21ST CENTURY TECHNOLOGIES INC, 10SB12G/A, 2000-12-22

21ST CENTURY TECHNOLOGIES INC
10SB12G/A, 2000-12-22
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U. S. Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-SB/A
AMENDMENT NO. 3

GENERAL FORM OF REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934

Commission File No. 000-29209

21st CENTURY TECHNOLOGIES, INC.
-------------------------------------
(Name of Small Business Issuer in its Charter)

NEVADA 48-1110566
------------------------------ -----------------------------
(State or Other Jurisdiction of (I.R.S. Employer ID. No.)
incorporation or organization)

2513 East Loop 820 North
Ft. Worth, TX 76118
-----------------------------------------
(Address of Principal Executive Offices)

Issuer's Telephone Number, including area code: (817) 284-0099
Facsimile Number: (817) 284-7528

Securities Registered under Section 12(b) of the Exchange Act:

None.

Securities Registered under Section 12(g) of the Exchange Act:

$0.001 Par Value Common Voting Stock

Title of Class

<PAGE> 1

Table of Contents

PART I

Item 1: Description of Business

Item 2: Management's Discussion and Analysis or Plan of Operations

Item 3: Description of Property

Item 4: Security Ownership of Certain Beneficial
Owners and Management

Item 5: Directors, Executive Officers, Promoters and
Control Persons

Item 6: Executive Compensation

Item 7: Certain Relationships and Related Transactions

Item 8: Description of Securities

PART II

Item 1: Market Price for Common Equity and
Dividends of 21st Century Technologies, Inc.
and Other Shareholder Matters

Item 2: Legal Proceedings

Item 3: Changes In and Disagreements With Accountants

Item 4: Recent Sales of Unregistered Securities

Item 5: Indemnification of Directors and Officers

PART F/S

Index to Financial Statements

PART III

Item 1: Index to and Description of Exhibits

-ii-

<PAGE> 2

Part I

ITEM 1. DESCRIPTION OF BUSINESS

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

21st Century Technologies, Inc. (the "Company") is a Nevada corporation. The
Company merged into a "public shell" (formerly First National Holding
Corporation) after acquiring certain assets of Innovative Weaponry Weaponry,
Inc., a debtor in bankruptcy and commenced trading on June 1, 1995. The
authorized capital of the Company is 200,000,000 shares of common voting stock
par value $.001 per share. The Company has issued 51,667,753 shares effective
March 31, 2000 and on a fully diluted basis 79,587,253 shares.

Organization and Charter Amendments
-----------------------------------

The following amendments to the Articles of Incorporation of the Company
(formerly First National Holding Corporation as filed January 28, 1994 with
the Nevada Secretary of State) have been made since its organization.

1. On September 9, 1994, a Merger Agreement was entered into by and between
First National Holding Corporation, a Nevada corporation, and First
National Holding Corporation, a Delaware corporation with the Nevada
corporation as the surviving entity.

2. On September 19, 1994 an amendment was filed with the Nevada Secretary
of State changing the name from First National Holding Corporation to
Innovative Weaponry, Inc.

3. On May 19, 1995, First National Holding Corporation (Nevada) filed
Articles of Merger with First National Holding Corporation, a Delaware
corporation, with the Nevada Secretary of State with the Nevada
corporation as the surviving entity.

4. On September 25, 1995, an amendment was filed with the Nevada Secretary
of State changing the name from Innovative Weaponry, Inc. to 21st
Century Technologies, Inc.

Changes of Control During the Past Three Years
----------------------------------------------

In September of 1994, the Board of Directors entered into a consulting
contract with Kenneth E. Wilson, the Company's current Chairman, President and
Chief Executive Officer. This agreement required the Company to issue
1,000,000 shares of Company common stock to Mr. Wilson and to compensate him
at the rate of $10,000.00 per month. In the event it was unable to pay Mr.
Wilson in cash, the Company agreed that it would issue to him common stock in
amount equal to $0.02 per share (which was the share price at the time the
consulting contract was executed.) Subsequently, the Company was only able to
pay Mr. Wilson $10,000 per month from September 1994 through December 1994.

In January 1995, the Company and Mr. Wilson re-negotiated the agreement to
remunerate him solely in stock of the Company. This was necessary

<PAGE> 3

because of the Company's cash flow position and inability to pay Mr. Wilson
under the original consulting agreement. The new agreement provided Mr. Wilson
would continue to perform services for the Company in exchange for 500,000
shares of Company common stock per month. As of the expiration date of the
new agreement, January 5, 1998, Mr. Wilson had earned a total of 19,000,000
shares of the Company's common stock.

Further, the new agreement required that the stock not be issued until after
the end of the initial term of the agreement, which was three years. However,
to date, no shares have been issued to Mr. Wilson at his request, firstly
because of the income tax consequences to him, and secondly, because the
shares were required by the Company for its own corporate financing needs to
raise additional working capital. Before any shares are issued to Mr. Wilson,
the Company will provide advance public disclosure to its shareholders of the
full details.

See the caption "Security Ownership of Certain Beneficial Owners and
Management", Item 4, for information respecting the beneficial ownership of
securities of the Company by Kenneth E. Wilson and others; and see caption
"Directors, Executive Officers, Promoters and Control Persons," Item 5, for
other material information regarding these persons.

Business
--------

The Company has five subsidiaries:

1. Innovative Weaponry Incorporated.

Innovative Weaponry is a manufacturer of tritium products available in night
sights and other "night seeing" sights in the weapons industry. Both military
and private gun owners currently purchase tritium based night sights with
additional applications currently under research and development. The
Innovative Weaponry products feature multi-color tritium sights with the front
sight brighter than the rear sight thereby enhancing low light sighting.
Innovative Weaponry products have been sold to Original Equipment
Manufacturers, certain members of the United States military (including two
Navy Seal Teams and, United States Customs, Drug Enforcement, Fish and Game,
and state and local police departments nationwide. Specifically, the Texas
Department of Public Safety purchased five thousand (5,000) sets of sights to
equip the patrol officers. Two Navy Seals teams purchased five hundred (500)
sets of sights to equip the teams' hand guns. The United States Army received
one hundred (100) sets of sight for testing. H & K purchased seven thousand
(7,000) sets of sights for resale. During the past several years the company
has outfitted numerous state and local police departments through out the
United States with PT Night Sights on their officers hand guns.

Innovative Weaponry sells under the federal trade mark protected name "PT
Night Sights(TM)" a multi-color 3-dot night sight using the radioactive
isotope "tritium" in encapsulated form to provide light in low light and no
light situations. The Company's competition is (1) Ultimate Weapons Systems
selling under the trade name "Trijicon"; (2) Meprolight; and (3)Trilux. Each
of these companies is private and no

<PAGE> 4

public sales figures are available. We have the smallest market share of all
of our competitors.

Tritium, is a radioactive product, which is highly regulated by the U.S.
Nuclear Regulatory Commission ("NRC"). Innovative Weaponry is licensed with
the NRC to import "tritium" in connection with the manufacture of its night
sights. Innovative Weaponry is a New Mexico corporation and is 100% owned by
the Company.

Innovative Weaponry continues the business of Innovative Weaponry, Inc., a New
Mexico corporation, which filed a Chapter 11 bankruptcy plan in the U.S.
Bankruptcy Court for the District of New Mexico on August 26, 1994. Key to
the business is the use of the radioactive isotope "tritium" which is
luminescent (i.e. tritium glows in low and no light environments.)

2. Trident Technologies Incorporated.

Trident Technologies Corporation ("Trident"), a manufacturer of the Gripper (a
magnetic climbing device worn on the hand and feet) and the Sea Patch formerly
called the Underwater Seal. Trident is a Nevada corporation and is 100% owned
by the Company. The Sea Patch is a magnetic "cam-on/cam-off" device used to
seal leaks in the metal hulls of ships with both disaster and environmental
markets. Trident has experienced insignificant sales to date of both the
Gripper and Sea Patch. In November 1998, Trident redesigned the Sea Patch
when it was introduced at the Ship Repair and Conversion Exhibit '98 in
London, England. Trident intends on marketing the Gripper and Sea Patch to
the maritime and salvage repair industries.

The magnetic technology utilized by Trident is licensed from the Los Alamos
National Laboratory ("Los Alamos National Lab") in Los Alamos, New Mexico.
The license is set-forth in a "Limited Exclusive Patent License Agreement
Between The Regents of the University of California and Trident Technologies
Corporation for Seal Device for Ferromagnetic Containers" (Los Alamos Control
Number 97-41-00226.)

The Gripper was invented at the Los Alamos National Lab at the request of the
United States Department of Defense. The technology transfer from Los Alamos
Lab to Trident was facilitated through Trade Partners International, Inc. The
founder and President of Trade Partners was Dr. Thomas E. Murphy who is a
recognized national expert in the field of special operations, paramilitary,
and counter-terrorist operations and activities. Trident holds an exclusive
worldwide, all applications license to commercially exploit the technology.

The Grippers are "worn" on hands and feet to enable the user to climb or
traverse any steel surface. It is a lightweight magnetic device (each Gripper
weighs only 1.5 pounds) that attaches to any ferromagnetic material-iron,
steel, or their alloys. It fastens smoothly to a surface and can be attached
or detached with only one hand or foot. Using a set of Grippers (i.e. two
devices on the hands and two on the feet) the user can climb a vertical
surface, releasing and repositioning the Grippers as he ascends. Wearing
Grippers, a person can move up, down, or sideways with relative ease.

<PAGE> 5

The Gripper technology is patented in the United States with potential
applications in such areas such as bridge inspection, tank inspection,
underwater welding on ship's hulls, underwater inspection of off-shore oil
rigs structural support towers, ship's hull inspections, coating inspections,
emergency repairs on ship's hulls, etc.

The Sea Patch is also under developmental license from the Los Alamos National
Lab. The technology is based on a patented magnetic-hydraulic means of
implementing emergency ship, storage container, pipeline and other repairs
where surface integrity has been breached as in the case of a rip or tear to a
ship's hull. This technology poses a new approach to resolving a problem
having high public visibility due to the extensive environmental focus on
hazardous chemical and oil spillage in the environment from pipelines, storage
containers, railroad cars and marine transport vessels.

This technology utilizes certain aspects of the "Gripper" magnetic pack and
cam-on-cam-off technology to attach a compression Patch to tears, stress
fractures and punctures in a ship's hull above or below the waterline.

3. Griffon USA, Inc.

Griffon USA, Inc. ("Griffon"), is an importer and licensee of Continental
Weapons (Pty), Inc., a South African manufacturer of a replica 1911 Colt 45
sidearm, rifles and other guns. Griffon is regulated by the U.S. Bureau of
Alcohol, Tobacco and Firearms. Griffon is a Nevada corporation and is 100%
owned by the Company.

4. CQB Armor, Inc.

CQB Armor, Inc. ("CQB Armor"), is a Nevada corporation 100% owned by the
Company. CQB Armor was formed for the purpose of acquiring a line of soft and
hard body armor for the military, law enforcement, and private protection
services. The acquisition failed to close due to financial terms and CQB
Armor has remained inactive. The Company has no current plans to activate CQB
Armor.

5. Trade Partners International, Inc.

Trade Partners International, Inc. ("Trade Partners") was not actively engaged
in any trade or business, acting solely as a technology transfer facilitator
of the magnetic technology license from the Los Alamos Lab, until October 15,
1999, when it entered into a Memorandum Agreement with FinnCo Manufacturing,
LLC, a privately owned corporation based in South Africa. Under the terms of
the distribution agreement, Trade Partners has the right to distribute a
mono-ethylene glycol and water based product used to prevent punctures in tube
and tubeless tires (the "sealant") exclusively in the U.S., Canada, Caribbean,
India and Mexico for a ten-year initial period subject to extension. Trade
Partners is a Nevada corporation and is 100% owned by the Company.

Distribution Methods of the Products or Services
------------------------------------------------

The Company's distribution methods vary with each subsidiary. The Innovative
Weaponry, Griffon and Trade Partners subsidiaries sell their products and
services through a combination of (1) direct sales; (2)

<PAGE> 6

sales through 5 distribution agents; and (3) sales through manufacturers and
supply houses. The Trident subsidiary has sold a limited amount of its
Gripper products directly to customers. The distribution of Trident's Sea
Patch will utilize both direct sales and agency representation in the maritime
salvage and repair industry.

Competitive Business Conditions
-------------------------------

The Company depends on the quality of its products and a discounted pricing
strategy in comparison to its competitors. The risks associated with this
strategy are that we often must operate on a lower profit margin than our
competitors to gain market share. The demand for the Innovative Weaponry line
of tritium enhanced gun sights has grown due to our increased marketing
efforts. Expanded crime prevention and discretionary equipment funding by
federal and state governments makes it easier for law enforcement to afford
options like the PT Night Sights(TM) when ordering new equipment. Without
this funding, individuals must pay for these options themselves. Often we
must work with customers after the sale to help them locate financing within
their own budgets or to provide assistance in the preparation of requisitions
for funding.

Handguns are a highly politicized issue subject to increased public sector and
governmental scrutiny similar to the tobacco industry. The Company does not
believe, however, that this scrutiny is directed towards the military and law
enforcement sectors (which comprise the majority of Innovative Weaponry sales
to date).

The demand for the Trident line of products is untested, but we believe that
it should increase following certification by the American Bureau of Shipping
and increased product awareness in the maritime industry. In addition, we
believe that the maritime industry is concerned over anti-pollution
enforcement efforts by the Department of Justice, which have resulted in
multi-million dollar fines. We believe that the Sea Patch provides a tool to
fight pollution by leakage from ship's hulls, pipelines, tanks and other
metallic containers.

Competitive Advantages & Differentiation
----------------------------------------

The Company has the following competitive advantages and differentiation of
its respective subsidiaries' products and services.
Innovative Weaponry is one of three U.S. manufacturers who use "tritium" for
gun sights. Innovative Weaponry is currently the only importer of "tritium"
from South Africa. Its two competitors import from either Switzerland or
Canada where they enjoy exclusivity. The license to import "tritium" is
issued by the U.S. Nuclear Regulatory Commission. This license confers a
competitive advantage in that any new manufacturer of gun sights would have to
obtain regulatory approval to import "tritium". Although it is possible that
a new manufacturer could obtain the necessary license to import "tritium" in
order to compete with Innovative Weaponry, the issuance of the license may
delay market entry thereby providing the Company with a slight competitive
advantage.

PT Night Sights(TM) represents a narrow market segment for gun users who
desire help in alleviating the poor level of accuracy in low light

<PAGE> 7

conditions. PT Night Sights(TM) are sold primarily to the military,
sportsmen, law enforcement, government agencies and gun enthusiast, and
therefore does not have wide appeal to all gun users.

