IMSCO INC /MA/, SB-2/A, 1997-07-16

IMSCO INC /MA/
SB-2/A, 1997-07-16
MEDICINAL CHEMICALS & BOTANICAL PRODUCTS

Previous: MUNICIPAL INVT TR FD MULTISTATE SERIES 206 DEFINED ASSET FDS, 485BPOS, 1997-07-16

Next: SECURITY CAPITAL ATLANTIC INC, S-8, 1997-07-16

As filed with the Securities and Exchange Commission on July 16, 1997

Registration No. 333-19707
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------

Amendment No.2 to

FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

----------

IMSCO TECHNOLOGIES, INC.
(Exact names of registrant as specified in its charter)

Delaware ( ) 04-3021770
(State or other (Primary Standard Industrial (I.R.S. Employee
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)

40 Bayfield Drive
North Andover, Massachusetts 01845
(508) 689-2080

(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

----------

Sol L. Berg
IMSCO Technologies, Inc.
40 Bayfield Drive
North Andover, Massachusetts 01845
(508) 689-2080
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:
David E. Fleming, Esq.
Epstein, Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
(212) 351-4925

----------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, please check the following box. |X|

CALCULATION OF REGISTRATION FEE

====================================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered (1) Per Unit (1) Offering Price (1) Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Common Stock, $.001 par value ....................... 2,422,727 $ 2.875 $7,396,593 $ 2835.56
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value (2) ................... 242,273 $ 1.45 $ 351,294 $ 121.14
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 (3) ............................. 127,272 $ 1.32 $ 168,000 $ 57.93
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ............................................... 2,792,272 $ 3,262.71*
====================================================================================================================================

</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(b).

(2) Issuable upon exercise of the Class A Warrants.

(3) Issuable upon exercise of the Class D Warrants.

*Previously paid.
----------

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>

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

Subject to Completion, dated July 16, 1997

IMSCO TECHNOLOGIES, INC.

2,792,272 Shares of Common Stock

The persons named under "Selling Shareholders" herein propose to sell an
aggregate of 2,792,272 shares of Common Stock (the "Shares") of IMSCO
Technologies, Inc., a Delaware corporation (the "Company") (i) in one or more
transactions (which may include block transactions) at negotiated prices or at a
price or prices related to the then current market price of the Company's Common
Stock, or (ii) to a broker (for resale by such broker as principal) at a price
or prices related to the then current market price of the Company's Common
Stock, less such discount as shall be agreed upon by a Selling Shareholder and
the Broker, or (iii) by a combination of the methods described in clauses (i)
and (ii). See "Plan of Distribution."

Of the 2,792,272 Shares offered hereby, 2,422,727 are or are anticipated to
be issued and outstanding on the effective date of this Prospectus, 242,272 are
issuable upon the exercise of outstanding Class A Warrants exercisable at a
price of $1.45 per Share, and 127,272 are issuable upon exercise of the
outstanding Class D Warrants exercisable at a price of $1.32 per Share. The
Class A Warrants and Class D Warrants are collectively referred to herein as the
"Warrants." The exercise price of the Warrants and options may change as a
result of a variety of circumstances. This Prospectus does not authorize the
sale of any Warrants or options by any person. If all of the Warrants and
options are exercised, the Company will receive proceeds of approximately
$519,293 from the purcshase of the Common Stock underlying the Warrants. The
proceeds from the sale of the remaining Shares offered hereby will be received
solely by the Selling Shareholders. The Company estimates that it will incur
approximately $54,272 of costs and expenses in connection with this offering
including, without limitation legal and accounting fees, and securities filing
fees. See "Use of Proceeds."

The Selling Shareholders, and the brokers and dealers through which the
Shares may be offered, may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933, as amended, in which event any
compensation received by such brokers and dealers may be deemed to be
underwriters' compensation under such Act.

The Common Stock is listed on the NASDAQ OTC Bulletin Board under the
symbol "IMSO". On July 14, 1997 the closing price for the Common Stock on the
OTC Bulletin Board was $2.25 per share. See "Price Range of Common Stock."

AN INVESTMENT IN THE SECURITIES OFFERED PURSUANT
TO THIS PROSPECTUS IS SPECULATIVE AND INVOLVES
A HIGH DEGREE OF RISK. SEE "RISK FACTORS".

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

----------

The date of this Prospectus is July __ , 1997

----------

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; Room 1204, Everett
McKinley Dirksen Building, 210 South Dearborn Street, Chicago, Illinois 60604; 7
World Trade Center, New York, New York 10048; and Suite 500 East, Museum Square
Building, 5757 Wilshire Boulevard, Los Angeles, California 90036. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates.

The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form SB-2, Registration No. 333-19707 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Shares of which this Prospectus is a
part. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all the information set forth in the Registration
Statement, including the exhibits filed as part thereof and otherwise
incorporated therein to which reference is hereby made. Copies of the
Registration Statement and the exhibits may be inspected without charge at the
offices of the Commission, and may be obtained form the Public Reference Section
of the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549 upon payment
of the prescribed fees. In addition, the Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission through the Electronic Data Gathering, Analysis and Retrieval System
("EDGAR"). The Registration Statement of which this Prospectus forms a part has
been filed electronically through EDGAR and may be retrieved through the
Commission's Web site on the Internet.

