and improved profit margins. Through a
consultant who is also a director of the Company (the "Consultant"), the
Company has established direct contact with manufacturers in China and
has initiated pilot overseas manufacturing projects in China of
small-scale production runs of various products, including separate
projects through an affiliated company, Allen Field Co., Inc. ("AFC").
Currently, the Company has purchase orders with eight different
suppliers in China. There can be no assurance that the Company will be
able to consummate any acquisitions, maintain or establish additional
manufacturing relationships in China or achieve any of its growth
strategies. See "Prospectus Summary" and "Risk Factors--Risks Relating
to Manufacturing in China."

While small businesses comparable in size to the Company often
encounter major difficulties in securing manufacturing projects in China
due to prohibitive broker commissions and agency fees incurred both
domestically and abroad, which, based upon the Company's experience,
could account for up to 25% of the entire manufacturing project, the
Company, through the Consultant, has established direct contact with
certain manufacturers in China, allowing the Company to avoid such
commissions and fees and realize the benefit from lower costs of raw
materials and labor. For example, two of EHC's principal raw materials
at this time, ABS and polycarbonate, cost up to 50% less in China and
the cost of labor for factory workers in China was approximately $.33
per hour for the year ended 1997. To date, the Company has no written
contracts or arrangements with any manufacturer located in China and
there can be no assurance that the Company will be able to enter into
any such contracts or arrangements on favorable terms, if at all. Based
on its assessment of pilot manufacturing projects in China through AFC,
the Company believes that it can reduce its overall domestic
manufacturing costs, including shipping and tariffs, by more than 25%.
Although there can be no assurance of future results, based on such pilot
manufacturing projects, the Company has reduced overall domestic
manufacturing costs by 33% for the year ended December 26, 1998,
compared to its anticipated 25% reduction. See "Prospectus Summary", "Risk
Factors--Risks Relating to Manufacturing in China" and "Certain Transactions."

INTERNATIONAL SMART SOURCING, INC.
320 Broad Hollow Road, Farmingdale, NY 11735
1.516.293.0750 FAX 516.752.1971

<PAGE>

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE
COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) MAY ENGAGE IN PASSIVE MARKET-MAKING TRANSACTIONS IN THE COMMON STOCK
AND WARRANTS ON THE NASDAQ SMALLCAP MARKET IN ACCORDANCE WITH RULE 103 OF
REGULATION M. SEE "UNDERWRITING."

<PAGE>

CALIFORNIA RESIDENTS:

(1) This offering was approved by the State of California on the basis of a
limited offering qualification where offers and sales can only be made to
proposed investors based on their meeting certain suitability standards as
described below and the Company did not have to demonstrate compliance with
some or all of the merit regulations of the Department of Corporations as
found in Title 10, California Code of Regulations, Rules 260.140 et seq.

(2) The exemptions provided by Section 25104(h) of the Corporate Securities Law
of 1968, as amended, will be withheld but there may be other exemptions
available.

(3) The securities of the Company will be sold to California residents pursuant
to a limited offering qualification under a suitability standard of a liquid
net worth of not less than $250,000 (a net worth exclusive of home, home
furnishings and automobiles) plus a gross annual income of $65,000 or a
liquid net worth of $500,000; OR a net worth (inclusive) of $1,000,000 or a
gross annual income of $200,000.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this prospectus (the
"Prospectus"). References to the "Company" include International Smart Sourcing,
Inc., a Delaware corporation, and its wholly owned subsidiaries as of the
reorganization defined below, Electronic Hardware Corp., a New York corporation
("EHC") and Compact Disc Packaging Corp., a Delaware corporation ("CDP"), unless
otherwise indicated. Unless the context otherwise requires, this Prospectus
assumes (i) the reorganization of the Company effective as of December 24, 1998
(the "Reorganization") described more fully in "Certain Transactions,"
(ii) that the Underwriter's over-allotment option will not be exercised,
(iii) that the 125,000 shares of Common Stock and 125,000 Warrants issuable upon
the exercise of the warrant granted to the Underwriter in connection with this
Offering will not be outstanding ("Underwriter's Warrants") and (iv) that the
Redeemable Common Stock Purchase Warrants ("Warrants") will not be exercised,
unless otherwise indicated. This Prospectus contains forward-looking statements
involving risk and uncertainties. The Company's actual results may differ
significantly from the results discussed in such forward-looking statements.
Factors that might cause such differences include, but are not limited to, those
discussed in "Risk Factors."

THE COMPANY

The Company, through its principal subsidiary, EHC, has over 28 years of
experience in the design, marketing and manufacture of injection molded plastic
components and assemblies, including consumer, industrial and military knobs and
custom and mechanical assemblies, including micro verniers, push or pull-to-
turn clutch knobs and detent knobs. EHC also produces hardware items, including
shaft locks, mounting brackets, test jack covers, cabinet bumpers and captive
screws. The Company believes that EHC's long-term success is due to the average
29-year experience of its management team, strategic acquisitions of
complementary companies, products and product lines and its ability to adapt new
technologies and advanced manufacturing concepts to produce high-quality
products at competitive prices.

GROWTH STRATEGY

The Company intends to expand its operations through (i) the acquisition
and development of injection molded plastic products and assemblies manufactured
in the United States having niche markets, (ii) the redesigning of such products
and assemblies, if necessary, to improve their function and appearance and
(iii) the manufacturing of such products and assemblies in the People's Republic
of China ("China") at lower prices and improved profit margins. Through a
consultant who is also a director of the Company (the "Consultant"), the Company
has established direct contact with manufacturers in China and has initiated
pilot overseas manufacturing projects in China of small-scale production runs of
various products, including separate projects through an affiliated company,
Allen Field Co., Inc. ("AFC"). Currently, the Company has purchase orders with
eight different suppliers in China. There can be no assurance, however, that the
Company will be able to consummate any acquisitions, maintain or establish
additional manufacturing relationships in China or achieve any of its growth
strategies. See "Risk Factors--Risks Relating to Manufacturing in China."

While small businesses comparable in size to the Company often encounter
major difficulties in securing manufacturing projects in China due to
prohibitive broker commissions and agency fees incurred both domestically and
abroad, which, based upon the Company's experience, could account for up to 25%
of the entire manufacturing project, the Company, through the Consultant, has
established direct contact with certain manufacturers in China, allowing the
Company to avoid such commissions and fees and realize the benefit from lower
costs of raw materials and labor. For example, two of EHC's principal raw
materials at this time, AcrylonitirleButadiene Styrene ("ABS") and
polycarbonate, cost up to 50% less in China and the cost of labor for factory
workers in China was approximately $.33 per hour for the year ended 1997. To
date, however, the Company has no written contracts or arrangements with any
manufacturer located in China and there can be no assurance that the Company
will be able to enter into any such contracts or arrangements on favorable
terms, if at all. Based on its assessment of pilot manufacturing projects in
China through AFC, the Company believes that it can reduce its overall domestic
manufacturing costs, including shipping and tariffs, by more than 25%. Although

3
<PAGE>

there can be no assurance of future results, based on such pilot manufacturing
projects, the Company has reduced overall domestic manufacturing costs by 33%
for the year ended December 26, 1998, compared to its anticipated 25% reduction.
See "Risk Factors--Risks Relating to Manufacturing in China" and "Certain
Transactions."

PRODUCTS

Control Knobs and Assemblies

The Company, through its wholly-owned subsidiary EHC, manufactures a full
line of instrument control knobs, handles, value-added custom molding, dials and
similar devices for consumer, industrial and military electronics equipment.
EHC's knobs are used for precise setting of switches, on/off switches, volume
controls and critical setting of instrumentation switches. EHC manufactures a
standard line of knobs and knobs based on customers' exacting specifications.
Customers of EHC order the knobs by specifying particular descriptions and
features, including the shaft diameter, outer diameter, overall size, height,
color, illumination, dials and markings, such as lines, dots or numbers.

The Pull Pack(Trademark)

In March 1998, the Company, through CDP, a wholly-owned subsidiary, entered
into a five-year exclusive worldwide licensing agreement to manufacture, market,
sell and sub-license the Pull Pack(Trademark), a proprietary Disc packaging
system. The Pull Pack(Trademark) is a redesigned "Jewel Box," the packaging used
currently for Compact Discs, CD ROMs and Digital Video Discs ("DVD"). The Pull
Pack(Trademark) utilizes a drawer-like mechanism, avoiding the problems often
associated with currently available Disc packaging involving fragile hinges,
difficulty in opening and the removal of Discs and descriptive literature. See
"Business--Patents, Trademarks, Licenses and Royalty Rights."

A prototype version of the Pull Pack(Trademark) won the International
Design Magazine Award for Packaging in 1993. Between 1993 and 1997, Inch, Inc.,
the inventor of the Pull Pack(Trademark), explored various design concepts and
manufacturing methods and processes to reduce production costs in order to
enable the Pull Pack(Trademark) to become economically competitive. Late in
1997, the Company proposed to Inch, Inc. a more cost-efficient method of
producing the Pull Pack(Trademark) by utilizing the Company's sources in China.
The Company believes that by utilizing its contacts with Chinese manufacturers,
it can produce the Pull Pack(Trademark) on a cost-efficient and competitive
basis.

The Company acquired CDP by means of an agreement and plan of
reorganization effective December 24, 1998, whereby the Company issued 445,000
shares of its Common Stock for all of the issued and outstanding stock of CDP.
The purchased cost of such acquisition was $2,238,000, based upon the proposed
initial public offering price of the shares issued. The Company has allocated
$500,000 to the value of the exclusive license agreement which grants CDP the
right to manufacture, market and sell the Pull Pack(Trademark). The license
agreement will be amortized over a period of 10 years. Additionally, the Company
has allocated $1,738,000 to the value of the goodwill attributed to the
acquisition of CDP. Such charge to goodwill will be amortized over a period of
10 years. As a result of the amortization for both the license agreement and
goodwill, there will be a charge to the Company's operating and net income in
the approximate amount of $225,000 for each year during the next 10 years. Such
charge will adversely affect the results of the Company's future operating and
net income. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

The Company is currently negotiating with offshore manufacturers in China
to produce the Pull Pack(Trademark) and plans, although there can be no
assurance, to market the product as a specialty packaging system to a targeted
niche market, including CD ROM, special production, retail replacement packaging
and rental and institutional markets such as video stores, lending libraries and
technical research facilities. For the year ended December 31,

4
<PAGE>

1997, the market for Jewel Boxes sold in the music industry in the United States
was approximately $82,000,000 and the Company believes that the target niche
market for the Pull Pack(Trademark) is approximately $50,000,000. See "Risk
Factors--Initial Manufacturing Phase of the Pull Pack(Trademark); No Assurance
of Market Acceptance."

The Company was formed in 1970 as EHC, a New York corporation, and was
reorganized as of December 24, 1998 as a Delaware holding company for its two
wholly-owned subsidiaries, EHC and CDP. The Company changed its name from
International Plastic Technologies, Inc. to International Smart Sourcing, Inc.
on December 7, 1998. The Company maintains its principal executive offices at
320 Broad Hollow Road, Farmingdale, New York 11735. The Company's telephone
number is (516) 293-0750 and its internet address is http://www.ehcknobs.com.
See "Certain Transactions."

<PAGE>

THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
SECURITIES OFFERED................... 1,250,000 shares of Common Stock and 1,250,000 Warrants, each Warrant
entitling the holder to purchase one share of Common Stock at an exercise
price of $5.00 per share. The shares of Common Stock and the Warrants may
be purchased separately. See "Risk Factors--Possible Redemption of
Warrants and Effect on Common Stock" and "Description of Securities."

COMMON STOCK OUTSTANDING PRIOR TO THE
OFFERING(1)........................ 1,945,000

COMMON STOCK TO BE OUTSTANDING AFTER
THE OFFERING(2).................... 3,195,000

WARRANTS TO BE OUTSTANDING AFTER THE
OFFERING(3)........................ 1,250,000

TERMS OF THE PUBLIC WARRANTS......... Each Warrant is exercisable for a five-year period, commencing one year
from the date of this Prospectus, and entitles the holder thereof to
purchase one share of Common Stock at an exercise price of $5.00 per
share, subject to adjustment in certain circumstances. The Warrants are
redeemable by the Company at any time commencing one year after the date
of this Prospectus, at a price of $.10 per Warrant, upon not less than 30
days prior written notice to the registered holders of the Warrants,
provided that the average closing bid quotation of the Common Stock as
reported on Nasdaq or BSE, if traded thereon, or if not traded thereon,
the average closing sale price if listed on a national or regional
securities exchange, equals or exceeds 150% of the exercise price per
share of Common Stock for any 20 trading days within a period of 30
consecutive trading days ending on the 15th day prior to the day on which
the Company gives notice of redemption. See "Description of
Securities--Warrants."

USE OF PROCEEDS...................... The Company intends to use the net proceeds of the Offering for inventory
purchases and staffing, potential acquisitions, tooling, sales and
marketing, facilities and equipment, research and development, repayment
of debt, dividends to existing stockholders and working capital. See "Use
of Proceeds."

RISK FACTORS......................... The Securities offered hereby are speculative and involve a high degree of
risk and immediate substantial dilution and should not be purchased by
investors who cannot afford the loss of their entire investment. See "Risk
Factors" and "Dilution."
PROPOSED NASDAQ SMALLCAP MARKET
SYMBOLS(4)......................... Common Stock: ISMT
Warrants: ISMTW

PROPOSED BOSTON STOCK EXCHANGE
SYMBOLS(4)......................... Common Stock: ISM
Warrants: ISMW
</TABLE>

- ------------------
(1) Does not include 300,000 shares of Common Stock or options which may be
granted pursuant to the Company's Stock Option and Grant Plan. See
"Management--Stock Option and Grant Plan."

(2) Does not include (i) 1,250,000 shares of Common Stock reserved for issuance
upon exercise of the Warrants; (ii) 187,500 shares of Common Stock issuable
upon exercise of the Underwriter's over-allotment option; (iii) 187,500
shares of Common Stock issuable upon exercise of the Warrants underlying the
Underwriter's over-allotment option; (iv) 125,000 shares of Common Stock
reserved for issuance upon exercise of the Underwriter's Warrants;
(v) 125,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Underwriter's Warrants and (vi) 300,000 shares of Common
Stock or options which may be granted pursuant to the Company's Stock Option
and Grant Plan. See "Management--Stock Option and Grant Plan," "Description
of Securities" and "Underwriting."

(3) Does not include (i) 125,000 Warrants issuable to the Underwriter upon
exercise of the Underwriter's Warrants and (ii) 187,500 Warrants issuable
upon exercise of the Underwriter's over-allotment option.

(4) The Nasdaq SmallCap Market and Boston Stock Exchange trading symbols do not
imply that a liquid and active market will be developed or sustained for the
Common Stock or Warrants upon completion of the Offering.

<PAGE>

SUMMARY OF FINANCIAL INFORMATION

The summary financial information as of December 26, 1998 and for each of
the years in the two years in the period ended December 26, 1998 has been
abstracted from the financial statements of the Company included elsewhere
herein (audited, with the exception of the pro-forma information). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Consolidated Financial Statements."

<TABLE>
<CAPTION>
HISTORICAL PRO-FORMA(1)
---------------------------------- ----------------
YEAR ENDED YEAR ENDED
---------------------------------- ----------------
DECEMBER 26, DECEMBER 27, DECEMBER 26,
1998 1997 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales............................................................ $ 5,883,001 $ 6,054,747 $5,883,001
----------- ----------- ----------
----------- ----------- ----------
Cost of Sales........................................................ 4,153,387 3,831,599 4,153,387
----------- ----------- ----------
----------- ----------- ----------
Net Income (Loss) Before Income Taxes................................ (224,586) 245,255 (554,072)
Provision for taxes.................................................. 66,760 -- --
----------- ----------- ----------
Net Income (loss).................................................... (291,346) 245,255 (554,072)
----------- ----------- ----------
----------- ----------- ----------
Net Income (Loss) Per Share.......................................... (0.19) 0.16 (0.28)
----------- ----------- ----------
----------- ----------- ----------
Net Income (loss).................................................... $ 291,346 -- $ (554,072)
Pro-Forma Income Tax (Benefit)(2).................................... (98,000) -- (62,000)
----------- ----------
Pro-Forma Net Loss................................................... $ 193,346 -- $ 492,072
----------- ----------
----------- ----------
Pro-Forma Net Income (Loss) Per Share(2)............................. $ (0.13) -- $ (0.25)
----------- ----------
----------- ----------
Weighted Average Number of Shares for Historical and
Pro-Forma Income (Loss) Per Share.................................. 1,502,492 1,500,000 1,945,000
----------- ----------- ----------
----------- ----------- ----------
</TABLE>

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
DECEMBER 26, 1998
-----------------------------------
ACTUAL AS ADJUSTED(3)
----------------- --------------
<S> <C> <C>
Current Assets................................................................. $ 2,057,360 $6,321,719
Total Assets................................................................... 5,308,911 9,226,411
Current Liabilities............................................................ 2,833,911 2,451,411
Long Term Debt................................................................. 430,402 430,402
Stockholders' Equity........................................................... 2,044,598 6,344,598
</TABLE>

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

(1) Reflects the acquisition of CDP by the Company as if the acquistion had
occurred at the beginning of 1998, after giving effect to certain
adjustments, including amortization.

(2) The pro forma provisions for income taxes have been included to show, for
comparative purposes, the Company's results of operations for the year ended
December 26, 1998 as if EHC had been subject to Federal income tax as a C
corporation under the Internal Revenue Code of 1986, as amended (the
"Code"). For the period up to December 24, 1998, EHC had been treated for
federal income tax purpose as a closely-held corporation under Subchapter S
of the Code. Effective December 25, 1998, EHC's S corporation election was
terminated and thereafter the Company will be taxed as a C Corporation under
the Code.

(3) Adjusted to reflect the sale of 1,250,000 shares of Common Stock and
1,250,000 Warrants offered hereby and use of proceeds thereof. Assumes no
exercise of the Underwriters over-allotment option.

7
<PAGE>

RISK FACTORS

The purchase of the Securities is speculative and involves a high degree of
risk including, but not necessarily limited to, the Risk Factors described
below. The Securities should not be purchased by investors who cannot afford the
loss of their entire investment. Prospective investors should carefully review
and consider the following risks as well as the other information contained in
this Prospectus.

HISTORY OF OPERATING AND NET LOSSES AND DECREASE IN SALES

The Company recorded net losses of $291,346, and pro forma net losses
reflecting the acquisition of CDP of $554,072, for the year ended December 26,
1998. There can be no assurance that the Company will not continue to experience
losses. In addition, the Company's net sales decreased $171,746, or 3%, to
$5,883,001 for the year ended December 26, 1998 from $6,054,747 for the year
ended December 27, 1997. Sales to non-affiliate companies decreased by
$1,028,000, or 18%, to $4,656,000 for the fiscal year ended December 26, 1998
from $5,684,000 for the fiscal year ended December 27, 1997. The Company
attributes the decrease in net sales to generally slower industry bookings
particularly in the consumer, military and industrial segments and the
redesigning of a customer's product which forced the Company to redesign control
knobs for such product. Sales to AFC, an affiliated company, increased by
$856,000, or 231%, to $1,227,000 for the fiscal year ended December 26, 1998
from $371,000 for fiscal year ended December 27, 1997, of which approximately
$722,000 was incurred during the third and fourth quarters of fiscal year ended
December 27, 1998 due to AFC increasing its inventory levels in preparation of
purchasing its products from manufacturers in China which require a longer lead
time. Furthermore, preliminary results of operations indicate that the Company
will experience a decrease in revenues in the first quarter of 1999, as compared
to the first quarter of 1998, due to slower industry bookings and lower sales
to AFC as AFC readjusts its inventory needs. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

FUTURE AMORTIZATION OF LICENSE AGREEMENT AND GOODWILL ATTRIBUTED TO CDP
ACQUISITION

RISKS RELATING TO MANUFACTURING IN CHINA

Dependence on Single Consultant. The Company relies on the Consultant, who
is also a director of the Company, to serve as its agent in connection with its
dealings with manufacturers in China. There can be no assurance that the
Consultant will continue working with the Company in the Consultant's present or
any capacity. The Company has a non-exclusive agreement with the Consultant's
company, B.C. China Business Consulting, Inc., whereby the Consultant is to
provide such consulting services until March 1, 2008. The Consultant is entitled
to receive an hourly rate as mutually determined and agreed upon by the Company
and the Consultant from time to time plus 1.5% of the net cost of products
manufactured in China up to $5,000,000 per year and 1% of net costs exceeding
$5,000,000. Such fee arrangement is subject to review after the first year of
the agreement by the Company's Board of Directors. The Consultant shall also be
entitled to shares of Common Stock and options to purchase Common Stock pursuant
to the Company's Stock Option and Grant Plan. Various factors may sever the
non-exclusive consultancy agreement between the Consultant and the Company,
including termination by either party for cause or otherwise, the death or
incapacity of the Consultant or the overseas manufacturers' unwillingness to
work with the Consultant on current terms, if at all. In addition, there can be
no assurance that the remuneration of the Consultant and related costs will not
become prohibitive in the future. In the event of the termination of the
Company's consulting agreement with the Consultant, there can be no assurance
that the Company will be able to find a comparable consultant, if any, or be
able to establish direct manufacturing relationships in China. Such loss or
inability to find a new consultant would have a material adverse effect on the
financial prospects and international operations of the Company. See
"Management--Stock Option and Grant Plan" and "Certain Transactions."

8
<PAGE>

Internal Political and Other Risks. The Company intends, although with no
assurance, to arrange for the manufacture of a significant number of products in
China, including the Pull Pack(Trademark), if possible, and other products which
have yet to be determined. As a result, the Company's operations and assets are
subject to significant political, economic, legal and other uncertainties.
Changes in policies by the Chinese government resulting in changes in laws,
regulations, or the interpretation thereof, confiscatory taxation, restrictions
on imports and exports and sources of supply, currency devaluations or the
expropriation of private enterprise could materially adversely affect the
Company. Under its current leadership, the Chinese government has been pursuing
economic reform policies, including the encouragement of private economic
activity and greater economic decentralization. There can be no assurance,
however, that the Chinese government will continue to pursue such policies, that
such policies will be successful if pursued, that such policies will not be
significantly altered from time to time or that business operations in China
would not become subject to the risk of nationalization, which could result in
the total loss of investments. Economic development may be limited as well by
the imposition of austerity measures intended to reduce inflation, the
inadequate development of an infrastructure and the potential unavailability of
adequate power and water supplies, transportation, satisfactory roads,
communications, raw materials and parts. If for any reason the Company is unable
to establish its proposed manufacturing relationships in China, the Company's
profitability could be impaired substantially, its competitiveness and market
position could be jeopardized materially and there can be no assurance that the
Company could continue its operations.

Uncertain Legal System and Application of Laws. The legal system of China
relating to foreign outsourcing is both new and continually evolving, and
currently there can be no certainty as to the application of its laws and
regulations in particular instances. China does not have a comprehensive system
of laws. Enforcement of existing laws or agreements may be sporadic and
implementation and interpretation of laws inconsistent. The Chinese judiciary is
relatively inexperienced in enforcing the laws that exist, leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate laws exist in China, it may not be possible to obtain swift and
equitable enforcement of such laws.

Lack of United States Jurisdiction. There is no international treaty
governing nor is there an acknowledgment of recognition regarding enforcement of
judgments or jurisdiction between the United States and China. Due to such lack
of United States' jurisdiction in China, the Company might not be able to bring
legal actions or enforce judgments against manufacturers or other business
entities situated in China. In the event of a dispute with a manufacturer or
other business entity in China, the Company could be precluded from relief,
including damages and equitable remedies, which could have a material adverse
effect on the Company's business and operations.

Inflation and China's Rapid Economic Growth. China's economy has been
growing rapidly, creating problems such as inflation. The Chinese government has
imposed measures attempting to check inflation but to date, these methods have
not been effective. There could be an adverse impact on the Company's business
if widespread social or political unrest results from the economic climate.

Dependence on China Factories. Many of the Company's newly acquired or
developed products will be manufactured at factories located in China.
Firefighting and disaster relief or assistance in some parts of China are
primitive by Western standards. The Company does not maintain insurance for its
products manufactured in Chinese factory buildings. Any material damage to, or
the loss of, any of the Company's manufacturers in China due to fire, severe
weather, flood, or other act of God or cause, could have a material adverse
effect on the Company's financial condition, business and prospects. The Company
does not maintain any business interruption insurance.

Possible Changes and Uncertainties in Economic Policies. As part of its
economic reform, China has designated certain areas, including areas where the
Company intends to maintain certain of its manufacturing relationships, as
Special Economic Zones. Foreign enterprises in these areas benefit from greater
economic autonomy and more favorable tax treatment than enterprises in other
parts of China. Changes in the policies or laws governing Special Economic Zones
could have a material adverse effect on the Company.

Recent Turbulent Relations with the United States; Entry into the World
Trade Organization. The United States has in the past considered revocation of
China's most favored nation ("MFN") trade status, which provides China with the
trading privileges available generally to trading partners of the United States,
and the United States and China have recently been involved in controversy over
the protection of intellectual property

9
<PAGE>

rights that threatened a trade war between the countries. In 1996, President
Clinton extended China's MFN status and the United States and China reached an
agreement that averted a trade war. However, there can be no assurance that
future controversies will not arise that again threaten the status quo involving
trade between the United States and China, or that the United States will not
revoke or refuse to extend China's MFN status. In either of such eventualities,
the businesses of the Company could be adversely affected. In addition, while
the United States has announced a change in policy that may make it easier for
China to join the World Trade Organization (the "WTO"), the successor to the
General Agreement on Tariffs and Trade, if China does not join the WTO, the
Company and its manufacturers located in China may not benefit from the lower
tariffs and other privileges enjoyed by competitors located in countries which
are members of the world trade system and, as a result, the Company's business
could be adversely affected.

International Business Risks. The Company intends to increase revenue
through an international manufacturing strategy. The Company's operations will
be subject to the wide range of general business risks associated with
international operations, including unexpected changes in legal and regulatory
requirements; changes in tariffs, exchange rates and other barriers; political
and economic instability; inability to repatriate net income from foreign
markets; difficulty in protecting the Company's intellectual property; and
potentially adverse tax consequences. Additionally, the Company has had
relatively few pilot overseas manufacturing projects. Such inexperience combined
with various other international manufacturing risks could cause the Company's
attempted international growth strategy to fail, causing a material adverse
affect to the operations of the Company. See "Business."

FOREIGN CURRENCY AND FOREIGN EXCHANGE REGULATION

The Company intends, although there can be no assurance, to arrange for the
manufacture of a significant number of products in China, including the Pull
Pack(Trademark), if possible, and other products which have yet to be
determined. The Company may be required to accomplish such transactions through
the use of foreign currencies, directly or indirectly. The Company does not
currently engage in currency exchange rate hedging transactions. To the extent,
however, that the Company may engage in any such hedging transactions in the
future, there can be no assurance that any currency hedging policies implemented
by the Company in the future will be successful. As a result, fluctuations in
exchange rates of the U.S. dollar against foreign currencies could adversely
affect the Company's results of operations.