Innovative Weaponry was the first manufacturer in the United States to
introduce the multi-colored 3-dot design for tritium enhanced gun sights. Its
two competitors produced an "all green" version that can cause some confusion
in the lining-up of the sights, but have now introduced multi-color sights.
Innovative Weaponry provides custom work (although it is often time consuming
and with narrow profit margins) for a broad line of guns and offers a 15-year
warranty on its products as a means of providing extra services to its
customers. Its two competitors when surveyed offered only limited custom work
and warranties of 10-12 years on its tritium night sights. Because of the
Gripper and Sea Patch patented technology there are no other companies with
similar technology in the market place.

The magnetic technology utilized by Trident is licensed from Los Alamos
National Lab and, therefore, competitors would have to replicate the
technology in such a manner as not to infringe upon the aforesaid intellectual
property. Trident has adopted an intellectual property protection program with
respect to its magnetic technology the effectiveness of which will be
dependent upon having sufficient resources to take appropriate legal action
against possible infringement. The market for Trident's Gripper and Sea Patch
has been relatively untested to date. The future growth of Trident will
depend on the acceptance of its products. As the market for Trident's
products expands it can be expected that competitors will seek to introduce
alternative products. Trident will seek to differentiate its products based
upon superior design, functionality and customer support.

The maritime industry represents the largest market for the Gripper and Sea
Patch. In conjunction with maritime insurance carriers, dry dock repair and
salvage operators, Trident will be able to offer its technology to the
maritime industry.

Trident has submitted the Sea Patch to the American Bureau of Shipping for
classification. The American Bureau of Shipping is one of the world's leading
ship classification societies. The primary purpose of American Bureau of
Shipping is to determine the structural and mechanical fitness of ships and
other marine structures for their intended purpose. It does this through a
procedure known as classification. Classification involves the establishing
and administering of standards, known as Rules, for the design, construction,
and operational maintenance of marine vessels and structures. As a
not-for-profit and non-governmental organization, American Bureau of Shipping
acts as a self-regulating agency to the international marine industry, with
the mission of promoting the safety of life, property, and natural
environment.

The Griffon subsidiary faces strong competition from established handgun
manufacturers who have established name brand identity and a strong consumer
following. Griffon believes that the suggested retail price of $450 for the
1911 Colt 45 replica will enable it to penetrate market share since similarly
equipped hand guns are priced in the range of $600 per gun. In addition, the
Griffon 1911 Colt 45 replica will

<PAGE> 8

come with the added feature of having affixed a PT Night Sight(TM) (which is
manufactured by its sister subsidiary, Innovative Weaponry), other custom
up-grades (such as gun handle), and an optional leather holster. All of these
custom features will help differentiate the Griffon's product in the eyes of
the consumer. In addition, Griffon will benefit from its ability to cross
sell existing customers of Innovative Weaponry (who have already established
themselves as satisfied customers of the Company).

The CQB Armor subsidiary is inactive. However, any proposed body armor
business will face strong competition from a number of established body armor
companies. As with the Griffon subsidiary, CQB Armor should benefit from
cross selling to existing customers of Innovative Weaponry.

The Trade Partners subsidiary will face strong competition from a number of
established sealant companies. However, the unique properties of the sealant
make it "water friendly" giving it an advantage over sealant that tend to
clump when exposed to moisture. Trade Partners will demonstrate its sealant
at trade shows and seek to penetrate large distribution channels such as
established chain stores and outlets. Trade Partners enjoys a 10-year
exclusive on the sale of the tire sealant.

Patents, Trademarks, Licenses, Franchisees, Concessions, Royalty
----------------------------------------------------------------
Payments or Labor Contract
--------------------------

The Innovative Weaponry subsidiary has a license from the Nuclear Regulatory
Commission to import "tritium" a radioactive isotope from South Africa.
Currently, Innovative Weaponry is importing 100% of its "tritium" from
suppliers in South Africa.

The Trident subsidiary has an exclusive Los Alamos National Lab license
granted through Trade Partners to use patented and trade secret protected
magnetic technology used in the Gripper and the Sea Patch. The License
Agreement was originally valued at $75,000. Subsequently, it was
re-negotiated and the Company acquired all of the common stock of Trade
Partners in a Type B reorganization.

Trident, as sub-licensee, is obligated to pay a royalty fee of 8.0% on net
income (as defined in the License Agreement) of products sold using the
patented technology. Further, Trident is to pay an annual maintenance fee,
which was $24,000 for the third year and all subsequent years of the License
Agreement. All royalty fees paid during a specific year are to be credited to
that year's maintenance fee and the maintenance fee requirement is considered
met if the royalty payments during a License Agreement year are equal to or
exceed the required maintenance fee.

The Griffon subsidiary has an exclusive import license granted to it by
Continental Weapons International (Pty) Ltd. of South Africa who manufactures
the 1911 Colt 45 replica. The South African manufacturer charges Griffon a
flat rate on goods purchased based on volume of sales and other marketing
considerations. Prices are inclusive of all payments and there is no separate
license or royalty payment due on Griffon's purchases.

<PAGE> 9

Need for Governmental Approval of Principal Products or Services
----------------------------------------------------------------

The Innovative Weaponry subsidiary will continue to need ATF and NRC approval
to continue to do business. The Griffon subsidiary will continue to need an
import license from the ATF in order to continue its business. The grant of
these licenses from governmental agencies is subject to certain record keeping
requirements, periodic inspections, and timely reporting. If either
Innovative Weaponry or Griffon failed to comply with these requirements it is
possible that the responsible government agency could cancel, suspend, or
qualify those companies right to do business in regulated fields.

Effect of Existing or Probable Government Regulations on Business
-----------------------------------------------------------------

Currently, the existing regulations of the ATF and NRC impact upon the
Company's business with respect to the Innovative Weaponry subsidiary and the
ATF with respect to the Griffon subsidiary, which imports and distributes hand
guns from South Africa.

The Company believes that there is a push towards legislation mandating some
type of lock on firearms as a safety measure. In addition, there may be an
attempt by both the public and private sectors to hold firearm manufacturers
liable for damages caused by a criminal who while committing a crime uses a
firearm to cause harm or death. Class actions in the asbestos, breast implant
and cigarette industries are examples of this type of litigation.

Class action litigation against handgun manufacturers by Attorney Generals of
various states, municipalities and federal governmental agencies has been
initiated against well-known manufactures such as Colt Industries, Inc. As a
result, many hand gun manufacturers are being forced to defend multimillion
dollar lawsuits seeking damages for personal and property damages caused by
the illegal use of hand guns by criminals. These class actions are in the
very early stages of litigation and it is uncertain whether these actions will
go forward to trial. If these class actions are not settled their impact on
gun manufacturers could result in monetary judgments that could effectively
bankrupt these manufacturers.

We distribute handguns through our Griffon subsidiary as opposed to being a
manufacturer. To date, sales of Griffon's line of replica handguns has been
limited to less than 500 Colt 45 1911 replicas. If we were to stop selling
the Griffon line of handguns to the public because of a change in handgun
legislation or anti-handgun lobbying efforts, it would result in a loss of 14%
of total revenues with 85% of revenues derived from sales by Innovative
Weaponry.

There will be no impact on Innovative Weaponry since it does not manufacture
hand guns limiting its business to re-fitting hand guns with PT Night
Sights(TM). However, Innovative Weaponry is highly regulated in its
importation, storage, and distribution of radioactive gaseous "tritium".
Various countries, including Canada, Russia, South Africa, and Switzerland,
supply tritium.

"Tritium" is a radioactive isotope of hydrogen and is highly regulated to
prevent over-exposure which can be dangerous and even life threatening to
humans. Tritium emits low energy beta particles and

<PAGE> 10

almost no gamma rays transforming itself simultaneously into helium. This
process is called radioactive decay and proceeds at an unalterable rate for
each type of radioisotope. The time required for a radioactive isotope to
decay is half of its original strength or to lose half of its activity is
called "half-life". Tritium decays with a half-life of 12.3 years. The
conventional unit of measurement of radioactivity is the Curie (symbol Ci)
(3.7 x 10 disintegration per second). The newer, S.1., Unit is the Becquerel
(symbol Bq) (1 disintegration per second). Ionizing radiation is part of our
natural surroundings. The natural sources of radiation include: minerals in
the earth; radioactive gasses in the air; cosmic rays from outer space and the
sun. All of these sources are referred to as "natural background" radiation.
Some manufactured products, such as building materials and luminous paints, as
well as, our food and water, contain small quantities of radioactive material.
Also, for many years, X-rays have been used for medical purposes.

When a person is exposed to radiation, some of it is absorbed by the body
causing ionization of molecules of tissue. The amount of radiation that is
absorbed is measured as a "radiation dose". Two units of dose measurement are
currently in use. The conventional unit is the "rem". The other unit is
Sievert (Sv) with 1 Sv equal to 100 rems. In terms of strength, 1 rem and 1
Sv are relatively large doses of radiation. It is more usual to refer to
lilrem (abbreviated as mrem) which represents one-thousandth of a rem and a
milliSiever or mSv.

In everyday life, we are exposed to different sources of radiation as follows:

Natural Background 1 to 3.5 mSv per year
Medical X-Ray 0.002 mSv per year
Chest 0.06 mSv per year
Skull 0.20 mSv per year
Spinal Column 1.30 mSv per year
Upper GI 2.45 mSv per year
Abdomen 0.55 mSv per year
Barium Enema 4.05 mSv per year
Pelvis 0.65 mSv per year
Bone Fracture 0.01 mSv per year
Tritium Encapsulated 0.001 mSv per year or less

The Company has insurance coverage as follows: $10 million face, $1 million
radioactive liability policy, $1 million per instance, $1 million product
liability, $5 million gun, and general liability. The Company does not believe
that it is subject to environmental or personal injury liability with respect
to exposure to its "tritium" based product used in gaseous form to light
devices (even assuming the destruction of the encapsulated tritium in its
entirety). Nonetheless, the Company maintains strict safety guidelines in the
handling, storage and manufacture of its tritium products. Innovative
Weaponry has passed all of its NRC and State of Texas audits for each of its
years of operation.

<PAGE> 11

Research and Development
------------------------

The Company has no research and development group. Periodically, we make
refinements to the PT Nights on a line production basis. Refinements to the
Sea Patch and Gripper design have been the result of production line
modifications. The core technology underlying the Sea Patch and Gripper is
licensed from the Los Alamos National Lab who developed the patented magnetic
technology.

Number of Employees
-------------------

The Company currently employs 19 full time, 2 part time employees, and 2
outside consultants. We train our employees in house and are not dependent on
recruitment programs. All of our hourly employees are at will with hourly
wages based upon level of experience and the length of employment.

Risk Factors
-------------

We have been in operations for the past five years, but have failed to achieve
profitability in our subsidiaries on a consolidated basis. This has
necessitated that sale of additional shares by the Company in order to raise
working capital. Further, the market for our shares has been limited
necessitating the sale of large blocks of shares at discounted prices. The
Company's liquidity has been adversely affected by continued expenditures on
expanding our subsidiaries businesses during times when they experience lack
of profitability.

Limited Operating History.
-------------------------

We have a limited operating history of five years. The following table
reports revenue from each subsidiary from 1995 through December 31, 1999.

Revenues of Wholly Owned Subsidiaries
And Percentage Attributable to Consolidated Revenues
For the Five Year Period Beginning 1995 through
December 31, 1999

1995/% 1996/% 1997/% 1998/% 1999/%
<S> <C> <C> <C> <C> <C>
Innovative $599,605/100% $247,735/100% $712,471/100% $1,673,443/98% $754,734/85%
Weaponry

Trident n/a n/a n/a $ 27,570/2% $ 5,500/1%

Griffon n/a n/a n/a n/a $131,695/14%

Trade
Partners n/a n/a n/a n/a $ 0

CQB Armor n/a n/a n/a n/a $ 0

Total $599,605 $247,735 $712,471 $1,701,013 $882,929

</TABLE>
<PAGE> 12

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview
--------

Management has focused on increasing sales of the PT Night Sights(TM) to law
enforcement and the military. Direct sales marketing has been headed-up by
Kenneth E. Wilson who as Chairman, President and CEO deals directly with
police departments across the country.

Innovative Weaponry attended trade shows including the Shot Show in Atlanta
(January 1999); International IWA in Nuremberg, Germany (March 1999); Trexpo
West (Los Angeles June 1999); Trexpo East (Washington, D.C. June 1999);
International Chief's of Police (North Carolina October 1999); and the
National Wholesalers Buying Show (October 1999).

Trident has established a representative office in Denham Springs, LA that is
in close proximity to the gulf port facilities surrounding New Orleans, LA.
The Trident subsidiary introduced its product lines at a maritime and salvage
trade show in London, England in the Fall of 1998. Trident attended the
Maritime Ship Repair and Emergency Response Seminar (Washington, DC August
1999); the HAZMAT Show (St. Louis, MO April 2000); the Offshore Technology
Conference (Houston, TX May 2000).

The Griffon subsidiary has imported to date less than 700 1911 Colt 45
replicas with an order of 1,000 additional replicas subject to importation
upon securing financing.

Trade Partners attended the Inter Bike trade show in Las Vegas, NV during
September 1999.

The CQB Armor subsidiary is inactive.

Government Regulation and Legal Uncertainties.
----------------------------------------------

We are regulated by the SEC, federal and state securities laws. Finally, we
are regulated by any rules and regulations pertinent to companies listed on
the over-the-counter bulletin board and pink sheets.

ATF, NRC, OSHA and Texas Department of Health
---------------------------------------------

The Company is currently regulated by three agencies of the United States and
the Department of Health of the State of Texas in connection with its
activities involving firearms and "tritium", a radioactive isotope gas. These
agencies are the Bureau of Alcohol, Tobacco and Firearms (the "ATF"); the
Nuclear Regulatory Commission (the "NRC"); the Occupational Health and Safety
Administration ("OSHA") and the State of Texas.

The ATF regulates the import and sale of firearms by Innovative Weaponry and
Griffon. The NRC regulates the importation of "tritium" and its use in the
manufacture of PT Night Sights(TM). Each of these agencies has respectively
granted Innovative Weaponry and Griffon all necessary permits, licenses and/or
grants of authority to transact business. Substantial rules and regulations
control the manner in which Innovative Weaponry and Griffon transacts business
in firearms

<PAGE> 13

and Innovative Weaponry uses "tritium". Innovative Weaponry and Griffon are
required to maintain required books and records in connection with their
firearms business and are subject to onsite inspection by these agencies
and/or the Department of Justice, at anytime. In addition, the Company
maintains its own manufacturing facility which is subject to certain safety
requirements imposed upon it by NRC, OSHA and the State of Texas Department of
Health. Innovative Weaponry and Griffon share the Company's manufacturing
facility.