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

<PAGE>

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

PROSPECTUS SUMMARY

The following is a summary of certain information contained in this Prospectus
and is qualified in its entirety by the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Investors should consider carefully the information set forth in this Prospectus
under the heading "Risk Factors."

The Company

IMSCO Technologies, Inc., a Delaware corporation ("IMSCO" or the "Company")
is a development stage company. The Company develops and is attempting to
commercialize, market and license electrostatic separation products based on its
proprietary technologies. Electrostatic separation takes advantage of the
fundamental electrical properties of attraction, wherein unlike or opposite
charges attract each other, and repulsion, wherein like or the same charges
repel each other, and uses charged materials to selectively separate other
substances. In the last three years, the Company has developed several
separation technologies based on electrostatics combined with mechanical
separation. This technology was originally developed by the Company for the
specific purpose of separating viruses and viral particles from human plasma. In
1993, the Company successfully designed an electrostatic separation technology
which removes on demand caffeine from brewed liquids, such as coffee and tea.
The Company calls its decaffeination technology the "DECAFFOMATIC" (herein
"DECAFFOMATIC" or the "Decaffeination System"). The Company calls its plasma
separation technology the "PLASMA PURE".

Based on its basic and early stage research and testing, it is the
Company's belief that the PLASMA PURE is capable of removing significant amounts
of infectious viral particles from human plasma. Although further significant
research and testing needs to be conducted, the Company believes that the PLASMA
PURE device may be capable of removing viral particles without significantly
affecting the other chemical properties of the plasma. Additionally, based on
the Company's internal laboratory testing and research conducted by the Company
at the University of Massachusetts in 1994 and 1995 and at the University of
Akron in 1996 and 1997, the Company believes that the DECAFFOMATIC can remove in
excess of 95% of the caffeine from brewed beverages such as coffee and tea. In
1993, separate patent applications were filed by the Company with the U.S.
Office of Patents and Trademarks for the PLASMA PURE and DECAFFOMATIC separation
technologies. On August 22, 1995 the Company was granted a patent by the United
States Patents and Trademarks Office ("PTO"), Patent No. 5,443,709 for
"Apparatus for Separating Caffeine From a Liquid Containing the Same". On April
2, 1996 the Company was granted a patent by the PTO, Patent No. 5503724, for
"Process for Decaffeinating Caffeine Containing Liquid". The Company believes
that it has substantially completed its research and development of the
DECAFFOMATIC technology and is ready to introduce its decaffeination products to
the commercial institutional coffee brewer market in 1997.

The Company's objective is to become a leader in the development of
electrostatic separation market by capitalizing on its proprietary technology.
The Company's strategy is to initially focus on commercializing and launching
the DECAFFOMATIC products. The Company is also pursuing further research and the
development of the PLASMA PURE technologies and related products and other
specific separation technologies that may be used with particular proprietary
and non-proprietary products manufactured by other companies. Although there can
be no assurances, the Company intends to implement its strategy by (i)
continuing to establish manufacturing contracts with third party contract
manufactures for its developed products, (ii) expanding its research and
development activities for additional uses and applications applying its
proprietary technologies, (iii) establishing marketing agreements, licensing
agreements and distribution agreements with recognized market leaders for
marketing and distribution of its products, and (iv) seeking regulatory approval
for its proposed medical products such as PLASMA PURE.

In l995, the Company formally established a new subsidiary called Decaf
Products, Inc. ("DPI"), which was incorporated in the State of Delaware on April
5, l995, that will manufacture and directly market the DECAFFOMATIC technology
and products in North America. On September 20, 1996, DPI entered into a
Manufacturing and Distribution Agreement with NEWCO Enterprises, Inc. ("NEWCO"),
of St. Charles, Missouri to manufacture a coffee brew basket, incorporating the
decaffeination technology, for DPI's sales to the institutional coffee maker
marketplace in North America (the "NEWCO Agreement"). Under the NEWCO Agreement,
NEWCO was granted the exclusive right to market and distribute the products
incorporating the Company's decaffeination technology to the so-called "office
coffee supply" market segment in North America for a period of three years. Over
the past four months, the Company has been working with NEWCO to develop, design
and test working models, and assist in the design of moulds for the production
of the decaffeination device. Although there are no assurance, it is anticipated
that sales under the NEWCO Agreement will occur in 1997. See "Business
- -Marketing and - Manufacturing." Although there can be no assurance, the Company
intends to license the DACAFFOMATIC technology to another unrelated company for
manufactures marketing aand distribution in the rest of the world. See "Business
- - Marketing."

In December 1995, the Company formally established another subsidiary,
BioElectric Separation and Testing, Inc. ("BEST"), a Delaware corporation, to
further conduct research and development on the PLASMA PURE and all related
medical applications of the Company's core electrostatic separation technology.
The Company has only considered limited early stage basic research with respect
to the PLASMA PURE electrostatic separation technology and will need to expand
an estimated $.5 to $1 million over the next 18 months in order to conduct the
necessary clinical trials and research to submit the PLASMA PURE for approval by
the United States Food and Drug Administration ("FDA"). The PLASMA PURE has not
been submitted to the FDA for approval and, if submitted, there is no assurance
that it will be approved. Given the limited funds available to the

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

<PAGE>
- --------------------------------------------------------------------------------

Company and consequent delays in conducting the necessary research and testing,
the PLASMA PURE will not likely be submitted to the FDA, if at all after
considering further research results, until at least 1998. See "Risk Factors
Research and Development; Government Regulation;" "Business - Research and
Development."