RISKS RELATING TO THE USE OF FOREIGN SUPPLIERS

The Company intends, although there can be no assurance, to arrange for the
manufacture of certain products overseas. Such overseas manufacturers will be
dependent upon foreign suppliers. Although the Company currently has purchase
orders with eight different suppliers in China, it does not have contractual
agreements with any suppliers. No one vendor accounts for more than 10% of the
Company's purchases, except for Shanghai Foodstuffs Export & Import Corporation
and Royal Screw Machine Products. The loss of the Company's business
relationship with either principal supplier could have a material adverse effect
on the Company. The Company will not have contractual agreements with suppliers,
and the overseas manufacturers may not have contractual agreements with such
suppliers. Prices for and supply of those products may be adversely affected by
changing international economic conditions. The Company may also be subject to
other risks associated with its international relationships, including tariff
regulations and requirements for export licenses, unexpected changes in
regulatory requirements, potentially adverse tax consequences, economic and
political instability, restrictions on repatriation of earnings and the burdens
of complying with a wide variety of foreign laws. In addition, the laws of
certain countries may not protect the Company's products and intellectual
property rights to the same extent as the laws of the United States. There can
be no assurance that such factors will not have a material adverse effect on the
Company's future sales or licenses and, consequently, on the Company's business,
prospects, results of operations or financial condition as a whole. See
"Business."

DEPENDENCE ON KEY PERSONNEL

The success of the Company will be largely dependent on the personal
efforts of Andrew Franzone, age 61, Chief Executive Officer and President, David
L. Kassel, age 63, Chairman, Harry Goodman, age 72, Vice President, and other
key personnel. Although the Company has entered into 10-year employment
agreements with Messrs. Franzone, Kassel and Goodman, each dated as of
March 15, 1998, such employment agreements are

10
<PAGE>

terminable by the employee at any time, subject only to noncompetition
provisions. All other key personnel are "at-will" employees. The employment of
each such key employee may be terminated by the individual officer or the
Company at any time, for any reason, if at all. While the Company maintains "key
man" life insurance in the amount of $500,000 on the life of Andrew Franzone,
the loss of the services of Messrs. Franzone, Kassel, Goodman or certain other
key employees could have a material adverse effect on the Company's business and
prospects. Furthermore, pursuant to the Stockholders' Agreement (the
"Stockholders' Agreement") between the Company and Messrs. Franzone, Kassel and
Goodman (collectively, the "Stockholders"), upon the death of any Stockholder,
his estate may cause the Company to redeem 250,000 shares of Common Stock for an
aggregate purchase price of $500,000; provided, however, only to the extent that
the Company receives proceeds from life insurance policies on the life of such
Stockholder. As of the date of this Prospectus, only Mr. Franzone has "key man"
life insurance. If Mr. Franzone's estate exercises such redemption rights, the
Company will have to use the proceeds from Mr. Franzone's "key man" life
insurance to satisfy such obligation, and, therefore, such proceeds otherwise
allocated to the Company will be expended. Such expenditure may be at a time
when the Company is in need of the insurance proceeds. The success of the
Company is also dependent upon its ability to hire and retain qualified
operational, financial, technical, marketing, sales and other personnel. There
can be no assurance that the Company will be able to hire or retain such
necessary personnel. See "--Dependence on Single Consultant; --Offering Proceeds
to Benefit Officers, Directors and Principal Stockholders," "Management--
Employment Agreements" and "Certain Transactions."

DEPENDENCE ON UNION EMPLOYEES

Of the Company's 81 employees, 38 employees are factory workers and factory
supervisors represented in a collective bargaining agreement by Local 531,
International Brotherhood of Teamsters, AFL-CIO. The current collective
bargaining agreement was amended by means of a Memorandum of Agreement dated as
of May 10, 1998 and was extended until May 9, 2001. While the Company has never
experienced a work stoppage, there can be no assurance that a work stoppage will
not result in the future. The collective bargaining agreement regulates various
employment issues between the Company and the union employees, including pay,
overtime, working conditions, vacations and benefits. No assurance can be given
that the Company will enter into future collective bargaining agreements on
favorable terms to the Company, if at all, or that it will negotiate
successfully any future extension to the collective bargaining agreement. In the
event conflicts with the union arise, including strikes or work stoppages, or
the Company fails to negotiate a future extension to the current collective
bargaining agreement or future extensions, the Company could incur higher
ongoing labor costs and could experience a significant disruption of its
operations, which could have a material adverse effect on the Company's
business, financial condition and results of operations.

BROAD UNSPECIFIED DISCRETION OF MANAGEMENT IN APPLICATION OF PROCEEDS OF THE
OFFERING

Approximately 22.5% of the net proceeds of the Offering will not be
allocated for a specific use, but rather for working capital (13.2%) and future
potential product acquisitions (9.3%). In addition, management may from time to
time reallocate funds among the uses discussed in "Use of Proceeds" or to new
uses if it believes such reallocation to be in the Company's best interests.
Accordingly, management of the Company will have broad discretion in allocating
the Offering proceeds. See "Use of Proceeds" and "Certain Transactions."

CONTROL BY CURRENT OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS

Upon consummation of the Offering, the officers, directors and existing
stockholders of the Company will beneficially own approximately 59.5% of the
Company's outstanding Common Stock (56.2% if the Underwriter's over-allotment
option is exercised in full). While no individual will be a beneficial owner of
a majority of the outstanding shares of Common Stock of the Company, such
persons collectively may be able to effectively control the decisions on matters
including election of the Company's directors, increasing the authorized capital
stock, dissolution, merger or sale of the assets of the Company and generally
may be able to direct the affairs of the Company. This concentration of
ownership may also have the effect of delaying, deferring or preventing a change
in control of the Company and making certain transactions more difficult or
impossible absent the support of such stockholders, including proxy contests,
mergers involving the Company, tender offers, open-market purchase programs or
other purchases of Common Stock that could give public, minority stockholders of
the Company the opportunity to realize a premium over the then-prevailing market
price for shares of Common Stock. See "Principal Stockholders."

11
<PAGE>

OFFERING PROCEEDS TO BENEFIT OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS

The Company has various bank credit facilities which are personally
guaranteed by Messrs. Franzone, Kassel and Goodman. The Company has received a
letter agreement from Republic National Bank of New York to release such
personal guarantees upon the successful completion of the Offering. The Long
Island Development Corporation will not release the personal guarantees of
Messrs. Franzone, Kassel and Goodman. Therefore, such officers, directors and
principal stockholders may have various interests differing from those of the
investors of the Offering.

Also, pursuant to the Stockholders' Agreement, the estates of Messrs.
Franzone, Kassel and Goodman are each entitled, to the extent that the Company
receives proceeds from insurance on the lives of the deceased, to redeem up to
250,000 shares of the Company for $500,000 and may sell the remaining shares
pursuant to Rule 144 under the Securities Act, even though at such time the
Common Stock of the Company may have a fair market value at less than $2.00 per
share, resulting in dilution to stockholders and an expenditure of the Company's
capital even if such expenditures would adversely affect the Company's liquidity
and financial resources. At the date of this Prospectus, only Mr. Franzone has
"key man" life insurance in the amount of $500,000. Such amount, if
Mr. Franzone's estate exercises its redemption rights, would be used to redeem
Mr. Franzone's shares of Common Stock at a time when the Company might otherwise
need the proceeds. See "--Dependence on Key Personnel" and "Certain
Transactions."

Furthermore, pursuant to the Company's respective employment agreements
with each of Messrs. Franzone, Kassel and Goodman, if any one of such executives
dies during the term or is unable to competently and continuously perform the
duties assigned to him because of ill health or other disability (as defined in
the employment agreements), the executive or the executive's estate or
beneficiaries shall be entitled to full compensation for three years following
the date thereof. If the executive is terminated without cause, the executive
shall be entitled to full compensation for the remainder of the term. Such
expenditure of the Company's capital at such time could adversely effect the
Company's liquidity and financial resources. During 1997, David L. Kassel
rendered services to the Company in consideration for the sum of $150,000. At
the request of the Company, in lieu of a lump sum payment, Mr. Kassel accepted a
promissory note due on January 1, 1999, with interest at 6% per annum which was
subsequently amended on December 8, 1998 extending the maturity date to not
later than 30 days after the effective date of the Registration Statement to
which this Prospectus is a part (the "Effective Date"). The Company will pay the
principal amount and accrued interest on such note with the proceeds of this
Offering. In January 1998, CDP issued a promissory note to Mr. Kassel for the
principal amount of $107,500 bearing interest of 10% per annum and maturing on
January 1, 1999 for repayment of loans advanced to CDP by Mr. Kassel which was
subsequently amended on December 8, 1998 extending the maturity date to not
later than 30 days after the Effective Date. Additionally, CDP issued a
promissory note to Mr. Kassel as of May 29, 1998 for the principal amount of
$25,000 bearing interest at a rate of 10% per annum and maturing not later than
30 days after the Effective Date. The Company has guaranteed the repayment of
each of such promissory notes. The Company intends to repay the principal amount
and accrued interest on the notes when due from the proceeds of this Offering.
See "--Dependence on Key Personnel," "Dividend Policy," "Use of Proceeds,"
"Management--Employment Agreements," "Certain Transactions" and "Underwriting."

RELATED PARTY TRANSACTIONS

Certain officers, directors and affiliates of the Company have engaged in
business transactions with the Company which, by nature, could not have been the
result of arms'-length negotiations between independent parties, thereby
providing benefit to certain officers, directors and affiliates of the Company,
without providing the same benefits, if any, to the Company or its stockholders.
Notwithstanding, the Company believes that the terms of these transactions were
as favorable to the Company as those that could have been obtained from
unaffiliated parties under similar circumstances at the time. Additionally, the
Company has made sales to AFC, an affiliated company, which resulted in gross
profit margins materially less than the Company's overall margins for the
respective periods. While such sales are materially less advantageous to the
Company than those made to non-affiliates, the Company attributes such
difference to the type of products manufactured on behalf of the affiliate,
which does not require any additional assembly or marking. In addition, there is
an account receivable from AFC in the amount of approximately $635,000 as of
December 26, 1998. However, all future transactions between the Company and its
officers, directors and affiliates must be approved by a majority of
disinterested, independent members of the board of directors of the Company and
will be on terms no less favorable than could

12
<PAGE>

be obtained from unaffiliated third parties. In the event such transactions are
not approved by such disinterested directors, thereby precluding the Company
from entering into such transactions, and the Company is unable to enter into
any transactions with unaffiliated third parties on equal or more favorable
terms, the operations of the Company may be adversely affected. See "Certain
Relationships and Related Transactions" and "Notes to Consolidated Financial
Statements."

RISKS RELATING TO PROPOSED EXPANSION

The Company intends, although with no assurance, to use the proceeds of the
Offering to seek to expand its current level of operations through acquisitions
of products and product lines and international manufacturing. Successful
expansion of the Company's operations will be dependent, among other things, on
the Company's ability to achieve significant market acceptance for its new
products, enter into satisfactory marketing arrangements, secure adequate
sources of supply on a timely basis and on commercially reasonable terms, if at
all, and successfully manage growth, including monitoring operations,
controlling costs and maintaining effective quality controls. Failure of the
Company to expand successfully could have a material adverse effect on its
business. See "Use of Proceeds" and "Business."

RISKS RELATING TO GROWTH THROUGH UNSPECIFIED ACQUISITIONS

An element of the Company's strategy for the future is expansion through
the acquisition of products or product lines. The Company expects to allocate
approximately $400,000, or 9.3%, of the net proceeds of this Offering to such
acquisitions. As a result, the Company will evaluate potential acquisition
opportunities, some of which may be material in size or scope. Pursuant to the
Certificate of Incorporation and By-laws of the Company, the directors have the
discretion to effect any acquisition made in good faith, thereby precluding the
Company's stockholders from voting on such matters. Acquisitions generally
involve a number of special risks, including (i) the time associated with
identifying and evaluating product acquisition candidates, (ii) the
incorporation of acquired or licensed products or services into the Company's
current products and services, (iii) possible adverse short-term effects on the
Company's operating results, (iv) the inability to maintain uniform standards,
controls, procedures and policies, and (v) the realization of acquired
intangible assets. There can be no assurance that the Company would be
successful in overcoming these risks or any other problems encountered with any
future acquisitions, investments, strategic alliances or related efforts. The
Company may issue equity securities and other forms of consideration in
connection with future acquisitions, which could cause dilution to investors
purchasing Common Stock of the Company. There can be no assurance that the
Company will be able to identify additional suitable acquisition candidates,
that it will be able to consummate or finance any such acquisitions on favorable
terms, if at all, or that it will be able to integrate any such acquisitions
successfully into its operations. See "Use of Proceeds," "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

INITIAL MANUFACTURING PHASE OF THE PULL PACK(TRADEMARK); NO ASSURANCE OF MARKET
ACCEPTANCE

One of the Company's wholly-owned subsidiaries, CDP, entered into a
five-year exclusive worldwide license agreement to market, manufacture, sell and
sub-license the Pull Pack(Trademark). Although the Company has completed
market-study surveys, the Company has not commenced marketing activities or
generated revenues from the sale of the Pull Pack(Trademark). The Pull
Pack(Trademark) may require additional development, marketing and investment
prior to commercialization. The Company may also enter into agreements with
investors and entrepreneurs, and may be dependent upon those individuals and
their subsequent success in performing their responsibilities. In addition, the
Company's product is subject to the risks of failure inherent in the development
of products based on innovative technologies. Accordingly, there can be no
assurance that the Company's research and development efforts will be
successful, that the sale of the product will generate revenue or that others
will not develop competitive or superior products. As a result of the early
stage of the product, the Company cannot predict with certainty when it will be
able to market the product profitably, if at all. The Company's failure to
market and profitably sell the Pull Pack(Trademark) and other commercially
viable products could have a material adverse effect on the Company's business,
operating results and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."

13
<PAGE>

DIFFICULTIES IN INTEGRATING CDP INTO THE COMPANY

The Company entered into an agreement to acquire CDP as of December 24,
1998. CDP has entered into a five-year exclusive worldwide licensing agreement
dated March 1, 1998 to arrange for the manufacture, marketing, sale and
sublicensing of the Pull Pack(Trademark), a proprietary Disc packaging system.
The Company has no experience in Disc packaging and such industry may involve
risks and uncertainties which are unknown to the Company and which could have a
material adverse effect on the Company's financial condition and results of
operations. In addition, the Company faces various difficulties in integrating
CDP into the Company's present business, including diversion of management's
attention, increased burdens on the Company's management and financial controls,
increased marketing demands and possible adverse effects to the Company's
operating results. As a result, the integration of CDP into the Company could
have a material adverse effect on the Company's results of operations and
financial performance. See "Business--Products--The Pull Pack(Trademark)."

RISKS RELATING TO LICENSING AGREEMENT

The Company, through its wholly-owned subsidiary, CDP, entered into an
exclusive worldwide license agreement with Inch, Inc. dated as of March 1, 1998
whereby the Company obtained the right and license to manufacture, use, sell and
sublicense a Disc packaging system. CDP holds the exclusive license for a
minimum of five years and a maximum of the life of the patent. The Company
applied for a new trademark under the name "Pull Pack(Trademark)" in March 1998.
The agreement generally requires the Company to pay royalties on sales of
products developed from the licensed technologies and fees on revenues from
sublicensees, where applicable. The agreement also requires that CDP obtain an
unspecified $1,000,000 capital investment by February 28, 2000, which provision
shall be satisfied from the proceeds of this Offering, and provides that Inch,
Inc. will act as a consultant to CDP for the design and manufacture of the Pull
Pack(Trademark) at certain hourly rates based on the number of units sold.
Should the Company default on its obligations to Inch, Inc. under the license
agreement, its license could terminate or become non-exclusive and could have a
material adverse effect on the Company's operations and prospects. See
"Business--Patents, Trademarks, Licenses and Royalty Rights."

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY INFORMATION

The Company's ability to effectively compete may in part depend on its
success in protecting its proprietary technology in the United States and
abroad. The Company owns or licenses the technology to two patents and has filed
one additional patent application with the United States Patent and Trademark
Office (the "PTO"). There can be no assurance that the PTO or any foreign
jurisdiction will grant the Company's patent applications or that the Company
will obtain any patents or other protection for which application for patent
protection has been made. No assurance can be given that patents issued to or
licensed by the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide any competitive advantage or
that the Company will have the resources to pursue any litigation against any
party the Company believes to be an infringer. The Company will also rely on
trade secrets, know-how and continuing technological advancement in seeking to
achieve a competitive position. No assurance can be given that the Company will
be able to protect its rights to its unpatented trade secrets or that others
will not independently develop substantially equivalent proprietary information
and techniques or otherwise gain access to the Company's trade secrets. See
"Business--Patents, Trademarks, Licenses and Royalty Rights."

In addition to protecting its proprietary technology and trade secrets, the
Company may be required to obtain additional licenses to patents or other
proprietary rights from third parties. No assurance can be given that any
additional licenses required under any patents or proprietary rights would be
made available on acceptable terms, if at all. If the Company does not obtain
required licenses, it could encounter delays in product development while it
attempts to design around blocking patents, or it could find that the
development, manufacture or sale of products requiring such licenses could be
foreclosed.

The Company could also incur substantial costs in defending any patent
infringement suits or in asserting any patent rights, including those granted by
third parties. The PTO could institute interference proceedings against the
Company in connection with one or more of the Company's patents or patent
applications, and such proceedings could result in an adverse decision as to
priority of invention. The PTO or others could also institute reexamination
proceedings with the PTO against the Company in connection with one or more of
the Company's patents or patent applications and such proceedings could result
in an adverse decision as to the validity or scope of any patents that the
Company may obtain or have the right to use.

14
<PAGE>

DEPENDENCE UPON SUPPLIERS AND RAW MATERIALS

Although the Company currently has purchase orders with eight different
suppliers in China, the Company does not have any oral or written contracts or
agreements with suppliers of its raw materials. No one vendor accounts for more
than 10% of the Company's purchases, except for Shanghai Foodstuffs Export &
Import Corporation and Royal Screw Machine Products. The loss of the Company's
business relationship with either principal supplier could have a material
adverse effect on the Company. In the event that a relationship with a supplier
upon which the Company depends is terminated, there can be no guarantee that the
Company would be able to locate other satisfactory suppliers, or even if other
suppliers could be located, that the Company would be able to establish
commercial relationships with any such suppliers on favorable terms, if at all.
If the Company is unable to establish commercial relationships with other
suppliers, it may be required to suspend or curtail some of its current services
and product lines. In addition, the Company's principal raw materials are
currently readily available, but there can be no guarantee that a general
shortage of such raw materials will not occur. Such a shortage could also
suspend or curtail some of the Company's services. In the event the Company
cannot secure such raw materials or any other raw materials on reasonable
commercial terms, it may have to go to other sources and may not be able to
secure similar quality or prices. Any suspension or curtailment of raw materials
could have a material adverse effect on the Company. See "Business."

DEPENDENCE UPON DISTRIBUTORS

Approximately 20% of the products manufactured by EHC, one of the Company's
wholly-owned subsidiaries, are sold through distributors. The Company does not
have any oral or written contracts or agreements with any of its distributors.
In the event that a relationship with a distributor upon which the Company
depends is terminated, there can be no guarantee that the Company would be able
to locate other satisfactory distributors, or even if other distributors could
be located, that the Company would be able to establish commercial relationships
with any such distributors on favorable terms, if at all. In such case, the
Company would be forced to distribute 100% of its manufactured products on its
own, which may force the Company to suspend or curtail some of its product lines
or hire additional workforce to handle such additional distribution, which in
either event could have a material adverse effect on the Company's results of
operations. See "Business--Distribution Methods."

GOVERNMENT REGULATION OF TECHNOLOGY

Expansion into foreign markets may require the Company to comply with
certain regulatory requirements of the U.S. or foreign governments. The
technology contained in the Company's products may be subject to U.S. export
controls. There can be no assurance that such export controls, either in their
current form or as may be subsequently enacted, will not delay introduction of
new products or limit the Company's ability to distribute products outside of
the U.S. Further, various countries may regulate the import of certain
technologies contained in the Company's products. Any such export or import
restrictions, future legislation or regulation or government enforcement could
have a material adverse effect on the Company's business, operating results and
financial condition. In addition, the Company must qualify certain of its
products on government-regulated Qualified Product Lists in order to sell such
products to the U.S. Military. Failure to qualify products on such lists would
have adverse effects on the Company's ability to sell products to the U.S.
Military. Any such export or import restrictions, new legislation or regulation
or government enforcement of existing regulations could have a material adverse
effect on the Company's business, operating results and financial condition.
There can be no assurance that the Company will be able to comply with
additional applicable laws and regulations without excessive cost or business
interruption, if at all, and failure to comply could have a material adverse
effect on the Company. See "Business--Government Approval."

LEGAL RESTRICTIONS ON SALES OF SHARES UNDERLYING THE WARRANTS

The Warrants are not exercisable unless, at the time of the exercise, the
Company has an effective Registration Statement covering the shares of Common
Stock issuable upon exercise of the Warrants, and such shares have been
registered, qualified or deemed to be exempt under the securities laws of the
state of residence of the exercising holder of the Warrants. Although the
Company has agreed to maintain the effectiveness of the Registration Statement
of which this Prospectus is a part, covering the shares of Common Stock issuable
upon

15
<PAGE>

the exercise of the Warrants effective for the term of the Warrants, the
Company's failure to do so would deprive the Warrants of any value. See
"Description of Securities--Warrants."

The Common Stock and Warrants may be purchased separately. Purchasers may
buy Warrants in the aftermarket in, or may move to, jurisdictions in which the
shares underlying the Warrants are not so registered or qualified during the
period that the Warrants are exercisable. In this event, the Company would be
unable to issue shares to those persons desiring to exercise their Warrants, and
holders of Warrants would have no choice but to attempt to sell the Warrants in
a jurisdiction where such sale is permissible or allow them to expire
unexercised. See "Description of Securities--Warrants."

POSSIBLE DELISTING OF SECURITIES FROM NASDAQ SMALLCAP OR BSE

Upon approval, the Securities will be listed on Nasdaq SmallCap and BSE.
There can be no assurance, however, that the Company will satisfy the
maintenance criteria for continued listing on either Nasdaq SmallCap or BSE. In
order to remain quoted on Nasdaq SmallCap, under recently amended maintenance
criteria, a company must have net tangible assets (total assets, excluding
goodwill, minus total liabilities) of $2 million (or alternatively, net income
of $500,000 in two of the three most recent fiscal years, or a market
capitalization of $35 million). In addition, continued inclusion requires that
the listed security have a minimum bid price of $1.00 per share, public float
(shares not held directly or indirectly by any officer or director or any person
who is the beneficial owner of more than 10% of the total outstanding shares) of
at least 500,000 shares and the market value of such shares be at least
$4,000,000. There must also be 300 registered holders of the Common Stock.

The Securities will also be listed on the BSE, if approved. There can be no
assurance that the Company will satisfy the criteria for continued listing. In
order to remain quoted on BSE, a company must have total assets of $1,000,000,
public float of 150,000 shares with a market value of $500,000, 250 beneficial
holders and Stockholders' Equity of $500,000.

If the Company is unable to satisfy Nasdaq SmallCap's or BSE's listing
standards, its securities may be delisted from Nasdaq SmallCap or BSE. In such
event, trading, if any, in the Securities would thereafter be conducted in the
over-the-counter market on the so-called "pink sheets" or the NASD's "Electronic
Bulletin Board." As a consequence of such delisting, an investor could find it
more difficult to dispose of, or to obtain accurate quotations as to the price
of, the Securities. Consequently, the liquidity of the Securities could be
impaired, not only in the number of securities which could be bought and sold,
but also through delays in the timing of transactions, reduction in security
analyst and news media coverage of the Company and lower prices for the
Securities than might otherwise be attained.

"PENNY STOCK" RESTRICTIONS

The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a "penny stock." Regulations of the Securities
and Exchange Commission (the "Commission") define a "penny stock" to be any
non-Nasdaq equity security that has a market price (as therein defined) of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any transaction in a penny
stock, of a disclosure schedule prepared by the Commission relating to the penny
stock market. Disclosure is also required to be made about commissions payable
to both the broker-dealer and the registered underwriter and current quotations
for the securities. Finally, monthly statements are required to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.

The foregoing required penny stock restrictions will not apply to the
Securities if such Securities are listed on Nasdaq and have certain price and
volume information provided on a current and continuing basis or meet certain
minimum net tangible assets or average revenue criteria. However, there can be
no assurance that the Securities will qualify for exemption from these
restrictions. In any event, even if the Securities are exempt from such
restrictions, the Company would remain subject to Section 15(b)(6) of the
Securities Exchange Act of 1934 , as amended (the "Exchange Act"), which gives
the Commission the authority to prohibit any person that is engaged in unlawful
conduct while participating in a distribution of a penny stock from associating
with a broker-dealer or participating in a distribution of a penny stock, if the
Commission finds that such a restriction would be in the public interest. If the
Securities were subject to the rules on penny stocks, the market liquidity for
the

16
<PAGE>

Securities could be severely adversely affected. See "Risk Factors--Possible
Delisting of Securities from Nasdaq SmallCap or BSE."

RISKS OF LOW-PRICED STOCK

If the Securities are delisted from Nasdaq SmallCap or BSE, they will
become subject to Rule 15g-9 under the Exchange Act, which imposes additional
sales practice requirements on broker-dealers selling such securities to persons
other than established customers and "accredited investors" (generally,
individuals with net worth in excess of $1,000,000 or annual incomes exceeding
$200,000, or $300,000 together with their spouses, for the last two years). For
transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, such rule may
adversely affect the ability of broker-dealers to sell the Securities and may
adversely affect the ability of purchasers in the Offering to sell in the
secondary market any of the Securities acquired hereby. See "Risk
Factors--Possible Delisting of Securities from Nasdaq SmallCap or BSE."

NO PRIOR PUBLIC MARKET

Prior to the Offering, there has been no public market for the Securities.
Accordingly, there can be no assurance that an active trading market will
develop or, if developed, be sustained subsequent to the Offering.

ARBITRARY DETERMINATION OF OFFERING PRICE

The Offering price of the Securities and the exercise price and terms of
the Warrants have been determined arbitrarily by negotiations between the
Company and the Underwriter. Factors considered in such negotiations, in
addition to prevailing market conditions, included the history and prospects for
the industry in which the Company competes, an assessment of the Company's
management, the prospects of the Company, its capital structure and certain
other factors deemed relevant. Therefore, the Offering price of the Common Stock
and the exercise price and terms of the Warrants do not necessarily bear any
relationship to established valuation criteria and may not be indicative of
prices that may prevail at any time or from time to time in the public market
for the Common Stock. See "Underwriting."