Year 2000
---------

The Company experienced no problems related to Year 2000 or Y2K computer
remediation issues.

Results of Operations
---------------------

The following table sets forth selected consolidated statements of
operating data as a percentage of total revenues:

Year Ended Year Ended 3 Mos. Ended 3 Mos. Ended
December 31, December 31, March 31, March 31,
1998 1999 1999 2000
------------- ------------- ------------ -------------
AMOUNT
PERCENTAGE OF
REVENUES

Revenues $ 1,701,013 $ 889,327 $ 222,660 $ 274,393
100% 100% 100% 100%

Cost of Revenues 469,910 547,013 185,307 253,930
28% 62% 63% 72%

Gross Profit 1,231,103 342,314 37,2633 20,463
72% 38% 17% 7%

Selling/General and
Administrative 752,769 1,094,713 188,542 476,067
44% 123% 84% 177%

Income (Loss) from
Operations 113,869 (881,929) (182,280) (488,601)
7% (99)% (82)% (178)%

During 1999, we reported revenues of $889,327 in comparison to $1,701,013 in
1998. The decrease of revenues in 1999 represents a decline of 47% from 1998.
This difference was caused by a decrease in the sale of Night Sights in 1999
over 1998. In 1998, we sold 31,103 Night Sights to Continental in South
Africa, which was an account that we had been working on for over 6 months.
In 1999, we did not sell any additional Night Sights to Continental and we
were not able to complete another large sale with another distributor or
dealer.

<PAGE> 14

In 1999, we made a number of internal changes that resulted in increasing Cost
of Revenues from 1998. In 1998, our Cost of Revenues was $469,010, which
increased by 16% in 1999 to $547,013. This was due to expansion of our
manufacturing personnel during 1999 as we positioned ourselves for future
growth.

We had significant increases in Selling, General and Administrative Expense
from 1998 to 1999. We greatly expanded our business capacity resulting in the
added expenses in these categories in 1999 over 1998. No new expense items
were incurred in 1999 over 1998.

In June 1999, we determined that we needed to expand our sales of Night
Sights. We determined that in order to expand sales that we needed to sell
more Night Sights and at a lower price to our distributors. Thus, we expanded
our line production facility at Innovative Weaponry to produce more Night
Sights. Next, we finalized a new master distributor model that featured a
highly competitive pricing structure for Night Sights at the distributor
level. Further, we decided that our subsidiaries should account for a greater
percentage of revenues. In particular, we determined that our Trident
subsidiary needed to relocate in an area more proximate to the maritime and
shipping industries. This expansion in 1999 necessitated an increase in
expenses at both the administrative and selling levels.

During the first quarter of 2000, we had revenues of $274,393 as opposed to
revenues of $222,660 during the first quarter of 1999. This was an increase
of 23% and was the result of increased marketing and promotional activities.

Cost of Revenues was $253,930 in the first quarter of 2000 as contrasted with
$185,397 for the first quarter of 1999, an increase of 36%. This is the
result of additional manufacturing personnel and increasing costs of
production.

The significant increase in Selling, General and Administrative Expenses for
the three months ended March 31, 2000 over comparable period of the previous
year increased to $476,067 during the first quarter of 2000 an increase of
152% over the first quarter of 1999's expense of $188,642. This is the result
of the expansion in personnel, equipment, promotional and other costs which
were started in 1999 as we positioned ourselves for future sales.

We feel that revenues are trending upward due to steadily increasing sales of
Night sights and that expenses have peaked and will remain constant or
decrease as we reach economies of scale in production.

Liquidity.
----------

The Company is dependent on cash on hand, revenue from the sales of PT Night
Sights, and its ability to raise cash through the sale of its shares. At
present, the Company needs cash for monthly operating expenses in excess of
its historic sales revenues. The Company will continue to require additional
capital funding for a significant period of time until sales increase. The
Company will finance further growth

<PAGE> 15

through both debt and equity offerings, which will further dilute current
shareholders.

Cash Flows from operations decreased $847,734 during 1999 decreased due to the
loss from operations of $881,929, an increase in inventory of $190,149 and a
decrease in accounts payable of $229,173. Financing activities, primarily the
sale of common stock, provided $948,427. This gave net cash gain of $111,814
for the year 1999. The Company has ordered 1000 Griffon hand guns from
Continental Weapons in South Africa. This will require $130,000 in additional
financing during fiscal 2000.

ITEM 3. DESCRIPTION OF PROPERTY.

Fort Worth, TX.
---------------

The Company leases 4,000 square feet consisting of executive, manufacturing,
and storage space at the same address of its principal executive office at a
monthly lease charge of $2,400. As lessee, the Company has made substantial
leasehold improvements to the space. The space is divided into an executive
office suite; mail room; manufacturing facility; tritium storage vault;
tritium curing and assembly line; raw materials storage; and employee
cafeteria. The cost of these improvements is subject to depreciation expense
adjustments over the lease term. At the termination of the lease on December
31, 2000 (subject to renewal), the Company will not be able to recover the
cost of these improvements. In addition, the Company owns certain
manufacturing equipment (drill presses, grinders, cutters and computer
lathes), raw materials for the manufacture of product, product inventory,
general business equipment, furniture, and related office supplies.

Santa Ana, CA.
-------------

The Company leases 3,000 square feet consisting of manufacturing and storage
space at 3040 Halladay, Unit A, Santa Ana, CA 92705. The lease is for five
years at $0.63 per square foot with monthly rent of $1,890 per month. The
Santa Ana facility produces PT Night Sights and tritium enhanced fiber optic
sights. The facility is equipped with two Bridgeport computer numerical
control milling machines; one Bridgeport milling machine; one band saw; one
parts grinder; one parts tumbler; and parts inventory. Currently, the
facility employs two machinists with employment capacity for six. The
facility will operate on three shifts of eight hours each.

Denham Springs, LA.
------------------

The Company leases 1,000 square feet consisting of executive office space and
storage space at 1810 South Range Avenue, Suite 3, Denham Springs, LA 70726.
The lease is for six months at $600.00 per month. The office is equipped with
Sea Patch demonstration equipment including a 5"x15 Sea Patch, computer,
Dillon ED 2000 Dynometer to measure pull force, a fluid pressure displacement
pump to measure back pressure, and a Pace American single axle enclosed
trailer for on site demonstrations of the Sea Patch.

<PAGE> 16

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth, as of March 27, 2000, the beneficial
ownership of our outstanding common stock of; (I) each person or group known
by us to own beneficially more than 5% of our outstanding common stock, (ii)
each of our executive officers, (iii) each of our director's and (iv) all
executive officers and directors as a group. Beneficial ownership is
determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Except as indicated by
footnote, the persons named in the table below have sole voting power and
investment power with respect to all shares of common stock shown as
beneficially owned by them. The percentage of beneficial ownership is based
on 79,587,253 shares of common stock outstanding as of March 27, 2000 on a
fully diluted basis.

_____________________________________________________________________________

(1) (2) (3) (4)
Title of Class Name and Amount and Percentage of Class
Address of Nature of
Beneficial Beneficial
Owner Owner
_____________________________________________________________________________

Common Kenneth E. Wilson & 19,601,000 25.8% (note 3)
Patricia Wilson

Common Common 21st Century
Technologies 9,000,000 11.8%
Funding LP

Common Executive Officers 21,201,000 27%
As Group

Footnotes:

(1) The Company has authorized one class of common voting shares.

(2) The addresses of all executive officers are at the Company's headquarters,
2513 East Loop, 820 North, Ft. Worth, TX 76118. The address of 21st Century
Technologies Funding Limited Partnership, a Virginia Limited Partnership (21st
Century Technologies Funding LLC, a Virginia Limited Liability Company,
General Partner) is at 281 Independent Blvd. #205, Virginia Beach VA, 23462.

(3) Mr. Wilson has the right to acquire 19,000,000 shares pursuant to his past
employment and consulting agreements with the Company. The shares have not
been issued to him because of the income tax consequences and the Company's
need for corporate funding principally through the issuance of its shares.
The shares issued to Patricia G. Wilson were in consideration of her
employment with the Company. As husband and wife, the shares owned by Pat
Wilson and those obligated to Mr. Wilson are for SEC reporting purposes
aggregated subject to disposition under Texas community property laws.

On March 30, 1998, the Company agreed to sell 9,000,000 shares of unregistered
common stock at $0.08 per share in a Private Placement Offering Memorandum
prepared by 21st Century Technologies Funding, LLC

<PAGE> 17

who acted as the General Partner. The Company and the General Partner are not
affiliated. After holding the shares for the one-year period required under
Rule 144, the Partnership subsequently sold a total of 6,000,000 shares in the
open market at an average sale price of $0.12 per share.

In November 1999, the Company granted 21st Century Technology Funding LP and
its General Partner (whose sole principal is Allen Drake), 281 Independence
Blvd., Suite 205, Virginia Beach, VA 23462 options for a total of 6,000,000
shares at an exercise price of $0.10 per share. The options have been
exercised in full by 21st Century Technology Funding LP I with payment of
$600,000 receipted by the Company in March 2000.

The Executive Officers as a group acquired their respective shares in
consideration of their employment during the period 1995 through December 31,
1999. Options covering 600,000 shares were granted in July 1999 to Douglas N.
Spring and Burren Palmer respectively in connection with their employment with
Trident. These options were exercised in February 2000.

(4) The percentage of class has been calculated on a fully diluted basis of
79,587,253 shares.

Security Ownership of Management
-------------------------------

The following table sets forth the share holdings of the Company's directors
and executive officers as of the date hereof:

_____________________________________________________________________
(1) (2) (3) (4)

Title of Class Name and Amount and Percentage of Class
Address of Nature of
Beneficial Beneficial
Owner Owner
_______________________________________________________________________

Common Kenneth E. Wilson 19,601,000 25.8%
And Patricia Wilson

Common Fred W. Rausch, Jr. 400,000 .5%
Director

Common David Gregor 500,000 .6%
President of
Innovative Weaponry
and Director

Common Douglas N. Spring 700,000 .9%
President of Trident
and Director

All Executive 21,201,000 27%
Officers As Group

<PAGE> 18

Notes:

(1) The Company has authorized one class of common voting shares.

(2) The addresses of all executive officers are at the Company's headquarters,
2513 East Loop, 820 North, Ft. Worth, TX 76118.

The Executive Officers as a group acquired their respective shares in
consideration of their employment during the period 1995 through March 27,
2000.

Mr. Rausch has been a Director since the Company's inception. His shares were
earned in lieu of compensation.

Mr. Gregor was elected to serve as a Director in February 2000. He has
previously served as a Director during the years 1995 through 1998 and was
past President of Innovative Weaponry.

Mr. Spring was employed by the Company as President of its Trident subsidiary
effective July 28, 1999. At the time, Mr. Spring purchased 100,000 shares of
the Company at $0.10 per share. Mr. Spring is paid an annual salary of
$65,000 and is to be paid a three per cent sales commission on goods sold by
him for Trident (1.5% paid in cash and 1.5% paid in stock). In addition, at
the time of Mr. Spring's employment, the Company granted him options for the
purchase of 600,000 common shares at $0.10 per share. These options were
exercised by Mr. Spring in March 2000. Options covering 600,000 shares were
granted in July 1999 to Douglas N. Spring and Burren Palmer respectively in
connection with their employment with Trident. These options were exercised
in February 2000.

(4) The percentage of class has been calculated on a fully diluted basis of
79,587,253 shares as of March 27, 2000.

Changes In Control
------------------

There are no present arrangements or pledges of the Company's securities which
may result in a change of control of the Company.

ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.

Identification of Directors and Executive Officers.
--------------------------------------------------

Our directors, executive officers and key employees and their respective ages
and positions are set forth below. Biographical

<PAGE> 19

information for each of those persons is also presented below. Our executive
officers are appointed by our Board of Directors and serve at its discretion.

Directors and Officers

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

Kenneth E. Wilson 58 Chief Executive Officer, President
and Chairman of the Board

Patricia G. Wilson 44 Director

David Gregor 42 Secretary/Treasurer and Director

Douglas Spring 30 Director

Fred W. Rausch, Jr. 76 Director

Business Experience.
-------------------

Kenneth E. Wilson, 58, is the Chairman of the Board of Directors, Chief
Executive Officer and President of the Company. Mr. Wilson has acted as a
consultant to Innovative Weaponry while it was in bankruptcy in New Mexico and
was instrumental in formulating a plan of reorganization. Since 1995, Mr.
Wilson has acted as a consultant of the Company and its various subsidiaries
until he was elected Chairman in 1998. Prior to joining the Company, Mr.
Wilson was experienced in mergers and acquisitions, corporate finance, and
investment banking. During the five years preceding his affiliation with the
Company, Mr. Wilson provided estate planning, living trust, annuities and
other insurance programs. Mr. Wilson has been instrumental in guiding the
Company through its early development and acquisition of key licenses and
products. In addition, Mr. Wilson has been the chief sales person on behalf
of the Company negotiating contracts and product delivery specifications with
customers. Mr. Wilson has traveled extensively for the Company in the U.S.,
England, Germany and South Africa.

Patricia G. Wilson, 42, is President of Trade Partners and Innovative
Weaponry's Safety Officer for the Nuclear Regulatory Commission in Washington,
D.C. A Texas native, Mrs. Wilson is a graduate of the University of Texas
where she received her B.A. with a double major in psychology and
biochemistry. Mrs. Wilson has over 18 years business experience before
joining the Company in 1994. During 1994 through 1999, Mrs. Wilson served as
the Company's Chairman and President.

David Gregor, 46, is President of Innovative Weaponry Weaponry. Mr. Gregor is
a graduate of Temple University. From 1984 to 1986, Mr. Gregor was a member
of the U.S. Navy Seal Team (Number 6). Mr. Gregor received specialized
training at the Pennsylvania gunsmith School; Remington Armory School; Smith
and Wesson Armory School; Sig Sauer Armorer School; Heckler and Koch Armory
School (Germany); U.S. Marine Corps Marksmanship Unit (Quantico, VA); Depart
of the Army Armory Training; Certified Armory Training Instructor for the
State of New Mexico; and attended cross-training at the Federal Bureau of
Investigation Academy (Quantico, VA). Before joining the Company in 1994, Mr.
Gregor worked as the chief gunsmith with the U.S. Department

<PAGE> 20

of Energy's Central Training Academy in Albuquerque, NM and A&P Arms, Virginia
Beach, VA.