On September 20, 1996, the Company entered into a stock purchase agreement
and a separate media purchase agreement ("Media Purchase Agreement") to sell an
aggregate of 2,272,728 shares of its common stock, par value $.001, to two
purchasers. Hampton Tech Partners II, LLC, a Colorado limited liability company
("HTP-II") which purchased 1,136,364 shares under the Stock Purchase Agreement,
and Proxhill Marketing, Ltd., a private media and advertising company based in
Colorado ("PML"), which received 1,136,364 shares under the Media Purchase
Agreement. The closings under the agreements occurred in November and December
1996, under the Media Purchase Agreement the sales price was $1.32 per share and
gross proceeds and prepaid media credits received by the Company were
$3,000,000. The proceeds were paid $1,500,000 in cash by HTP-II under the Stock
Purchase Agreement and $1,500,000 in media credits to be used at the Company's
direction by PML. The Company intends to use the media credits during the next
18 months to market its DECAFFOMATIC products under the Stock Purchase
Agreement. In both stock sales, the purchasers HTP-II and PML were granted
certain registration rights, and accordingly 2,272,728 of the shares being
offered herein are being registered for HTP-II and PML as Selling Shareholders.

HTP-II and PML, the holders of 2,400,000 of the Shares, including shares
issuable upon exercise of the Class D Warrants, in the aggregate being
registered hereunder, have agreed to contractually have the Shares restricted on
sale under a "lock-up" arrangement contained in the HTP-II Stock Purchase
Agreement and the PML Media Purchase Agreement (the "Lock-Up Agreements"). Under
the Lock-Up Agreements, one-third (1/3) of the Shares will be released at any
time after the effective date of the Registration Statement. After the release
of the initial one-third of the Shares, the remaining two-thirds (2/3) of the
Shares shall be locked-up and not sold until July 15, 1997. During the "lock-up"
period, after this Prospectus has become effective, HTP-II shall have the right
to distribute the Shares to its respective shareholder-members, provided that
each shareholder-member shall be individually subject to the "lock-up" time
periods. After the respective "lock-up" has expired, each holder, including the
various shareholder-members of HTP-II, shall only sell Shares at the same rate
as permitted under Rule 144.

The Company was originally formed in 1986 under the laws of the State of
Nevada. In 1987 the Company changed its corporate domicile from Nevada to
Massachusetts since the corporate operations were located in Massachusetts,
which was accomplished through action by the shareholders and the Board of
Directors in 1987. The Company's name at that time was IMSCO, Inc. In July 1996,
the Company was reincorporated in Delaware as IMSCO Technologies, Inc. In order
to effectuate this change, the Company proposed the implementation of the
following plan. In May 1996, the Company filed a Certificate of Incorporation in
Delaware incorporating a new wholly-owned subsidiary, IMSCO Technologies, Inc.
The Board of Directors of the Company at a meeting held in May 1996 voted,
subject to the adoption by the stockholders, to merge into its wholly-owned
subsidiary, IMSCO Technologies, Inc., a Delaware corporation. On July 9, 1996,
the stockholders of IMSCO, Inc., voted to approve the change of corporate
domicile from Massachusetts to Delaware. Therefore, on July 18, 1996, there
remained one surviving corporation and the name of this surviving corporation
became IMSCO Technologies, Inc. As of the effective date of the merger, each
stockholder of the Company held one share of common stock, par value $.001 per
share, of IMSCO Technologies, Inc. for each one share of common stock, par value
$.001 per share, of IMSCO, Inc. previously held by him. Unless the context
otherwise requires, "IMSCO" and the "Company" refer to IMSCO Technologies, Inc.,
a Delaware corporation.

The Company's principal business address is 40 Bayfield Drive, North
Andover, Massachusetts 01845 and its telephone number is (508) 689-2080.

Risk Factors

The shares of Common Stock offered hereby involve a high degree of risk,
including but not limited to the Company's history of operating losses and
accumulated deficit; early stage of product commercialization; dependence on new
products and technologies; uncertainty of market acceptance of its products;
uncertainty of results of research and no clinical trials for PLASMA PURE;
dependence on limited marketing partners; potential adverse effect of
competition and technological change; no manufacturing experience; dependence on
patents, trade secrets and proprietary rights; effects of FDA and other
government regulation; effects of international sales; future capital needs and
uncertainty of additional financing; dependence upon key personnel; product
liability exposure and potential unavailability of insurance; control by
existing stockholders; anti-takeover provisions; most of proceeds going to
Selling Shareholders; limited prior public market for the Common Stock;
volatility of the Common Stock price; substantial number of shares eligible for
future sale; substantial registration rights; potential adverse impact on future
market price from sales of shares; adverse impact from potential release of
shares to lock-up; absence of dividends, and dilution to investors. See "Risk
Factors" for a more complete discussion of risk factors which should be
considered by potential investors.