POSSIBLE REDEMPTION OF WARRANTS AND EFFECT ON COMMON STOCK

The Warrants are redeemable by the Company at any time commencing one year
from the date of this Prospectus, for $.10 per Warrant upon 30 days prior
written notice, provided that the average closing price or bid price of the
Common Stock as reported on Nasdaq SmallCap or BSE, if traded thereon, or if not
traded thereon, the average closing sale price if listed on a national or
regional securities exchange has been in excess of 150% of the then current
Warrant exercise price for any 20 trading days within the 30 consecutive trading
days ending on the 15th day prior to notice of redemption. Redemption of the
Warrants by the Company could force the holders to (i) exercise the Warrants and
pay the exercise price at a time when it may be disadvantageous for the holders
to do so, (ii) sell the Warrants at the then current market price when they
might otherwise wish to hold the Warrants or (iii) accept the redemption price,
which is likely to be substantially less than the market value of the Warrants
at the time of redemption. In the event of the exercise of a substantial number
of Warrants within a reasonably short period of time after the right to exercise
commences, the resulting increase in the amount of Common Stock of the Company
in the trading market could substantially affect the market price of the Common
Stock. See "Description of Securities--Warrants."

POSSIBLE VOLATILITY OF STOCK PRICE

The stock market generally has experienced and is likely in the future to
experience significant price and volume fluctuations which could adversely
affect the market price of the Common Stock without regard to the significant
fluctuations in response to variations in quarterly operating results,
shortfalls in sales or earnings below analyst estimates, stock market conditions
and other factors. There can be no assurance that the market price of the
Securities will not experience significant fluctuations or decline below the
Offering price.

17
<PAGE>

LACK OF DIVIDENDS

The Company has not paid any dividends, except distributions by EHC as a
Subchapter S corporation, and does not contemplate paying dividends in the
foreseeable future. It is currently anticipated that earnings, if any, will be
retained by the Company to finance the development and expansion of the
Company's business. See "Dividend Policy."

ANTITAKEOVER EFFECT OF CERTIFICATE OF INCORPORATION

The Company's Certificate of Incorporation authorizes the Board of
Directors to determine the rights, preferences, privileges and restrictions of
unissued series of preferred stock, $.001 par value per share (the "Preferred
Stock"), and to fix the number of shares of any series of Preferred Stock and
the designation of any such series, without any vote or action by the Company's
stockholders. Thus, the Board of Directors can authorize and issue up to
1,000,000 shares of Preferred Stock with voting or conversion rights that could
adversely affect the voting or other rights of holders of the Company's Common
Stock. In addition, the issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change of control of the Company, since the
terms of the Preferred Stock that might be issued could potentially prohibit the
Company's consummation of any merger, reorganization, sale of substantially all
of its assets, liquidation or other extraordinary corporate transaction without
the approval of the holders of the outstanding shares of the Common Stock. The
Company, however, has no intention of adopting a stockholder rights plan
("poison pill") in the foreseeable future. See "Description of
Securities--Preferred Stock."

IMMEDIATE AND SUBSTANTIAL DILUTION

The Offering will result in an immediate and substantial dilution of $3.06
(68%) per share between the Offering price and the pro forma net tangible book
value per share of Common Stock. See "Dilution."

UNDERWRITER'S INFLUENCE ON THE COMPANY

Upon consummation of the Offering, the Underwriter has been granted, for a
period of five years, the right to designate one individual to serve on the
Board of Directors of the Company. If the Underwriter were to exercise such
right, it could be deemed under certain circumstances to be in a position to
assert influence over the Company. See "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Upon the consummation of the Offering, the Company will have 3,195,000
shares of Common Stock outstanding (3,382,500 shares if the Underwriter's
over-allotment option is exercised in full and assuming no exercise of Warrants
or the Underwriter's Warrants). Of these shares, the 1,250,000 shares sold in
the Offering (1,437,500 shares if the Underwriter's over-allotment option is
exercised in full) will be freely tradeable. The remaining 1,945,000 shares are
deemed to be "restricted securities," as that term is defined under Rule 144
("Rule 144") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), in that such shares were issued and sold by the Company in
private transactions not involving a public offering and are not covered
currently by an effective registration. Except for an aggregate of 1,945,000
shares of Common Stock beneficially owned by the officers, directors and
principal stockholders of the Company subject to "lock-up" agreements between
such persons and the Underwriter, whereby such persons agree not to directly or
indirectly, sell, offer, pledge, contract to sell, hypothecate, grant any option
to purchase or otherwise dispose for a period of two years, subject to certain
exceptions, such shares are subject to the resale restrictions of Rule 144 and
will become so eligible at various times. In addition, the Company has granted
the Underwriter demand and piggyback registration rights with respect to the
securities issuable upon exercise of the Underwriter's Warrants.

Under Rule 144, a stockholder who has beneficially owned restricted shares
for at least one year (including persons who may be deemed to be "affiliates" of
the Company under Rule 144) may sell within any three month period a number of
shares that does not exceed the greater of: (i) 1% of the then outstanding
shares of a particular class of the Company's Common Stock as reported on its
10-Q filing, or (ii) the average weekly volume on Nasdaq during the four
calendar weeks preceding such sale and may only sell such shares through
unsolicited brokers' transactions. A stockholder who is not deemed to have been
an "affiliate" of the Company for at least 90 days and who has beneficially
owned his shares for at least two years would be entitled to sell such shares
under Rule 144 without regard to the volume limitations described above.

18
<PAGE>

Prior to the Offering, there has been no public market for the Company's
Securities. Sales of substantial amounts of shares of the Company's Common
Stock, pursuant to Rule 144 or otherwise, could have a depressive effect on the
market price of the Securities, and consequently make it more difficult for the
Company to raise capital through the sale of equity securities in the future at
a time and price which the Company deems appropriate.

In addition, pursuant to the Stockholders' Agreement, each of
Messrs. Kassel, Goodman and Franzone (the "Selling Stockholders"), holders of an
aggregate of 1,900,000 shares of Common Stock (the "Registrable Shares") at the
date of this Prospectus, are entitled to certain demand and "piggyback"
registration rights with respect to such Registrable Shares. Pursuant to the
Stockholders' Agreement, any Selling Stockholder holding an aggregate of 7% of
the outstanding shares of Common Stock may request that the Company file a
registration statement under the Securities Act, and subject to certain
conditions, the Company generally will be required to use its best efforts to
effect any such registration. In addition, if the Company proposes to register
any of its securities, either for its own account or for the account of other
stockholders, the Company is required, with certain exceptions, to notify the
Selling Stockholders and, subject to certain limitations, to include in such
registration statement all the Registrable Shares requested to be included by
such Selling Stockholders. The Company is generally obligated to bear the
expenses, other than underwriting discounts and sales commissions, of these
registrations. Each of the Selling Stockholders has waived his "piggyback" and
demand registration rights for a two-year period, commencing upon the completion
of this Offering, and has entered into an agreement with the Underwriter whereby
he agrees not to effect any disposition of his shares of Common Stock for a
two-year period, commencing upon the completion of this Offering, without the
prior written consent of the Underwriter. Notwithstanding, the exercise by one
or more of these registration rights may involve a substantial expense to the
Company and may adversely affect the terms upon which the Company may obtain
additional financing. See "Risk Factors--Shares Eligible for Future Sale;
Registration Rights," "Management--Employment Agreements" and "Shares Eligible
for Future Sale."

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 145 of the General Corporation Law of the State of Delaware
contains provisions entitling directors and officers of the Company to
indemnification from judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney's fees, as the result of an action or proceeding in
which they may be involved by reason of being or having been a director or
officer of the Company provided said officers or directors acted in good faith.
The Company's Certificate of Incorporation contains provisions indemnifying
officers and directors of the Company to the fullest extent permitted by
Delaware law. These provisions provide, among other things, that a director of
the Company shall not be liable either to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director. These provisions
may limit the ability of the Company's stockholders to collect any monetary
liability damages owed to them by an officer or director of the Company.

RELATIONSHIP OF UNDERWRITER TO TRADING

The Underwriter may act as a broker or dealer with respect to the purchase
or sale of the Securities in the over-the-counter market where each is expected
to trade. The Underwriter may engage in transactions that stabilize, maintain or
otherwise affect the market price of the Securities in accordance with Rule 103
of Regulation M, pursuant to which such persons may bid for or purchase
securities for the purpose of stabilizing their market prices. The Underwriter
also has the right to act as the Company's exclusive agent in connection with
any future solicitation of Warrant holders to exercise their Warrants. Unless
granted an exemption by the Commission from Rule 10b-6 under the Exchange Act,
the Underwriter will be prohibited from engaging in any market-making activities
or solicited brokerage activities with regard to the Company's Securities during
a period beginning five business days prior to the commencement of any such
solicitation and ending on the later of the termination of such solicitation
activity or the termination (by waiver or otherwise) of any right the
Underwriter may have to receive a fee for the exercise of the Warrants following
such solicitation. As a result, the Underwriter and soliciting broker/dealers
may be unable to continue to make a market in the Company's securities during
certain periods while the exercise of the Warrants is being solicited. Such a
limitation could impair the liquidity and market price of the Securities.

19
<PAGE>

USE OF PROCEEDS

Assuming the sale of the Securities offered hereby, the net proceeds to the
Company, after deducting estimated underwriting discounts and commissions and
expenses payable by the Company in connection with the Offering, are estimated
to be approximately $4,300,000 (approximately $5,100,000 if the Underwriter's
over-allotment option is exercised in full). The Company expects to use such
proceeds as follows:

<TABLE>
<CAPTION>
APPROXIMATE AMOUNT % OF NET
INTENDED APPLICATION OF NET PROCEEDS OF NET PROCEEDS PROCEEDS
- ------------------------------------ ------------------ -----------
<S> <C> <C>
Inventory Purchases and Staffing(1) ...................... $1,215,000 28.2%
Tooling(2) ............................................... $ 485,000 11.3%
Sales and Marketing(3) ................................... $ 455,000 10.6%
Facilities and Equipment(4) .............................. $ 412,000 9.6%
Potential Product Acquisitions............................ $ 400,000 9.3%
Repayment of Debt(5) ..................................... $ 382,500 8.9%
Research and Development.................................. $ 382,000 8.9%
Working Capital(6)........................................ $ 568,500 13.2%
---------- ------
Total................................................ $4,300,000 100.0%
---------- ------
---------- ------
</TABLE>

- ------------------
(1) Includes the hiring of nine additional engineering and procurement personnel
and additional inventory manufactured in China.
(2) Consists of molds, castings and dies for the products under development.
(3) This amount will be used for trade journal advertisements, mailings, sales
literature and public relations.
(4) Includes engineering, computer and mold-making programs, improved
communications equipment and additional warehouse and office space within
the Company's existing facility.
(5) In repayment of the following promissory notes: (i) a promissory note, dated
December 31, 1997, issued by the Company to David L. Kassel in the principal
amount of $150,000, bearing interest at a rate equal to 6% per annum and
maturing not later than 30 days after the Effective Date; (ii) a promissory
note, dated January 1, 1998, issued by CDP to Mr. Kassel in the principal
amount of $107,500, bearing interest at a rate equal to 10% per annum and
maturing not later than 30 days after the Effective Date; (iii) a promissory
note, dated May 29, 1998, issued by CDP to Mr. Kassel in the principal
amount of $25,000, bearing interest at a rate equal to 10% per annum and
maturing not later than 30 days after the Effective Date; (iv) a demand
negotiable promissory note, dated October 27, 1998, issued by EHC to
Mr. Kassel in the principal amount of $25,000, bearing interest at a rate
equal to 10% per annum and maturing upon demand; (v) a demand negotiable
promissory note, dated October 28, 1998, issued by EHC to Harry Goodman in
the principal amount of $25,000, bearing interest at a rate equal to 10% per
annum and maturing upon demand; and (vi) a demand negotiable promissory
note, dated December 7, 1998, issued by the Company to Mr. Goodman in the
principal amount of $50,000, bearing interest at a rate equal to 10% per
annum and maturing upon demand.
(6) Includes the interest payable on the promissory notes referenced in footnote
(5) above. See "Risk Factors--Offering Proceeds to Benefit Officers,
Directors and Principal Stockholders" and "Certain Transactions--Officer
Loans."

In the event that the Company's plans change or its assumptions change or
prove to be inaccurate or if the proceeds of the Offering prove insufficient to
fund operations (due to unanticipated expenses or difficulties or otherwise),
the Company may find it necessary or advisable to reallocate some of the
proceeds within the above-described categories or to use portions thereof for
other purposes or may be required to seek additional financing or curtail its
operations. Future events, including changes in economic or industry conditions
or the Company's planned operations, may require the Company to reallocate
proceeds among the various intended uses if it is determined at a later date
that an increase in any expenditures or reallocation of proceeds is necessary or
desirable. Any such determination would be based on, among other things, whether
and to what extent revenue from sales is sufficient to offset operating expenses
and the capital requirements associated with expanding its operations.

The Company may, if and when the opportunity arises, use a portion of the
proceeds of the Offering, possibly including a portion of the proceeds allocated
to working capital, together with the issuance of debt or

20
<PAGE>

equity securities, to acquire rights to products. Any decision to make such an
acquisition will be based upon a variety of factors, including, among others,
the purchase price and other financial terms of the transaction. Potential
acquisition candidates may include products that are compatible with the
Company's products, or that the Company believes would provide the Company with
additional distribution channels. As of the date of this Prospectus, the Company
has no agreements, understandings or arrangements with respect to any such
product acquisition and is not in the process of reviewing specific acquisition
opportunities or engaged in negotiations with any potential acquisition
candidates. There can be no assurance that the Company will be able to
successfully consummate any acquisition or successfully integrate any acquired
product into its operations. Investors in the Offering will not have an
opportunity to evaluate the specific merits or risks of any acquisition.

Proceeds not immediately required for the purposes set forth above will be
invested in short-term, investment-grade, interest-bearing securities.

<PAGE>

DIVIDEND POLICY

The Company intends for the foreseeable future to retain future earnings,
if any, to provide funds for the development and expansion of the Company's
operations. Except as discussed below, any payment of dividends after the
completion of the Offering, as determined at the discretion of the Board of
Directors, will be dependent upon the financial condition, capital requirements
and earnings of the Company, and other factors the Board of Directors may deem
relevant.

From its inception until December 24, 1998, EHC was treated as a
closely-held corporation under Subchapter S of the Code and, therefore, did not
pay federal or state income taxes on amounts earned during such periods. EHC
distributed dividends to its stockholders for the years ended December 30, 1995
and December 28, 1996 in the aggregate amounts of $207,243 and $133,379,
respectively. Additionally, EHC distributed an aggregate amount of approximately
$115,000 for the year ended December 27, 1997 and the period from December 28,
1997 until December 24, 1998.

22
<PAGE>

DILUTION

At December 26, 1998, the pro forma net tangible book value of the Company
was $306,446, or $0.16 per share of Common Stock, based on 1,945,000 shares of
Common Stock outstanding. The net tangible book value per share represents the
amount of the Company's total tangible assets less total liabilities, divided by
the number of shares of Common Stock outstanding. After giving effect to the
receipt of the net proceeds (estimated to be approximately $4,300,000) from the
sale of 1,250,000 shares of Common Stock offered hereby at an assumed Offering
price of $4.50 per share and 1,250,000 Warrants at $.10 per Warrant, the pro
forma net tangible book value of the Company at December 26, 1998 would be
$4,606,446 or $1.44 per share of Common Stock. This would result in dilution to
the public investors (i.e., the difference between the estimated Offering price
per share of Common Stock and the net tangible book value thereof after giving
effect to the Offering) of approximately $3.06 per share, or 68% of the Offering
price per share. The following table illustrates the per share dilution:

<TABLE>
<CAPTION>
PER SHARE OF
COMMON STOCK
------------
<S> <C> <C>
Assumed Offering price (1)........................................................ $ 4.50
Net tangible book value at December 26, 1998.................................... $0.16
Increase in net tangible book value attributable to new investors............... 1.28
-----
Pro forma net tangible book value after the Offering.............................. 1.44
------
Pro forma dilution of net tangible book value to the new investors................ $ 3.06
------
------
</TABLE>

- ------------------
(1) Offering price before deduction of estimated expenses of the Offering and
underwriting discounts and exclusive of the purchase price of $.10 per
Warrant.

The following table summarizes as of September 26, 1998, the number and
percentage of shares of Common Stock purchased from the Company, the percentage
and amount of total consideration paid and the average price per share paid by
existing stockholders and by new investors pursuant to the Offering.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................................ 1,945,000 60.9 $ 319,441 5.4 $0.16
New investors........................................ 1,250,000 39.1 5,625,000 94.6 $4.50
--------- ----- ---------- -----
Total......................................... 3,195,000 100% $5,944,441 100%
--------- ----- ---------- -----
--------- ----- ---------- -----
</TABLE>

The above table assumes no exercise of the Underwriter's over-allotment
option. If the Underwriter's over-allotment option is exercised in full, the new
investors will have paid $6,468,750 for 1,437,500 shares of Common Stock,
representing approximately 95.3% of the total consideration, for 42.5% of the
total number of shares of Common Stock outstanding.

<PAGE>

CAPITALIZATION

The following table sets forth as of December 26, 1998: (i) the actual
capitalization of the Company and (ii) the capitalization of the Company as
adjusted to reflect (a) the issuance and sale of the 1,250,000 shares of Common
Stock and 1,250,000 Warrants offered hereby; (b) the acquisition of CDP; and
(c) receipt of the net proceeds therefrom, after deducting underwriting
discounts and commissions and estimated offering expenses. This table should be
read in conjunction with the Company's consolidated financial statements and the
notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 26, 1998
----------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
Debt................................................................................ $2,290,625 $1,908,125
---------- ----------
Stockholders' Equity:

Common Stock, $.001 par value, 10,000,000 shares authorized, 1,945,000 issued and
outstanding, actual; 10,000,000 shares authorized, 3,195,000 issued and
outstanding, as adjusted(1).................................................... 1,945 3,195

Additional paid-in capital........................................................ 1,904,297 6,203,047

Retained earnings................................................................. 138,356 138,356
---------- ----------

Total stockholders' equity..................................................... 2,044,598 6,344,598
---------- ----------

Total capitalization........................................................... $4,335,223 $8,252,723
---------- ----------
---------- ----------
</TABLE>

- ------------------
(1) Assumes no exercise of the (i) Warrants; (ii) Underwriter's over-allotment
option; and (iii) Underwriter's Warrants.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company was formed for the purpose of developing or acquiring
domestically manufactured injection molded plastic products or assemblies,
redesigning the products to improve function and appearance and, by using its
relationships with vendors in China, to manufacture the products offshore in
order to deliver them at lower prices and improved profit margins. EHC, the
Company's principal subsidiary, has over 28 years of experience in the design,
marketing and manufacture of injection molded plastic components used in
industrial, consumer and military products. The Company believes that its
long-term experience in the manufacture and assembly of injection molded plastic
components, coupled with direct access to manufacturing facilities in China,
will enable the Company to provide improved products at lower prices with
improved profit margins.

RESULTS OF OPERATIONS

For the year ended December 26, 1998 compared to the year ended December
27, 1997:

NET SALES

Net sales decreased $171,746, or 3%, to $5,883,001 for the year ended
December 26, 1998 from $6,054,747 for the year ended December 27, 1997. The
decrease was attributable to the redesigning of a key customer's product and
generally slower industry bookings. One of the Company's customers redesigned a
military product, which in turn required the Company to redesign the control
knobs that it manufactures for such product. The Company began shipping the
redesigned knobs in the fourth quarter of 1998. However, the Company lost sales
during the period in which it built the tooling for the redesigned control
knobs, which period lasted approximately 14 weeks. The loss of the sales during
that period contributed to the Company's decrease in net sales. Additionally,
the redesigned product may adversely impact the Company's net sales in the
future due to the fact that the product now requires fewer control knobs. While
the previous design required five control knobs, the redesigned product only
requires two control knobs.

In addition, sales to non-affiliate companies decreased by $1,028,000, or
18%, to $4,656,000 for the fiscal year ended December 26, 1998 from $5,684,000
for the fiscal year ended December 27, 1997. The Company believes that such
decrease was due to overall lower industry orders particularly in the consumer,
military and industrial segments. Notwithstanding, sales to AFC, an affiliated
company, increased by $856,000, or 231%, to $1,227,000 for the fiscal year ended
December 26, 1998 from $371,000 for fiscal year ended December 27, 1997, of
which approximately $722,000 was incurred during the third and fourth quarters
of fiscal year ended December 27, 1998 due to AFC increasing its inventory
levels in preparation of purchasing its products from manufacturers in China
which require a longer lead time. Furthermore, preliminary results of operations
indicate that the Company will experience a decrease in revenues in the first
quarter of 1999, as compared to the first quarter of 1998, due to slower
industry bookings and lower sales to AFC as AFC readjusts its inventory needs.

In order to compensate for the changes within the industry, the Company's
marketing budget was restructured to begin a trade publication advertising
campaign, which takes advantage of new catalogs and mailing literature that have
been developed over the last two years. Such advertising material includes trade
publications, catalogs, post cards and faxback mailers. An Internet website has
been developed using a consistent identifiable format and creating a recognition
factor for our potential customer. Funds for the new advertising campaign were
derived from the reorganization of the Company's field sales force. The Company
believes that it has found progressive ways of selling its products without
incurring the overhead cost associated with a large field sales force.

For example, through the use of the Company's new contact management
software and database marketing techniques, the Company is systematically
identifying and maintaining information concerning existing and potential
customers, including names of engineers and purchasing agents and the Company's
sales history with such entities, enabling the Company to efficiently highlight
its manufacturing capabilities. Through this process, the Company believes that
it is generating additional business from existing customers who are not aware
of its complete capabilities, while also attracting new customers.

25
<PAGE>

The Company's on time deliveries (97%) and excellent quality (1% rejection)
were also factors in maintaining its customer base. A substantial portion of the
Company's business comes from large, established customers who certify their
suppliers based on delivery performance and quality rating. Improvements in
these areas have helped with repeat business. A substantial portion of the
Company's sales are made to large publicly owned customers, generally on an open
account basis.

GROSS PROFITS

The Company realized an overall gross margin percentage for the year ended
December 26, 1998 of 29%, which represents a decrease from 37% experienced
during the year ended December 27, 1997. The decrease in gross profit occurred
because of a change in the product mix. In 1998 the Company relied more heavily
on molded products which do not have secondary operations. These types of
products are different from the standard product line which do require secondary
operations, such as assembly, machining, painting, printing and finishing, and
consequently earn a higher profit.

The use of cellular manufacturing, just in time systems and Kanban method
of inventory control have aided in reducing the manufacturing cost of certain
product lines which are produced in small lots with very short lead times. This
allows the Company to carry fewer inventories and have very short lead-time in
comparison to the industry's previous history. Small lot production in the
manufacturing cells, in addition to operator training, statistical process
control and certified suppliers, has led to the improvements in delivery and
quality. Additional improvements have come from new purchasing software, which
is linked to the inventory control system.

Market research was performed to determine which product prices could be
increased. Prices on product lines, which require many operations and have
limited competition, were increased to meet the Company's targets. Standard
products, such as the Mil-spec line and the regent series, were adjusted to
cover increased material and labor costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased $6,767 or less than
1% to $1,764,126 for the year ended December 26, 1998 from $1,770,893 for the
year ended December 27, 1997.

CDP ACQUISITION

In March 1998, CDP entered into a five-year exclusive worldwide licensing
agreement to manufacture, market, sell and sub-license the Pull Pack(Trademark),
a proprietary Disk packaging system. The Company acquired CDP by means of an
agreement and plan of reorganization effective December 24, 1998, whereby the
Company issued 445,000 shares of its Common Stock for all of the issued and
outstanding stock of CDP. The purchased cost of such acquisition was $2,238,000,
based upon the proposed initial public offering price of the shares issued. The
Company has allocated $500,000 to the value of the exclusive license agreement
which grants CDP the right to manufacture, market, sell and sub-license the
Pull Pack(Trademark). The license agreement will be amortized over a period of
10 years. Additionally, the Company has allocated $1,738,000 to the value of the
goodwill attributed to the acquisition of CDP. Such charge to goodwill will be
amortized over a period of 10 years. As a result of the amortization for both
the license agreement and goodwill, there will be a charge to the Company's
operating and net income in the approximate amount of $225,000 for each year
during the next 10 years. Such charges will adversely affect the results of the
Company's future operating and net income. See "Risk Factors--Future
Amortization of License Agreement and Goodwill Attributed to CDP Acquisition"
and "Business--Products--The Pull Pack(Trademark)."

A pre-production model of the Pull Pack(Trademark) was developed in June
1998 for market research and sales purposes. Production tooling for the Pull
Pack(Trademark) was recently completed and the Company has purchased limited
quantities of the Pull Pack(Trademark) manufactured by its suppliers in China
which will be used by the Company to demonstrate the product to potential
purchasers and solicit orders.

Although there can be no assurance, the Company believes that the
development of the Pull Pack(Trademark) is currently complete based upon its
analysis of samples run from production molds. Based upon the satisfactory
nature of the samples, the Company has ordered the first 100,000 units of the
Pull Pack(Trademark), which will be shipped

26
<PAGE>

during the first quarter of 1999. The Company has completed market-study
surveys, but has yet to commence marketing activities or generate any revenue
from sales of the Pull Pack(Trademark). Although there can be no assurance, the
Company believes that it will commence commercial production of the Pull
Pack(Trademark) in the first or second quarter of 1999. See
"Business--Products--The Pull Pack(Trademark)."

The Company is not aware of any impediments to production of the Pull
Pack(Trademark) at this time. However, until the Company has actually commenced
its sales and marketing program for the Pull Pack(Trademark), there can be no
assurance that the Company will be successful in selling the Pull
Pack(Trademark) in sufficient quantities, if at all. See "Risk Factors--Initial
Manufacturing Phase of the Pull Pack(Trademark); No Assurance of Market
Acceptance," "--Difficulties in Integrating CDP into the Company," "--Risks
Relating to Licensing Agreement" and "Business--Products--The Pull
Pack(Trademark)."

The Company's appraisal of the acquisition of CDP and the exclusive license
to manufacture, market, sell and sub-license the Pull Pack(Trademark) was based
upon the Company's assessment of expected net cash inflow from CDP resulting
from potential sales generated within the potential market for Disc packaging
systems. The Pull Pack(Trademark) is a redesigned "Jewel Box," the packaging
currently used for Compact Discs, CD ROMs and DVD. The Company plans, with no
assurance, to market the Pull Pack(Trademark) as a specialty packaging system to
a targeted niche market, including CD ROM, special production, retail
replacement packaging and rental and institutional markets such as video stores,
lending libraries and technical research facilities.

Management of the Company arrived at its expected net cash inflow by first
determining the particular niche market for the Pull Pack(Trademark). Management
of the Company estimated that the Pull Pack(Trademark) could capture a
percentage of the niche market in its first year of commercial production based
upon the Company's prior market research. Management then estimated the net cash
inflow from sales of the Pull Pack(Trademark) based upon its projected share of
the niche market by applying its experience in manufacturing margins coupled
with its knowledge of manufacturing in China through pilot programs with AFC.
See "Business--Products--The Pull Pack(Trademark)."