Douglas N. Spring, 30, is the President of Trident's Sea Patch Sales Division
in Denham Springs, LA. Mr. Spring attended Southeastern Louisiana University
during 1988-1991. Mr. Spring was employed for eight years by Exxon Company
USA in various capacities from 1991-1999. While employed at Exxon, Mr. Spring
became experienced in the handling, inspection and maintenance of gasoline,
diesel and jet fuels. As a member of the Primary Fire Squad at Exxon, Mr.
Spring responded to emergencies ranging from gas leaks to major fires and fuel
spills.

From 1994-1997, Mr. Spring owned and operated Wolf Creek Outdoors a
manufacturer and retailer of hunting products. From 1997-1999, Mr. Spring was
a sales associate at Highlander Sports Inc. where he sold sporting products to
major retailers and distributors. From 1995-1998, Mr. Spring owned and
operated Confederate Coatings and Arma Coatings South which provided
spray-coating materials for truck beds, roofs, conveyor operators, and grain
storage bins. During this period of time, Mr. Spring distributed coating
products to dealers in the Southeastern United States, trained and certified
new dealers as technicians/sprayers in the polyurethane business.

Fred W. Rausch, Jr., 76, earned his J.D. Degree from Washburn University Law
School. Mr. Rausch has over 30 years experience in various legal tenures
including 2 years Assistant Revisor of Kansas Statutes; 7 years Assistant
Attorney General, Kansas; 8 years Workers Compensation Fund Director, Kansas;
10 years General Counsel, Kansas Association of School Boards, and 30 years,
Municipal Counsel, various Kansas municipalities. Mr. Rausch is admitted to
practice law before the U.S. Supreme Court; U.S. Military Court of Appeals;
U.S. Court of Appeals for the 10th Circuit; U.S. District Court Kansas; Kansas
Supreme Court; and all other Kansas courts. Mr. Rausch is a U.S. Army Reserve
Colonel having served duty in World War II and Korea.

Significant Employees.
----------------------

The Company currently has significant employees who are not executive
officers. These employees handle "tritium" and perform various precision
machine functions whose quality could be diminished and/or interrupted if they
terminated their employment with the Company. As business develops, it may be
required to engage the services of additional technical employees to diminish
this possibility.

Family Relationships.
---------------------

Kenneth E. Wilson and Patricia G. Wilson are related by marriage. Further,
Josh Edward Wilson, who is the son of Kenneth and Patricia Wilson, is Director
of Marketing for the Company and Executive Vice President of Innovative
Weaponry.

<PAGE> 21

ITEM 6. EXECUTIVE COMPENSATION.

The following table sets forth the aggregate compensation paid by the Company
for services rendered during the periods indicated.

Summary Compensation Table

Fiscal
Name and Principal Position Year(s) $Salary Bonus

Kenneth E. Wilson, 1999-00 $120,000* $0
Chairman, President,
CEO and President
Innovative Weaponry

Patricia G. Wilson 1997-00 $65,000 $0
President Trade
Partners, Nuclear Safety
Officer and Director

David Gregor 1997-00 $70,000 $0
Secretary-Treasurer,
Master Gunsmith and
Director

Douglas N. Spring 1999-00 $60,000 $0
President Trident
And Director

(1) For two of the last three fiscal years, Mr. Wilson was paid no
salary. In January 1999, the Company agreed to pay Mr. Wilson $120,000 per
annum with payments of $10,000 per month. However, the Company paid Mr.
Wilson only $60,000 in 1999 because it did not have sufficient revenue to pay
him in full. The 1999 balance due Mr. Wilson was waived by him. Since
January 2000, the Company has had sufficient revenues paying Mr. Wilson
$10,000 per month and is current through May 2000.

(2) Mrs. Wilson's terms as President of the Company expired in March
2000. Previously, Mrs. Wilson served as the Company's President since 1995.
Mrs. Wilson is currently employed by the Company as both the President of
Trade Partners and the Nuclear Regulatory Safety Officer for Innovative
Weaponry.

(3) Mr. Gregor assumed the responsibilities of Secretary-Treasurer in
March 2000 following the resignation of Ms. Bartley (who performed those
duties since 1998 at a per annum salary of $45,000). In addition, Mr. Gregor
is the master gunsmith in charge of design, fabrication, and quality control
works with the Innovative Weaponry and Griffon subsidiaries. The salary of
Mr. Gregor is $70,000 per annum.

(5) Douglas N. Spring has served as President of Trident since June 1999.
Mr. Spring was elected to the Board of Directors in March 2000.

<PAGE> 22

Compensation of Directors
-------------------------

We do not have any standard arrangement for compensation of our directors for
any services provided as director, including services for committee
participation or for special assignments.

Employment Contracts and Termination of Employment and
------------------------------------------------------
Change-in-Control Arrangements through 1999.
---------------------------------------------

To date, there are no employment contracts, compensatory plans or
arrangements, including payments to be received from the Company, with respect
to any director or executive officer of the Company which would in any way
result in payments to any such person because of his or her resignation,
retirement or other termination of employment with the Company or its
subsidiaries, any change in control of the Company, or a change in the
person's responsibilities following a change of control of the Company.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The only transactions between members of management, nominees to become
directors or executive officers, 5% stockholders, or promoters or persons who
may be deemed to be parents of the Company are:

If 19,000,000 shares of common stock are to be issued versus settlement of
cash payment to Kenneth E. Wilson.

Under a consulting agreement we were required to issue 1,000,000 shares of
Company common stock to Mr. Wilson and to compensate him at the rate of
$10,000.00 per month. We agreed that if the Company was unable to pay Mr.
Wilson in cash, the Company would issue Mr. Wilson its common stock in amount
equal to $0.02 per share (which was the share price at the time the consulting
contract was entered into between the Company and Mr. Wilson). The Company
paid Mr. Wilson through December of 1994. In January of 1995, the Company
and Mr. Wilson re-negotiated the agreement to remunerate him solely in stock
of the Company. This was necessary because of the Company's cash flow
position and inability to pay Mr. Wilson the previously agreed upon fee under
the original consulting agreement. The agreement required Mr. Wilson to
perform services for the Company in exchange for 500,000 shares of Company
common stock per month. As of the expiration date of the agreement, January
5, 1998, Mr. Wilson earned a total of 19,000,000 shares of the Company's
common stock. The agreement required that the stock not be issued until after
the end of the initial term of the agreement, which was three years. To date,
no shares have been issued to Mr. Wilson at his request because of firstly,
the income tax consequences to him, and secondly, because the on going
corporate financial needs of the Company required the issuance of the
remaining treasury shares. Before any shares are issued to Mr. Wilson, the
Company will provide in advance full public disclosure to its shareholders.

<PAGE> 23

Item 8. DESCRIPTION OF SECURITIES

Common Stock
-------------

We are authorized to issue 200,000,000 shares of common stock, par value
$.001, of which 50,083,763 shares were issued and 43,905,850 outstanding as of
March 27, 2000 and on a fully diluted basis 78,873,763 shares. All shares of
common stock have equal rights and privileges with respect to voting,
liquidation and dividend rights. Each share of common stock entitles the
holder thereof (i) to one non-cumulative vote for each share held of record of
all matters submitted to a vote of the stockholders, (ii) to participate
equally and to receive any and all such dividends as may be declared by the
Board of Directors out of funds legally available; and (iii) to participate
pro rata in any distribution of assets available for distribution upon our
liquidation. Our stockholders have no preemptive rights to acquire additional
shares of common stock or any other securities. All outstanding shares of
common stock are fully paid and non-assessable.

Preferred Stock
----------------

We have not authorized or issued any preferred stock.

Options and Warrants
--------------------

On June 12, 1997, we granted Princeton Research, Inc., 3887 Pacific Street,
Las Vegas, NV 89121 staggered options for a total of 3,000,000 shares in
consideration of investor relations, investment banking, corporate finance,
and other consulting services. The options have been extended through
December 31, 2002, as follows: options for 1,000,000 shares at $0.50 per
share; options for 1,000,000 shares at $1.25 per share; and options for
1,000,000 shares at $1.50 per share. Upon exercise of the options, the
Company has agreed to file a S-8 registration statement with the SEC to
register the shares.

In November 1999, we granted 21st Century Technology Funding LP I and its
General Partner (whose sole principal is Allen Drake), 281 Independence Blvd.,
Suite 205, Virginia Beach, VA 23462 options for a total of 6,000,000 shares at
an exercise price of $0.10 per share. As further consideration, 21st Century
Technology Funding LP I agreed to transfer back to the Company's treasury
3,000,000 shares of the original 9,000,000 shares purchased by it in 1998.
The options have been exercised in full and payment of $600,000 has been made
to the Company by the General Partner's principal effective March 2000.

Part II

ITEM 1. MARKET PRICE FOR COMMON EQUITY AND DIVIDENDS OF
21st CENTURY TECHNOLOGIES AND OTHER SHAREHOLDER MATTERS

Our common stock is traded over-the-counter and quoted on the OTC NASD
Electronic Bulletin Board under the symbol "TEXN". The following table
represents the range of the high and low bid prices of our stock as reported
by the Nasdaq Trading and Market Services for each fiscal quarter for the last
two fiscal years ending December 31, 1999. Such quotations represent prices
between dealers and may not include retail

<PAGE> 24

markups, markdowns, or commissions and may not necessarily represent actual
transactions.

Year Quarter High Low
---- ------- ---- ---

1998 First Quarter .31 .16
Second Quarter .48 .165
Third Quarter .46 .18
Fourth Quarter .23 .11

1999 First Quarter .24 .11
Second Quarter .17 .10
Third Quarter .165 .08
Fourth Quarter .19 .087

2000 First Quarter 5.343 .14

Our market has traded sporadically and is often thinly traded with large
changes in volume of shares traded on any particular day. Shareholders should
consider the possibility of the loss of the entire value of their shares. In
the opinion of Management, the increase in our share price in the First
Quarter of 2000 was due to American Bureau of Shipping certification of the
Sea Patch with the decline in share price due to de-listing to the pink
sheets.

As of March 27, 2000, we had approximately 792 stockholders of record.
Management controls 21,201,000 shares of our outstanding shares (including the
19,000,000 shares due Mr. Wilson).

Dividends
---------

We have not declared dividends on our common stock and do not anticipate
paying dividends on our common stock in the foreseeable future.

Stock Splits
------------

When we merged with First National Holdings Corporation in 1995, we authorized
a 250 to 1 reverse stock split resulting in 50,000 shares being authorized and
issued. We then increased our share authorization to 200,000,000 without any
further stock splits.

ITEM 2: LEGAL PROCEEDINGS

We are not involved in any material pending legal proceedings, other than
routine litigation incidental to our business, to which we are a party or of
which any of our property is subject.

During 1998, the Company entered into a settlement agreement settling a
certain action styled Paul A. McCullough vs. Innovative Weaponry Weaponry,
Inc., at Law No. 96-133 in the Circuit Court for Arlington County, Virginia,
which consisted, in part, of a Confessed Judgment Promissory Note obligating
Innovative Weaponry to pay McCullough in

<PAGE> 25

monthly installments of $1647.67. The balance owing on said note was settled
by issuing John E. McCullough, Sr., Two Hundred Twelve Thousand Four Hundred
(212.400) shares of common stock, without restrictive legend, of 21st Century
Technologies, Inc.

The Company settled a lawsuit (involving a contract dispute) styled Morgan
Casner Associates, Inc. vs. Innovative Weaponry, et al, Cause No. 96CA006325,
in the Civil Division, Superior Court of the District of Columbia. The
Company paid $150,000 and received a release of Judgment, which had been
granted in the suit.

The Company entered into a settlement agreement settling a certain action
under United States District Court for the Northern District of Oklahoma Case
No. 97-CV-004-H. Cunningham will return 71,000 shares of the Company's common
stock after such time as the Company pays $39,000.00 plus interest. Said
payment due and payable on May 12, 1998. The Company paid this settlement on
May 8, 1998 and said shares were returned to the treasury.

Dr. Frederick C. Lester loaned IWI-New Mexico $80,000 prior to the Bankruptcy.
Under the Plan of Reorganization, he was awarded 80,000 shares in the
reorganized Company. He eventually filed suit and a settlement agreement was
reached after the current balance sheet date which awarded him $10,000 per
month for twelve months. The Company made one $10,000 payment, however, the
stock price increased and Dr. Lester returned the payment and sold his shares.
The Company's attorneys feel that there is no further liability in this case.

Further, to the knowledge of management, no director or executive officer is
party to any action in which any has an interest adverse to the Company.

ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

We have had no change in, or disagreements with, our principal independent
accountant during our last two fiscal years.

ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES

The following discussion describes all securities we have sold within the past
three fiscal years without registration:

1997
----

Effective January 1, 1997, the Company had 13,311,000 shares of common stock
issued and outstanding. During the calendar year ending December 31, 1997,
the Company issued an additional 5,515,000 shares of common stock through a
self-underwriting under Rule 504 of Regulation D of the Securities Act of
1933. The shares were sold for cash with gross proceeds of less than
$1,000,000. No underwriting discounts were paid directly or indirectly by the
Company in connection with the sales of any of its shares.

<PAGE> 26

1997

Number $ Per
Name Shares(1) Share (2) Date(s)
------------- ----------- --------- ---------
Austtell J/T 2,500 .04 12/18/97
K. Coffey 40,000 .04 1/29/97
T. Dogson 62,500 .04 3/13/97
Glasgow Trustee 30,000 .04 1/20/97
J. Groves 200,000 .04 1/20/97
Groves Partners 200,000 .04 1/20/97
D. Ishibashi 75,000 .04 1/20/97
K. Jackson 75,000 .04 9/8/97
McDaniel Motors 25,000 .04 1/20/97
R. Meyer 700,000 .04 5/7/97
P. McCarrick 200,000 .04 8/6/97
W. Mowery 300,000 .04 4/9/97
M. Pitel 100,000 .04 3/13/97
Princeton 800,000 .04 8/6/97
Research
Wallstreet
Trading Group 1,000,000 .04 9/8/97
1,000,000 .04 9/8/97
R. Wilpitz 82,500 .04 1/20/97
A.A. Wilson 2,500 .04 12/18/97
A.H.Wilson J/T 2,500 .04 12/18/97
T. Wilson J/T 2,500 .04 12/18/97

1998
----
Effective January 1, 1998, the Company had 18,825,863 shares issued and
outstanding. During the calendar year ending December 31, 1998, the Company
issued an additional 14,461,967 shares in a self-underwriting under Rule 504
of Regulation D of the Securities Act of 1933. The shares were sold for cash
based upon market price for its common shares with gross proceeds of less than
$1,000,000. No underwriting discounts were paid directly or indirectly by the
Company in connection with the sales of any of its shares.