The Offering

Securities Offered.............. 2,792,272 shares of Common Stock, of
which 2,422,727 are or anticipated to be
be issued and outstanding on the
effective date hereof, 242,272 are
issuable upon exercise of the Class A
Warrants at $1.45 per share, and 127,272
are issuable upon exercise of the Class
D Warrants exercisable at $1.32 per
share. See "Description of Securities."

Common Stock.................... The Company has 15,000,000 shares of
Common Stock authorized of which
approximately 6,167,424 are issued and
outstanding as of the date hereof. See
"Risk Factors", "Dilution", and
"Description of Securities."

Common Stock to be
Outstanding

after Offering.................. 6,167,424 shares of Common Stock,
excluding the 369,545 shares that may be
issued upon exercise of the Warrants.

- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
OTC Bulletin
Board Symbol.................... IMSO
- --------------------------------------------------------------------------------

<PAGE>

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

SUMMARY FINANCIAL INFORMATION

The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this Prospectus. Such
information should be read in conjunction with such financial statements,
including the notes thereto. The Company is in the development stage and has not
had operating revenue or income for any period from January 1, 1993, to the date
of this Prospectus.

<TABLE>
<CAPTION>
Three Months Ended
Years ended December 31 March 31
---------------------------- ---------------------------
1996 1995 1997 1996
----------- ----------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue $ 3,022 $ 3,070 $ 3,245 $ 0
Operating Expenses 757,824 408,700 480,949 23,599
Operating Income (Loss) (762,302) (405,630) (477,704) 23,599
Net Income (Loss) (762,758) (406,630) (477,704) (23,599)
Let (Loss) per Share ($ .23) ($ .14) ($ .08) ($ .01)
Weighted average shares Outstanding 3,274,954 2,899,790
</TABLE>

<TABLE>
<CAPTION>
Three Months Ended
Years ended December 31 March 31
---------------------------- ---------------------------
1996 1995 1997 1996
----------- ----------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash $ 450,880 $ 8,634 $ 287,228 $ 2,990
Current Assets 2,150,880 8,634 1,751,728 2,990
Total assets 2,251,944 12,980 1,917,022 7,336
Total liabilities 77,883 63,343 65,385 61,297
Accumulated deficit
during development stage (1,989,212) (1,226,454) (2,466,916) (1,250,052)
Total stockholders' equity (deficit) 2,174,061 (50,363) 1,851,637 53,961
</TABLE>

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

<PAGE>

RISK FACTORS

The securities offered hereby involve a high degree of risk, including, but
not limited to, the several factors described below. These securities should be
purchased only by persons who can afford a loss of their entire investment.
Investors should consider carefully the following risk factors inherent in and
affecting the business of the Company and this offering in evaluating an
investment in the securities offered hereby. This Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, or Section 21 E of the Securities Exchange Act of 1934,
as amended, or subsequent expansions or replacements of such sections, including
information with respect to the Company's plans and strategy for its business.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes", "anticipates", "plans", "estimates",
"feels", "expects" and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause actual events or the Company's actual results to differ materially from
those indicated by such forward-looking statements. These factors include,
without limitation, those set forth below under the caption "Prospectus
Summary", "Risk Factors", "Business" and under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in this Prospectus.

Development Stage Company - History of Operating Losses and Accumulated Deficit.

The Company is in the development stage and its operations are subject to
all the problems, expenses, delays and other risks inherent in the establishment
of a new business enterprise, as well as the problems inherent in developing and
marketing a new product/service and in establishing a name and business
reputation. The likelihood of the success of the Company must also be considered
in connection with the rapidly and continually changing technology and the
competitive environment in which the Company will operate. There can be no
assurance that the Company's operations will result in its becoming or remaining
economically viable. Potential investors should be aware of the problems,
delays, expenses and difficulties encountered by any company in a developmental
stage, many of which may be beyond the Company's control. These include, but are
not limited to, unanticipated regulatory compliance, marketing problems and
intense competition that may exceed current estimates. The Company has had no
revenues from operations to date and, because it is just beginning to enter the
commercial stage, it will likely sustain operating losses for an indeterminate
time period. The Company has incurred net losses in each year since inception,
including net losses of approximately $762,758 during the year ended December
31, 1996. As of December 31, 1996, the Company had an accumulated deficit from
the development stage of approximately $1,989,212. These losses have resulted
primarily from expenses associated with the Company's research and development
activities and general administrative expenses. The Company anticipates that its
expenses will increase in the future. The amount of future expenses,
corresponding further potential net losses and time required by the Company to
reach profitability, if ever, are uncertain. The Company's ability to generate
significant revenue and become profitable is dependent in large part on its
commercializing the Company's lead product, the DECAFFOMATIC, expanding its
manufacturing contracts with third party manufacturers, entering into additional
marketing agreements and the ability of its marketing contractors to
commercialize successfully products incorporating the Company's technologies.
There can be no assurance that the operations of the Company will generate
significant revenue or will ever be profitable.