The Company has made significant appraisal assumptions regarding (i) the
period in which material net cash inflows from the Pull Pack(Trademark) are to
commence, (ii) margins and expense levels, (iii) the percentage of the niche
market it estimated that the Pull Pack(Trademark) could capture and (iv) the net
cash inflow generated from the Pull Pack(Trademark). Based upon the current
stage of manufacturing of the Pull Pack(Trademark), the Company has assumed that
commercial production of the Pull Pack(Trademark) will commence in the first or
second quarter of 1999 and that net cash inflow from such sales will also
commence in the first or second quarter of 1999. The margins and expense levels
of the Pull Pack(Trademark) have been assumed based upon the Jewel Box market
and target niche market coupled with the anticipated costs of commercial
production and the current pricing of Disc packaging systems. The percentage of
the niche market was estimated based upon prior market research and the
assumption that marketing efforts would be successful. Finally, the net cash
inflow was estimated based upon a combination of the foregoing appraisal
assumptions coupled with the belief that manufacturing margins for the Pull
Pack(Trademark) will be similar to the Company's prior manufacturing experience.
See "Business--Products--The Pull Pack(Trademark)."

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs arise from working capital requirements,
capital expenditures and principal and interest payments. Historically, the
Company's primary source of liquidity has been cash flow generated internally
from operations, supplemented by bank borrowings and long term equipment
financing. The Company's cash decreased to $16,146 on December 26, 1998 from
$351,740 on December 27, 1997. Cash flow provided by operating activities was
$371,394 for the year ended December 26, 1998 on a net loss of $291,000. The
increase in accounts receivable was attributable to the start up of business for
International Smart Sourcing, Inc. The increase in accounts payable were the
result of the increase in accounts receivable and additional expenses due to the
Offering.

Cash used in investing activities for the year ended December 26, 1998 and
December 27, 1997 was $240,000 and $190,000, respectively, which consisted of
cash for the purchase of tooling, molds, machinery and equipment. As of the date
of this Prospectus, the Company does not plan on any material commitments for
capital expenditures.

27
<PAGE>

Net cash used in financing activity for the year ended December 26, 1998
was $468,000. Cash of $320,000 was provided from borrowings on available credit
lines and shareholder loans, which was offset by $239,405 principal repayment on
loans.

The Company believes that the proceeds of the Offering combined with the
cash balances and cash generated from operations will satisfy the Company's
working capital, business development and capital expenditures for at least 12
months. The Company may require additional sources of liquidity to fund future
growth, including additional equity offerings or debt financings. The Company
routinely evaluates potential acquisitions of businesses, products and
technologies that complement its business. As of the date of this Prospectus,
the Company has no agreements with respect to such transactions. Increased costs
or expenses, acquisition prospects and opportunities for growth or expansion may
increase the demand for working capital, necessitating additional capital
infusion.

NEW ACCOUNTING PRONOUNCEMENTS

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which prescribes a method of accounting for
stock-based compensation that determines compensation expenses based on fair
market value measured at grant date. SFAS No. 123 gives companies that grant
stock options or other equity instruments to employees, the option of either
adopting the new rules or continuing current accounting; however, disclosure
would be required of the pro forma amounts as if the new rules had been adopted.
SFAS No. 123 is effective for transactions entered into in fiscal years that
begin after December 15, 1995.

In 1997, the Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which establishes
standards for reporting and display of comprehensive income and its components,
and Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"), which establishes standards for the way public
business enterprises are to report information about operating segments in
annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. SFAS 131 also establishes standards for related disclosure about
products and services, geographic areas and major customers. SFAS No. 130 and
No. 131 are effective for years beginning after December 15, 1997.

<PAGE>

BUSINESS

THE COMPANY

The management team at EHC is comprised of molding, mechanical, industrial
and design engineers, enabling EHC to provide early and total involvement with
customers in the design and development of products. The Company believes that
such concurrent engineering results in reduced costs and shorter lead times
while improving quality. The technical staff at EHC has improved efficiency by
64% since 1995, due in large part to the use of Computer Aided Design
technology, cellular manufacturing and the Kanban manufacturing system. Computer
Aided Design technology utilizes computer generated graphic models during the
prototype phase and aids in optimal method planning for manufacturing. The
Kanban manufacturing system is a method of inventory control which allows
representatives of each departmental stage of the manufacturing process to
directly reorder inventory, as needed, thereby reducing overhead costs
associated with material control functions. EHC's products and technical
strengths are promoted by an aggressive, customer-focused internal sales force.

EHC meets a full range of its clients' needs by maintaining early and total
involvement, from the design and development to the ultimate manufacture and
packaging of the product. When a custom-made product is initially requested,
experienced EHC application engineers assist the customer during the concept
design stage, which the Company considers critical to the success of the
manufacturing process. During this stage, EHC application engineers draw upon
the Company's experience, expertise and technological innovation to assist
clients in reducing costs, meet accelerated market schedules and ensure high
quality workmanship.

Once EHC has successfully assisted the client in creating an efficient
design, such design is converted into a model. EHC currently has a relationship
with a local university whereby EHC utilizes such university's Computer Assisted
Manufacturing three dimensional computer graphics database, which is compatible
with EHC's system, to generate a drawing used to manufacture tooling, a Computer
Aided Design ("CAD"). The CAD is then used in conjunction with a Rapid Prototype
Machine to produce a design model for aesthetic evaluations.

The Company incorporates many other technological innovations and advanced
manufacturing practices to consolidate the Company's workplace. Through such
innovations, the Company is able to achieve state-of-the-art quality control
procedures and consistently produce high quality products. For the fiscal year
ended December 27, 1997, 97% of EHC's manufacturing projects were delivered on
time and less than 1% of its products were returned due to unsatisfactory
quality.

The Company is currently having its facility certified for International
Quality Standard ("ISO") 9001, a manufacturing certification required by
European companies and looked upon favorably throughout the world. ISO 9001
requires the Company to meet certain stringent requirements established in
Europe to ensure that the facility's manufacturing processes, equipment and
associated quality control systems will satisfy specific customer requirements.
The Company believes that obtaining ISO 9001 certification will benefit the
Company in the plastic manufacturing market, both nationally and
internationally.

The Company's factory is divided into manufacturing cells, which the
Company believes accounts for a more efficient workplace and improved quality.
Each cell is responsible for a complete manufacturing process, from machining to
assembly and from indicia marking to the ultimate packaging of the product. The
cells are operated by teams of cross-trained employees knowledgeable of both the
product and the manufacturing process. The cell teams meet regularly to solve
problems and develop more efficient manufacturing methods. The

29
<PAGE>

Company believes that this consolidated manufacturing approach results in high
quality, on-time delivery, competitive pricing and a loyal customer base.

Additionally, the Company believes that it has created a cost-effective
workplace by decreasing inventory costs. The Company's "pull" (also known as
"JIT," which stands for Just-in-Time) system is designed to introduce raw
materials and components at the time necessary to fulfill customer orders. This
system eliminates costs associated with the storage and handling of large
amounts of inventory. The Company believes that it also accounts for a more
timely rate of delivery. The "pull" system depends on long-term relationships
with suppliers. The Company believes that due to its strong relationships with
suppliers and its well-trained workforce, the system will continue to provide
efficient and prompt delivery.

The Company offers secondary operations on its molded products. Services
such as hand painting, pad printing, hot stamping and engraving are provided at
a customer's request. These marking systems can be used on most materials and
varying contours. The Company believes that these extra manufacturing services
allow for greater flexibility and increased customer satisfaction.

The Company was originally formed in 1970 as EHC, a New York corporation,
and was reorganized as of December 24, 1998 as a Delaware holding company for
its two wholly-owned subsidiaries, EHC and CDP. The Company changed its name
from International Plastic Technologies, Inc. to International Smart Sourcing,
Inc. on December 7, 1998. As part of the Reorganization, the stockholders of
each of the subsidiaries exchanged the following percentage ownership in the
respective subsidiaries for the percentage of shares of the Company: David
Kassel exchanged 33% of EHC and 90% of CDP for 46.3% of the Company; Andrew
Franzone exchanged 33% of EHC for 25.7% of the Company; Harry Goodman exchanged
33% of EHC for 25.7% of the Company; and David Cowan exchanged 10% of CDP for
2.3% of the Company.

GROWTH STRATEGY

The Company intends to expand its operations through (i) the acquisition
and development of injection molded plastic products and assemblies manufactured
in the United States having niche markets, (ii) the redesigning of such products
and assemblies, if necessary, to improve their function and appearance and
(iii) the manufacturing of such products and assemblies in China at lower prices
and improved profit margins. Through a Consultant who is also an independent
director of the Company, the Company has established direct contact with
manufacturers in China and has initiated pilot overseas manufacturing projects
in China of small-scale production runs of various products, including separate
projects through an affiliated company, AFC. Currently, the Company has purchase
orders with eight different suppliers in China. There can be no assurance that
the Company will be able to consummate any acquisitions, maintain or establish
additional manufacturing relationships in China or achieve any of its growth
strategies. See "Risk Factors--Risks Relating to Manufacturing in China."

While small businesses comparable in size to the Company often encounter
major difficulties in securing manufacturing projects in China due to
prohibitive broker commissions and agency fees incurred both domestically and
abroad, which, based upon the Company's experience could account for up to 25%
of the entire manufacturing project, the Company, through the Consultant, has
established direct contact with certain manufacturers in China, allowing the
Company to avoid such commissions and fees and realize the benefit from lower
costs of raw materials and labor. For example, EHC's principal raw materials at
this time, ABS and polycarbonate, cost up to 50% less in China and the cost of
labor for factory workers in China was approximately $.33 per hour for the year
ended 1997. To date, the Company has no written contracts or arrangements with
any manufacturer located in China and there can be no assurance that the Company
will be able to enter into any such contracts or arrangements on favorable
terms, if at all. Based on its assessment of pilot manufacturing projects in
China through AFC, the Company believes that it can reduce its overall domestic
manufacturing costs, including shipping and tariffs, by more than 25%. Although
there can be no assurance of future results, based on such pilot manufacturing
projects, the Company has reduced overall domestic manufacturing costs by 33%
for the year ended December 26, 1998, compared to its anticipated 25% reduction.
See "Risk Factors--Risks Relating to Manufacturing in China" and "Certain
Transactions."

30
<PAGE>

PRODUCTS

Control Knobs and Assemblies

The Company, through EHC, a wholly-owned subsidiary, manufactures a full
line of instrument control knobs, handles, value-added custom molding, dials and
similar devices for consumer, industrial and military electronics equipment.
EHC's knobs are used for precise setting of switches, on/off switches, volume
controls and critical setting of instrumentation switches. EHC manufactures many
of the knobs to order based on the customers' exacting specifications as well as
its standard line. Customers of EHC order the knobs by specifying particular
descriptions and features, including the shaft diameter, outer diameter, overall
size, height, color, illumination, dials and markings, such as lines, dots or
numbers. EHC also has a standard product line of consumer, industrial and
military knobs available for sale through catalogs.

Overall, the number of different types of knobs EHC has manufactured in its
history is in the order of tens of thousands. Some knobs are manufactured with
mechanical devices built into the knob. For example, one of the Company's
locking knobs turns freely and sets upon depression, resisting shock, vibration
or accidental movement. A clutch knob is one that continues to turn even after
the device has reached a pre-set limit so that the pressure of the turning knob
does not damage the equipment. Most knobs are resin-based and injection molded.
Some knobs are painted and some are delivered "as molded." Certain knobs are
made with aluminum inlays, caps, dials or skirts and may have fittings of
screws, bushings, springs or set screws.

The knobs and assemblies can be sold in lots of as few as one knob or as
large as 500,000 units or more. EHC requires a $150 per order minimum charge.
Knob prices to the customer range from as low as $.09 per unit to as much as
$150 per unit.

The Pull Pack(Trademark)

The Company, through CDP, a wholly-owned subsidiary, has entered into an
exclusive international licensing agreement to manufacture, market, sell and
sub-license the Pull Pack(Trademark), a proprietary Disc packaging system. The
Pull Pack(Trademark) is a redesigned "Jewel Box," the packaging used currently
for Compact Discs, CD ROMs and DVD. The Pull Pack(Trademark) implements a
drawer-like mechanism, avoiding the problems associated with currently available
Disc packaging involving fragile hinges, difficulty in opening and the removal
of Discs and descriptive literature. The drawer carries the Disc, and a tray
above the drawer holds the descriptive booklet. When the drawer is opened, the
tray is pushed forward one-half inch beyond the outer housing, providing the
user with the option of removing the Disc or the booklet or both. The drawer
also holds an inlay card, which provides the graphics for the spine and the
bottom of the package. See "Business--Patents, Trademarks, Licenses and Royalty
Rights."

31
<PAGE>

While no contracts or agreements are in place, the Company is currently
negotiating with manufacturers in China to produce the Pull Pack(Trademark) and
plans, with no assurance, to market the product as a specialty packaging system
to a targeted niche market, including CD ROM, special production, retail
replacement packaging and rental and institutional markets such as video stores,
lending libraries and technical research facilities. For the year ended 1997,
the market for Jewel Boxes sold in the music industry in the United States was
approximately $82,000,000 and the Company believes that the target niche market
for the Pull Pack(Trademark) is approximately $50,000,000. See "Risk
Factors--Risks Relating to Manufacturing in China" and "--Initial Marketing
Phase of the Pull Pack(Trademark); No Assurance of Market Acceptance."

The Company believes that the Pull Pack(Trademark) is well positioned to be
sold in specialty niche markets. The Company believes that the Pull
Pack(Trademark) receives favorable reviews because it complements what has made
the Compact Disc the preferred format in both the entertainment and educational
industries, ease of use and durability.

The Company intentionally relies upon current technologies and materials
used for the Pull Pack(Trademark) so that it can be interchangeable with current
Jewel Boxes. The Pull Pack(Trademark) is the same size as the standard Jewel Box
and is made from the same clear plastic. It also uses the same graphic inserts
as Jewel Boxes, a booklet and inlay card, which allows Compact Disc distributors
to use Jewel Boxes or the Pull Pack(Trademark) interchangeably without requiring
special graphics to be printed. The Company believes that this complete
compatibility will also allow the Pull Pack(Trademark) to be sold directly to
consumers who want to replace their broken Jewel Boxes with a more durable and
convenient package.

A pre-production model of the Pull Pack(Trademark) was developed in June
1998 for market research and small production runs. Concurrently, the production
tooling of the Pull Pack(Trademark) is complete and the product has been
produced in limited quantities. The Company believes, with no assurance, that it
will commence commercial production of the Pull Pack(Trademark) in the first or
second quarter of 1999. However, due to the early manufacturing stage of the
product, there are currently no contracts or agreements with potential
suppliers, distributors, manufacturers or customers concerning production of the
Pull Pack(Trademark). The Company will initially target market opportunities
such as replacement packaging, CD ROM packaging, rental and institutional
markets, such as video stores, lending libraries and technical research
facilities, special production markets and newly developed discs. As consumers
become familiar with the Pull Pack(Trademark), the Company intends to sell
directly to the OEMs, who are the original content providers in both the music
and CD ROM industries.

Replacement Market. The Company will target several key distribution
avenues in the replacement market, including mass merchandisers, office supply,
computer, music chains and catalogs. The Company believes that it is important
to sell the Pull Pack(Trademark) in all of the above channels, and not just in
music stores. The Company estimates that approximately 100 million replacement
units are sold per year at an average price of $0.15 per unit, or an aggregate
of $15,000,000.

Computer stores and music retailers sell replacement Jewel Boxes so that
consumers can replace broken packages. Compact Discs distributed in paperboard
sleeves also fuel the replacement market as consumers replace such packaging
with Jewel Boxes. The Company believes that individual retail chains sell
approximately 30,000 replacement packages per month. Chain stores, office supply
stores, computer chains, mail order companies and music stores all sell
replacement Jewel Boxes, usually in packs of three, five or ten.

CD Rom Market. CD ROMs are frequently housed in Jewel Box packaging. CD
ROM volume in the United States is estimated to have reached 278 million units
in 1995. Computer and CD ROM use continues to increase, as consumer retail store
purchases supplement software sold with computers by OEMs.

Industrial Market. Many businesses prepare demonstration or promotional
discs for music, software, and product promotion, including such retailer
catalogs as L.L. Bean, Williams-Sonoma and Tiffany. Although those Compact Discs
or CD ROMs which are distributed free of charge are not included in statistical
data bases, the Company estimates that approximately 20 million of these units
were distributed in the year ended December 31, 1997. Consequently, the Company
believes that the market available for the Pull Pack(Trademark) is statistically
understated.

Special Production Market. Special packaging is frequently created to meet
the demands of major recording artists or provide a uniquely distinctive package
for special promotions. Such packaging is assembled

32
<PAGE>

by hand because automated insertion machines cannot accommodate non-standard
packaging. The Company believes it has the ability to provide such packaging at
reasonable costs. The Company estimates that approximately five to ten million
units are packaged in this manner each year.

Newly Developed Discs. The Company believes that new disc formats that
have recently reached the market or are expected to do so in the near future
will also expand market opportunities. These formats include the Photo Compact
Disc and the DVD, both of which can be packaged using a variation of the Pull
Pack(Trademark) concept. DVDs are the same size as the compact discs now in use,
but will be sold in packages two inches larger than a Jewel Box to fit into
current retail video racks. The Company believes that the laser packaging may
provide an opportunity for the Pull Pack(Trademark) to become the package of
choice. Other entertainment formats--Digital Compact Cassettes and Digital Audio
Tape--are also available and can be packaged using a variation of the Pull
Pack(Trademark) concept.

OEM Market. The OEM market is the largest user of Compact Disc packaging.
The Company estimates that OEMs used approximately one billion units in the
United States for the year ended December 31, 1997. Once the Pull
Pack(Trademark) has become visible in the replacement market, the Company
believes that it is likely to be requested by consumers for new title releases.
The Company will attempt to capitalize on this demand by marketing directly to
the OEM market. The six major OEMs for music are: Warner/Elektra/Atlantic, Sony,
PolyGram, Capitol/EMI, MCA and BMG. These OEMs generally have their Jewel Boxes
manufactured by outside sources. Jewel Boxes are delivered partially assembled,
and the OEM uses automated equipment to insert the Discs and graphic components
and to shrink wrap the packages. If sales volume in the OEM market exceeds the
Company's ability to increase production, the Company will consider licensing
the right to produce the Pull Pack(Trademark) to the OEM or its supplier.

The Company also plans, although with no assurance, to introduce a more
durable version of the Pull Pack(Trademark) which will utilize the same tooling
as the standard Pull Pack(Trademark), but will be made out of a tough, clear
plastic called zylar. These zylar packages will be marketed to rental and
institutional markets such as video stores, lending libraries and technical
research facilities, so that the Company will have access to different market
segments simply by substituting one raw material for another.

COMPETITION

Knob and Assembly Manufacturing/Injection Molding

The Company believes that its segment of the plastic injection molding
industry is highly fragmented and that no one participant is dominant in the
industry. The Company believes that the most important competitive factor in
this industry is investment in tooling, as the high cost of tooling relative to
the low revenue of individual products is a barrier to entry in this market. The
Company currently owns approximately 1,500 tools, which gives it the ability to
manufacture over 10,000 products and assemblies. Other key competitive factors
in this industry include quality of products, depth of industry knowledge, a
sizable customer base, ability to provide products on a timely basis, level of
experience, breadth of products and services offered, responsiveness to customer
requests and ability to produce a wide variety of projects in a timely manner
and at a competitive price.

The Company believes that its main competitors in the control knobs and
components segment of the injection molding industry are the following: Rogan
Corporation, which produces instrument and consumer knobs; Philips Plastic
Manufacturing Corporation, which produces consumer knobs; Davies Molding
Company, which produces instrument knobs; and Aerospace Knob Company, which
produces military avionic knobs. With its range of consumer, instrument and
military knobs, EHC strives to provide the broadest and most extensive line of
knobs and assemblies in order to maintain an advantage over its competitors.

Pull Pack(Trademark)

The Company believes that the primary competition for the Pull
Pack(Trademark) is the current Jewel Box manufactured by Atlanta Precision
Molding, Auriga and International Packaging Corp. Other companies have developed
alternative Compact Disc packaging, but the Company believes that none have
proved to be a challenge at this time because production costs are prohibitive
or the designs have not been accepted by the general public or OEMs. Three of
these packages are the Laserfile, from Laserfile Inc., the Utmost Rotary CD
Case, from Co-Joint Corp. and the Alpha Pak, from Alpha Enterprise, Inc.

33
<PAGE>

SUPPLIERS AND RAW MATERIALS

EHC's principal raw materials consist of Lexan (polycarbonate), nylon, ABS
and polypropylene. Such materials are generally available commodities sold to
the injection molding industry by a variety of suppliers. suppliers in China,
the Company does not have any oral or written contracts or agreements with any
suppliers. No one vendor accounts for more than 10% of the Company's purchases,
except for Shanghai Foodstuffs Export & Import Corporation and Royal Screw
Machine Products. The loss of the Company's business relationship with either
principal supplier could have a material adverse effect on the Company.
Notwithstanding, while a shortage of a particular supplier's raw materials would
not materially affect the Company, a general shortage of raw materials could
adversely impact the Company. The Company has never experienced a shortage in
raw materials and does not anticipate any shortages to occur in the reasonably
foreseeable future, however, there can be no assurance that there will not be a
shortage of raw materials. See "Risk Factors--Risks Relating to the Use of
Foreign Suppliers" and "--Dependence Upon Suppliers and Raw Materials."

If and when the Company begins to contract for the manufacturing of
products in China, including the Pull Pack(Trademark), the Chinese manufacturers
will arrange for all raw materials from local suppliers. While the Company
believes that there will be no shortage of such materials overseas and that
prices will remain comparatively low, there can be no assurance that no
shortages will occur. In addition, the Company is subject to the risk of
political or economic dislocation in China which could affect the availability
or cost of raw materials. The Company anticipates that the raw materials used
for the Pull Pack(Trademark) will consist of either crystal styrene, general
purpose styrene, polypropylene or zylar.

DISTRIBUTION METHODS

EHC sells its products solely to industrial customers either directly or
through major distributors. EHC never sells directly to retail consumers.
Approximately 20% of EHC's products are principally sold through the following
distributors: Newark Electronics, Allied Electronics, Inc., Bisco Industries,
Inc., Alatec Electronics, Inc. and Peerless Electronics, Inc. The Company does
not have oral or written contracts or agreements with such distributors.

GOVERNMENT APPROVAL

The Company is subject to certain regulations in connection with its sale
of products to the U.S. Military. In order to sell many of its products to the
U.S. Military, a product must be listed on one of the Qualified Product Lists
("QPL"). Certain of the Company's products have been approved for inclusion on
QPLs, so that they may be sold to the U.S. Military. The Company's products have
been listed on the QPLs each year since 1970. Should the Company lose such QPL
approval, it would lose its ability to sell products to the U.S. Military.
Expansion into foreign markets may require the Company to comply with additional
regulatory requirements. Various countries may regulate the import of the
Company's products. Any such export or import restrictions, new legislation or
regulation or government enforcement of existing regulations could have a
material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that the Company will be able to
comply with additional applicable laws and regulations without excessive cost or
business interruption and failure to comply could have a material adverse effect
on the Company. See "Risk Factors--Government Regulation of Technology."

RESEARCH AND DEVELOPMENT

The Company believes that its commitment to research and development has
distinguished the Company among its competitors. The Company spent approximately
$225,000 on research and development in 1998, including expenditures on new knob
designs, computer aided design technology and engineering feasibility studies on
potential new product lines. The Company, through EHC, spent approximately
$150,000 in 1997 on both new tooling for new knob designs and product
development, and $75,000 in 1996 on new tooling for new knob designs. The
Company has secured various federal government and New York State monies for
product development, including a $150,000 federal assistance/match funds grant.
The Company's customers do not bear research and development costs, as all
research and development is funded solely by the Company, some of which is
through federal or state funding.

34
<PAGE>

PATENTS, TRADEMARKS, LICENSES AND ROYALTY RIGHTS

The Company, through CDP, a wholly-owned subsidiary, entered into a minimum
five-year license agreement dated as of March 1, 1998 with Inch, Inc., to obtain
the exclusive worldwide licensing rights to make, use, sell and sublicense the
Pull Pack(Trademark). In consideration of the exclusive license, the Company
agreed to pay Inch, Inc. royalties of (i) 2% of the annual gross sales of Pull
Pack(Trademark) less any returns, credits and allowances; (ii) 25% of any
royalties or fees from sublicensees payable within 30 days of receipt; and
(iii) a $30,000 reimbursement payment for expenses incurred in obtaining a
patent. The Company is entitled to exclusive license rights of Pull
Pack(Trademark) for a minimum of five years and a maximum of the United States
life of the patent, which expires in 2012. If royalties paid to Inch, Inc. do
not equal or exceed a minimum total of $30,000 from February 1, 1999 to
February 1, 2000, $40,000 for the next 12 month period and $50,000 for each 12
month period thereafter, or if CDP does not obtain a cash capital investment of
$1,000,000 by February 28, 2000, Inch, Inc. shall have the right to terminate
the exclusive license agreement upon 30 days' notice. The Company intends to
obtain the $1,000,000 necessary for the cash capital investment through the
proceeds of this Offering. In the event that the exclusive license is
terminated, CDP shall continue to hold a non-exclusive license at the above
referenced royalty rate. Inch, Inc. has also agreed to provide consulting
services to CDP at the rate of $50 per hour prior to the sale of 10,000 units
and $110 per hour after the sale of 10,000 units. CDP has agreed to indemnify
and hold harmless Inch, Inc. against all damages and liabilities arising out of
the manufacture of the Pull Pack(Trademark).

In 1995, Pull Pack(Trademark) was issued Patent No. 5,383,544, which
expires in January 2012. On June 16, 1998, EHC was issued Patent No. 5,765,449,
which expires on June 16, 2015. EHC has submitted a patent application on a
tactile detent knob. However, there can be no assurance that such patent will
issue.

The Company may apply for additional patents relating to other aspects of
its production. There can be no assurance as to the degree of protection which
existing or future patents, if any, may afford the Company, or that competitors
will not develop similar or superior methods or products outside the protection
of any patent issued to the Company. See "Risk Factors--Risks Relating to
Licensing Agreements" and "Risk Factors--Uncertainty Regarding Patents and
Proprietary Information."

EMPLOYEES

As of the date of this Prospectus, the Company had a total of 81 employees.
13 of these employees work on a part-time basis. 38 of the Company's employees
are represented in collective bargaining agreements by Local 531, International
Brotherhood of Teamsters, AFL-CIO. 15 employees work in Sales and Administration
while 66 employees are factory workers.

The Company believes it has a satisfactory relationship with its unionized
labor and has never experienced a work stoppage. The current collective
bargaining agreement was amended by means of a Memorandum of Agreement dated as
of May 10, 1998 and was extended until May 9, 2001. Union employees are covered
by the Sick & Welfare Fund, Local 531, to which the Company contributes a
specified amount each year.