1998

Number $ Per
Name Shares(1) Share (2) Date(s)
------ ---------- --------- ---------
J. Barot 62,500 .08 3/12/98
125,000 .08 3/19/98
K. Barot 125,000 .08 3/9/98
H. Barot 62,500 .08 2/25/98
M. Barot 250,000 .08 2/25/98 and
3/19/98
3,000 .08 7/17/98
S. Barot 125,000 .08 6/22/98

<PAGE> 27

W. Bell 30,000 .08 1/20/98
C. Bell 10,000 .08 1/20/98
D. Byers 81,500 .08 3/10/98
C. Dacumos 3,109,500 .08 4/2/98, 4/3/98
4/15/98, 5/1/98
6/26/98 and
7/17/98
E. Dahm 27,000 .08 7/17/98 and
9/29/98
K. Dahm 25,000 .08 9/10/98
T. Dodson 62,500 .08 1/16/98
A. Drake 4,000 .08 7/17/98
B. Drake 12,500 .08 7/16/98
K. Drake 2,000 .08 7/17/98
D. Everton 100,000 .08 7/16/98
J. Gavitt 62,500 .08 1/16/98
G. Glasgow 17,550 .08 1/20/98
D. Goins 12,500 .08 7/16/98
R. Green 10,000 .08 1/20/98
100,000 .08 3/11/98
D. Gregor 100,000 .08 3/11/98
P. Hertzman 50,000 .08 1/20/98
G. Hill 10,000 .08 1/20/98
G. Hughes 87,500 .08 1/20/98
K. Jackson 10,000 .08 1/20/98
W. Johnson 10,000 .08 1/20/98
J. Lane 12,500 .08 7/16/98
S. Loftis 10,000 .08 1/20/98
A. Lopez Jr. 5,000 .25 7/16/98
E. Lopez 5,000 .08 8/7/98
J. Macalik 200,000 * 6/22/98
S. Master 62,500 .08 2/24/98
P. Mattson 12,500 .08 7/16/98
V. Mattson 5,000 .08 7/16/98
S. McCullough 200,000 .08 5/6/98
S. Painter 62,500 .08 7/17/98
O.C. Perkins 30,000 .08 1/20/98
E. Picardo 2,000 .08 7/24/98
J. Pitts 8,000 .08 8/7/98
L. Pitts 112,500 .08 3/13/98 and
8/7/98
13,200 .25 7/16/98
M. Roland 2,000 .08 7/17/98
I. Salem 12,500 .08 3/19/98
P. Selevan 62,500 .08 7/16/98
M. Sheppard 17,550 .08 1/20/98
M. Toney 2,000 .08 7/17/98
D. Thompson 5,000 .08 1/20/98
S. Vannocker 32,000 .08 7/16/98 and
7/17/98
J. Wallace 17,500 .20 8/17/98 TST
M. Webster 33,333 .15 3/25/98
N. Westbrook 5,000 .08 1/20/98

<PAGE> 28

Technologies 87,500 .08 1/27/98
Acquisition
L.P.

21st Century 9,000,000 .08 3/23/98
Technologies
Funding L.P.

Alpha Technologies 1,000,000 .08 7/17/98 and
L.P. 7/24/98

The natural limited partners and the number of units that they
purchased are as follows:

Limited Partners Unit(s)

Shayman Barot 15
Ferdinand and Maria Bayona 10
Robert Bell 4
Denton Byers 15
Lynn Pape Carrol 2
Violah Clark 5
Sandra Cullon 16
Arkumkumar Dewani 5
Corazon Denoste 25
Matthew Diezel 25
Billie Earnest 2
Peggy Economidis 5
Jack Ferebee 3
Denise Kelly 2
Michael Kolodziej 2
Michael Longman 12
Kalpesh Master 10
Melvin and Susan Mathias 2
Russel Moulton 2
Barbara Ogles 2
Elsie Picardo 10
Ginger Power 2
Charene Sellers 5
Thomas Sellers, Jr. 5
Linda Carol Sellers 101
Shantilal N. Shah 10
State Manufacturing of VA 4
Rebecca Van Gosen 2
Elizabeth Wetherington 5
Rocky Allis and Denise Hemilright 5
Romeo and Fe Apilado 10
Gloria and Henry Armstrong 4
Barbara Arthur 2
Anne Baker 5
Rupa Barot 2
S. Barot 7
Felina and Melanie Bayona 12
Ferdinand and Marie Bayona 35
Gerald Brutsman 5
Joseph Burns 5
Aurea Busuego 5

<PAGE> 29

Daniel and Dorisann Cammeron 10
Robert and Lorraine Carr 5
Conception Castro 10
Andres and Violah Celi 10
Andres Celi 5
Violah Celi 7
Barry and Sandra Cornell 10
Wm. and Delia Cumpit 9
Cristeta Dacumos 10
Cristeta Dacumos IRA 11
Elaine Dacumos 6
Virgilio Dacumos 2
Kenneth Dahm 3
Crisostomo and Corazon Denosta 5
Corazon Denosta 7
Arunkamar and Jayshree Dewani 30
Harry Diezel 11
Matthew Diezel 3
Virginia Diezel 4
Allen Drake 24
Daniel Drake 10
Kevin Drake 5
Mary Ruth Drake 10
Charles Driscoll 10
Lyn Fairchild 10
Ralph Ferebee 10
Dennis Friends 10
Donald Gates 3
Jayesh Jhaveri 3
Carmelita Juachon 2
Mervyn Lee Judd 14
Jayne Jungen 2
Alfredo and Cynthia Lasmarias 5
Laeser Lucena 10
Leon Lago 5
Adolfo and Bella Mapanao 5
Dineshchandra and Sarla Master 5
Gregory and Natash Meyer 5
Jamie Milo 5
Mart and Criesta Martin 12
Melvin and Susan Mathias 10
Zaldy and Erlinda Mendoza 25
Robert and Judy Miller 5
Frank Mixner 8
Vernon Meyers 10
Stacy Moore 5
Gerardo Navarrete 5
Barbara Norton 5
Rosario Pacson 4
Elvira Parado 6
Elma Pascual 5
Raymond and Elma Pascual 5
Bharat and Nili Patel 25
Pritesh Patel 25
Ramesh Patel 10
Sanjay and Jeshai Patel 6
Surendra and Hasubala Patel 10

<PAGE> 30

Joni Payne 10
Eisle Picardo 20
Ginger Power 30
Paresh and Shefali Randeria 8
Parag and Janvi Rawall 2
Felicisimo and Juanita Sayco 20
Gerry and May Sayco 13
Steven Schaefer 4
Linda Sellers 25
Rodolfo Sevilla 10
Rakesh Shah 10
Mehul Shah 6
Adeleida Soriano 5
Francine Tanyag 10
Jagdish and Shamilia Tarpara 4
Robert Thurber 8
Avelina Vitug 10
Brian and Luan Wheaton 5
Leon Williams 25
Raymond Wilson 3
Teresa Wright 5
Edna Youngman 5

1999
----

Effective January 1, 1999, the Company had 33,287,830 shares issued and
outstanding. Effective December 31, 1999, the Company had issued an
additional 6,930,648 shares pursuant to a self-underwriting under Rule 504 of
Regulation D of the Securities Act of 1933. The shares were sold for cash
based upon market price for its commons shares with gross proceeds of less
than $1,000,000. No underwriting discounts were paid directly or indirectly
by the Company in connection with the sales of any of its shares.

1999

Number $ Per
Name Shares(1) Share (2) Date(s)
------------ ----------- --------- ----------

D. Barot 600,000 .06 3/9/99 and 5/26/99
P.D. Barot 200,000 .06 3/31/99
J.J. Barot 1,000,000 .06 2/18/99, 2/26/99,
3/9/99, and 3/10/99
J.J. Barot 300,000 .08 12/8/99
K. Barot
M. Barot
M.J. Barot 500,000 .06 2/26/99 and 4/29/99
M.J. Barot 200,000 .07 4/29/99
M.J. Barot 1,100,000 .08 9/8/99
S.J. Barot 100,000 .07 9/7/99
S.J. Barot 100,000 .08 12/10/99
J. Bouck 12,500 .08 12/27/99
K. Bridges 5,000 .08 12/16/99
D. Byers 200,000 .06 4/29/99
A. Carter 12,500 .08 11/17/99

<PAGE> 31

Continental 2,177,254 .03 2/23/99
Weaponry (PTY)
Ltd. (1)
A. Criscione 115,000 .07
A. Criscione 79,300 .10 9/8/99 and 9/13/99
C. Dacumos 25,000 .08 11/17/99
E. Dacumos 12,500 .08 11/17/99
M. Davis 1,000 .14 4/26/99
K. Doerfler 86,250 .06 8/25/99
B. Dorfman 625,000 .08 6/2/99, 8/5/99
9/2/99 and 10/12/99
B. Dorfman 1,070,00 .10 4/9/99, 4/15/99
4/29/99, 5/26/99
6/11/99, 6/22/99
9/22/99 and 9/24/99
A. Drake 96,000 .08 1/22/99, 7/12/99
and 12/9/99
B. Drake 12,500 .08 1/22/99
M. Drake 80,000 .08 1/22/99
R. Duenke 250,000 .08 10/5/99 and 12/13/99
J. Fridley 12,500 .08 12/16/99
R. Green 57,500 .10 1/27/99
R. Greenlee 15,000 .08 12/10/99
L.J. Guarnieri 30,000 .08 12/16/99
G. Hanson 12,500 .08 12/16/99
N. Hanson 12,500 .08 12/16/99
M. Hays 87,500 .08 12/10/99 and 12/16/99
R. Hays 12,500 .08 12/16/99
R. Head 25,000 .08 11/24/99
P. Hertzman 62,500 .08 8/13/99
W. Hood 12,500 .08 12/16/99
J. Ibay 62,500 .08 11/17/99
K. Jackson 25,000 .08 3/29/99
J.D. Johnson 50,000 .08 11/17/99
Z. Kerstner 43,700 .08 11/27/99
F. Klecky 12,500 .08 11/17/99
A. Messler 8,750 .08 12/7/99
D. Mosley 12,500 .08 4/12/99
E.C. Oden 50,000 .08 12/16/99
S. Odinetz 175,000 .08 10/19/99 and 12/13/99
T. Painter 28,572 .07 9/10/99
100,000 .08 12/6/99
S. Patel 300,000 .08 12/6/99 and 12/21/99
D. Phillips 2,500 .08 12/16/99
P. Randeria
G. Russell 25,000 .08 11/17/99
F. Sayco 25,000 .08 11/17/99
John G. Sellers 360,000 .08 11/3/99

On February 23, 1999, the Company issued 2,117,254 shares to Continental
Weaponry (PTY) Ltd., a South African proprietary corporation, in an offshore
transaction pursuant to Regulation S in consideration of a license fee for the
Griffon line of handguns. The shares were priced at a discount to market with
an aggregate value of $38,750.00

The issuance of our common shares in years 1997, 1998, 1999 and 2000 were
exempt from registration under the Securities Act of 1933 as Rule

<PAGE> 32

504 private transaction not involving a public distribution and the following
operative facts: (a) the aggregate offering price of the common shares offered
and sold did not exceed $1,000,000 per year; (b) we did not advertise or
engage in any sales solicitations to the pubic for the securities, but only
made offers and sales of the same to persons with whom we had a pre-existing
relationship to us; (c) all sales were made by the Company as Issuer or
through one of the Company's executive officers as agents of the Issuer; (d)
we did not pay any sales commissions, bonuses, or other forms of compensation
to any executive officers directly or indirectly for acting as agents of the
Issuer; (e) we believe that each purchaser acquired the securities for
his/her/its own account for investment purposes and not for resale; (f) we
placed on each share certificate a restrictive legend stating that the
securities have not been registered and cannot be resold or are otherwise
restricted from transfer without benefit of registration.

In 1997, we issued in lieu of cash payment 200,000 Rule 144 shares to Mr.
Patrick McCarrick for web design and graphic materials and 800,000 Rule 144
shares to Princeton Research, Inc. for investor relations and related
corporate finance consulting. In 1998, we issued in lieu of cash payment
200,000 Rule 144 shares to Mr. Josh Macalik for work performed at the
Company's headquarters. Mr. Macalik is the son of Kenneth Wilson and Patricia
Wilson. Mr. Macalik has legally changed his name to Josh Wilson and is
currently employed by the Company as an executive vice-president in sales and
marketing.

Technologies Acquisition LP raised a total of $977,000 by selling 977 units
priced at $1,000 per unit in 1998. The General Partner is Technologies
Acquisition Corporation whose president and sole stockholder is Keith Carroll.
After fees and commissions, the Partnership invested one percent (1%) of its
capital or $7,000.00 for the purchase of 87,500 shares in 21st Century
Technologies, Inc. at $0.08 per share. The balance of the partnership's
capital was invested in unaffiliated companies.

21st Century Technology Funding L.P. raised a total of $900,000 by selling 900
units priced at $1,000 per unit in 1998. The General Partner is 21st Century
Technologies LLC whose member manager is Allen Drake. After fees and
commissions, one hundred percent (100%) of the partnership capital was used to
buy 9,000,000 restricted shares of 21st Century Technologies, Inc. at $0.08
per share. A total of 6,000,000 shares were subsequently sold by the
partnership after a period of one year.

Alpha Technologies Limited Partnership raised a total of $332,000 by selling
332 units priced at $1,000 per unit in 1998. The General Partner is Alpha
Technologies LLC whose member manager is Allen Drake. After fees and
commissions, twenty one percent (21%) of its capital or $80,000 was used to
buy restricted shares of 21st Century Technologies, Inc. at $0.08 per share.
The balance of the partnership's capital was invested in unaffiliated
companies.

21st Century Technologies, Inc. (the "Company") issued in an initial sale its
common stock to the partnerships above. In so issuing its shares, the Company
relied upon an exemption from the registration requirements in Section 5 of
the Securities Act of 1933, as amended (the "Act"), provided by Regulation D
promulgated pursuant to the Act.

<PAGE> 33

These shares so issued bore restrictive legend and were governed by Rule 144
promulgated under the Act for resale into the public market place, or
otherwise.

Any resale by the partnership not into the public market place would have been
in accordance with Section 4(1) of the Act and the rules and regulations
derivative therefrom.

The Company does not have in its possession documents provided by the
partnerships to purchasers when and if the partnership resold the
corporation's securities, since it does not control directly or indirectly any
activities of the partnerships.

The Company believes, based on the number of shares ever owned at any given
moment by the partnerships, and/or by the partnerships' ability to control or
to be controlled by the Company that the partnerships are not affiliates of
the Company. Further, if the partnerships have acted as underwriters pursuant
to Section 2(11) or any other Section of the Act, the Company believes that
the resultant legal and/or factual issues are with the partnerships and not
the Company.