Going Concern Qualification in Independent Auditor's Report

The report by the Company's independent auditors included in this
Prospectus contains an explanatory paragraph regarding the Company's ability to
continue as a going concern. Such report states that the Company incurred a loss
of $762,758 for the fiscal year 1996 and has incurred continuing losses from
development stage operations. The continuing losses raise substantial doubt
about the Company's ability to continue as a going concern. In the opinion of
management, existing funding without any revenues will be sufficient to fund the
Company's operating expenses and capital requirements for at least the next
six months.

Future Capital Requirements; Uncertainty of Future Funding.

IMSCO'S operations to date have consumed substantial amounts of cash. As
the Company continues its research and development of its electrostatic
technologies in various areas, it expects to continue spending substantial
amounts over the foreseeable future. The Company anticipates that its existing
capital resources will be adequate to satisfy its current capital requirements
for at least the next 6 months. Thereafter, the Company will need to raise
substantial additional funds through equity or debt financings, or sale or
licensing of its technology and products. There can be no assurance that any
such additional funding will be available to the Company or that the Company
will have sales of its products. In the event the Company has insufficient
working capital, and is unable to locate additional capital on acceptable terms,
the Company may be required to curtail its operations substantially, including
its research and development activities, and consequently purchasers of the
Shares may suffer significant or complete economic loss of their investment. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Early Stage of Product Commercialization; Technological Uncertainties.

The Company is in the development stage, and has only recently begun to
enter the early stage of product commercialization with its DECAFFOMATIC
products. The development of any products will require significant further
research, development, testing and regulatory approvals and additional
investment prior to commercialization. Substantially all of the Company's
resources have been, and for the foreseeable future will continue to be,
dedicated to the discovery, development and commercialization of electrostatic
separation technologies, most of which are still in the early stages of
development and testing. While the Company believes that the development of the
DECAFFOMATIC technology is substantially complete and plans are being made to
introduce the DECAFFOMATIC product to the market in 1997, there are a number of
challenges that the Company must successfully address to complete any of its
development efforts. With respect to PLASMA PURE, although the results of
initial basic research by the Company and/or its collaborators was positive, it
may be inconclusive and may not be indicative of results that will be obtained
in human clinical trials. As results of particular preclinical studies and
clinical trials are received by the Company, the Company may abandon projects
such as PLASMA PURE, which it might otherwise have believed to be promising,
some of which may be described in this Prospectus. The Company presently is
pursuing product opportunities that will require extensive additional capital
investment, research, development, testing, regulatory clearance or approvals
prior to commercialization. There can be no assurance that the Company's
development programs will have necessary capital funding, will be successfully
completed, or that required regulatory clearance or approvals will be obtained
on a timely basis, if at all.

In addition, the product development programs conducted by the Company and
its collaborators are subject to risks of failure inherent in the development of
product candidates based on new technologies. These risks include the
possibility that the technologies used by the Company will prove to be
ineffective or any or all of the Company's products or technologies needing FDA
clearance will prove to be unsafe or toxic or otherwise fail to receive
necessary regulatory approvals; that the product candidates, if safe and
effective, will be difficult to manufacture on a large scale or uneconomical to
market; that the proprietary rights of third parties will preclude the Company
or its collaborators from marketing products utilizing the Company's
technologies; or that third parties will market superior or equivalent products.
There can be no assurance that any medical products being developed by the
Company or others will be successfully developed or commercially accepted.
Accordingly, there can be no assurance that the Company's research and
development activities will result in any commercially viable products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business - "Research and Development" and "- Competition."

Government Regulations.

The production and marketing of some of the Company's products, including
the PLASMA PURE, are subject to regulation for safety and efficacy by numerous
federal, state and local agencies, and comparable agencies in foreign countries.
In the United States, the Federal Food, Drug and Cosmetic Act, the Public Health
Service Act, the Controlled Substances Act and other federal statutes and
regulations govern or influence the testing, manufacture, safety, labelling,
storage, recordkeeping, approval, advertising and promotion of the Company's
proposed products and technologies. Non-compliance with applicable requirements
can result in fines and other judicially imposed sanctions including the
initiation of product seizures, injunction actions, mandatory recalls and
criminal

<PAGE>

prosecutions based on products, promotional practices, or manufacturing
practices that violate statutory requirements. In addition, administrative
remedies can involve voluntary recalls or cessation of sale of products,
administrative detention, public notice, voluntary changes in labeling,
manufacturing or promotional practices, as well as the refusal of the government
to enter into supply contracts or to approve NDAs. The FDA also has the
authority to withdraw approval of instruments and devices in accordance with
statutory procedures.

The Company's PLASMA PURE system will be considered a medical device. As
such, the FDA would require the Company to obtain either a premarket
notification clearance under Section 510(k) of the Federal, Food, Drug, and
Cosmetic Act ("510(k)"), or an approved premarket application ("PMA") prior to
sales and marketing of the device in the United States. The 510(k) premarket
notification may be obtained if the medical device manufacturer can establish
that the newly developed product is substantially equivalent to another legally
marketed device. The FDA may also require clinical data or other evidence of
safety and effectiveness.