PROPERTY

The Company operates from an approximately 20,000 square foot facility
located in Farmingdale, New York. The facility is owned and operated by K&G
Realty Associates, a partnership owned by David L. Kassel, the Company's
Chairman, and Harry Goodman, the Company's Vice President. The mortgage on the
facility is guaranteed by EHC. The Company's lease, currently under a 10-year
extension, expires in December 2005. The annual rent is currently $138,000 per
year, and provides for annual adjustments equal to the greater of the increase
in the Consumer Price Index or 5%. Pursuant to a rider to the lease agreement
dated as of March 1, 1998, EHC shall pay as additional rent, any and all real
property taxes for the demised premises in excess of $26,000 per annum. In 1998,
the real estate taxes were approximately $32,000. The Company believes that the
property is suitable for its presently foreseen use. See "Certain Transactions."

LEGAL PROCEEDINGS

The Company is not aware of any legal proceedings to which it is a party.
Additionally, the Company is not aware of any legal proceedings contemplated by
government authorities.

<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth information concerning the executive
officers, directors and significant employees of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Andrew Franzone...................................... 61 Chief Executive Officer and President, Director
David L. Kassel...................................... 63 Chairman of the Board of Directors
Harry Goodman........................................ 72 Vice President and Secretary, Director
Steven Sgammato...................................... 39 Chief Financial Officer
Frank Pellegrino..................................... 52 Vice President of Engineering
Bao-Wen Chen......................................... 30 Director
Carl Seldin Koerner.................................. 49 Director
Mitchell Solomon..................................... 39 Director
</TABLE>

Andrew Franzone has served as President of EHC since 1987. Mr. Franzone has
also served as president of AFC since 1984. Mr. Franzone served as Chairman of
the Board of Directors and President of Ackerman Bodnar Corp., a manufacturer of
interior aircraft lighting, from 1974 through 1983. See "Certain Transactions."

David L. Kassel founded EHC in 1970. Mr. Kassel has served as Chairman of
EHC since 1975 and President of CDP since 1995. From 1983 until 1995, he was
Chairman of the Board of Directors of American Safety Closure Corp., a company
engaged in the manufacturing of bottle caps. Mr. Kassel has been the Chairman
and principal stockholder of AFC since 1984. Mr. Kassel has been the Chairman of
Memory Protection Devices, Inc., a company engaged in the manufacturing of
devices for the protection of computer memory, since 1987. Mr. Kassel has been a
partner in K&G Realty Associates, a privately-held real estate company, since
1978. See "Certain Transactions."

Harry Goodman served as Vice President of EHC since 1986. Mr. Goodman
served as President of EHC from 1976 to 1986 and began working as an officer of
EHC in 1970. Mr. Goodman has been a partner at K&G Realty Associates since 1978.
Mr. Goodman has served as an officer of AFC since 1984. Mr. Goodman has served
as an officer of Memory Protection Devices, Inc. since 1987. See "Certain
Transactions."

Steven Sgammato has served as Chief Financial Officer of EHC since 1987.
Mr. Sgammato served as a manager in accounting for Gimbel's Corp. from 1982 to
1986, and a manager in accounting of Conran's Habitat from 1986 to 1987.
Mr. Sgammato earned an MBA in Management from Dowling College, located in
Oakdale, New York, in 1997.

Frank Pellegrino has served as the Vice President of Engineering of EHC
since 1974.

Bao-Wen Chen joined the Company in 1998 as a director. Ms. Chen currently
serves as the president of B.C. China Business Consulting, Inc., a partner of
China Trade Limited and Secretary General of the U.S.-China Economics and Trade
Promotion Council. In 1995, Ms. Chen formed B.C. China Business Consulting,
Inc., a provider of advisory and consulting services to clients engaging in
transactions between U.S. and Chinese companies, and currently serves as its
president. In January 1998, Ms. Chen became a partner of China Trade Limited, a
company comprised of U.S. businessmen, international attorneys and U.S. resident
Chinese nationals formed to assist clients in representation and trade, sales
and distribution and strategic service in transactions between U.S. and Chinese
companies. Since 1992, Ms. Chen has served as Secretary General of the
U.S.-China Economics and Trade Promotion Council, a non-profit government trade
organization providing a forum to promote economic exchange and trade between
Chinese and U.S. companies. See "Certain Transactions."

Carl Seldin Koerner, Esq. joined the Company in 1998 as a director.
Mr. Koerner has been a practicing attorney since 1976 and is a managing partner
in the law firm of Koerner Silberberg & Weiner, LLP. Mr. Koerner established
Koerner Silberberg & Weiner, LLP, in 1986 and has served as counsel to the
Company since 1976. Mr. Koerner has served as a principal of Koerner Kronenfeld
Partners, LLC, a conceptual capital development company, since 1996 and has
served on the board of directors of ASI Solutions Incorporated (NASDAQ: ASIS), a
human resources outsourcing firm, since 1997. See "Certain Transactions" and
"Legal Matters."

36
<PAGE>

Mitchell Solomon joined the Company in 1998 as a director. Mr. Solomon has
served as President and director of Eby Electro Inc., a privately held
corporation, since 1993 and serves as President and director of Aspro Technology
Inc. and ECAM Technology Inc., both privately held corporations.

BOARD COMMITTEES

The Board of Directors of the Company has established a compensation
committee (the "Compensation Committee") and an audit committee (the "Audit
Committee"). The Compensation Committee, which will consist of David L. Kassel
and two directors, Carl Seldin Koerner and Mitchell Solomon, determines the
salaries and bonuses of the Company's executive officers. The Compensation
Committee also administers the Company's 1998 Stock Option and Grant Plan.
Mr. Kassel, Mr. Koerner and Mr. Solomon will serve as members of the Audit
Committee. The Audit Committee recommends the appointment of auditors and
oversees the accounting and audit functions of the Company.

DIRECTOR COMPENSATION

Directors receive a fee of $300 per month for serving on the Board of
Directors and reimbursement of reasonable expenses incurred in attending
meetings. All directors hold office until the next annual meeting of the
stockholders and the election and qualification of their successors. Executive
officers are elected by the Board of Directors annually and serve at the
discretion of the Board.

EXECUTIVE COMPENSATION

The following table sets forth the cash compensation paid or accrued by the
Company to the Company's Chief Executive Officer and the Company's other
executive officer whose compensation exceeded $100,000 for the fiscal year ended
December 27, 1997. No other officer received cash compensation in excess of
$100,000 in 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION FOR YEARS ENDED
DECEMBER 26, 1998
AND DECEMBER 27, 1997
-------------------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ---- -------- ----- ------------
<S> <C> <C> <C> <C>
Andrew Franzone
Chief Executive Officer and President............................ 1998 $ 99,176 $ 0 $ 7,800
1997 $ 96,585 $ 0 $ 7,800
David L. Kassel
Chairman of the Board............................................ 1998 $209,399(1) $ 0 $ 10,400
1997 $ 76,588 $ 0 $ 10,400
</TABLE>

- ------------------
(1) Includes $150,000 in consideration for consulting services provided by
Mr. Kassel to the Company, which payment was postponed in exchange for the
issuance to Mr. Kassel of a promissory note bearing interest at a rate equal
to 6% per annum due January 1, 1999 which was subsequently amended on
December 8, 1998 extending the maturity date to not later than 30 days after
the Effective Date. See "Certain Transactions."

EMPLOYMENT AGREEMENTS

The Company entered into executive employment agreements as of March 15,
1998 with Andrew Franzone, David L. Kassel and Harry Goodman, each an
"Executive." The term of each of the employment agreements lasts until March 2,
2008 (the "Term"). The annual base salaries of Messrs. Franzone, Kassel and
Goodman under their employment agreements are $125,000, $100,000 and $100,000,
respectively, with annual salary adjustments equal to the greater of 5% or an
increase equal to the Consumer Price Index. Each Executive is entitled to fringe
benefits and an annual bonus to be determined by the Compensation Committee of
the Board of Directors. Each Executive can be terminated for cause (as defined
in the employment agreements) with all future compensation ceasing. If the
Executive dies during the Term or is unable to competently and continuously

37
<PAGE>

perform the duties assigned to him because of ill health or other disability (as
defined in the employment agreements), the Executive or the Executive's estate
or beneficiaries shall be entitled to full compensation for three years
following the date thereof. If the Executive is terminated without cause, the
Executive shall be entitled to full compensation for the remainder of the Term.
If the Executive resigns, his compensation ceases as of the date of his
resignation. During the period of employment and for a period of two years
thereafter, the Executives are prohibited from competing with the Company;
provided, however, that the Executives may provide services to other
noncompeting businesses. In order for a restrictive covenant to be enforceable
under applicable state law, the covenant must be limited in terms of scope and
duration. While the Company believes that the covenants in the employment
contracts are enforceable, there can be no assurance that a court will declare
them to be enforceable under particular circumstances.

CASH GAIN SHARING PROGRAM

EHC has a Cash Gain Sharing Program (the "Program"), which entitles all
full-time, non-union employees (including supervisory union employees) and other
key EHC employees (excluding officers), as determined by the Company, to extra
compensation based on the cash profits of EHC. The distributions are based on a
schedule of Company objectives determined each year by the Company. If positive
cash flow averages less than $2,000 per week in a quarter, the Company will not
make any distributions. The Company considers a full-time employee to work at
least 30 hours per week. Employees must complete a 90-day probationary period
before they are eligible to participate in the Program. For the year ended
December 27, 1997, the Company distributed $87,000 pursuant to the Program. The
Company made no distribution for the year ended December 26, 1998.

STOCK OPTION AND GRANT PLAN

The Stock Option and Grant Plan (the "Grant Plan") was adopted by the
Company's Board of Directors as of March 17, 1998 and approved by its
stockholders as of March 17, 1998. Officers, directors, employees, consultants
and key persons of the Company are eligible to participate in the Grant Plan.
The Grant Plan is designed to provide employees and such other individuals with
a performance incentive, a direct stake in the Company's future welfare and an
incentive to remain with the Company. The Company believes that the Grant Plan
will encourage qualified persons to seek employment with the Company.

The Grant Plan provides for grants of an aggregate of 300,000 shares of
Common Stock or options to purchase shares of Common Stock intended to qualify
as incentive stock options ("Incentive Options"), under Section 422 of the Code
as well as options that do not so qualify ("Non-Qualified Options"). The
Incentive Options shall be granted only to employees or employee-directors of
the Company. Such Incentive Options shall be exercisable for shares of Common
Stock at an exercise price no less than the fair market value of the shares of
Common Stock on the date of grant and are not exercisable after the tenth
anniversary of the date of grant. Notwithstanding the foregoing, pursuant to
Section 422 of the Code, optionees who beneficially own in excess of 10% of the
Company's voting stock are not entitled to receive Incentive Options unless the
exercise price of such options is no less than 110% of the fair market value of
the Common Stock on the date of grant and such options are not exercisable more
than five years from the date of grant. Additionally, to the extent that the
aggregate fair market value of the Common Stock with respect to which the
Incentive Options are exercisable for the first time during any calendar year
exceeds $100,000, the options attributable to the excess over $100,000 shall be
treated as Nonqualified Options under the Code. Non-Qualified Options shall be
exercisable for shares of Common Stock at an exercise price of no less than 85%
of the fair market value of the Common Stock on the date of grant and are not
exercisable after the tenth anniversary of the date of grant.

The Grant Plan provides that it will be administered by the Compensation
Committee. The Compensation Committee determines which officers, directors,
employees, consultants and key persons shall receive shares or options, whether
the individual shall receive shares or options and if options, the terms and
conditions of the options, including the exercise price of each option, the term
of each option, the number of shares of Common Stock to be covered by each
option and any performance objectives or vesting standards applicable to each
option. Subject to the requirements of the Code, the Compensation Committee will
also designate whether the options granted shall be Incentive Options or
Non-Qualified Options. Pursuant to an agreement between the Company and the
Underwriter, no grants of options or shares which are not covered under the
Grant Plan can be made for 24 months after the Effective Date, without the
approval of the Underwriter. The Company intends to

38
<PAGE>

register all or a portion of the shares under the Grant Plan with the Securities
and Exchange Commission within three months after the Offering. See
"Underwriting."

401(K) PLAN

The Company sponsors, through EHC and an affiliated company, AFC, a
401(k) Plan (the "Plan") available for all non-union employees and union
supervisors who have attained the age of 21 and have completed three months of
service with the Company. The Plan was adopted effective August 1, 1993 and was
amended effective August 1, 1997. Under the Plan's qualified cash or deferred
arrangement, a participant may, under an arrangement with the Company, elect to
contribute 1% to 15% of his or her annual compensation to the Plan on behalf of
the participant, in lieu of the participant's current receipt of such
compensation. In addition to the employee's contribution, the Company may, but
need not, make discretionary contributions to the Plan in such amounts as it
determines. As of the date of this Prospectus, the Company has not contributed
to the Plan. A participant's contributions made under the qualified cash or
deferred arrangement are 100% vested at all times. Discretionary contributions
become vested thereafter at the rate of 20% for each additional full year of
service, until 100% vested. Benefits are payable upon a participant's
termination of employment for any reason, in the form of one lump sum payment or
in installments extending over a fixed period of years, depending upon the
employee's election.

<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of the Effective Date and as
adjusted to reflect the sale of 1,250,000 shares of Common Stock by the Company,
with respect to the beneficial ownership of shares of Common Stock by (i) each
person or a group of persons known by the Company to be the owner of more than
5% of the outstanding shares of Common Stock, (ii) each director, (iii) each
executive officer named in the Summary Compensation Table under the caption
"Management," and (iv) all officers and directors as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
AMOUNT AND SHARES OWNED
NATURE OF -------------------------
BENEFICIAL PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) OFFERING OFFERING(3)
- --------------------------------------- ------------ -------- -----------
<S> <C> <C> <C>
David L. Kassel........................................................... 900,000 46.3% 28.2%
Andrew Franzone........................................................... 500,000 25.7% 15.6%
Harry Goodman............................................................. 500,000 25.7% 15.6%
All Directors and Officers as a Group..................................... 1,900,000 97.7% 59.5%
</TABLE>

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

(1) Unless otherwise indicated, the address of each individual is c/o the
Company, 320 Broad Hollow Road, Farmingdale, New York 11735.

(2) For purposes of the above table, a person or group of persons is deemed to
have "beneficial ownership" of any shares that such person or group has the
right to acquire within 60 days after such date; and for purposes of
computing the percentage of outstanding shares held by each person or group
on a given date, such shares are deemed to be outstanding, but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.

Beneficial ownership is determined in accordance with Rule 13d-3 under the
Exchange Act and is generally determined by voting power or investment power
with respect to securities. Except as indicated by footnote, and subject to
community property laws where applicable, the Company believes that the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.

(3) Does not include (i) 1,250,000 shares of Common Stock reserved for issuance
upon exercise of the Warrants; (ii) 187,500 shares of Common Stock reserved
for issuance upon exercise of the Underwriter's over-allotment option;
(iii) 187,500 shares of Common Stock issuable upon exercise of the Warrants
underlying the Underwriter's over-allotment option; (iv) 125,000 shares of
Common Stock reserved for issuance upon exercise of the Underwriter's
Warrants; (v) 125,000 shares of Common Stock issuable upon exercise of the
Warrants underlying the Underwriter's Warrants and (vi) 300,000 shares of
Common Stock or options which may be granted pursuant to the Company's Stock
Option and Grant Plan.

40
<PAGE>

CERTAIN TRANSACTIONS

REORGANIZATION

The Company was founded in 1970 as EHC, a New York corporation, and was
reorganized as a Delaware holding company with two wholly-owned subsidiaries,
EHC and CDP, as of December 24, 1998. The Company changed its name from
International Plastic Technologies, Inc. to International Smart Sourcing, Inc.
on December 7, 1998. As part of the Reorganization, the Company acquired, solely
in exchange for 1,945,000 shares of Common Stock of the Company, all of the
outstanding capital stock of EHC (three shares) and CDP (500 shares). The value
and number of the Company's Common Stock issued to former holders of the
outstanding capital stock of CDP and EHC was determined by negotiations between
the Company and Andrew Franzone, David L. Kassel, Harry Goodman, Robert Gillings
and David Cowan. Mr. Gillings subsequently transferred his shares of CDP to
David L. Kassel in an arms'-length transaction effected on May 29, 1998 in
return for a nonrecourse promissory note (the "Note") from Mr. Kassel in favor
of Mr. Gillings in the principal amount of $450,000 bearing interest at the rate
of 6% per annum, payable in full on August 1, 2000 (the "Maturity Date") or
earlier as provided in the Note. None of the principal amount of the Note has
been paid to date and no principal or interest payments are due before the
Maturity Date. Mr. Gillings will not have any voting rights with respect to the
transferred shares prior to the Maturity Date. However, in the event that
Mr. Kassel defaults on the Note by failing to fully pay the principal and
interest due within 30 days after the Maturity Date, Mr. Gillings retains the
right to demand return of the shares and either hold such shares, in which case
he will retain all voting rights thereto, or to sell such shares in a public or
private sale in accordance with all applicable rules and regulations under the
Securities Act.

The Reorganization exchange is an arm's-length transaction acceptable to
each of the parties based upon the above-referenced negotiations. The amount of
shares issued is based on a ratio of shares held in CDP and EHC to a percentage
of shares of the Company.

LEASES

EHC leases its facility in Farmingdale, New York from K&G Realty Associates
("K&G"), a partnership owned by David L. Kassel and Harry Goodman, both officers
and directors of the Company. The lease agreement has been extended until
December 31, 2005. The annual rent is currently $138,000, with increases equal
to the greater of the increase in the Consumer Price Index or 5%. Pursuant to a
rider of the lease agreement dated as of March 1, 1998, EHC shall pay as
additional rent, any and all real property taxes for the demised premises in
excess of $26,000 per annum. In 1998, the real estate taxes were approximately
$32,000. The mortgage agreement between Long Island Commercial Bank and K&G
dated November 28, 1995 is a 15 year self-liquidating adjustable mortgage
currently bearing 9 1/2% interest in the original principal amount of $610,000.
The mortgage is guaranteed by EHC. By agreement dated November 28, 1995, K&G has
assigned all rents due from EHC to the Long Island Commercial Bank. The Company
believes that the terms and consideration of this lease are no less favorable to
the Company than a lease from a third party. See "Certain Transactions."

CREDIT FACILITIES

On July 29, 1996, EHC entered into a term loan agreement (the "Term Loan")
with Republic National Bank of New York for the principal amount of $500,000, of
which $275,000 remains outstanding as of December 26, 1998. The Term Loan bears
interest at 1% above the annual interest rate established by Republic National
Bank as its reference rate for domestic commercial loans and is payable in 11
quarterly installments, commencing on October 31, 1996 with a final payment of
the remaining balance due and payable on July 31, 1999. EHC may prepay the loan
without penalty. The Term Loan is guaranteed by David L. Kassel, Harry Goodman,
Andrew Franzone and AFC, an affiliate of the Company. The guarantee provisions
which are part of the Term Loan provide that upon any default under the Term
Loan, the bank may immediately cause the related note to be due and payable by
the guarantors. See "Certain Transactions."

On July 29, 1996, EHC entered into a demand loan agreement (the "Demand
Loan") with Republic National Bank for the principal amount of $1,000,000, of
which $973,000 remains outstanding as of December 26, 1998. The Demand Loan
bears interest at 1/2% above the interest rate established by Republic National
Bank.

41
<PAGE>

EHC entered into a loan agreement (the "Loan" and together with the Term
Loan and Demand Loan, the "Indebtedness") with Long Island Development
Corporation ("LIDC") for the principal amount of $250,000 on February 21, 1997,
of which $216,200 remains outstanding as of December 26, 1998, and granted LIDC
a security interest in all of its personal property. The Loan is payable in 120
monthly installments with interest at 7% per annum, commencing on March 1, 1997
and continuing until February 1, 2007. The loan is guaranteed by AFC, Andrew
Franzone, David L. Kassel and Harry Goodman. The guarantors jointly and
severally represent and agree to identical provisions of the Loan as EHC,
including guarantee provisions which provide that in the event of default of the
Loan, the bank may declare the related promissory note due and payable.
Additionally, AFC guaranteed a security agreement between EHC and LIDC relating
to the Loan. Under the security agreement, both EHC and AFC grant and convey a
security interest in all of their property, goods and chattels and promise to
retain possession of their collateral, keep collateral in its location, in good
repair and fully insured and defend title of the collateral. Upon any default of
the Loan, the obligations of the security agreement become immediately due and
payable by sale of the collateral of EHC and AFC.

The Company has received a letter agreement from Republic National Bank of
New York stating that it will release the personal guarantees of Messrs.
Franzone, Kassel and Goodman under the Term Loan upon the successful completion
of the Offering. LIDC has stated that it will not release the personal
guarantees of Messrs. Franzone, Kassel and Goodman under the Loan.

OFFICER LOANS

Messrs. Kassel and Goodman have advanced funds to the Company for working
capital. The loans advanced by Mr. Kassel are represented by the following six
notes: (i) a promissory note, dated September 13, 1994, from EHC in favor of
David Kassel Defined Benefit for the principal amount of $125,000, bearing
interest at a rate of 10% per annum, payable in monthly installments of
approximately $2,656 per month, and maturing on September 13, 1999, (ii) a
promissory note, dated August 1, 1996, from EHC in favor of Kassel MGT Defined
Benefit for the principal amount of $219,483, bearing interest at a rate of 10%
per annum, payable in 60 monthly installments of approximately $4,633 per month,
(iii) a promissory note, dated December 31, 1997, from EHC in favor of
Mr. Kassel for the principal amount of $150,000, bearing interest at a rate of
6% per annum and maturing on January 1, 1999 (the "$150,000 Note"), (iv) a
promissory note, dated January 1, 1998, from CDP in favor of Mr. Kassel for the
principal amount of $107,500, bearing interest at a rate of 10% per annum and
maturing on January 1, 1999 (the "$107,500 Note"), (v) a promissory note, dated
May 29, 1998, from CDP in favor of Mr. Kassel for the principal amount of
$25,000, bearing interest at a rate of 10% per annum and maturing 30 days after
the Effective Date (the "$25,000 Note") and (vi) a demand negotiable promissory
note, dated October 27, 1998, from EHC in favor of Mr. Kassel for the principal
amount of $25,000 bearing interest at 10% per annum, payable in monthly
installments of $208.34 and maturing upon demand. The Company will pay the
principal amount and accrued interest of the $150,000 Note, $107,500 Note and
$25,000 Note with the proceeds of this Offering. The Company has guaranteed the
repayment of the $107,500 Note and the $25,000 Note. The Company has entered
into agreements with Mr. Kassel, dated December 8, 1998, whereby the Company
shall be required to pay the principal amount and accrued interest of the
$150,000 Note and the $107,500 Note within 30 days after the Effective Date. See
"Risk Factors--Offering Proceeds to Benefit Officers, Directors and Principal
Stockholders," "Use of Proceeds" and "Certain Transactions."

The loans advanced by Mr. Goodman are represented by the following four
notes: (i) a demand negotiable promissory note, dated September 1, 1994, from
EHC in favor of Mr. Goodman for the principal amount of $125,000, bearing
interest at a rate of 10% per annum and payable over five years, (ii) a demand
negotiable promissory note, dated August 1, 1996, from EHC in favor of Mr.
Goodman, for the principal amount of $175,000 bearing interest at a rate of 10%
per annum and payable over five years, (iii) a demand negotiable promissory
note, dated October 22, 1998, from EHC in favor of Mr. Goodman for the principal
amount of $25,000, bearing interest at a rate of 10% per annum, payable in
interest-only installments of $208.34 per month and maturing upon demand and
(iv) a demand negotiable promissory note, dated December 7, 1998, from EHC in
favor of Mr. Goodman for the principal amount of $50,000, bearing interest at a
rate of 10% per annum, payable in interest-only installments of $416.67 per
month and maturing upon demand. See "Certain Transactions."

42
<PAGE>

AFFILIATED TRANSACTIONS

EHC is a guarantor of two loan agreements between AFC, an affiliate of the
Company, and Republic National Bank for the aggregate principal amount of
$1,000,000, of which $857,500 has been borrowed and remains outstanding as of
December 26, 1998. Each of the directors of EHC are also stockholders, directors
and officers of AFC, a New York corporation incorporated in 1985. The Vice
President and General Manager of AFC, Andrew Franzone, Jr., is the son of the
President and Chief Executive Officer of the Company. Additionally, EHC and AFC
have entered into an engineering consulting and services agreement on a fee-for-
services basis. Under such agreement, (a) EHC will have the exclusive right to
manufacture or contract for the manufacturing of certain AFC products on a time
and materials basis, and (b) EHC will not develop products in the following
lines other than for AFC: (i) point of sale display items; (ii) cabinet and
furniture plastic hardware; and (iii) endcaps on cylinders or mailing tubes. The
Company believes the terms and consideration of this agreement are no less
favorable to the Company than agreements with similar unrelated third party
companies.

The Company recorded sales to AFC in the approximate amount of $1,100,000
for the year ended December 26, 1998. The Company's gross profit on such sales
was $334,000. The Company realized a gross profit margin of 32% on such sales,
compared with an overall gross profit margin of 29% for the same period. There
is an account receivable from AFC in the amount of approximately $635,000 as of
December 26, 1998.

EHC recorded sales to AFC in the approximate amounts of $176,000 for the
year ended December 26, 1998 and $371,000 for the year ended December 27, 1997.
The Company's gross profit on such sales was $29,000 for the year ended
December 26, 1998 and $30,000 for the year ended December 27, 1997. EHC realized
an overall gross profit margin of 29% for the year ended December 26, 1998 and
37% for the year ended December 27, 1997, compared with a gross profit margin
for AFC products of 24% for the year ended December 26, 1998 and 16% for the
year ended December 27, 1997. The products sold to AFC during these periods
consisted of custom molded products, which do not require any secondary
operations such as machining, painting, printing and finishing. As a result,
manufacturing operations for such products are reduced or eliminated and the
Company earns a lower gross profit margin.

Ms. Bao-Wen Chen, a director of the Company, also provides consulting
services to the Company on behalf of her company, B.C. China Business
Consulting, Inc. ("BCI"), in connection with the Company's manufacturing in
China. The agreement between the Company and BCI provides that BCI will provide
such consulting services until March 1, 2008 at an hourly rate as mutually
determined and agreed upon by the Company and the Consultant from time to time
and an amount equivalent to 1.5% of the net cost of products manufactured in
China up to $5,000,000 per year and 1% of net costs exceeding $5,000,000. In
consideration for her services to the Company, Ms. Chen shall receive on the
Effective Date an aggregate amount of (i) 25,000 shares of unregistered Common
Stock granted pursuant to the Grant Plan and (ii) 25,000 options granted
pursuant to the Grant Plan, exercisable at $4.50 per share, and fully vesting on
the second anniversary of the Effective Date and terminating on the tenth
anniversary of the Effective Date. The Company intends to register all or a
portion of the shares under its Stock Option and Grant Plan with the Securities
and Exchange Commission within three months after the Offering. The Company
believes that consulting fees paid to Ms. Chen and grants of Common Stock and
options are no less favorable to the Company than consideration it would pay to
other third party consultants, as the Consultant's consideration was determined
through arms' length transactions between the Consultant and the Company at a
time when the Consultant was not affiliated in any way with the Company. See
"Management--Stock Option and Grant Plan."