We believe that, in light of the foregoing, the sale of our securities to the
respective subscribers did not constitute the sale of an unregistered security
in violation of the federal securities laws and regulations promulgated
thereunder.

ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our Articles of Incorporation and bylaws provide for the indemnification of
present and former directors and officers and each person who serves at our
request as our officer or director. To the full extent of Nevada Revised
Statutes Sections 78.7502 and 78.751 indemnification for a director is
mandatory and indemnification for an officer, agent or employee is permissive.

We will indemnify such individuals against all costs, expenses and liabilities
reasonably incurred in a threatened, pending or completed action, suit or
proceeding brought because such individual is our director or officer. Such
individual must have conducted himself in good faith and reasonably believed
that his conduct was in, or not opposed to, our best interest. In a criminal
action he must not have had a reasonable cause to believe his conduct was
unlawful. This right of indemnification shall not be exclusive of other
rights the individual is entitled to as a matter of law or otherwise.

We will not indemnify an individual adjudged liable due to his negligence or
willful misconduct toward us, adjudged liable to us, or if he improperly
received personal benefit. Indemnification in a derivative action is limited
to reasonable expenses incurred in connection with the proceeding. Also, we
are authorized to purchase insurance on behalf of an individual for
liabilities incurred whether or not we would have the power or obligation to
indemnify him pursuant to our bylaws.

<PAGE> 34

PART F/S

INDEX TO FINANCIAL STATEMENTS

21st Century Technologies, Inc. and its wholly owned subsidiaries,
Consolidated Financial Statements (unaudited) for the three months ended March
31, 2000

* Consolidated Balance Sheet For the Three Months Ended March 31, 2000 and
1999 (unaudited)

* Consolidated Statements of Operations For the Three Months Ended March
31, 2000 and 1999(unaudited)

* Consolidated Statements of Cash Flows (unaudited) For the Three Months
Ended March 31, 2000 and 1999

* Consolidated Statements of Stockholders' Equity (unaudited) For the
Three Months Ended March, 2000

* Notes to Consolidated Financial Statements For the Three Months Ended
March 31, 1999 (unaudited)

21st Century Technologies, Inc and its wholly owned subsidiaries Audited
Financial Statements December 31, 1999 and December 31, 1998.

* Independent Auditor's Report.

* Consolidated Balance Sheet December 31, 1999 and 1998.

* Consolidated Statements of Operations For the Two Years Ended December
31, 1999 and 1998.

* Consolidated Statements of Comprehensive Income For the Two Years Ended
December 31, 1999 and 1998.

* Consolidated Statements of Cash Flows For the Two Years Ended December
31, 1999 and 1998.

* Supplemented Schedule of Non-Cash Financing Activities For the Two Years
Ended December 31, 1999 and 1998.

* Consolidated Statements of Stockholders' Equity For the Two Years Ended
December 31, 1999.

* Notes to Consolidated Financial Statements For the Years Ended December
31, 1999 and 1998.

<PAGE> 35

21st Century Technologies, Inc. and Subsidiaries

Consolidated Balance Sheet
(Unaudited)

March 31, 2000 March 31, 1999
-------------- --------------
Assets

Current Assets:
Cash and cash equivalents $ 732,069 $ 23,990
Accounts Receivable 1,078,318 982,707
Inventories 435,194 159,416
Notes Receivable 28,465 35,000
-------------- --------------
Total Current Assets 2,274,046 1,201,113

Property, Plant, and Equipment, Net 344,332 188,060

Other Assets, Net 464,392 432,017
-------------- --------------
Total Assets $ 3,082,770 $ 1,821,190
============== ==============

Liabilities and Stockholders' Equity

Current Liabilities:
Accounts Payable-trade 210,069 124,964
Accounts Payable-other 66,079 1,029

Total Current Liabilities 276,148 125,993

Other Liabilities:
Working Capital Advances 1,446,958 0
Customer Deposits 4,304 1,435
Notes Payable 32,720 71,882
-------------- --------------
Total Other Liabilities 1,483,982 73,317
-------------- --------------

Total Liabilities: 1,760,130 199,310

Stockholders' Equity:
Common Stock, issued 51,667,753 and
outstanding shares at $.001 par value
at March 31, 2000 51,667 37,932
Paid-in Capital 4,498,917 3,629,103
Stock Earned, Not Issued 360,000 360,000
Retained Earnings (Deficit) (3,553,316) (2,365,066)
Treasury Stock ( 31,628) (30,089)
Stock Subscriptions (3,000) ( 10,000)
-------------- --------------
Total Stockholders' Equity 1,322,640 1,621,880
-------------- --------------
Total Liabilities and Stockholders' Equity $ 3,082,770 $ 1,821,190
============== ==============

See Notes to Consolidated Financial Statements

<PAGE> 36

21st Century Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations
(Unaudited)

3 Months Ended 3 Months Ended
Mar 31, 2000 Mar 31, 1999
-------------- --------------
Net Sales $ 274,393 $ 222,660

Cost of Sales 253,930 185,397
-------------- --------------
Gross Profit 20,463 37,263

General and administrative expenses 476,067 188,642

Depreciation and Amortization 32,997 30,901
-------------- --------------

Net Income (Loss) (488,601) (182,280)

Estimated Income Taxes 0 0
-------------- --------------

Net Income (Loss) $ (488,601) $ (182,280)
============== ==============

Earnings (Loss) Per Common Share:
Basic and Fully Diluted $ (0.01) $ (0.01)

See Notes to Consolidated Financial Statements

<PAGE> 37

21st Century Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended March 31, 2000

Mar 31, 2000 Mar 31, 1999
-------------- --------------
Cash Flows From Operating Activities:
Net Income (Loss) $ (488,848) $ ( 182,280)
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation and Amortization 32,997 30,901

Change in operating assets and liabilities:
Accounts receivable ( 90,701) 13,956
Inventory ( 86,069) ( 440)
Other non-current assets and liabilities, net 16,246 ( 6,787)
Accounts payable 7,699 86,717
-------------- --------------
Net Cash Provided (Used) by
Operating Activities (608,676) ( 57,933)

Cash Flows From Investing Activities:
Purchase Equipment (315,467)
--------------
Net Cash Provided (Used) by
Investing Activities (315,467)

Cash Flows From Financing Activities:
Working Capital Advances 1,446,958
Increase/(Decrease) in long-term debt (40,162) (70,027)
Sale of stock and subscriptions received 137,602 140,829
-------------- --------------
Net Cash Provided (Used) by
Financing Activities 1,544,398 70,802
-------------- --------------
Net Increase (Decrease) in Cash
and Cash Equivalents 620,255 12,869
Cash and Cash Equivalents at Beginning of Period 111,814 11,121
-------------- --------------

Cash and Cash Equivalents at End of Period $ 732,069 $ 23,990
============== ==============

See Notes to Consolidated Financial Statements

<PAGE> 38

21st Century Technologies, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity

For the Three Months Ended March 31, 2000

<TABLE>
<CAPTION>
Common Paid-in Retained Treasury Stock Issued
Stock Capital (Deficit) Stock Subscribed Total Shares
--------- ------------ ------------ --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Stock Earned, Not Issued - - - - $ 360,000 $ 360,000 -

Balance December 31, 1999 $ 50,083 $ 4,420,260 $(3,064,715) $(31,628) $ (79,700)$1,654,300 50,083,753

Sale of Stock 1,584 78,657 - - - 80,241 1,584,000

Subscriptions Received - - - - 76,700 76,700 -

Net Income (Loss) - - (488,601) - - (488,601) -
--------- ------------ ------------ --------- --------- ----------- ----------

Balance March 31, 2000 $ 51,667 $ 4,498,917 $(3,553,316) $(31,628) $ 357,000 $1,322,640 51,667,753
========= ============ ============ ========= ========= =========== ==========

</TABLE>
<PAGE> 39

See Notes to Consolidated Financial Statements

21st Century Technologies, Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)

Note 1: Summary of Significant Accounting Policies:

a. Organization and Business Activities

21st Century Technologies, Inc. was incorporated under the laws of the State
of Delaware on May 15, 1967 as Satcom Corporation. On November 6, 1991, the
Company changed its name to Hughes Pharmaceutical Corporation. Subsequent to
1991, the Company changed its name from Hughes Pharmaceutical Corporation to
First National Holding Corporation(FNHC) Delaware. The Company became public
in 1985 through a merger with International Fluidics Control, Inc. (formerly
Sensory Systems, Inc., Training With The Pros, Inc., and/or M-H Studios,
Inc.). International Fluidics Control, Inc. successfully completed a public
offering of its securities in 1969 under Regulation A of the Securities Act of
1933.

As of December 31, 1985, the Company had liquidated all business operations
and began the search for a suitable merger or acquisition candidate. As a
result of this action, the Board of Directors approved a quasi-reorganization
for accounting purposes, effective January 1, 1986, whereby all accumulated
deficits in shareholders' equity were offset against additional paid-in
capital and common stock balance sheet accounts to the extent of reducing
these accounts to equal the par value of the issued and outstanding shares of
common stock.

During the third quarter of 1994, in conjunction with the execution of a
letter of intent to acquire Innovative Weaponry, Inc. (a New Mexico
corporation), the Company consummated a plan of merger between FNHC Nevada
and FNHC Deleware whereby the Nevada Corporation was the survivor (see below)
and changed its corporate name to Innovative Weaponry, Inc. to better reflect
its future actions and pending relationship with the acquisition target. On
September 15, 1997, the Board of Directors approved a name change to 21st
Century Technologies, Inc.

Innovative Weaponry, Inc. - New Mexico was incorporated on June 22, 1988 under
the laws of the State of New Mexico. The Company was formed for the
development and sale of specialized firearms, firearm systems and related
equipment. On September 14, 1992, Innovative Weaponry, Inc. filed a petition
for relief under Chapter 11 of the Federal Bankruptcy Laws in the United
States Bankruptcy Court of the District of New Mexico. Under Chapter 11,
certain claims are stayed while the Debtor continues business operations as
Debtor-in-Possession. On August 19, 1994, IWI-NV (now 21st Century
Technologies, Inc.) and IWI-NM entered into a letter of intent whereby IWI-NV
would use its unregistered, restricted common stock and cash to satisfy
certain obligations of IWI-NM in settlement of IWI-NM's bankruptcy action.
On February 1, 1995, the U. S. Bankruptcy Court of the District of New Mexico
confirmed the IWI-NM's

<PAGE> 40

plan of reorganization. The plan became effective 30 days after its
confirmation. IWI-NM became a wholly owned subsidiary of Innovative Weaponry,
Inc. (IWI-NV) (formerly First National Holding Corporation) (FNHC Nevada) (now
known as 21st Century Technologies, Inc.), a publicly owned company.

b. Cash and Cash Equivalents:

For purposes of reporting cash flows, the Company considers all cash on hand
and in banks, certificates of deposit and other highly liquid debt instruments
with a maturity of three months or less at the date of purchase to be cash and
cash equivalents.

c. Revenue recognition and credit policies:

In the normal course of business, the Company sells its goods on "cash in
advance" or "cash on delivery", but primarily extends unsecured credit to its
customers involved in the retail and wholesale sale of the Company's products.
Revenue is recognized when products are shipped to the wholesale or retail
purchaser. All products are shipped F.O.B. the Company's facilities.

Management has provided an allowance for doubtful accounts, which reflects its
opinion of amounts, which will eventually become uncollectible. In the event
of complete non-performance by the Company's customers, the maximum exposure
to the Company is the outstanding trade accounts receivable balance at the
date of non-performance.

d. Inventory:

Inventory consists of raw materials used in the manufacture of firearm
products and finished goods imported for resale. Inventory is carried at the
lower of cost or market value, using the first-in, first-out method (FIFO).

e. Property and equipment:

Property and equipment is recorded at its historical cost. Depreciation is
provided in amounts sufficient to relate the asset cost to operations over the
estimated useful life (three to seven years) using the straight-line method
for financial reporting purposes. Gains and losses from disposition of
property and equipment are recognized as incurred and are included in
operations.

f. Income Taxes:

The Company uses the asset and liability method as identified in SFAS 109,
Accounting for Income Taxes.

<PAGE> 41

g. Estimates:

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

h. Asset Impairment:

The Company adopted the provisions of SFAS 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, in its
financial statements for the year ended December 31, 1995. The Company
prepares an undiscounted estimate of future cash flows for each long-lived
asset (excluding production equipment) on an annual basis. If the carrying
value of the asset exceeds undiscounted future cash flows expected to be
produced by the asset, the Company recognizes an impairment loss. The Company
measures the amount of the impairment loss as the amount by which the carrying
value of the asset exceeds its fair value. The Subsidiary Bankruptcy Excess
Reorganization Value is evaluated annually for events or conditions which
would indicate impairment. Management estimates cash flows which can be
expected for continuing to use the asset and then compares these estimated
cash flows to the asset's carrying amount. If the estimated cash flows
resulting from continuing to use the asset exceed the carrying amount of the
asset, an impairment adjustment is not necessary. There has been no effect as
of December 31, 1999 of adopting SFAS 121.

i. Stock-Based Compensation:

The Company will follow the fair value based method of accounting as
prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, for its
stock-based compensation. The Company currently does not have a stock option
plan.

j. Principles of Consolidation and Presentation --Wholly-Owned Subsidiaries:

The consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany transactions and accounts have been eliminated
in the consolidation.

k. License Agreement:

The License agreement is amortized over the life of the related patent
technology (generally 17 years) using the straight-line method.

<PAGE> 42

l. Research and Development Costs:

The Company expenses any research and development costs in the period which
they are incurred. There are no research and development costs incurred in
the periods presented.

m. Treasury Stock:

The Company utilizes the cost method to account for the acquisition of
Treasury Stock.

n. Basis of Presentation:

Financial information presented as of any date other than December 31 has been
prepared from the books and records without audit. The accompanying financial
statements have been prepared in accordance with the instructions to Form
10QSB and do not include all of the information and the footnotes required by
generally accepted accounting principles for complete statements. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such financial statements,
have been included.

These financial statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1999.

Note 2: Accounts Receivable

On November 6, 1998, Innovative Weaponry received a purchase order from
Continental Weapons Ltd for 32,103 Night Sights. Continental was invoiced and
a quantity of sights were shipped to South Africa. The balance of the order (
approximately 1,000 sights) has been manufactured and is being held at the
Company's manufacturing facility to be installed on the Griffon replica of the
Colt 45 as they are received by the Company. The Company is receiving the
first 1000 pistols sightless and are invoiced for a pistol without sights.
The receivable is decreased by the number of sights used when they are
installed on the pistols and income is credited for the sights installed. Due
to Continental's inability to ship the entire 1000 pistol order, the
receivable was not decreased materially during 1999. The Continental Weapons
invoice remains unpaid as of December 31, 1999; however, the Company has
negotiated an agreement to sell the receivable for the full invoice value.
The sale is scheduled to occur in the second quarter of 2000.