If the manufacturer cannot establish equivalence or if the FDA determines
that the device requires more extensive review, the FDA will require the
submission of PMA. The PMA must contain nonclinical and clinical investigation
results, a description of the methods, facilities and controls used for
manufacturing, and the proposed labeling for the device. The Company must
receive FDA approval for trials to test the PLASMA PURE device. FDA review of a
PMA would take at least six months following submission of Phase III test
results, and may take longer. (See "Business -- Government Regulation" for
details on the various phases) It is currently estimated by the Company that
with adequate funding, it would take approximately two years to receive FDA
clearance. No assurance can be given that approval of the PLASMA PURE PMA would
be granted.

Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities must be obtained in any foreign country prior
to the commencement of marketing of the product in that country. The approval
procedure varies from country to country, can involve additional testing, and
the time required may differ from that required for FDA approval. Although some
procedures for unified filings exist for certain European countries, in general
each country has its own procedures and requirements, many of which are time
consuming and expensive. Thus, substantial delays in obtaining required
approvals from both the FDA and foreign regulatory authorities can result after
the relevant applications are filed. After such approvals are obtained, further
delays may be encountered before the products become commercially available.

The Company has not prepared or filed any applications with the FDA or any
governmental authority for approval of the PLASMA PURE device or any related
product. No assurance can be given that any required FDA or other governmental
approval will be granted, or if granted, will not be withdrawn. Governmental
regulation may prevent or substantially delay the marketing of the Company's
proposed products, cause the Company to undertake costly procedures and furnish
a competitive advantage to the more substantially capitalized companies with
which the Company plans to compete. In addition, the extent of potentially
adverse government regulations which might arise from future administrative
action or legislation cannot be predicted.

Competition.

The Company competes with numerous firms, many of which are large,
multi-national organizations with worldwide distribution. These firms have
substantially greater capital resources, research and development and technical
staffs, facilities and experience in obtaining regulatory approvals, as well as

<PAGE>

in the manufacturing, marketing and distribution of products, than the Company.
Academic institutions, hospitals, governmental agencies and other public and
private research organizations are also conducting research and seeking patent
protection and may develop competing products or technologies on their own or
through joint ventures or other arrangements. In addition, recently developed
technologies or technologies that may be developed in the future are or could be
the basis for competitive products. No assurance can be given that the Company's
competitors will not succeed in developing technologies and products that are
more effective or less costly than any that are being developed by the Company.

The Company expects products approved for sale, if any, to compete
primarily on the basis of product uniqueness, efficacy, safety, reliability,
price and patent position. The Company's competitive position will also depend
on its ability to attract and retain qualified scientific and other personnel,
develop effective proprietary products, implement production and marketing
plans, obtain patent protection and secure adequate capital resources. See
"Business - Competition."

Uncertainty of Market Acceptance.

The Company has only recently commenced limited marketing activities.
Achieving market acceptance for the Company's products will require substantial
marketing efforts and the expenditure of significant funds. There can be no
assurance that the Company and its marketing contractors and partners will be
able to commercialize successfully or achieve market acceptance of the Company's
products and technologies. There is no assurance that the Company will be able
to create a successful marketing program, or that the Company's products can be
sold in a manner that will permit the Company to achieve long range
profitability. Further, there can be no assurance that the Company's competitors
will not develop competing technologies that are less expensive or otherwise
superior to the products of the Company. The failure to market successfully the
Company's products would have a material adverse effect on the Company's results
of operations and financial conditions.

Dependence on Marketing Partners.

The Company has limited experience in sales, marketing and distribution.
Therefore, the Company's strategy for commercialization of its products includes
entering into agreements with other companies to market current and certain
future products incorporating the Company's technology. To date, the Company has
entered into one such agreement with NEWCO. There can be no assurance that the
Company will be able to enter into additional marketing agreements on terms
favorable to the Company, if at all, or that current or future agreements will
ultimately be beneficial to the Company.

The Company is dependent for product sales revenues upon the success of
such third party marketing partners in performing their responsibilities. The
amount and timing of resources which may be devoted to the performance of their
contractual responsibilities by its marketing partners are not within the
control of the Company. There can be no assurance that such marketing partners
will perform their obligations as expected, pay any additional revenue or
license fees beyond the stated minimums to the Company or market any products
under the marketing agreements, or that the Company will derive any revenue from
such arrangements. Moreover, certain of the agreements provide for termination
under certain circumstances. There can be no assurance that the interests of the
Company will continue to coincide with those of its marketing partners or that
the marketing partners will not develop independently or with third parties
products which could compete with the Company's products, or that disagreements
over rights or technology or other proprietary interests will not occur. To the
extent that the Company chooses not to or is unable to enter into future
agreements, it would experience increased capital requirements to undertake the
marketing or sale of its current and future products. There can be no assurance
that the Company will be able to market or sell its current or future products
independently in the absence of such agreements. Additionally , although NEWCO
has agreed under the NEWCO Agreement, to certain minimum purchases of the
DECAFFOMATIC products, in the event that NEWCO purchases less than the required
minimum the Company's primarily legal remedy is to cancel the NEWCO Agreement.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business - Marketing."