Carl Seldin Koerner, a director of the Company, is a managing partner of
the law firm of Koerner Silberberg & Weiner, LLP. Mr. Koerner has been general
counsel to the Company since 1976 and is acting as counsel to the Company in
connection with this Offering. The Company believes that the fees paid to
Koerner Silberberg & Weiner, LLP are comparable to those fees that would have
been paid to an unrelated third party law firm. Mr. Koerner is entitled to
receive a fee of $300 per month and reimbursement of reasonable expenses in
attending meetings in connection with his serving as a member of the Board of
Directors. See "Legal Matters."

In order to obtain the benefit of better purchasing opportunities, some
goods or services, including insurance, are purchased jointly by one or more of
EHC, AFC, K&G and Memory Protection Devices, Inc. and the cost of such goods or
services are shared by the parties.

All future transactions and loans between the Company and its officers,
directors, affiliates and five percent shareholders will be made or entered into
on terms no less favorable than could be obtained from unaffiliated

43
<PAGE>

third parties and such transactions and loans, including the forgiveness of any
loans, must be approved by a majority of disinterested, independent members of
the board of directors of the Company.

STOCKHOLDERS' AGREEMENT

The Company intends to enter into the Stockholders' Agreement with David
Kassel, Harry Goodman and Andrew Franzone (collectively, the "Stockholders") the
day immediately preceding the Effective Date. Pursuant to the Stockholders'
Agreement, each Stockholder covenants that he will not, directly or indirectly,
sell, transfer, assign, pledge, option, mortgage, hypothecate or otherwise
dispose of or encumber his respective shares of the Company's Common Stock other
than (i) to a permitted transferee, including the Stockholder's estate,
immediate family or trust established for the benefit thereof, and such
transferee agrees to be bound by the Stockholders' Agreement, (ii) pursuant to
an effective registration statement under the Securities Act or (iii) pursuant
to an exemption from registration afforded by the Securities Act. Upon the death
of any Stockholder, the estate of such deceased Stockholder has the right
(i) to cause the Company to redeem 250,000 shares of Common Stock of the
deceased Stockholder for an aggregate of $500,000 only to the extent that the
Company receives proceeds from life insurance policies on the life of such
Stockholder and (ii) to sell a number of shares of Common Stock of the deceased
Stockholder in accordance with Rule 144 promulgated under the Securities Act;
provided, however, that in no event shall the estate of a deceased Stockholder
be permitted to sell more than 25,000 shares of Common Stock of the Stockholder
within any three-month period. Also, the Stockholders have been granted certain
"piggyback" and demand registration rights with respect to their shares of
Common Stock. Notwithstanding, the Stockholders have entered into a letter
agreement with the Company and Underwriter thereby waiving their registration
rights for a two-year period, commencing upon the completion of this Offering.
See "Risk Factors--Dependence on Key Personnel; --Offering Proceeds to Benefit
Officers, Directors and Principal Stockholders; --Shares Eligible for Future
Sale; Registration Rights" and "Description of Securities--Registration Rights."

KEY MAN LIFE INSURANCE

EHC is the beneficiary of a key man life insurance policy on behalf of
Andrew Franzone, the Chief Executive Officer of the Company. In the event of Mr.
Franzone's death or disability the Company will receive $500,000. See "Risk
Factors--Dependence on Key Personnel;" and "--Offering Proceeds to Benefit
Officers, Directors and Principal Stockholders."

<PAGE>

DESCRIPTION OF SECURITIES

The authorized capital stock of the Company upon completion of the Offering
will consist of 10,000,000 shares of Common Stock, of which 3,195,000 shares
will be issued and outstanding, and 1,000,000 shares of undesignated Preferred
Stock issuable in series by the Board of Directors, of which no shares will be
issued and outstanding. The following summary description of the capital stock
of the Company is qualified in its entirety by reference to the Company's
Certificate of Incorporation (the "Certificate") and By-laws (the "By-laws"),
copies of which are filed as exhibits to the Registration Statement of which
this Prospectus is a part. The Certificate and By-laws have been duly adopted by
the stockholders and the Board of Directors of the Company.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders. The holders of Common Stock are not
entitled to cumulative voting rights. Therefore, the holders of a majority of
the shares voted in the election of directors can elect all of the directors
then standing for election, subject to the rights of the holders of Preferred
Stock, if and when issued. The holders of Common Stock have no preemptive or
other subscription rights.

The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors from funds
legally available therefor, with each share of Common Stock sharing equally in
such dividends. The possible issuance of Preferred Stock with a preference over
Common Stock as to dividends could impact the dividend rights of holders of
Common Stock.

There are no redemption provisions with respect to the Common Stock. All
outstanding shares of Common Stock, including the shares offered hereby, are, or
will be upon completion of the Offering, fully paid and non-assessable.

The By-laws provide that the number of directors shall be fixed by the
Board of Directors. Any director of the Company may be removed from office with
or without cause by the holders of a majority of the outstanding shares of the
Company entitled to vote at an election of directors.

UNDESIGNATED PREFERRED STOCK

The Board of Directors of the Company is authorized, without further action
of the stockholders of the Company, to issue up to 1,000,000 shares of Preferred
Stock in one or more classes or series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, and the
number of shares constituting any series or the designation of such series.
However, pursuant to the Certificate, the holders of Preferred Stock would not
have cumulative voting rights with respect to the election of directors. Any
such Preferred Stock issued by the Company may rank prior to the Common Stock as
to dividend rights, liquidation preference or both, may have full or limited
voting rights and may be convertible into shares of Common Stock.

The purpose of authorizing the Board of Directors to issue Preferred Stock
is, in part, to eliminate delays associated with a stockholder vote on specific
issuances. The issuance of Preferred Stock could adversely affect the voting
power of the holders of Common Stock and could have the effect of delaying,
deferring, or preventing a change in control of the Company.

WARRANTS

The following is a brief summary of certain provisions of the Warrants, but
such summary does not purport to be complete and is qualified in all respects by
reference to the actual text of the warrant agreement (the "Warrant Agreement")
among the Company, the Underwriter, and Continental Stock Transfer and Trust
Company (the "Warrant Agent"). A copy of the Warrant Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part. As
of the date hereof, there are no Warrants outstanding. See "Additional
Information."

Exercise Price and Terms. Each Warrant entitles the registered holder
thereof to purchase, at any time over a five year period, commencing one year
after the Effective Date, one share of Common Stock at $5.00 per share, subject
to adjustment in accordance with the anti-dilution provisions and other
provisions referred to below. The holder of any Warrant may exercise such
Warrant by surrendering the certificate representing the Warrant to the Warrant
Agent, with the subscription form thereon properly completed and executed,
together

45
<PAGE>

with payment of the exercise price. The Warrants may be exercised at any time in
whole or in part at the applicable exercise price until expiration of the
Warrants. No fractional shares will be issued upon the exercise of the Warrants.

The exercise price of the Warrants bears no relationship to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of the securities offered hereby.

Adjustments. The holders of the Warrants are protected against dilution of
their interests by adjustments, as set forth in the Warrant Agreement, of the
exercise price and the number of shares of Common Stock purchasable upon the
exercise of the Warrants upon the occurrence of certain events, including stock
dividends, stock splits, combinations or reclassification of the Common Stock,
or sale by the Company of shares of its Common Stock or other securities
convertible into Common Stock at a price below the then-applicable exercise
price of the Warrants. Additionally, an adjustment would be made in the case of
a reclassification or exchange of Common Stock, consolidation or merger of the
Company with or into another corporation (other than a consolidation or merger
in which the Company is the surviving corporation) or sale of all or
substantially all of the assets of the Company in order to enable warrantholders
to acquire the kind and number of shares of stock or other securities or
property receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon the exercise of the Warrant.

Redemption Provisions. Commencing one year after the date of this
Prospectus, all, but not less than all, of the Warrants are subject to
redemption at $0.10 per Warrant on not less than 30 days' prior written notice
to the holders of the Warrants provided the per share closing price or bid
quotation of the Common Stock as reported on Nasdaq SmallCap or BSE, if traded
thereon, or if not traded thereon, the average closing sale price if listed on a
national or regional securities exchange equals or exceeds 150% of the then
current exercise price (subject to adjustment) for any 20 trading days within a
period of 30 consecutive trading days ending on the 15th day prior to the date
on which the Company gives notice of redemption. The Warrants will be
exercisable until the close of business on the day immediately preceding the
date fixed for redemption in such notice. If any Warrant called for redemption
is not exercised by such time, it will cease to be exercisable and the holder
will be entitled only to the redemption price.

Transfer, Exchange and Exercise. The Warrants are in registered form and
may be presented to the Warrant Agent for transfer, exchange or exercise at any
time commencing one year after the Effective Date and prior to their expiration
date five years from the date of this Prospectus, at which time the Warrants
become wholly void and of no value. If a market for the Warrants develops, the
holder may sell the Warrants instead of exercising them. There can be no
assurance, however, that a market for the Warrants will develop or continue.

The Warrants are not exercisable unless, at the time of the exercise, the
Company has an effective Registration Statement including the shares of Common
Stock issuable upon exercise of the Warrants, and such shares have been
registered, qualified or deemed to be exempt under the securities laws of the
state of residence of the exercising holder of the Warrants. Although the
Company will use its best efforts to have all the shares of Common Stock
issuable upon exercise of the Warrants registered or qualified on or before the
exercise date and to maintain a current prospectus relating thereto until the
expiration of the Warrants, there can be no assurance that it will be able to do
so.

The Warrants are separately transferable immediately upon issuance.
Although the Warrants will not knowingly be sold to purchasers in jurisdictions
in which the Warrants are not registered or otherwise qualified for sale or
exemption, purchasers may buy Warrants in the after-market in, or may move to,
jurisdictions in which Warrants and the Common Stock underlying the Warrants are
not so registered or qualified or exempt. In this event, the Company would be
unable lawfully to issue Common Stock to those persons desiring to exercise
their Warrants (and the Warrants would not be exercisable by those persons)
unless and until the Warrants and the underlying Common Stock are registered, or
qualified for sale in jurisdictions in which such purchasers reside, or any
exemption from registration or qualification exists in such jurisdiction.

Warrantholder Not a Stockholder. The Warrants do not confer upon holders
any voting, dividend or other rights as stockholders of the Company.

Modification of Warrants. The Company and the Warrant Agent may make such
modifications to the Warrants as they deem necessary and desirable that do not
adversely affect the interests of the warrantholders. No modifications may be
made to the Warrants without the consent of two-thirds of the warrantholders.

46
<PAGE>

UNDERWRITER'S WARRANTS

In connection with the Offering, the Company has agreed to issue to the
Underwriter the Underwriter's Warrants, which consist of up to 125,000 shares of
Common Stock and 125,000 Warrants, initially exercisable at 160% of the Offering
price as of the Effective Date. The Underwriter's Warrants will be exercisable
for a period of four years commencing one year after the closing of the
Offering. The Underwriter is entitled to certain registration rights under the
Securities Act relating to the shares of Common Stock received upon the exercise
of the Underwriter's Warrants. The Underwriter's Warrants may not be sold,
transferred, assigned, pledged or hypothecated during the first year after
issuance, except to the Underwriter and persons who are officers and partners
thereof. The exercise price and the number of shares of Common Stock that may be
purchased are subject to adjustment pursuant to anti-dilution provisions of the
Underwriter's Warrants. See "Underwriting."

REGISTRATION RIGHTS

Pursuant to the Stockholders' Agreement between the Company and Messrs.
Kassel, Goodman and Franzone (the "Selling Stockholders"), holders of an
aggregate of 1,900,000 shares of Common Stock (the "Registrable Shares"), the
Selling Stockholders have certain "piggyback" and demand registration rights. If
the Company at any time proposes to register any shares of Common Stock under
the Securities Act by registration on Form S-1, SB-2 or any successor or similar
form(s), whether or not for sale for its own account (other than registration of
securities in connection with an employee benefit plan, Company stock option or
dividend reinvestment plan or in connection with the acquisition of assets or
shares of or merger or consolidation with another corporation), and the
registration form to be used may also be used for the registration of the
Registrable Shares, the Company shall notify the Selling Stockholders and permit
such stockholders to include their Registrable Shares in such registration
statement. If the registration statement is an underwritten offering, only the
Registrable Shares which are to be distributed by the underwriters may be
included in the registration statement, subject to the managing underwriter's
consent. If the underwriter advises the Company that such inclusion would be
disadvantageous to its underwriting effort, the Company will include in such
registration statement (i) first, the shares of Common Stock of any other
holders of shares of Common Stock or options, warrants or other securities
convertible into Common Stock who are entitled to "piggyback" registration
rights prior to those which the Selling Stockholders propose to register,
allocated among the Company and such stockholders in accordance with any
agreement among the Company and such stockholders; and (ii) second, the
Registrable Shares which the Selling Stockholders propose to register and shares
of Common Stock or options, warrants or other securities convertible into Common
Stock of any other holders who are entitled to "piggyback" registration rights
in proportion to the number of shares of Common Stock which the Selling
Stockholders propose to register.

The Selling Stockholders also have demand registration rights pursuant to
the Stockholders' Agreement. Pursuant to such agreement, at any time subsequent
to this Offering and any time which the Company is not restricted from effecting
a second registration pursuant to any applicable law, any one of the Selling
Stockholders holding an aggregate of 7% of the outstanding shares of Common
Stock may request that the Company effect a registration statement including
such stockholder's Registrable Shares. Upon request, the Company must notify the
other Selling Stockholders of the exercising stockholder's request, and use its
best efforts to effect the registration of: (i) the Registrable Shares which the
Company has been so requested to register by the Selling Stockholder and (ii)
all other Registrable Shares owned by Selling Stockholders, the others of which
shall have made a written request to the Company for registration thereof. Each
of the Selling Stockholders has waived his "piggyback" and demand registration
rights for a two-year period, commencing upon the completion of this Offering,
and has entered into an agreement with the Underwriter whereby he agrees not to
effect any disposition of his Registrable Shares for a two-year period,
commencing upon the completion of this Offering, without the prior written
consent of the Underwriter. Notwithstanding, the exercise by one or more of
these registration rights may involve a substantial expense to the Company and
may adversely affect the terms upon which the Company may obtain additional
financing. See "Management--Employment Agreements," "Description of Securities--
Registration Rights" and "Shares Eligible for Future Sale."

47
<PAGE>

DELAWARE LAW WITH RESPECT TO BUSINESS COMBINATIONS

As of the date of this Prospectus, the Company will be subject to the State
of Delaware's "business combination" statute, Section 203 of the Delaware
General Corporation Law. In general, such statute prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with a person who
is an "interested stockholder" for a period of three years after the date of the
transaction in which that person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder. An "interested stockholder" is
a person who, together with affiliates, owns (or, within three years prior to
the proposed business combination, did own) 15% or more of the Delaware
corporation's voting stock. The statute could prohibit or delay mergers or other
takeovers or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the Delaware General Corporation Law, the Company has
included in its Certificate a provision to eliminate the personal liability of
its directors for monetary damages for breach or alleged breach of their
fiduciary duties as directors, except for liability for breaches of duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 174 of the
Delaware General Corporation Law or for any transaction from which a director
derives an improper personal benefit. This provision does not alter a director's
liability under the federal securities laws and does not affect the availability
of equitable remedies, such as an injunction or recission, for breach of
fiduciary duty. In addition, the By-laws of the Company provide that the Company
is required to indemnify its officers and directors, employees and agents under
certain circumstances, including those circumstances in which indemnification
would otherwise be discretionary, and the Company is required to advance
expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. The By-laws provide
that the Company, among other things, will indemnify such officers and
directors, employees and agents against certain liabilities that may arise by
reason of their status or service as directors, officers, or employees (other
than liabilities arising from willful misconduct of a culpable nature), and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified. At present, the Company is not aware of any
pending or threatened litigation or proceeding involving a director, officer,
employee or agent of the Company in which indemnification would be required or
permitted. The Company believes that its charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company on the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Securities, the Company will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Continental Stock
Transfer and Trust Company.

REPORTS TO STOCKHOLDERS

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.

As of the Effective Date, the Company has registered its Common Stock and
Warrants under the provisions of Section 12(g) of the Exchange Act, and the
Company has agreed that it will use its best efforts to continue to maintain
such registration for a minimum of five years from the Effective Date. Such
registration will require the Company to comply with periodic reporting, proxy
solicitation and certain other requirements of the Exchange Act.

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of the Offering, the Company will have 3,195,000
shares of Common Stock outstanding (3,382,500 shares if the Underwriter's
over-allotment option is exercised in full and assuming no exercise of Warrants
or the Underwriter's Warrants). Of these shares, the 1,250,000 shares sold in
the Offering (1,437,500 shares if the Underwriter's over-allotment option is
exercised in full) will be freely tradeable. The remaining 1,945,000 shares are
deemed to be "restricted securities," as that term is defined under Rule 144, in
that such shares were issued and sold by the Company in private transactions not
involving a public offering and are not currently part of an effective
registration. Except for the "lock-up" agreements described below, such shares
are eligible for sale under Rule 144, or will become so eligible at various
times. In addition, the Company has granted the Underwriter demand and piggyback
registration rights with respect to the securities issuable upon exercise of the
Underwriter's Warrants. No prediction can be made as to the effect, if any, that
sales of shares of Common Stock or even the availability of such shares for sale
will have on the market prices prevailing from time to time. If the holders of
the shares, eligible for registration so choose, they could require the Company
to register all of said shares at anytime. See "Underwriting."

In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or other persons whose shares are aggregated), who has owned
restricted shares of Common Stock beneficially for at least one year is entitled
to sell, within any three month period, a number of shares that does not exceed
the greater of 1% of the total number of outstanding shares of the same class
or, if the Common Stock is quoted on Nasdaq, the average weekly trading volume
during the four calendar weeks preceding the sale. A person who has not been an
affiliate of the Company for at least the three months immediately preceding the
sale and who has beneficially owned shares of Common Stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.

Except upon the consent of the Underwriter, all executive officers, all
directors and holders of substantially all of the outstanding stock of the
Company have agreed not to, directly or indirectly, issue, offer, agree or offer
to sell, sell, transfer, assign, encumber, grant an option for the purchase or
sale of, pledge, hypothecate or otherwise dispose of any beneficial interest in
such securities for a period of 24 months following the Effective Date.
Notwithstanding, pursuant to the Stockholders' Agreement, if either of Messrs.
Franzone, Kassel or Goodman dies during the lock-up period, each estate of the
deceased may, to the extent that the Company receives proceeds from insurance on
the life of the deceased, cause the Company to redeem up to 250,000 shares for
$500,000 and may sell the remaining shares pursuant to Rule 144, provided that
the estate does not sell more than 25,000 shares within any three-month period.
For a period of two years from the date of this Prospectus, the Company has also
agreed not to file any registration statement relating to the offering or sale
of the Company's securities (not including a registration statement on Form S-8
on behalf of employees and the Consultant) without the consent of the
Underwriter. See "Risk Factors--Dependence on Key Personnel; --Offering Proceeds
to Benefit Officers, Directors and Principal Stockholders" and "Certain
Transactions."

Pursuant to the Stockholders' Agreement, each of the Selling Stockholders,
holders of an aggregate of 1,900,000 shares of Common Stock (the "Registrable
Shares") at the date of this Prospectus, is entitled to certain demand and
"piggyback" registration rights with respect to such Registrable Shares pursuant
to the Stockholders' Agreement. Any Selling Stockholder holding an aggregate of
7% of the outstanding shares of Common Stock may request that the Company file a
registration statement under the Securities Act, and subject to certain
conditions, the Company generally will be required to use its best efforts to
effect any such registration. In addition, if the Company proposes to register
any of its securities, either for its own account or for the account of other
stockholders, the Company is required, with certain exceptions, to notify the
Selling Stockholders and, subject to certain limitations, to include in such
registration statement all the Registrable Shares requested to be included by
such Selling Stockholders. The Company is generally obligated to bear the
expenses, other than underwriting discounts and sales commissions of these
registrations. Each of the Selling Stockholders has waived his "piggyback" and
demand registration rights for a two-year period, commencing upon the completion
of this Offering, and has entered into an agreement with the Underwriter whereby
he agrees not to effect any disposition of his shares of Common Stock for a
two-year period, commencing upon the completion of this Offering, without the
prior written consent of the Underwriter. Notwithstanding, the exercise by one
or more of these registration rights may involve a substantial expense to the
Company and may adversely affect the terms upon which the Company may obtain
additional financing. See "Risk Factors--Shares Eligible for Future Sale;
Registration Rights," "Management--Employment Agreements" and "Description of
Securities."

<PAGE>

Prior to the Offering, there has been no market for the Securities and no
prediction can be made as to the effect, if any, that market sales of shares of
the Securities or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.

UNDERWRITING

The Underwriter has agreed, subject to the terms and conditions of the
Underwriting Agreement (the "Underwriting Agreement") to purchase from the
Company and the Company has agreed to sell to the Underwriter on a firm
commitment basis, 1,250,000 shares of Common Stock and 1,250,000 Warrants.

The Underwriter is committed to purchase all the shares of Common Stock and
Warrants offered hereby, if any of such Securities are purchased. The
Underwriting Agreement provides that the obligations of the Underwriter are
subject to conditions precedent specified therein.

The Company has been advised by the Underwriter that the Underwriter
proposes initially to offer the Securities to the public at the initial public
offering prices set forth on the cover page of this Prospectus and to certain
dealers at such prices less concessions not in excess of $ per share of Common
Stock and $ per Warrant. Such dealers may reallow a concession not in excess
of $ per share of Common Stock and $ per Warrant to certain other dealers.
After the commencement of the Offering, the public offering prices, concession
and reallowance may be changed by the Underwriter.

The Underwriter has informed the Company that it does not expect sales to
discretionary accounts.

The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act that arise out of or
are in connection with the Registration Statement, Prospectus and related
Exhibits filed with the Commission. The Company has also agreed to pay to the
Underwriter a non-accountable expense allowance equal to 3% of the gross
proceeds derived from the sale of the Securities underwritten hereby, provided
that the underwriting is successfully completed.

The Company has granted to the Underwriter an over-allotment option,
exercisable during the 45-day period from the Effective Date, to purchase up to
an additional 187,500 shares of Common Stock and/or 187,500 Warrants at the
Offering price per share of Common Stock and Warrants, respectively, offered
hereby, less underwriting discounts and the non-accountable expense allowance.
Such option may be exercised only for the purpose of covering over-allotments,
if any, incurred in the sale of the Securities offered hereby. To the extent
such option is exercised in whole or in part, the Underwriter will have a firm
commitment, subject to certain conditions, to purchase the number of the
additional securities proportionate to its initial commitment.

In connection with the Offering, the Company agreed to sell to the
Underwriter, for nominal consideration, warrants to purchase from the Company up
to 125,000 shares of Common Stock and 125,000 Warrants (the "Underwriter's
Warrants"). The Underwriter's Warrants are initially exercisable at 160% of the
Offering price as of the Effective Date, for a period of four years, commencing
one year after the Effective Date. The Underwriter's Warrants are restricted
from sale, transfer, assignment or hypothecation for a period of 12 months from
the date hereof, except to officers of the Underwriter. The Underwriter's
Warrants provide for adjustment in the number of shares of Common Stock and
Warrants issuable upon the exercise thereof and in the exercise price of the
Underwriter's Warrants as a result of certain events, including subdivisions and
combinations of the Common Stock. The Underwriter's Warrants grant to the
holders thereof certain rights of registration for the securities issuable upon
exercise thereof.

Except upon the consent of the Underwriter, all executive officers, all
directors and holders of substantially all of the outstanding stock of the
Company have agreed not to, directly or indirectly, issue, offer, agree or offer
to sell, sell, transfer, assign, encumber, grant an option for the purchase or
sale of, pledge, hypothecate or otherwise dispose of any beneficial interest in
such securities for a period of 24 months following the Effective Date.
Provided, however, that if either of Messrs. Franzone, Kassel or Goodman dies
during the lock-up period, the estate of the deceased may, to the extent that
the Company receives proceeds from insurance on the life of the deceased, cause
the Company to redeem up to 250,000 shares for $500,000 and may sell the
remaining shares pursuant to Rule 144, provided that the estate does not sell
more than 25,000 shares within any three month period, even though at such time
the Common Stock of the Company may have a fair market value at less than

50
<PAGE>

$2.00 per share, resulting in dilution to stockholders and an expenditure of the
Company's capital even if such expenditures would adversely affect the Company's
liquidity and financial resources. If any such transaction is entered into or
any such lock-ups are waived or shortened, to the extent that the Company is
aware of any such transaction or early release and is required to disclose the
same, such information will be disclosed in a timely manner. In addition,
without the consent of the Underwriter and except pursuant to the exercise of
the Warrants and the Underwriter's Warrants, the Company has agreed that it, its
subsidiaries and affiliates shall not sell or offer for sale any of their equity
securities commencing the Effective Date for a period of 24 months thereafter.
The Company has further agreed for a period of 24 months following the Effective
Date not to file a registration statement covering any of its securities without
the prior written consent of the Underwriter, except a registration statement on
Form S-8 relating to the Company's employees and Ms. Bao-Wen Chen, a consultant
and independent director of the Company who is entitled to receive an aggregate
of 25,000 registered shares of Common Stock pursuant to the Grant Plan, fully
vesting on the second anniversary of the Effective Date.

Upon the exercise of any Warrants more than one year after the date of this
Prospectus, which exercise was solicited by the Underwriter, and to the extent
not inconsistent with the guidelines of the NASD and the Rules and Regulations
of the Commission, the Company has agreed to pay the Underwriter a commission
which shall not exceed 5% of the aggregate exercise price of such Warrants in
connection with bona fide services provided by the Underwriter relating to any
warrant solicitation. In addition, the individual must designate the firm
entitled to payment of such warrant solicitation fee. However, no compensation
will be paid to the Underwriter in connection with the exercise of the Warrants
if (a) the market price of the Common Stock is lower than the exercise price,
(b) the Warrants were held in a discretionary account or (c) the Warrants are
exercised in an unsolicited transaction. Unless granted an exemption by the
Commission from Rule 10b-6 under the Exchange Act, the Underwriter will be
prohibited from engaging in any market-making activities with regard to the
Company's securities for the period from five business days (or other such
applicable periods as Rule 10b-6 may provide) prior to any solicitation of the
exercise of the Warrants until the later of their termination of such
solicitation activity or the termination (by waiver or otherwise) of any right
the Underwriter may have to receive a fee. As a result, the Underwriter may be
unable to continue to provide a market for the Company's securities during
certain periods while the Warrants are exercisable. If the Underwriter has
engaged in any of the activities prohibited by Rule 10b-6 during the periods
described above, the Underwriter undertakes to waive unconditionally its right
to receive a commission on the exercise of such Warrants.