3/31/00 12/31/99 12/31/98
----------- ---------- -----------

Outstanding Invoice-Continental $ 923,422 $ 923,422 $ 930,987

Note 3: Other Assets

<PAGE> 43

University of California as operators of Los Alamos National Laboratory
(patent holder) related to the development, marketing and sales rights to
certain specified magnetic and/or magnet technology.

The agreed-upon and negotiated value of the Agreement at acquisition date was
$75,000. Subsequently, the transaction was re-negotiated and 21st Century
acquired all of the common stock of TPI in a Type B reorganization.

Trident, as sub-licensee, is obligated to pay a royalty fee of 8.0% on net
income (as defined in the Agreement) of products sold using the patented
technology. Further, Trident is to pay an annual maintenance fee, which was
$24,000 for the third and all subsequent years of the Agreement. All royalty
fees paid during a specific year are to be credited to that year's maintenance
fee and the maintenance fee requirement is considered met if the royalty
payments during an Agreement year are equal to or exceed the required
maintenance fee.

Trademark: The trademark "PT Night Sights" has been capitalized at cost and
is being amortized over 17 years.

Bankruptcy excess Re-Organization Cost: Innovative Weaponry, Inc. (IWI)
emerged from a bankruptcy filing under Chapter 11 of the US Bankruptcy Code,
effective March 1, 1995. As a result of the Plan of Reorganization, IWI
became a wholly owned subsidiary of 21st Century Technologies, Inc. and all
prior IWI shareholders retained less that a 50% interest in the combined
reorganized entities.

In conjunction with IWI's emergence from protection under Chapter 11, IWI
adopted "fresh-start" accounting as a result of its acquisition by 21st
Century. "Fresh start" accounting allows for the restatement of all assets
and liabilities being set to the fair market value of each respective category
and the restatement of retained earnings to "0". The resulting amount was
debited to the account "Reorganization value in excess of amounts allocable to
identifiable assets". This balance is being amortized over ten (10) years
using the straight-line method. The amortization period began on March 1,
1995, concurrent with the effective date of IWI's Plan of Reorganization.

The adjustment necessary to reflect the "fresh-start" accounting, as
prescribed by Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" issued by the American Institute of
Certified Public Accountants reflected a Reorganization value in excess of
amounts allocable to identifiable assets.

Note 4: Stockholders' Equity

The total number of all classes of authorized capital stock is 200,000,000
shares, all of which are Common Stock, $0.001 par value per share. As of
March 31, 2000, there are 51,667,753 shares of common stock issued.

<PAGE> 44

Note 5: Earnings (Loss) Per Common Share

Earnings per common share are computed by dividing net income by the weighted
average number of common shares outstanding during the years 1999 and 1998.
There were no common stock equivalents outstanding during the years 1999 and
1998. SFAS No. 128, Earnings per Share applies to entities with publicly held
common stock and establishes standards for computing and presenting earnings
per share (EPS). Basic EPS excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.

Note 6: Income Taxes

At December 31, 1999, the Company has available net operating loss
carryforwards of approximately $2,704,715 for federal income tax purposes that
begin to expire in 2008. The federal carryforwards resulted from losses
generated in prior years and have created a deferred tax asset o $919,603. It
is believed to be "more likely than not" that taxable income in the periods
prior to the expiration of the deferred tax assets will not be sufficient for
the deferred tax assets to be recognized; therefore, a valuation allowance of
$919,603 has been recognized to offset the deferred tax assets. There are no
deferred tax liabilities. Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes.

Note 7: Risks and Uncertainties

The Company operates in highly specialized industries. There are only four
companies worldwide who manufacture and sell night sights using tritium. The
Company ranks number three out of four. The gun sight industry is highly
dependent on major firearms manufacturers as well as consumer and governmental
demand for weapons. World conditions and economies can affect the future
sales of this product.

The Company's magnetic and hydraulic-magnetic technologies are largely
un-proven and may require additional extensive testing before marketing these
products can continue. Demand for these products from governmental and
industrial sources is largely estimated and while the Company has studied
various markets, no assurance can be given that these products can be
successfully marketed.

In the future, these products will be marketed outside the United States,
which will subject the Company to foreign currency fluctuation risks.

The Company's firearm replica and tire sealant import division has not been
tested in the U. S. market and the estimated demand for these products may not
reach the Company's expectations.

<PAGE> 45

Note 8: Fair Values of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
financial instruments:

Cash and Cash Equivalents. The carrying amount reported in the balance sheet
for cash and cash equivalents approximates its fair value.

Accounts Receivable and Accounts Payable. The carrying amount of accounts
receivable and accounts payable in the balance sheet approximates fair value.

Short-Term and Long-Term Debt. The carrying amount of the debts recorded in
the balance sheet approximates fair value.

The carrying amounts of the Company's financial instruments at December 31,
1999 and 1998 represent fair value.

Note 9: Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. It requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 requires that an enterprise (a) classify
items of other comprehensive income by their nature in a financial statement
and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid in capital in the equity
section of a statement of financial position. The Company's comprehensive
income does not differ from its reported net income.

Note 10: Business Segments

The Company has five business segments: (a) Manufacture of night sights for
handguns, (b) Manufacture of "the Gripper", a patented device used for
climbing steel surfaces, (c) Manufacture of an Emergency Magnetic-Hydraulic
Sea Patch System (d) Importation and resale of firearms and (e) Importation
and Distribution of a Tire Sealant product. The majority of the Company's
sales are derived from sales of night sights. The other segments sales are not
material to these financial statements.

<PAGE> 46

ALVIN L DAHL
& ASSOCIATES, PC
Certified Public Accountants
A Professional Corporation

Independent Auditor's Report

Board of Directors and Stockholders
21st Century Technologies, Inc.
2513 East Loop 820 North
Ft. Worth, TX 76118

We have audited the accompanying consolidated balance sheets of 21st Century
Technologies, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the related statements of operations, comprehensive income, retained earnings,
and cash flows for the years then ended. 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.

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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of 21st
Century Technologies, Inc. and subsidiaries as of December 31, 1999 and 1998,
and the results of its operations and its cash flows for the years then ended
in conformity with generally accepted accounting principles.

/s/ Alvin L. Dahl & Associates, P.C.

ALVIN L. DAHL & Associates, PC

March 14, 2000

Dallas, Texas

903 N. Bowser Road, Suite 370 * Richardson, Texas 70581 *
(972)664-1527 * FAX (972) 6664-1430

<PAGE> 47

21st Century Technologies, Inc. and Subsidiaries

Consolidated Balance Sheet
December 31, 1999 and 1998

1999 1998
------------- ------------
Assets
Current Assets:
Cash and cash equivalents $ 111,814 $ 11,121
Accounts Receivable(Note 2) 987,617 996,663
Inventories(Note 3) 349,125 158,976
Notes Receivable(Note 4) 0 35,000
------------- ------------
Total Current Assets 1,448,556 1,201,760

Property, Plant, and Equipment, Net (Note 6) 127,439 187,314

Other Assets, Net (Note 7) 421,475 425,230
------------- ------------
Total Assets $ 1,997,470 $ 1,814,304
============= ============

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable-trade (Note 5 ) 104,790 38,929
Accounts Payable-other 163,659 347
------------- ------------
Total Current Liabilities 268,449 39,276

Other Liabilities:
Deposits 1,311 3,372
Notes Payable (Note 9) 73,410 141,908
------------- ------------
Total Other Liabilities 74,721 145,280
------------- ------------

Total Liabilities: 343,170 184,556

Stockholders' Equity (Note 10):
Common Stock, $0.001 par value, 50,083,763
shares issued and 43,905,850 outstanding in 1999
and 35,023,113 shares issued and 33,477,830
outstanding in 1998 50,083 35,023
Paid-in Capital 4,420,260 3,418,856
Stock Earned, Not Issued (Note 13) 360,000 360,000
Retained Earnings (Deficit) (3,064,715) (2,182,786)
Treasury Stock (31,628) (30,089)
Stock Subscriptions ( 79,700 (10,000)
------------- ------------
Total Stockholders' Equity 1,654,300 1,591,004
------------- ------------
Total Liabilities and Stockholders' Equity $ 1,997,470 $ 1,814,304
============= ============

See Notes to Consolidated Financial Statements

<PAGE> 48

21st Century Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations
For the Two Years Ended December 31, 1999 and 1998

1999 1998
------------- ------------
Net Sales $ 889,327 $ 1,701,013

Cost of Sales 547,013 469,910
------------- ------------

Gross Profit 342,314 1,231,103

General and administrative expenses 1,094,713 762,769

Depreciation and Amortization 129,530 123,604

Non-Operating Expenses 0 240,861
------------- ------------
Income (Loss) before Income Taxes (881,929) 103,869

Estimated Income Taxes 0 0
------------- ------------

Net Income (Loss) $ (881,929) $ 103,869
============= ============

Earnings (Loss) Per Common Share: (Note 12)
Basic and Diluted $ (0.02) $ 0.00

See Notes to Consolidated Financial Statements

<PAGE> 49

21st Century Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income
(Note 17)
For the Two Years Ended December 31, 1999

1999
----

Net Income $ (881,929)

Other comprehensive income, net of tax 0
--------------

Comprehensive income $ (881,929)
==============

1998
----

Net Income $ 103,869

Other comprehensive income, net of tax 0
--------------

Comprehensive income $ 103,869
==============

See Notes to Consolidated Financial Statements

<PAGE> 50

21st Century Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Two Years Ended December 31, 1999 and 1998

1999 1998
------------- ------------
Cash Flows From Operating Activities:
Net Income (Loss) $ (881,929) $ 103,869
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation and Amortization 129,530 123,604
Change in operating assets and liabilities:
Accounts receivable 9,046 (860,773)
Inventory ( 190,149) (74,396)
Other non-current assets (143,405) (28,359)
Accounts payable-trade 229,173 (31,763)
------------- ------------
Net Cash Provided (Used) by Operating Activities (847,734) (747,818)

Cash Flows From Investing Activities:

Net Cash Provided (Used) by Investing Activities 0 (66,568)

Cash Flows From Financing Activities:
Decrease in long-term debt (66,498) (53,552)
Purchase Treasury Stock (1,539) (30,089)
Sale of stock 1,016,464 900,945
------------- ------------
Net Cash Provided (Used) by Financing Activities 948,427 817,304
------------- ------------

Net Increase (Decrease) in Cash and Cash Equivalents 100,693 2,918
Cash and Cash Equivalents at Beginning of Year 11,121 8,203
------------- ------------

Cash and Cash Equivalents at End of Year $ 111,814 $ 11,121
============= ============

See Notes to Consolidated Financial Statements

<PAGE> 51

21st Century Technologies, Inc.
and Consolidated Subsidiaries

Schedule of Non-Cash Financing Activities

For the Two Years Ended December 31, 1999 and 1998

1999 1998
------------- ------------
Issue Common Stock for Debt $ $ 28,410

Issue Common Stock for Services $ 133,618 $ 35,553

See Notes to Consolidated Financial Statements

<PAGE> 52

21st Century Technologies, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity

For the Two Years Ended December 31, 1999

Balance, January 1, 1998 $ 19,015 $ 2,189,813 $(1,936,655) $ - $ - $ 272,173 19,015,863

Sale of Common stock 16,007 1,235,343 - - - 1,251,350 16,007,250

Purchase of Treasury Stock - - - (39,889) - (39,889) -

Sale of Treasury Stock - (6,300) - 9,800 - 3,500 -

Stock Subscriptions - - - - (10,000) (10,000) -

Net Income(Loss) - - 103,869 - - 103,869 -
--------- ------------ ------------ --------- --------- ----------- ----------
Balance December 31, 1998 35,022 3,418,856 (2,182,786) (30,089) (10,000) 1,591,003 35,023,113

Sale of Common Stock 15,061 901,433 - - - 916,494 15,060,640

Purchase of Treasury Stock - - - (57,200) - (57,200) -

Sale of Treasury Stock - 99,971 - 55,661 - 155,632 -

Subscriptions Paid - - - - 7,000 7,000 -

Subscriptions Received - - - - (76,700) (76,700) -

Net Income(Loss) - - (881,929) - - (881,929) -
--------- ------------ ------------ --------- --------- ----------- ----------

Balance December 31, 1999 $ 50,083 $ 4,420,260 $(3,064,715) $(31,628) $(79,700) $1,654,300 50,083,753
========= ============ ============ ========= ========= =========== ==========

See Notes to Consolidated Financial Statements

</TABLE>
<PAGE> 53

21st Century Technologies, Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998

Note 1: Summary of Significant Accounting Policies:

a. Organization and Business Activities

<PAGE> 54

NM became a wholly owned subsidiary of Innovative Weaponry, Inc. (IWI-NV)
(formerly First National Holding Corporation) (FNHC Nevada) (now known as 21st
Century Technologies, Inc.), a publicly owned company.

b. Cash and Cash Equivalents:

c. Revenue recognition and credit policies:

d. Inventory:

e. Property and equipment:

f. Income Taxes:

The Company uses the asset and liability method as identified in SFAS 109,
Accounting for Income Taxes.

g. Estimates:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the

<PAGE> 55

reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

h. Asset Impairment:

i. Stock-Based Compensation:

j. Principles of Consolidation and Presentation --Wholly-Owned Subsidiaries:

The consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany transactions and accounts have been eliminated
in the consolidation.

k. License Agreement:

The License agreement is amortized over the life of the related patent
technology (generally 17 years) using the straight-line method.

l. Research and Development Costs:

The Company expenses any research and development costs in the period which
they are incurred. There are no research and development costs incurred in
the periods presented.

<PAGE> 56

m. Treasury Stock:

The Company utilizes the cost method to account for the acquisition of
Treasury Stock.

Note 2: Accounts Receivable

At December 31, 1999 and 1998, accounts receivable is comprised of the
following:

1999 1998
---------- ----------
Trade Receivables $ 988,471 $ 995,790
Plus: Other 873
Less Allowance for bad debts 854 0
---------- ----------
Total $ 987,617 $ 996,663

Credit is extended on an evaluation of the customer's financial condition and
generally collateral is not required.

On November 6, 1998, Innovative Weaponry received a purchase order from
Continental Weapons Ltd for 32,103 Night Sights. Continental was invoiced and
a quantity of sights were shipped to South Africa. The balance of the order (
approximately 1,000 sights) has been manufactured and is being held at the
Company's manufacturing facility to be installed on the Griffon replica of the
Colt 45 as they are received by the Company. The Company receives credit
against the purchase price of the pistols they import for the sales price of
the sights. The Continental Weapons invoice remains unpaid as of December 31,
1999; however, the Company has negotiated an agreement to sell the receivable
for the full invoice value. The sale is scheduled to occur in the second
quarter of 2000.