Lack of Manufacturing and Sales and Marketing Experience

The Company has no experience in, and currently lacks the resources and
capability to, manufacture any of its proposed products on a commercial basis.
Initially, the Company anticipates that it will be dependent to a significant
extent on third party contract manufacturers or other entities for commercial
scale manufacturing of its products. Although it has no plans or intentions of
doing so, in the event the Company decides to establish a commercial scale
manufacturing facility, the Company will require substantial additional funds
and personnel and will be required to comply with extensive regulations
applicable to such facility. There can be no assurance that the Company will be
able to develop adequate commercial manufacturing capabilities either on its own
or through third parties. In addition, the Company does not anticipate
establishing its own sales and marketing capabilities in the foreseeable future.
There can be no assurance that the Company will be able to develop adequate
marketing capabilities either on its own or through third parties. See "Business
- - Manufacturing; - Marketing."

Possible Product Obsolescence.

The Company expects technological developments to continue at a rapid pace
in the electrostatic separation industries, and there can be no assurance that
technological developments will not cause the Company's technology to be
rendered obsolete. The Company's future success, if any, will be dependent upon
its ability to remain competitive with others involved in the development,
manufacture and marketing of similar products and technologies through its
continued capability to design high quality products in a cost efficient and
timely manner, of which there can be no assurance. See "Business."

No Assurance as to Protection of Intellectual Property; Dependence on
Intellectual Property.

The Company's success depends in large part on whether it can obtain
patents, maintain trade secret protection and operate without infringing on the
proprietary rights of third parties.

Patents have been granted to the Company for both method and devise in the
technology for the separation of caffeine from a brewed beverage. No other
patents have, as yet, been issued but it is expected that patents will be
issued. The Company believes that patent protection of its technologies,
processes and products is very important to its future operations. The success
of the Company's proposed products may significantly depend upon the Company's
ability to obtain patent protection. No assurance can be given that any
additional patents will be issued or if issued that they will have commercial
value to the Company. When a patent is granted, the cost of enforcing the
Company's patent rights in lawsuits, if necessary, may be significant and could
interfere with the Company's operations.

<PAGE>

is impossible. To the extent that the Company relies on unpatented proprietary
technology, no assurance can be given that others will not independently develop
or obtain substantially equivalent or superior technology or otherwise gain
access to the Company's trade secrets, that any obligation of confidentiality
will be honored or that the Company will be able to effectively protect its
rights to proprietary technology. Further, no assurance can be given that any
products developed by the Company will not infringe patents held by third
parties or that, in such case, licenses from such third parties would be
available on commercially acceptable terms, if at all. The Company's ability to
compete effectively with other companies will depend, in part, on its ability to
maintain the proprietary nature of its technologies. The Company intends to
market its products internationally, and the laws of some foreign countries may
not protect the Company's proprietary rights to as great an extent as do the
laws of the United States. There can be no assurance that the Company's
competitors will not independently develop comparable or superior technologies.
See "Business - Patents and License Rights."

Dependence Upon Key Management Personnel.

The success of the Company is substantially dependent upon existing
management. The Company considers Mr. Berg, Mr. Crose and Dr. Waldman to be key
executives. The loss of the services of Mr. Berg, Mr. Crose or Dr. Waldman, as
well as other key personnel, or any inability to attract and retain qualified
personnel to replace them in the event of their leaving the Company for any
reason, may adversely affect the Company's business. The Company has not applied
for key man life insurance on the lives of Mr. Berg, Mr. Crose or Dr. Waldman
and does not intend to. Because of the nature of its business, the Company will
be dependent upon its ability to attract and retain technological qualified
personnel, including competition from companies with substantially greater
resources than the Company. There is no assurance that the Company will
successfully recruit or retain personnel of the requisite expertise or in
adequate numbers to enable it to conduct its business as proposed.
See "Management."

Rapid Technological Change.

The market for biotechnology products has been characterized by rapid
technological change, frequent product introductions and evolving industry
requirements. The Company believes that these trends will continue into the
foreseeable future. The Company's success will depend, among other matters, upon
its ability to enhance its existing products and to successfully develop new
products that meet increasing customer requirements and gain market acceptance.
Achieving these goals will require continued substantial investment by the
Company in product development and marketing. There can be no assurance that the
Company will have sufficient resources to make these investments, that the
Company will be successful in developing product enhancements or new products on
a timely basis, if at all, or that the Company will be able to successfully
market these enhancements and new products once developed. Further, there can be
no assurance that the Company's products will not be rendered obsolete by new
industry standards or changing technology.

Products Liability and Other Claims.

The Company may be subject to substantial products liability costs if
claims arise out of problems associated with the products by the Company. The
Company currently has no product liability insurance; however, if product
liability insurance were to become available to the Company, it is anticipated
to be very expensive. Consequently, there can be no assurance that the Company
could afford such insurance, if available at all. The Company will seek to
maintain products liability coverage for the benefit of the Company to protect
the Company against such liabilities, but there can be no assurance that such
arrangements can be made, or if made, will be effective to insulate the assets
of the Company from such claims. The Company will attempt to maintain insurance
against such contingencies, in scope and amount which it believes to be
adequate. However, there can be

<PAGE>

no assurance that such product liability insurance will be available, or if
available, that it will adequately insure against such claim. If such insurance
is not obtained and maintained at sufficient levels, or if any product liability
claim were brought against the Company and were sustained for a sufficient
amount, it could have a material adverse affect on the business or financial
condition of the Company.