In connection with the Offering, the Underwriter and its affiliates may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Common Stock and Warrants. Such transactions may include
stabilization transactions effected in accordance with Rule 104 of
Regulation M, pursuant to which such persons may bid for or purchase Common
Stock or Warrants for the purpose of stabilizing their respective market prices.
The Underwriter also may create a short position for the account of such
Underwriter by selling more shares of Common Stock or Warrants in connection
with the Offering than it is committed to purchase from the Company, and in such
case may purchase shares of Common Stock or Warrants in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriter may also cover all or a portion of such short position
by exercising the Underwriter's over-allotment option. In addition, the
Underwriter may impose "penalty bids" under contractual arrangements whereby it
may reclaim from a dealer participating in the Offering the selling concession
with respect to shares of Common Stock and Warrants that are distributed in the
Offering but subsequently purchased for the account of the Underwriter in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock and Warrants at a level above
that which might otherwise prevail in the open market. None of the transactions
described in this paragraph is required, and if they are undertaken they may be
discounted at any time.

The Company has agreed that the Underwriter may nominate for election one
person to the Company's Board of Directors (which person shall be reasonably
acceptable to the Company) for a period of three years from the Effective Date.
In the event the Underwriter elects not to exercise the right, then the
Underwriter may designate one person to attend meetings of the Company's Board
of Directors as a non-voting advisor (which person shall be reasonably
acceptable to the Company). Such designee shall be entitled to attend all such
meetings of the Company's Board of Directors and to receive all notices and
other correspondence and communications sent by the Company to members of its
Board of Directors. The Company has agreed to reimburse designees of the
Underwriter for their out-of-pocket expenses incurred in connection with their
attendance of meetings of the Company's Board of Directors.

51
<PAGE>

Prior to the Offering, there has been no public market for the Common Stock
or the Warrants. Consequently, the Offering prices of the Securities has been
determined by negotiation between the Company and the Underwriter and does not
necessarily bear any relationship to the Company's asset value, net worth or
other established criteria of value. The factors considered in such
negotiations, in addition to prevailing market conditions, included the history
of and prospects for the industry in which the Company competes, an assessment
of the Company's management, the prospects of the Company, its capital
structure, the market for initial public offerings and certain other factors as
were deemed relevant.

The Company has agreed to retain the Underwriter as a financial consultant
to the Company for a period of 24 months after the Offering for an aggregate fee
of $120,000 payable in full upon consummation of the Offering. As the Company's
financial consultant, the Underwriter will provide investment banking services
to the Company as well as seek out strategic transactions on behalf of the
Company and furnish advice to the Company in connection with any such
transactions.

The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which are filed as exhibits to the Registration
Statement. See "Additional Information."

LEGAL MATTERS

The legality of the Securities offered hereby will be passed upon for the
Company by Koerner Silberberg & Weiner, LLP, New York, New York. Morrison Cohen
Singer & Weinstein, LLP, New York, New York, has acted as counsel for the
Underwriter in connection with the Offering. Carl Seldin Koerner, Esq., a
managing partner of the law firm of Koerner Silberberg & Weiner, LLP, is one of
the directors of the Company. See "Management" and "Certain Transactions."

EXPERTS

The consolidated financial statements of the Company and its subsidiary,
EHC, and the financial statements of CDP appearing in this Prospectus and
elsewhere in the Registration Statement, have been audited by Feldman Sherb
Ehrlich & Co., P.C. independent auditors, as set forth in their report and
appearing elsewhere herein, and are included in reliance upon the authority of
such firm as experts in accounting and auditing in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on
Form SB-2 (the "Registration Statement") under the Securities Act and the rules
and regulations promulgated thereunder, with respect to the Common Stock and
Warrants offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
For further information regarding the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed as part of the Registration Statement. Statements contained in
the Prospectus concerning the provisions or contents of any contract, agreement
or other document referred to herein are not necessarily complete with respect
to each such contract, agreement or document filed as an exhibit to the
Registration Statement. Reference is made to such exhibits for a more complete
description of the matters involved, and each statement shall be deemed
qualified in its entirety by such reference.

The Registration Statement, including the exhibits and schedules thereto,
may be inspected and copied at the public reference facilities maintained at the
Commission at Room 1204, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Company is
required to file electronic versions of these documents with the Commission
through the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) System. The electronically filed documents, including reports, proxy
statements and other information, are maintained by the Commission and may be
found at the World Wide Web site http://www.sec.gov.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
INTERNATIONAL SMART SOURCING, INC.
Independent Accountants' Report..................................................................... F-2
Consolidated Balance Sheet.......................................................................... F-3
Consolidated Statements of Operations............................................................... F-4
Consolidated Statement of Changes in Stockholders' Equity........................................... F-5
Consolidated Statements of Cash Flows............................................................... F-6
Notes to Consolidated Financial Statements.......................................................... F-7 to F-12

COMPACT DISC PACKAGING CORP. (A DEVELOPMENT STAGE ENTERPRISE)
Independent Accountants' Report..................................................................... F-13
Statements of Operations............................................................................ F-14
Statements of Stockholders Equity................................................................... F-15
Statements of Cash Flows............................................................................ F-16
Notes to Financial Statements....................................................................... F-17

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Summary of Transaction.............................................................................. F-18
Unaudited Pro Forma Consolidated Statement of Operations............................................ F-19
Notes to Unaudited Consolidated Statement of Operations............................................. F-20
</TABLE>

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
International Smart Sourcing, Inc.
Farmingdale, New York

We have audited the accompanying consolidated balance sheet of International
Smart Sourcing, Inc. and subsidiaries, as of December 26, 1998 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 26, 1998 and December 27, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, the
financial position of International Smart Sourcing, Inc. and subsidiaries as of
December 26, 1998 and the results of their operations and their cash flows for
each of the years ended December 26, 1998 and December 27, 1997 in conformity
with generally accepted accounting principles.

FELDMAN SHERB EHRLICH & CO., P.C.
Certified Public Accountants

New York, New York
February 15, 1999

F-2

<PAGE>

INTERNATIONAL SMART SOURCING, INC.

CONSOLIDATED BALANCE SHEET

DECEMBER 26, 1998

<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash.............................................................................................. $ 16,146
Accounts receivable (net of allowance for doubtful accounts of $14,000)........................... 511,522
Accounts receivable from related party............................................................ 635,061
Inventory......................................................................................... 785,000
Prepaid expenses.................................................................................. 109,631
----------
Total current assets........................................................................... 2,057,360
Property and equipment--net....................................................................... 592,720
Goodwill.......................................................................................... 1,738,152
License agreement................................................................................. 500,000
Deferred offering costs........................................................................... 346,859
Other assets...................................................................................... 73,820
----------
$5,308,911
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................................................. $ 973,688
Current portion of long term debt (including $533,453 to officer/stockholders).................... 1,801,796
Current portion of obligations under capital lease................................................ 58,427
----------
Total current liabilities...................................................................... 2,833,911
Long term debt (including $154,886 to officer/stockholders)....................................... 350,743
Obligations under capital leases.................................................................. 79,659
----------
Total liabilities.............................................................................. 3,264,313
----------
Stockholders' equity:
Common Stock--par value .001, authorized 10,000,000
issued and outstanding 1,945,000 shares......................................... 1,945
Paid In Capital................................................................................... 1,904,297
Retained Earnings................................................................................. 138,356
----------
2,044,598
----------
$5,308,911
----------
----------
</TABLE>

See notes to Consolidated Financial Statements

F-3
<PAGE>

INTERNATIONAL SMART SOURCING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
DECEMBER 26, DECEMBER 27,
1998 1997
--------------- ---------------
<S> <C> <C>
Net sales......................................................................... $ 5,883,001 $ 6,054,747
Cost of goods sold................................................................ 4,153,387 3,831,599
----------- -----------
Gross profit.................................................................... 1,729,614 2,223,148
----------- -----------
Operating expenses:
Selling and shipping............................................................ 583,980 472,096
General and administrative...................................................... 1,180,146 1,298,797
----------- -----------
Total operating expenses........................................................ 1,764,126 1,770,893
----------- -----------
Income (loss) before interest expense............................................. (34,512) 452,255
Interest expense--net............................................................. (190,074) (206,900)
----------- -----------
Income (loss) before income taxes............................................... (224,586) 245,355
Provision for income taxes........................................................ 66,760 --
----------- -----------
Net income (loss)................................................................. (291,346) 245,355
----------- -----------
----------- -----------
Net income (loss) per share--basic................................................ $ (0.19) $ 0.16
----------- -----------
----------- -----------
Weighted average common shares.................................................... 1,502,472 1,500,000
----------- -----------
----------- -----------
Net loss.......................................................................... $ (291,346)
Pro-forma income tax (benefit).................................................... (98,000)
-----------
Pro-forma net loss................................................................ $ 193,346
-----------
-----------
Pro-forma loss per share--basic................................................... $ (0.13)
-----------
-----------
Weighted average common shares used............................................... 1,502,472
-----------
-----------
</TABLE>

See notes to Consolidated Financial Statements

F-4

<PAGE>

INTERNATIONAL SMART SOURCING, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
CAPITAL STOCK ADDITIONAL
------------------- PAID IN RETAINED
SHARES STOCK CAPITAL EARNINGS TOTAL
--------- ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Balance December 28, 1996........................ 1,500,000 $1,500 $ 317,941 $ 19,427 $ 338,868
Net Income....................................... 245,355 245,355
Distributions.................................... (133,379) (133,379)
--------- ------ ---------- --------- -----------
Balance December 27, 1997........................ 1,500,000 1,500 317,941 131,403 450,844
Net loss......................................... (291,346) (291,346)
Distributions.................................... (114,900) (114,900)
Issuance of stock for acquisition of CDP......... 445,000 445 1,999,555 2,000,000
Termination of S Corporation..................... (413,199) 413,199 --
--------- ------ ---------- --------- -----------
Balance December 26, 1998........................ 1,945,000 $1,945 $1,904,297 $ 138,356 $ 2,044,598
--------- ------ ---------- --------- -----------
--------- ------ ---------- --------- -----------
</TABLE>

See notes to Consolidated Financial Statements

F-5

<PAGE>

INTERNATIONAL SMART SOURCING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................................. $ (291,346) $ 245,355
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization...................................................... 272,575 346,990
Gain on sale of fixed asset........................................................ -- (10,000)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable......................................... 169,949 (41,919)
Increase in accounts receivable from related party................................. (635,061) --
Decrease (increase) in inventory................................................... 258,011 (141,311)
Increase in prepaid expenses....................................................... (13,605) (1,400)
Decrease (increase) in other assets................................................ 38,537 41,308
Increase (decrease) in accounts payable and accrued expenses....................... 572,334 80,576
------------ ----------
Total Adjustments........................................................ 662,740 274,244
------------ ----------
Net cash provided by operating activities............................................ 371,394 519,599
------------ ----------
Cash flows from investing activities:
Proceeds from sale of equipment.................................................... -- 10,000
Expenditures for property and equipment............................................ (242,080) (200,089)
Cash acquired in acquisition....................................................... 2,611 --
------------ ----------
Net cash used in investing activities................................................ (239,469) (190,089)
------------ ----------
Cash flows from financing activities:
Deferred offering costs............................................................ (346,859) --
Increase in due from related parties............................................... (86,355) (71,352)
Distributions...................................................................... (114,900) (133,379)
Proceeds from loans................................................................ 320,000 507,100
Payments on loans.................................................................. (239,405) (348,049)
------------ ----------
Net cash used in financing activities................................................ (467,519) (45,680)
------------ ----------
Net increase (decrease) in cash...................................................... (335,594) 283,830
Cash, beginning of year.............................................................. 351,740 67,910
------------ ----------
Cash, end of year.................................................................... $ 16,146 $ 351,740
------------ ----------
------------ ----------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest............................................. $ 215,903 $ 175,521
------------ ----------
------------ ----------
Non-Cash Investing and Financing Activities:
Issuance of Company stock for acquisition of subsidiary............................ $ 2,000,000 $ --
------------ ----------
------------ ----------
</TABLE>

See notes to Consolidated Financial Statements

F-6

<PAGE>

INTERNATIONAL SMART SOURCING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS OF THE COMPANY

International Smart Sourcing, Inc. ("International") was incorporated in
February 1998 in Delaware as a holding company for the purpose of acquiring the
common stock of Electronic Hardware Corp. ("EHC") and Compact Disc Packaging
Corp. ("CDP") in contemplation of an initial public offering of International's
stock (the "Offering") (see note 17).

Under an agreement and plan of reorganization, dated December 24, 1998,
International issued 1,500,000 shares of its stock for the stock of EHC. After
the reorganization, the shareholders of EHC own the same proportionate interest
of International as EHC. EHC, a company located in Farmingdale, New York,
manufactures injection molded plastic components used in consumer, industrial
and military products sold in the United States. Accordingly, the reorganization
has been accounted for as a combination of commonly controlled entities and the
accompanying financial statements presented herein present the financial
position and results of operations and cash flows of International and EHC as if
they had been combined for all periods presented,

Under another agreement and plan of reorganization, dated December 24,
1998, International issued 445,000 shares of its stock for the stock of CDP, a
development stage enterprise which was incorporated in Delaware on January 31,
1995 to manufacture and market a proprietary compact disc packaging system. CDP
was owned prior to its merger with the Company by one of the shareholders of EHC
and one other shareholder. Such transaction is being accounted for under the
purchase method of accounting commencing on the date of the transaction.

Under such method of accounting, an acquiring corporation allocates the
cost of an acquired company to the assets acquired and liabilities assumed on
the basis of their fair value. The excess of the cost acquired over the amounts
assigned to identifiable assets less liabilities assumed is recorded as
goodwill. International has based the value of the shares issued for the
acquisition of CDP on the proposed initial public offering price of its shares
and has substantiated such cost and its allocation to identifiable assets, as
per Accounting Principles Board Opinion No.16. Accordingly, International has
allocated $500,000 to license cost and $1,738,000 to goodwill.

The following unaudited pro-forma summary combines the consolidated results
of operations of International, EHC and CDP as if the acquisition had occurred
at the beginning of 1997, after giving effect to certain adjustments, including
amortization.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 26, 1998 DECEMBER 27, 1997
----------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net sales........................................ $ 5,883,001 $ 6,054,747
Net loss......................................... (492,072) (130,175)
Net loss per common share........................ $ (0.25) $ (0.07)
</TABLE>

The pro-forma results do not necessarily represent the results which would
have occurred if the acquisition had taken place on the basis assumed above, nor
are they indicative of the results of future combined operations.

Hereinafter, International, EHC and CDP are collectively referred to as the
"Company".

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Fiscal Year--The Company operates on a "52-53 Week" reporting year
ending the last Saturday preceding December 31.

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

F-7
<PAGE>

INTERNATIONAL SMART SOURCING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(c) Recognition of Revenue--Revenue is recognized upon completion of the
sale which is when the goods are shipped to the customer.

(d) Inventories--Inventories are stated at the lower of cost or market.
Cost is determined principally by the use of the first-in, first-out
method.

(e) Depreciation and Amortization--Fixed assets are depreciated on the
straight line basis over the estimated useful lives of the related
assets. Leasehold improvements are being amortized on the straight line
basis over the shorter of the estimated useful life of the
improvements, which is 10 years, or the life of the lease.

(f) Income Taxes--Prior to December 24, 1998 EHC had made an election to be
treated as an S Corporation. Accordingly, under such election, income
taxes were paid by their shareholders on the shareholders'
proportionate share of income. International was incorporated as a
C corporation and, accordingly, taxes have been provided on income
generated by International.

(g) Net Income and Pro Forma Per Share Net Income--Net income per share is
computed based on the weighted average of number of common shares
outstanding during the period. Pro forma income and pro forma income
per share have been calculated as if EHC was a C corporation for
Federal and State income tax purposes.

(h) Accounting for Long-Lived Assets--The Company reviews long-lived assets
for impairment whenever circumstances and situations change such that
there is an indication that the carrying amounts may not be recovered.
At December 26, 1998, the Company believes that there has been no
impairment of its long-lived assets.

(i) Goodwill--Goodwill resulting from the acquisition of CDP is amortized
on a straight line basis over 10 years. The Company periodically
assesses the recoverability of the cost of its goodwill based on a
review of projected undiscounted cash flows of CDP. These cash flows
are prepared and reviewed by management in connection with the
Company's annual long range planning process.

(j) License Fee--The license fee resulting from the acquisition of CDP is
amortized on a straight line basis over 10 years.

(k) Deferred Offering Costs--Costs which are principally legal, accounting
and printing costs related to the Company's proposed initial public
offering are capitalized and will be reflected as a reduction of
stockholder's equity upon the closing of such public offering or
charged to expense if such offering is not consummated.

3. INVENTORY

Inventories consist of the following at December 26, 1998:

<TABLE>
<S> <C>
Raw Materials................................................. $ 80,000
Work in Process............................................... 89,000
Finished Goods................................................ 228,000
Components.................................................... 388,000
--------
$785,000
--------
--------
</TABLE>

F-8
<PAGE>

INTERNATIONAL SMART SOURCING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following at December 26, 1998:

<TABLE>
<CAPTION>
LIFE
----------
<S> <C> <C>
Machinery and Equipment........................................... 5-10 Years $3,108,724
Tools, Dies and Molds............................................. 5-10 Years 1,357,705
Leasehold Improvements............................................ 10 Years 217,836
Office Furniture and Fixtures..................................... 5 Years 182,784
----------
4,867,049
Less: accumulated depreciation and amortization................... 4,274,329
----------
$ 592,720
----------
----------
</TABLE>

5. OBLIGATIONS UNDER CAPITAL LEASES

The Company leases certain equipment under various capital lease
arrangements expiring in April 1998 through February 2002:

<TABLE>
<CAPTION>
CURRENT LONG-TERM
PORTION PORTION TOTAL
------- --------- --------
<S> <C> <C> <C>
Total minimum lease payments........................................ $68,422 $93,287 $161,709
Less: Amounts representing interest................................. 9,995 13,628 23,623
------- ------- --------
$58,427 $79,659 $138,086
------- ------- --------
------- ------- --------
</TABLE>

6. LOANS PAYABLE

Loans payable are comprised of the following at December 26, 1998:

<TABLE>
<S> <C> <C>
(1) Term loan payable, bank, due August 1999, payable in quarterly installments of $25,000
of principal plus interest at prime plus 1% (8.75% at December 26, 1998). The loan is
guaranteed by the Company's three officers/shareholders and requires the Company to
comply with certain covenants......................................................... $ 275,000
(2) Line of credit, bank (available up to $1,000,000), payable upon demand, bearing
interest at prime plus 1/2% (8.25% at December 26, 1998).............................. 973,000
(3) Loan agreement payable in monthly installments of $2,903 of principal and interest at
7% per annum due February 2007. The loan is guaranteed by the Company's three
officers/shareholders................................................................. 216,200
(4) Various loans payable to officer/shareholders, all bearing interest at 10% per annum,
payable in monthly installments ranging from $2,656 to $4,664 including interest. The
loans are due in dates ranging from September 1999 through February 2007. Certain
loans aggregating $304,750 are due 30 days after the Offering. Additionally, other
loans aggregating $100,000 are due upon demand........................................ 688,339
----------
2,152,539
Less: current portion 1,801,796
----------
Long-term portion $ 350,743
----------
----------
</TABLE>

F-9
<PAGE>

INTERNATIONAL SMART SOURCING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. LOANS PAYABLE--(CONTINUED)

<TABLE>
<S> <C> <C>
Long term debt mature as follows:
2000............................................................................. $ 110,823
2001............................................................................. 89,013
2002............................................................................. 24,940
2003............................................................................. 26,743
2004............................................................................. 28,677
Thereafter....................................................................... 70,547
----------
$ 350,743
----------
----------
</TABLE>

The loans are secured by substantially all the assets of the Company. The
Company estimates that the fair value of the above loans approximates their
carrying value.

7. INCOME TAXES

Included in the Company's 1998 consolidated net loss before income taxes is
approximately $195,000 of income from the operations of International Smart
Sourcing, Inc., a C corporation. The accompanying financial statements reflect a
tax provision of $66,000 which is a current tax at a 34% tax rate on such
income. Based upon EHC's current years's loss the pro-forma tax benefit of
$98,000 in 1998 represents the current year's benefit for $98,000 of income
taxes that EHC would have been subject to as a C corporation in 1997. No further
benefit is recorded as such benefit may not be realized.

8. RETIREMENT PLAN

The Company sponsors a 401(k) savings plan covering all non-union employees
who have attained the age of 21 and have completed 3 months of service.
Participants may contribute up to 15% of their annual compensation, subject to
certain limitations. In addition, the Company may make contributions to the
plan. During the years ended December 26, 1998 and December 27, 1997, the
Company did not make any contributions to the plan.

9. CASH GAIN SHARING PROGRAM

The Company's full time, non-union employees and other key company
employees receive additional compensation as determined by cash profits, as
defined, under the Cash Gain Sharing Program. For the year December 27, 1997
employees earned approximately $87,000 under the program. No additional
compensation was earned in 1998.

10. STOCK OPTION AND GRANT PLAN

In March 1998, the Company adopted the Stock Option and Grant Plan (the
"Plan") which provides for the aggregate grant of 300,000 shares of the
Company's common stock or options to purchase shares of common stock. No options
have been granted under the plan.

11. KEY MAN LIFE INSURANCE

The Company is the beneficiary of a $500,000 life insurance policy on the
life of the President of the Company.

F-10
<PAGE>

INTERNATIONAL SMART SOURCING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. COLLECTIVE BARGAINING AGREEMENT

The Company's factory employees and factory supervisors are represented by
a collective bargaining agreement between Local 531, International Brotherhood
of Teamsters, AFL-CIO and the Company. Such agreement expires in May 2001.

13. RELATED PARTY TRANSACTIONS

a. Sales during the years ended December 26, 1998 and December 27, 1997
included $1,227,000 and $371,000, respectively to another company owned
by the three officer/stockholders of the Company. Gross Profit on such
sales was approximately $363,000 and $30,000 for the years ended
December 26, 1998 and December 27, 1997, respectively. Accounts
receivable from the related company was $635,061 at December 26, 1998.

b. The Company leases its premises from a company owned by two of the
officer/stockholders of the Company at an annual rental of $138,000.
Such lease expires in December 2005. The mortgage on the premises in the
amount of $543,983 at December 26, 1998 is guaranteed by the Company.

c. During the year ended December 26, 1998, the Company entered into a
consulting agreement with one of its officer/stockholders for consulting
services provided in 1997. The Company executed a $150,000 promissory
note due within 30 days after the effective date of the Offering with
interest at 6% per annum for such services.

d. The Company subleases part of its premises to another company owned by
two of the officers/stockholders for an annual rent of $2,300 in 1998
and $3,000 in 1997.

e. In March 1998, the Company entered into employment agreements with its
three officer/stockholders for a period of 10 years at an aggregate
annual base salary of $325,000. Such agreement provides for increases at
the greater of 5% or the consumer price index and an annual bonus to be
determined by the Board of Directors.

f. In March 1998, the Company and an affiliate entered into an engineering
consulting and services agreement on a fee for services basis under
which the Company will have the right to manufacture certain of the
affiliate's products.

g. The Company is a guarantor on two loans made to an entity owned by the
three officer/stockholders of the Company. At December 31, 1998 the
outstanding aggregate balance on such loans was $857,500. The loans are
secured by an assignment of the affiliates fixed assets, accounts
receivable, inventories and all other assets. The unaudited figures of
the affiliate as of December 31,1998 are as follows:

<TABLE>
<S> <C>
Cash........................................................ $ 75,241
Accounts Receivable (Net)................................... 487,699
Inventories................................................. 1,444,545
Prepaid Expenses............................................ 91,716
Fixed Assets (Net).......................................... 624,099
Prepaid and Other Asset..................................... 162,171
----------
Total Assets................................................ 2,885,471
----------
----------
Total Liabilities (including due to the Company of
$632,928)................................................. 2,327,025
Stockholders' Equity........................................ 558,446
----------
Total Liabilities and Stockholders' Equity.................. $2,885,471
----------
----------
</TABLE>

F-11
<PAGE>

INTERNATIONAL SMART SOURCING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

14. LICENSE AGREEMENT

In March 1998, the Company entered into an exclusive license agreement with
a corporation which grants the Company the rights to manufacture, market and
sell a compact disc packaging system. The Company shall pay such corporation
annual royalties of 2% of net sales and 25% of other fees, as defined, plus an
initial fee of $30,000. The exclusive provisions of the license agreement are
subject to termination if certain minimum royalty levels are not obtained or if
the Company does not obtain a $1,000,000 cash investment within 24 months of the
agreement.

15. CONSULTING AGREEMENT

In March 1998, the Company entered into a ten year consulting agreement in
connection with the Company's plans to develop manufacturing resources in the
People's Republic of China ("China"). The Consultant will be paid at an hourly
rate as mutually determined and agreed upon by the Company and the Consultant
from time to time and 1.5% of the net cost, as defined, of all products
manufactured in China up to $5,000,000 per year and 1% of net costs in excess of
$5,000,000. The Consultant will also receive as of the effective date of the
Offering 25,000 shares of unregistered common stock of the Company and 25,000
options to purchase shares of common stock at $4.50 per share. Such options vest
on the second anniversary of the effective date of the Offering.

16. PREFERRED STOCK

17. PROPOSED PUBLIC OFFERING

In February 1998, the Company entered into a letter of intent with an
underwriter for the sale of 1,250,000 shares of common stock at $4.50 per share
and 1,250,000 redeemable warrants at $.10 per warrant to purchase one share of
common stock at $5 per share. The Company has agreed to retain the underwriter
as a consultant for a period of two years after the offering for a fee of
$120,000 payable upon the consummation of the offering.

18. STOCKHOLDERS' AGREEMENTS

In March 1998, the Company entered into an agreement with each of its three
officer/stockholders which provides that in the event of the death of the
stockholder within 24 months after the consummation of a public offering of the
Company's stock, the estate of the stockholder can require the Company to
repurchase 250,000 shares of the stockholder's stock for $500,000. The
repurchase of stock can only be made though the use of insurance proceeds
payable to the Company upon the death of the stockholder.

F-12

<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors of
Compact Disc Packaging Corp.
Farmingdale, New York

We have audited the accompanying statements of operations, stockholders' equity
and cash flows of Compact Disc Packaging Corp. for the years ended December 24,
1998 and December 31, 1997 and for the period January 31, 1995 (inception)
through December 24, 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations, stockholders' equity and cash
flows of Compact Disc Packaging Corp. for each of the years ended December 24,
1998 and December 31, 1997 and for the period from January 31, 1995 (inception)
through December 24, 1998 in conformity with generally accepted accounting
principles.