Note 3: Inventories

At December 31, 1999 and 1998, inventories are comprised of the following:

1999 1998
--------- ---------
Finished goods $ 30,715 $ 17,376
Griffon Pistols 39,930
Purchased for Resale 109,740
Raw materials 168,740 141,600
---------- ---------
Total current cost $349,125 $158,976

Note 4: Notes Receivable

As of December 31, 1999 and 1998, Notes Receivable of the Company are as
follows:
1999 1998
---------- ---------
Frank Mahan 0 $ 25,000
Carl Swan 0 $ 10,000

Note 5: Accounts Payable

<PAGE> 57

As of December 31, 1999 and 1998, the Company was obligated on the following
accounts payable amounts:

1999 1998
---------- ----------
Trade Payables $ 106,749 $ 38,929
Excise & Sales Tax Payable 16,565
Other Payables & Accruals 147,094 347
---------- ----------
Total Accounts Payable $ 268,449 $ 39,276

Note 6: Property, Plant, and Equipment

1999 1998
---------- ---------
Leasehold improvements $ -0- $ -0-
Machinery and Equipment 329,668 310,260
Computer Equipment 52,399 50,826
Show Modules 30,586 30,586
Furniture and Fixtures 25,075 24,061
Real Estate 10,000 10,000
---------- ---------
Total $ 447,728 $ 425,733
Less: Accumulated depreciation (32,289) (238,419)
---------- ----------
Net property, plant, and equipment $ 127,439 $ 187,314

There are no capitalized leases included above. All equipment leases
maintained by the Company are expense leases, which are expensed as paid. The
Company has lease committments for office and manufacturing facilities; and
office equipment of $53,947; $41,902; $36,602; $36,602; $36,602 and $11,454 in
the years 2000 through 2005 respectively.

Note 7: Other Assets

License Agreement: In June 1995, Trident, a wholly owned subsidiary of the
Company, entered into a license agreement (Agreement) with Trade Partners
International, Inc. (TPI) to acquire the exclusive license to certain patent
rights conveyed to TPI by The University of California as operators of Los
Alamos National Laboratory (patent holder) related to the development,
marketing and sales rights to certain specified magnetic and/or magnet
technology.

<PAGE> 58

credited to that year's maintenance fee and the maintenance fee requirement is
considered met if the royalty payments during an Agreement year are equal to
or exceed the required maintenance fee.

Trademark: The trademark "PT Night Sights" has been capitalized at cost and
is being amortized over 17 years.

Other Assets of the Company are as follows:

1999 1998
---------- ---------
PT Night Sight Trademark $ 25,000 $ 25,000
Subsidiary Bankruptcy Excess Reorganization Value 511,303 511,303
License Agreement 75,000 75,000
Prepaids and deposits 8,769
Amortization (243,666) (196,488)

Note 8: Short-Term Borrowings

Current portion of Long Term Debt in 1999 includes:

Lee Pitts $ 18,614
Liberty Bank 40,072
Odyssey Group 19,729

<PAGE> 59

Note 9: Long-Term Debt and Related Matters

The President of the Company and her husband, CEO of the Company, have
advanced personal funds to the Company to cover cash operating shortfalls.
These advances were made during various critical periods when bank financing
or the sales of shares were not economically feasible due, in part, to the
Company's creditworthiness and cash flow position. These advances have been
made over a period of years and are not represented by a note payable. The
balance of the advances by the Wilson's is $95,828 at December 31, 1998 and
$11,896 at December 31, 1999. No maturity date or interest rate has been
established.

The Company is also indebted to the Odyssey Group, a payroll service in
Albuquerque, NM, Liberty Bank, and Lee Pitts. The loan from Liberty Bank is
secured by Equipment and was repaid in 2000. The Loan from Lee Pitts is
unsecured and was repaid in 2000. Mr. Pitts is a former officer and employee
of the IWI subsidiary.
1999 1998
--------- ---------

Odyssey Group(Recovar Group) $ 39,296 46,080
Liberty Bank 40,072 0
Wilsons(advances) 95,828
--------- --------
Notes Payable $ 73,410 $141,908

Note 10: Stockholders' Equity

At December 31, 1999 and 1998. the number of authorized and issued common
shares and the related par value and dividends paid are as follows:

1999 1998
------------ ------------

Common stock, authorized 200,000,000 50,000,000
Common stock issued 50,083,753 35,023,113
Common stock outstanding 45,390,850 33,477,830
Common stock, per share par value $ 0.001 $ 0.001
Cash dividends paid on common stock none none

As part of the Company's re-organization, certain payables were accrued and
expensed by IWI-New Mexico. These expenses were later booked as an
intercompany transaction and paid by 21st Century Techanologies, Inc., which,
again expensed the transactions as accounts payable. These transactions were
corrected in the 1997 financial statements and the 1997 retained earnings has
been restated to show these adjustments.

Note 11: Earnings (Loss) Per Common Share

<PAGE> 60

SFAS No. 128, Earnings per Share applies to entities with publicly held common
stock and establishes standards for computing and presenting earnings per
share (EPS). Basic EPS excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.

Note 12: Income Taxes

At December 31, 1999, the Company has available net operating loss
carryforwards of approximately $2,704,715 for federal income tax purposes that
begin to expire in 2008. The federal carryforwards resulted from losses
generated in prior years and have created a deferred tax asset of $919,603.
It is believed to be "more likely than not" that taxable income in the periods
prior to the expiration of the deferred tax assets will not be sufficient for
the deferred tax assets to be recognized; therefore, a valuation allowance of
$919,603 has been recognized to offset the deferred tax assets. There are no
deferred tax liabilities. Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax assets as
of December 31, 1999 and 1998 are as follows:

1999 1998
----------- ------------
Deferred tax assets:
Net operating loss carryforwards $ 2,704,715 $ 1,822,786
Deferred Tax Asset, Net 919,603 619,747
Valuation allowance for deferred tax assets (919,603) (619,747)
------------ ------------
Deferred tax assets 0 0

Note 13: Related-Party Transactions/Stock-Based Compensation

The Company accounts for stock-based compensation using the principles
prescribed in Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation which states that "...the fair value of the
equity instruments used to measure the transaction if that value is more
reliably measurable than the fair value of the consideration received."

In September of 1994, the board of directors entered into a consulting
contract with Ken Wilson, (husband of the current Company President). This
agreement required the Company to issue 1,000,000 shares of Company common
stock to Mr. Wilson and to compensate him at the rate of $10,000.00 per month.
Should the Company be unable to pay Mr. Wilson in cash, the Company would
issue Mr. Wilson its common stock in amount equal to $0.02 per share (which
was the share price at the time the consulting contract was entered into
between the Company and Mr. Wilson). The Company paid Mr. Wilson through
December of 1994. In January of 1995, the Company and Mr. Wilson
re-negotiated the agreement to remunerate him solely in stock of the Company.

<PAGE> 61

This was necessary because of the Company's cash flow position and inability
to pay Mr. Wilson the previously agreed upon fee under the original consulting
agreement. The agreement required Mr. Wilson to perform services for the
Company in exchange for 500,000 shares of Company common stock per month. As
of the expiration date of the agreement, January 5, 1998, Mr. Wilson earned a
total of 19,000,000 shares of the Company's common stock. The agreement
required that the stock not be issued until after the end of the initial term
of the agreement, which was three years. The stock has not been issued and
the shares will be subject to Rule 144 of the US Securities and Exchange
Commission when and if issued and will be further subject to a five year
"lock-up" requirement. This requirement precludes Mr. Wilson from selling said
stock for five years from the date of issuance. To record the prior years'
compensation expense, 1998's Beginning Retained Earnings was debited for
$350,000 and Compensation Expense in January of 1998 was debited for $10,000.
A new classification (stock earned, not issued) was added to the Stockholder's
Equity section of the balance sheet and was credited for $360,000 to record
the stock not issued to Mr. Wilson.

During 1999 and 1998 the Company issued shares to employees for bonus and
other compensatory services. These shares were valued at the then market rate
of $0.08 per share. The Company had not convertible debt outstanding during
these periods.

The Wilson's have advanced personal funds to the Company to cover cash
operating shortfalls (See Note 9).

Note 14: Commitments and Contingent Liabilities

none

Note 15: Risks and Uncertainties

In the future, these products will be marketed outside the United States,
which will subject the Company to foreign currency fluctuation risks.

The Company's firearm replica and tire sealant import division has not been
tested in the U. S. market and the estimated demand for these products may not
reach the Company's

<PAGE> 62

expectations.

Note 16: Fair Values of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
financial instruments:

Cash and Cash Equivalents. The carrying amount reported in the balance sheet
for cash and cash equivalents approximates its fair value.

Accounts Receivable and Accounts Payable. The carrying amount of accounts
receivable and accounts payable in the balance sheet approximates fair value.

Short-Term and Long-Term Debt. The carrying amount of the debts recorded in
the balance sheet approximates fair value.

The carrying amounts of the Company's financial instruments at December 31,
1999 and 1998 represent fair value.

Note 17: Comprehensive Income

Note 18: Business Segments

Note 19: Sale of Common Stock/Underwriting

On or about March 1, 1998, the Company entered into an agreement with 21st
Century Technologies Funding Limited Partnership, a Virginia Limited
Partnership (21st Century

<PAGE> 63

Technologies Funding LLC, a Virginia Limited Liability Company, General
Partner). The Company agreed to sell 10,000,000 shares of unregistered common
stock to the partnership at $0.08 per share, which would raise $800,000.00 in
unrestricted working capital for general corporate uses. The Partnership
offered for sale 1000 partnership units priced at $1,000.00 each to up to 35
non-accredited investors and unlimited offerings to accredited investors. The
offering began on March 30, 1998 and raised $720,000 for 9,000,000 shares.

Note 20: Non-Operating Expenses

During 1998, the Company entered into a settlement agreement settling a
certain action styled Paul A. McCullough vs. Innovative Weaponry, Inc., At Law
No. 96-133 in the Circuit Court for Arlington County, Virginia, which
consisted, in part, of a Confessed Judgement Promissory Note obligating IWI to
pay McCullough in monthly installments of $1647.67. The balance owing on said
note was settled by issuing John E. McCullough, Sr., Two Hundred Twelve
Thousand Four Hundred (212.400) shares of common stock, without restrictive
legend, of 21st Century Technologies, Inc.

Note 21: Subsequent Events

The Company's attorneys determined that the 1995 filing with the State of
Nevada which raised the Company's authorization to issue shares to 500,000,000
had not been recorded by the State. The number of shares issued and
outstanding were not in excess of of the state approved authorized amount,
however, committments for future issuance would have caused the Company to be
in violation of its state charter. Confirmations were obtained from all of
the Company's stockholders verifying the Company's issued and

<PAGE> 64

outstanding shares. The Company took action to re-complete the filing
requirements with the State of Nevada and has authorization to issue up to
200,000,000 shares.

Note 22: Earnings Per Share

For the Year Ended 12/31/98
-------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------- -------------- ---------
Income 103,869

Basic EPS

Income available to common stockholders 103,869 35,023,113 $0.00

Effect of Dilutive Securities

Common Stock Earned, not issued 19,000,000
-----------
Diluted Earnings Per Share

Income available to common stockholders
plus assumed conversions 103,869 54,023,113 $0.00

For the Year Ended 12/31/99
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------ ------------- ----------
Income (881,929)

Basic EPS

Income available to common stockholders (881,929) 44,096,450 ($0.02)

Effect of Dilutive Securities

Common Stock Earned, not Issued 19,000,000
------------
Diluted Earnings Per Share

Income available to common stockholders
plus assumed conversions (881,929) 63,096,450 ($0.00)

<PAGE> 65

PART III

ITEM 1: INDEX TO AND DESCRIPTION OF EXHIBITS

Exhibit
Number Description Location

1.1 Articles of Incorporation of First National *
Holding Corporation dated January 28, 1994

2.2 Certificate of Amendment to Articles of *
Incorporation filed September 19, 1994

2.3 Certificate of Amendment to Articles of *
Incorporation filed September 29, 1995

2.4 Articles of Merger filed May 19, 1995 *

2.5 Bylaws of 21st Century Technologies, *
Inc. filed September 28, 1994

6.1 Lease Agreement between 21st Century *
Technologies, Inc. and Landlord

6.2 Los Alamos Exclusive Patent License *

6.3 Agreement dated May 23, 1995 between the *
Regents of the University of California and
Trade Partners International, Inc

6.3 Trident Sub-License Agreement *
dated July 31, 1996

6.4 Limited Exclusive Patent License Agreement *
between the Regents of the University of
California and Trident Technologies Corporation

6.5 Application and Permit for Firearms *
Importation dated November 20, 1998

6.6 License of Dept. of Treasury, Bureau *
Of Alcohol, Tobacco and Firearms

6.7 Representation Agreement dated *
May 3, 1999

6.8 Registry of Radioactive Sealed Sources *
and Devices dated February 20, 1996

6.9 U.S. Nuclear Regulatory Commission *
Materials License dated October 18, 1996

<PAGE> 66

6.10 NRC Registration Amendment dated *
August 22, 1997

6.11 Request to Rescind Confirmatory Order *
dated September 14, 1998

6.12 Distribution and Agency Agreement *
dated October 15, 1999

6.13 Radioactive Materials License dated *
October 09, 1999

6.14 Lease Agreement between Trident Technologies **
Corporation and Dixie Business Development

6.15 Lease Agreement between 21st First Century **
Technologies, Inc. and Dyer Business Associates

6.16 Employment Agreement between 21st First Century **
Technologies, Inc. and Douglas N. Spring

6.17 Employment Agreement between 21st Century **
Technologies, Inc. and Burren Palmer

6.18 Agreement between 21st Century Technologies, **
Inc. and Princeton Research, Inc.

8.1 U.S. Bankruptcy Court Order Confirming *
Plan of Reorganization dated February 1,
1995

22.1 Subsidiaries of the Registrant *

27.1 Financial Data Schedule **

*Filed with company's initial Form 10-SB on January 27, 2000.
** Filed with company's Form 10-SB Amendment No. 1.

<PAGE> 67

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934,
21st Century Technologies, Inc. has caused this first amended registration
statement to be signed on its behalf by the undersigned, who is duly
authorized.

Date December 21 2000. 21st Century Technologies, Inc.

By: /s/ Kenneth E. Wilson
_______________________
Kenneth E. Wilson
Chairman of the Board
Chief Executive Officer