FELDMAN SHERB EHRLICH & CO., P.C.
Certified Public Accountants

New York, New York
February 15, 1999

F-13

<PAGE>

COMPACT DISC PACKAGING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
CUMULATIVE
YEAR ENDED JANUARY 31,1995
--------------------------- (INCEPTION) THROUGH
DECEMBER 24, DECEMBER 31, DECEMBER 24,
1998 1997 1998
------------ ------------ -------------------
<S> <C> <C> <C>
Net revenue.......................................................... $ 0 $ 0 $ 0
Costs and expenses:
Salaries........................................................... 15,500 26,000 41,500
Professional and consulting fees................................... 17,807 21,821 68,673
Research and development........................................... 44,974 20,010 90,568
Other general & administrative expenses............................ 27,405 21,899 62,410
---------- -------- ---------
Total costs and expenses (net loss).................................. $ (105,686) $(89,730) $(263,151)
---------- -------- ---------
---------- -------- ---------
</TABLE>

See notes to financial statements

F-14

<PAGE>

COMPACT DISC PACKAGING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
--------------------------
PAR VALUE DEFICIT
NUMBER OF AND CAPITAL IN ACCUMULATED DURING TOTAL STOCKHOLDERS'
SHARES EXCESS OF PAR DEVELOPMENT STAGE EQUITY (DEFICIENCY)
--------- -------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Balance--January 31, 1995 (inception)............. $ $ $
Issuance of Common Stock.......................... 500 25,000 25,000
Net Loss.......................................... (23,233) (23,233)
--- -------- ---------- -----------
Balance--December 31, 1995........................ 500 25,000 (23,233) 1,767
Net Loss.......................................... (44,502) (44,502)
--- -------- ---------- -----------
Balance--December 31, 1996........................ 500 25,000 (67,735) (42,735)
Net Loss.......................................... (89,730) (89,730)
--- -------- ---------- -----------
Balance--December 31, 1997........................ 500 $ 25,000 $ (157,465) $ (132,465)
Net Loss.......................................... (105,686) (105,686)
--- -------- ---------- -----------
Balance--December 24, 1998........................ 500 $ 25,000 (263,151) $ (238,151)
--- -------- ---------- -----------
--- -------- ---------- -----------
</TABLE>

See notes to financial statements

F-15

<PAGE>

COMPACT DISC PACKAGING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
CUMULATIVE
YEAR ENDED JANUARY 31, 1995
----------------------------- (INCEPTION)
DECEMBER 24, DECEMBER 31, THROUGH
1998 1997 DECEMBER 24, 1998
------------ ------------ -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................... $ (105,686) $(89,730) $(157,465)
---------- -------- ---------
Changes in assets and liabilities:
Increase (decrease) in accrued expenses................. 21,497 (3,316) 325
---------- -------- ---------
Net cash used in operating activities...................... (84,189) (93,046) (157,140)
---------- -------- ---------
Cash flows from financing activities:
Loans payable to stockholders.............................. 86,355 82,236 132,585
Issuance of capital stock.................................. -- -- 25,000
---------- -------- ---------
Net cash provided by financing activities.................... 86,355 82,236 157,585
---------- -------- ---------
Net increase (decrease) in cash.............................. 2,166 (10,810) 445
Cash, beginning of period.................................... 445 11,255 --
---------- -------- ---------
Cash, end of period.......................................... $ 2,611 $ 445 $ 445
---------- -------- ---------
---------- -------- ---------
</TABLE>

See notes to financial statements

F-16

<PAGE>

COMPACT DISC PACKAGING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS OF THE COMPANY

Compact Disc Packaging Corp. ( the "Company") was incorporated in Delaware
on January 31,1995 to manufacture and market a proprietary compact disc
packaging system. As of December 24, 1998 the Company has not generated any
revenue.

2. SIGNIFICANT ACCOUNTING POLICIES

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

b. Research and Development--Research and Development--Research and
development expenditures are charged to operations as incurred.

3. LICENSE AGREEMENT

In March 1998 the Company entered into an exclusive license agreement with
a corporation which grants the Company the rights to manufacture, market and
sell a compact disc packaging system. The Company shall pay such corporation
annual royalties of 2% of net sales and 25% of other fees, as defined, plus an
initial fee of $30,000. The exclusive provisions of the license agreement are
subject to termination if certain minimum royalty levels are not obtained or if
the Company does not obtain a $1,000,000 cash investment within 24 months of the
agreement.

4. PROPOSED PUBLIC OFFERING

In February 1998, a Delaware holding company, International Smart Sourcing,
Inc. ("International") was incorporated for the purpose of acquiring the stock
of the Company and one other affiliated company. As part of the acquisition,
which occurred as of December 24, 1998, International issued 445,000 shares of
its stock for the stock of CDP in a transaction accounted for as a purchase
commencing on the date of the transaction.

F-17

<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

The unaudited pro forma consolidated statement of operations for the year ended
December 26, 1998 reflects the combined results of International Smart Sourcing,
Inc. ("International") and its subsidiaries, Electronic Hardware Corp. ("EHC")
and Compact Disc Packaging Corp. ("CDP"), as if the acquisition of CDP had
occurred at the beginning of 1998, after giving effect to certain adjustments,
including amortization.

The unaudited pro forma consolidated statement of operations does not
necessarily represent actual results that would have been achieved had the
companies been together at the beginning of each respective period, nor are they
necessarily indicative of future results. The unaudited pro forma consolidated
statement of operations should be read in conjunction with the companies'
respective historical financial statements and notes thereto.

F-18

<PAGE>

INTERNATIONAL SMART SOURCING, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 26, 1998

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------- PRO FORMA ADJUSTMENTS
INTERNATIONAL SMART COMPACT DISC ----------------------------------------------
SOURCING INC. PACKAGING CORP. DR. CR.
------------------- --------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Net sales........................... 5,883,001 --
Cost of goods sold.................. 4,153,387 --
--------- ---------
Gross profit........................ 1,729,614 --
--------- ---------
Operating expenses:
Selling and shipping.............. 583,980 --
General and administrative........ 1,180,146 105,686 (1)223,800
--------- --------- ----------- -----------
Total operating expenses.......... 1,764,126 105,686 223,800 --
--------- --------- ----------- -----------
Loss before interest expense........ (34,512) (105,686) (223,800) --
Interest expense--net............... (190,074) --
--------- --------- ----------- -----------
Loss before income taxes.......... (224,586) (105,686) (223,800) --
Provision for income taxes.......... 66,760 -- (2) 66,760
--------- --------- ----------- -----------
Net loss.......................... (291,346) (105,686) (223,800) 66,760
Pro-forma income-taxes (benefit).... (98,000) -- (2) 36,000
--------- --------- ----------- -----------
Pro-forma net loss................ (193,346) (105,686) (259,800) 66,760
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Net loss per share--basic........... (0.19) --
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Pro-forma loss per share--basic..... (0.13) --
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Weighted average common shares
used.............................. 1,502,472 --
--------- --------- ----------- -----------
--------- --------- ----------- -----------

PRO FORMA
---------
TOTAL
---------
<S> <C>
Net sales........................... 5,883,001
Cost of goods sold.................. 4,153,387
---------
Gross profit........................ 1,729,614
---------
Operating expenses:
Selling and shipping.............. 583,980
General and administrative........ 1,509,632
---------
Total operating expenses.......... 2,093,612
---------
Loss before interest expense........ (363,998)
Interest expense--net............... (190,074)
---------
Loss before income taxes.......... (554,072)
Provision for income taxes.......... --
---------
Net loss.......................... (554,072)
Pro-forma income-taxes (benefit).... (62,000)
---------
Pro-forma net loss................ (492,072)
---------
---------
Net loss per share--basic........... (0.28)
---------
---------
Pro-forma loss per share--basic..... (0.25)
---------
---------
Weighted average common shares
used.............................. 1,945,000
---------
---------
</TABLE>

F-19

<PAGE>

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

A. The unaudited pro forma consolidated statement of operations for the year
ended December 26, 1998 reflects the combined results of International Smart
Sourcing, Inc. ("International") and its subsidiaries, Electronic Hardware
Corp. ("EHC") and Compact Disc Packaging Corp. ("CDP"), as if the
acquisition of CDP had occurred at the beginning of 1998, after giving
effect to certain adjustments, including amortization.

B. The following is an explanation of the pro forma adjustments.

(1) Amortization of a $500,000 license fee and $1,738,000 of goodwill on a
straight line basis over 10 years.

(2) Adjustment to income taxes to reflect the above transaction as if it had
been consummated at the beginning of 1998. The historical provision for
income taxes of $66,760, which results from the C Corporation income of
International, is eliminated based upon the pro forma consolidated loss of
the combined entities. The pro forma income tax benefit of $62,000 reflects
the current year's benefit of the pro forma taxes provided in 1997 in the
disclosures under Accounting Principles Board Opinion No. 16 in Note 1 to
International Smart Sourcing, Inc.'s financial statements. Any further tax
benefit would be reduced by a corresponding valuation allowance.

F-20

<PAGE>

COMPACT DISK PACKAGING CORP. a wholly-owned subsidiary of
International Smart Sourcing, Inc.
---------------------------------------------------------------------------

The Pull Pack Plastic CD ROM Tray

Two photographs, each of the prototype model of the Pull Pack(Trademark).
The photograph on the far left shows two hands opening the prototype Pull
Pack(Trademark) packaging. The second photograph shows two hands removing a
Compact Disc from the Pull Pack(Trademark) packaging system.

Convenient and reliable, the Pull Pack (TM) offers a simple and
effective solution to problems associated with conventional disc
packaging.

The Pull Pack (TM) is a redesigned "Jewel Box", the packaging currently
used for Compact Discs, CD ROMs and Digital Video Discs ("DVD").
The patented Pull Pack (TM) employs a drawer-like mechanism, avoiding
the problems associated with Disc packaging that is currently available,
involving fragile hinges, difficulty in opening and the removal of Discs
and descriptive literature.

ELECTRONIC HARDWARE CORP. a wholly-owned subsidiary of
International Smart Sourcing, Inc. website: http://www.ehcknobs.com
---------------------------------------------------------------------------

EHC
KNOBS
MECHANAICAL DEVICES
CUSTOM MOLDING

Photograph of various knobs and assemblies manufactured by EHC interspersed
throughout the page.

Electronic Hardware Corporation is a customer-focused supplier of molded
plastic components and assemblies. Our product line provides the
marketplace with many innovative solutions. Our mission is to exceed
customer expectations for service, quality and value through continuous
improvement of people, processes and products.

<PAGE>

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY BY ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 8
Use of Proceeds................................. 20
Dividend Policy................................. 22
Dilution........................................ 23
Capitalization.................................. 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 25
Business........................................ 29
Management...................................... 36
Principal Stockholders.......................... 40
Certain Transactions............................ 41
Description of Securities....................... 45
Shares Eligible for Future Sale................. 49
Underwriting.................................... 50
Legal Matters................................... 52
Experts......................................... 52
Additional Information.......................... 52
Index to Financial Statements................... F-1
</TABLE>

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

UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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

1,250,000 SHARES

OF COMMON STOCK

AND

1,250,000 REDEEMABLE

COMMON STOCK

PURCHASE WARRANTS

[INSERT LOGO]

------------------------
PROSPECTUS
------------------------

, 1999

[LOGO]

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

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company is a Delaware corporation, subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware. Section 145 of the General Corporation Law of the State of Delaware
empowers a Delaware corporation to indemnify, subject to the standards therein
prescribed, any person in connection with any action, suit or proceeding brought
or threatened by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation or was serving as such with
respect to another corporation or other entity at the request of such
corporation.

The Company's Certificate provides that each person who was or is made a
party to (or is threatened to be made a party to) or is otherwise involved in
any civil or criminal action, suit or proceeding by reason of the fact that such
person is or was a director or officer of the Company shall be indemnified and
held harmless by the Company to the fullest extent authorized by Section 145 of
the General Corporation Law of the State of Delaware against all expense,
liability and loss (including without limitation attorneys' fees) incurred by
such person in connection therewith.

Nothing contained in the Company's Certificate shall eliminate or limit the
liability of directors (i) for any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law;
(iii) under Section 174 of the General Corporation Law of the State of Delaware;
or (iv) for any transaction from which the director derived an improper personal
benefit.

The Company maintains directors and officers liability insurance covering
all directors and officers of the Company against claims arising out of the
performance of their duties.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below is an estimate of the fees and expenses payable by the
Company in connection with the issuance and distribution of the Common Stock.

<TABLE>
<S> <C>
SEC Registration............................................................... $ 4,675.00
NASD Filing Fee................................................................ 2,079.00
Nasdaq Listing Fee............................................................. 9,500.00
Boston Stock Exchange Listing Fee.............................................. 14,750.00
Transfer Agent Fee............................................................. 2,500.00
Printing and Engraving Costs................................................... 150,000.00
Legal Fees and Expenses........................................................ 270,000.00
Accounting Fees and Expenses................................................... 200,000.00
Blue Sky Fees and Expenses..................................................... 35,000.00
Miscellaneous.................................................................. 11,496.00
-----------
Total........................................................................ $700,000.00
-----------
-----------
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The following shares of Common Stock were issued by the Company during the
past three years without registering the securities under the Securities Act.
There were no underwriting discounts or commissions paid in connection with the
issuance of any of the securities set forth below.

The sales of the securities described in the following table were made in
reliance upon Section 4(2) of the Securities Act, which provides certain
exemptions for transactions not involving a public offering. The purchasers of
securities in each transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof. All purchasers of securities in each such
transaction had adequate information concerning the Company.

II-1

<PAGE>

As part of a reorganization, the Company acquired solely in exchange for
Common Stock of the Company, all of the outstanding capital stock of EHC and
CDP, effective as of December 24, 1998. The value and number of shares to be
issued to former holders of the outstanding capital stock of CDP and EHC was
determined by negotiations between the Company and Andrew Franzone, David L.
Kassel, Harry Goodman, Robert Gillings and David Cowan. Mr. Gillings
subsequently transferred his shares of CDP to David L. Kassel in an arms'-length
transaction dated May 29, 1998 in return for a nonrecourse promissory note from
Mr. Kassel in favor of Mr. Gillings in the principal amount of $450,000 bearing
interest at the rate of 6% per annum, payable in full on August 1, 2000 or
earlier as provided in such promissory note. The reorganization exchange is an
arm's-length transaction acceptable to each of the parties based upon such
negotiations. The amount of shares issued is based on a ratio of shares held in
CDP and EHC to a percentage of shares of the Company. Following the
reorganization, each of the following individuals will hold the amount of shares
of the Company's common stock set forth below:

<TABLE>
<S> <C>
David L. Kassel.................................................................... 900,000
Harry Goodman...................................................................... 500,000
Andrew Franzone.................................................................... 500,000
David Cowan........................................................................ 45,000
</TABLE>

ITEM 27. LIST OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<S> <C>
*1 Form of Underwriting Agreement
*2.1 Agreement and Plan of Reorganization between International Plastic Technologies, Inc. and CDP and
Amendment No. 1 effective as of December 24, 1998
*2.2 Agreement and Plan of Reorganization between International Plastic Technologies, Inc. and EHC and
Amendment No. 1 effective as of December 24, 1998
*3.1 Certificate of Incorporation of International Plastic Technologies, Inc. and Amendment to the
Certificate of Incorporation dated December 7, 1998
*3.2 By-Laws of International Plastic Technologies, Inc., as amended
*4.1 Form of Common Stock Certificate
*4.2 Form of Warrant Certificate
*4.3 Form of Warrant Agreement between the Company and Continental Stock Transfer and Trust Company
*4.4 Form of Underwriter's Warrant Agreement
*5 Opinion of Koerner Silberberg & Weiner, LLP
*10.1 Employment Agreement between the Company and Andrew Franzone
*10.2 Employment Agreement between the Company and David L. Kassel
*10.3 Employment Agreement between the Company and Harry Goodman
*10.4 Consulting Agreement between the Company and B.C. China Business Consulting, Inc. and Letter Agreement
between the Company and Bao-Wen Chen dated March 1, 1998, as amended
*10.5 Consulting Agreement between the Company and Network 1 Financial Securities, Inc.
*10.6 Lease Agreement between the Company and K&G Realty Associates dated December 19, 1989, Rider to Lease
Agreement dated January 1, 1990, Letter Agreement between the Company and K&G Realty Associates dated
March 16, 1995 and Riders to Lease Agreement dated March 1, 1998 and May 14, 1998
*10.7 Licensing Agreement between CDP and Inch, Inc.
*10.8 Promissory Notes payable to David L. Kassel dated September 13, 1994, August 1, 1996, December 31,
1997 and Janaury 1, 1998, and Guarantee of CDP Promissory Note dated January 1, 1998 by International
Plastic Technologies, Inc.
*10.9 Promissory Notes payable to Harry Goodman dated September 1, 1994 and August 1, 1996
*10.10 Demand Grid Note between AFC and Republic National Bank of New York dated December 1, 1997, Term Loan
Agreement Promissory Note between AFC and Republic National Bank of New York dated July 29, 1996 and
Guaranty and Security Agreement by EHC dated July 25, 1996
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<S> <C>
*10.11 Term Loan Agreement between EHC and Republic National Bank of New York dated July 29, 1996 and Term
Loan Agreement Promissory Note dated July 29, 1996
*10.12 Demand Grid Note between Republic National Bank of New York and EHC dated July 29, 1996
*10.13 Loan Agreement between EHC and Long Island Development Corporation dated February 21, 1997, Loan
Promissory Note dated February 21, 1997, Security Agreement dated February 21, 1997 and Waiver Letter
dated July 13, 1998
*10.14 Mortgage between K&G Realty Associates and Long Island Commercial Bank dated November 28, 1995, Rider
to Mortgage dated November 28, 1995, Mortgage Note, Guaranty of Mortgage Note by EHC and Assignment of
Leases and Rent
*10.15 Collective Bargaining Agreement between EHC and Local 531, International Brotherhood of Teamsters,
AFL-CIO and Memorandum of Agreement dated as of May 10, 1998
*10.16 Stockholders' Agreement between the Company, Andrew Franzone, David L. Kassel and Harry Goodman and
Amendment No. 1 to the Stockholders' Agreement
*10.17 International Plastic Technologies, Inc., 1998 Stock Option and Grant Plan
*10.18 Agreement between AFC and EHC to engineer, manufacture and import products
*10.19 Letter agreement between EHC and Republic National Bank of New York to release the personal guarantees
of Andrew Franzone, David Kassel and Harry Goodman dated May 14, 1998
*10.20 Demand Negotiable Promissory Note payable to David L. Kassel dated October 27, 1998
*10.21 Demand Negotiable Promissory Notes payable to Harry Goodman dated October 22, 1998 and December 7,
1998
*10.22 Agreement between EHC and David L. Kassel to extend maturity date of January 1, 1998 Promissory Note,
dated December 8, 1998
*10.23 Agreement between CDP and David L. Kassel to extend maturity date of January 1, 1998 Promissory Note,
dated December 8, 1998
*10.24 Promissory Note payable by CDP to David Kassel dated May 29, 1998 and Guarantee of the Promissory Note
by the Company
*21 List of Subsidiaries of the Company
*23.1 Consent of Koerner Silberberg & Weiner, LLP (contained in its opinion filed as Exhibit 5 hereto).
23.2 Consent of Feldman Sherb Ehrlich & Co., P.C.
*24 Power of Attorney (included on the signature page)
*27.1 Financial Data Schedule for International Smart Sourcing, Inc.
27.2 Financial Data Schedule for Compact Disc Packaging Corp.
</TABLE>

- ------------------------
* Previously filed.

ITEM 28. UNDERTAKINGS

A. Certificates

The undersigned registrant (the "Registrant") hereby undertakes to provide
to the Underwriter at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriter to permit prompt delivery to each purchaser.

B. Rule 415 Offering

The undersigned Company hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to: (i) include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) reflect in
the prospectus any facts or events which, individually or together, represent a
fundamental change in the information in the Registration Statement and;
(iii) include any additional or changed material information on the plan of
distribution.

II-3
<PAGE>

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

C. Request for Acceleration of Effective Date

The Company may elect to request acceleration of the Effective Date of the
Registration Statement under Rule 461 of the Securities Act.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the Securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

D. Rule 430A Offering

If the Company relies on Rule 430A under the Securities Act, the Company
hereby undertakes that:

(1) For purposes of determinating any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A of the Securities
Act and contained in a form of Prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act deemed to be
part of this Registration Statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all requirements of filing on Form SB-2 and authorizes this Amendment
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of New York, State of New York on March 23, 1999.

INTERNATIONAL SMART SOURCING, INC.

By: /s/ ANDREW FRANZONE
-------------------------------------
Andrew Franzone
Chief Executive Officer and President

In accordance with the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement was signed by the following persons in
the capacities and on the dates stated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer, President and March 23, 1999
- ------------------------------------------ Director
Andrew Franzone

* Chairman of the Board March 23, 1999
- ------------------------------------------
David L. Kassel

* Vice President and Director March 23, 1999
- ------------------------------------------
Harry Goodman

* Chief Financial Officer and Controller March 23, 1999
- ------------------------------------------
Steven Sgammato

* Director March 23, 1999
- ------------------------------------------
Carl Seldin Koerner

Director March 23, 1999

- ------------------------------------------
Bao-Wen Chen

Director March 23, 1999
/s/ MITCHELL SOLOMON
- ------------------------------------------
Mitchell Solomon

*By: /s/ ANDREW FRANZONE
-------------------------------------
Andrew Franzone, Attorney-in-fact
</TABLE>

II-5

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ---------- ----------- ------
<S> <C> <C>
*1 Form of Underwriting Agreement

*2.1 Agreement and Plan of Reorganization between International Plastic Technologies, Inc. and
CDP and Amendment No. 1 effective as of December 24, 1998

*2.2 Agreement and Plan of Reorganization between International Plastic Technologies, Inc. and
EHC and Amendment No. 1 effective as of December 24, 1998

*3.1 Certificate of Incorporation of International Plastic Technologies, Inc. and Amendment to
the Certificate of Incorporation dated December 7, 1998

*3.2 By-Laws of International Plastic Technologies, Inc., as amended

*4.1 Form of Common Stock Certificate

*4.2 Form of Warrant Certificate

*4.3 Form of Warrant Agreement between the Company and Continental Stock Transfer and Trust
Company

*4.4 Form of Underwriter's Warrant Agreement

*5 Opinion of Koerner Silberberg & Weiner, LLP

*10.1 Employment Agreement between the Company and Andrew Franzone

*10.2 Employment Agreement between the Company and David L. Kassel

*10.3 Employment Agreement between the Company and Harry Goodman

*10.4 Consulting Agreement between the Company and B.C. China Business Consulting, Inc. and
Letter Agreement between the Company and Bao-Wen Chen dated March 1, 1998, as amended

*10.5 Consulting Agreement between the Company and Network 1 Financial Securities, Inc.

*10.6 Lease Agreement between the Company and K&G Realty Associates dated December 19, 1989,
Rider to Lease Agreement dated January 1, 1990, Letter Agreement between the Company and
K&G Realty Associates dated March 16, 1995 and Riders to Lease Agreement dated March 1,
1998 and May 14, 1998

*10.7 Licensing Agreement between CDP and Inch, Inc.

*10.8 Promissory Notes payable to David L. Kassel dated September 13, 1994, August 1, 1996,
December 31, 1997 and Janaury 1, 1998, and Guarantee of CDP Promissory Note dated
January 1, 1998 by International Plastic Technologies, Inc.

*10.9 Promissory Notes payable to Harry Goodman dated September 1, 1994 and August 1, 1996

*10.10 Demand Grid Note between AFC and Republic National Bank of New York dated December 1, 1997,
Term Loan Agreement Promissory Note between AFC and Republic National Bank of New York
dated July 29, 1996 and Guaranty and Security Agreement by EHC dated July 25, 1996

*10.11 Term Loan Agreement between EHC and Republic National Bank of New York dated July 29, 1996
and Term Loan Agreement Promissory Note dated July 29, 1996

*10.12 Demand Grid Note between Republic National Bank of New York and EHC dated July 29, 1996
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ---------- ----------- ------
<S> <C> <C>
*10.13 Loan Agreement between EHC and Long Island Development Corporation dated February 21, 1997,
Loan Promissory Note dated February 21, 1997, Security Agreement dated February 21, 1997
and Waiver Letter dated July 13, 1998

*10.14 Mortgage between K&G Realty Associates and Long Island Commercial Bank dated November 28,
1995, Rider to Mortgage dated November 28, 1995, Mortgage Note, Guaranty of Mortgage Note
by EHC and Assignment of Leases and Rent

*10.15 Collective Bargaining Agreement between EHC and Local 531, International Brotherhood of
Teamsters, AFL-CIO and Memorandum of Agreement dated as of May 10, 1998

*10.16 Stockholders' Agreement between the Company, Andrew Franzone, David L. Kassel and Harry
Goodman and Amendment No. 1 to the Stockholders' Agreement

*10.17 International Plastic Technologies, Inc., 1998 Stock Option and Grant Plan

*10.18 Agreement between AFC and EHC to engineer, manufacture and import products

*10.19 Letter agreement between EHC and Republic National Bank of New York to release the personal
guarantees of Andrew Franzone, David Kassel and Harry Goodman dated May 14, 1998

*10.20 Demand Negotiable Promissory Note payable to David L. Kassel dated October 27, 1998

*10.21 Demand Negotiable Promissory Notes payable to Harry Goodman dated October 22, 1998 and
December 7, 1998

*10.22 Agreement between EHC and David L. Kassel to extend maturity date of January 1, 1998
Promissory Note, dated December 8, 1998

*10.23 Agreement between CDP and David L. Kassel to extend maturity date of January 1, 1998
Promissory Note, dated December 8, 1998

*10.24 Promissory Note payable by CDP to David Kassel dated May 29, 1998 and Guarantee of
Promissory Note by the Company

*21 List of Subsidiaries of the Company

*23.1 Consent of Koerner Silberberg & Weiner, LLP (contained in its opinion filed as Exhibit 5
hereto).

23.2 Consent of Feldman Sherb Ehrlich & Co., P.C.

*24 Power of Attorney (included on the signature page)

*27.1 Financial Data Schedule for International Smart Sourcing, Inc.

27.2 Financial Data Schedule for Compact Disc Packaging Corp.
</TABLE>

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

* Previously filed.

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 15, 1999 relating to the financial
statements of International Smart Sourcing, Inc. and subsidiaries as of December
26, 1998 and for each of the years in the two year period then ended and of our
report dated February 15, 1999 of Compact Disc Packaging Corp. as of December
24, 1998 and for each of the years in the two year period then ended and for the
period January 31, 1995 (inception) through December 24, 1998 in the
Registration Statement on Form SB-2, Amendment No.6, and the related Prospectus
of International Smart Sourcing, Inc.

/s/ Feldman Sherb Ehrlich & Co., P.C.

Feldman Sherb Ehrlich & Co., P.C.
Certified Public Accountants

New York, New York
March 23, 1999

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-24-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-24-1998
<CASH> 2,611
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,611
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,611
<CURRENT-LIABILITIES> 240,762
<BONDS> 0
0
0
<COMMON> 25,000
<OTHER-SE> (263,151)
<TOTAL-LIABILITY-AND-EQUITY> 2,611
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (105,686)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (105,686)
<INCOME-TAX> 0
<INCOME-CONTINUING> (105,686)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (105,686)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00

</TABLE>