Limited Prior Market for the Common Stock.

There has only been a limited public market for the shares of the Company
on the OTC Bulletin Board. There is no assurance that an active public market
for the Common Stock will develop in the United States at any time in the
future. At July 14, 1997 the Company had approximately 6,167,424 shares
outstanding. Of these shares, approximately 4,987,442 outstanding shares,
including the 2,272,727 outstanding shares being registered in this Prospectus,
will be freely tradable without restriction. As long as there is a limited
public market for the Company's Common Stock, the placement of a significant
number of shares for sale in the market at any one time could be difficult to
achieve at then current market prices, and could cause a material decline in the
price of the Common Stock.

Volatility of Stock Price.

The market price of the shares of Common Stock, like that of the common
stock of many other technology companies, has been and is likely to be highly
volatile. Factors such as the results of clinical trials by the Company or its
competitors, other evidence of the safety or efficacy of the Company's or
competitors products, announcements of technological innovations or new
commercial products by the Company or its competitors, government regulation,
developments in patent or other proprietary rights of the Company or its
competitors, fluctuations in the Company's operating results, sales of large
amounts of stock by shareholders, and limited, undercapitalized and less
experienced market makers are among the many reasons which could have a
significant effect on the market price of the Common Stock. In addition, the
stock market has experienced and continues to experience extreme price and
volume fluctuations which have affected the market price of many technology and
biotechnology companies. See "Capitalization" and "Dilution".

Management of Changing Business.

The Company is a development stage company which has primarily devoted its
activities to research and development. As the Company begins to emerge from the
development phase to a commercial operations place, given the level of technical
and marketing expertise necessary to support its anticipated new products and
customers, the Company must attract and retain highly qualified and well-trained
personnel. There are a limited number of persons with the requisite skills to
serve in these positions, and it may become increasingly difficult for the
Company to hire such personnel. The Company's emergence from the development
phase may also significantly strain the Company's management, financial and
other resources. The Company believes that improvements in management and
operational controls and operations, financial and management information
systems will be needed to manage future emergence from the development and
commercial operating phase, should it occur. The failure to implement such
changes could have a material adverse effect upon the Company. See "Management."

<PAGE>

Products Reliability.

Most applications incorporating the Company's technologies are being
developed or have only begun to be introduced to the market. As a result of the
limited period of use and the controlled environment in which most of the
Company's technologies have been tested and used to date, there can be no
assurance that they will meet their performance specifications under all
conditions or for all applications. If any of the Company's technologies fail to
meet such expectations, the Company may be required to enhance or improve that
technology, and there can be no assurance that the Company would be able to do
so on a timely basis, if at all. Any significant reliability problems could have
a material adverse effect on the Company's business and prospects.

General Economic Conditions

The operations of the Company are subject to general economic conditions,
particularly relating to consumer spending and credit card payment practices.
The risks would include any potential restrictions imposed by governmental
authorities, changes in federal, state, or local tax laws applicable to the
Company, availability of skilled labor, availability of capital for future
needs, consumer purchasing habits and trends, etc. The Company may not have
sufficient capitalization to survive lack of market acceptance and economic
exigencies in general.

Potential Issuance of Additional Shares.

The Company is currently authorized to issue up to a total of 15,000,000
shares of Common Stock, $.001 par value, and 1,000,000 shares of preferred
stock, $.001 par value per share (the "Preferred Stock"). There are currently
approximately 6,167,424 shares of Common Stock outstanding, and stock options
and warrants outstanding to acquire an additional 1,055,773 shares of Common
Stock.

The Company's Board of Directors is authorized, without stockholder
approval, to issue Preferred Stock in one or more series and to fix the voting
powers and the designations, preferences and relative, participating, optional
or other rights and restrictions thereof. Accordingly, the Company may further
issue a series of Preferred Stock in the future that will have preference over
the Common Stock with respect to the payment of dividends and proceeds from the
Company's liquidation, dissolution or winding up or have voting or conversion
rights which could adversely affect the voting power and percentage ownership of
the holders of the Common Stock. The Company currently has no plans,
commitments, arrangements or understandings to issue any Preferred Stock. See
"Description of Securities -Preferred Stock."

Shares Eligible for Future Sale; Potential Adverse Impact on Market Price From
Sales of Shares.

Sales of substantial amounts of Common Stock in the public market by
Selling Shareholders after this Prospectus becomes effective could adversely
affect the market price of the Common Stock and adversely affect the Company's
ability to raise capital at a time and on terms favorable to the Company.
Although the Company has approximately seven broker-dealers that are making a
market in its common stock as of the date hereof, the Company shares are thinly
traded on a limited basis. Consequently, if substantial amounts of Common Stock
are sold into the public market by Selling Shareholders, the prevailing market
price may be adversely affected. Upon the consummation of this offering based on
the shares outstanding on July 14, 1997, the Company will have approximately
6,167,424 shares of Common Stock outstanding. Of these shares, approximately
4,987,422 shares, including the 2,422,727 outstanding shares being registered in
this Prospectus, excluding the 369,545 shares issuable upon exercise of the
Warrants will be freely tradable without restriction or further registration
under the Securities Act, except for any shares held by an "affiliate" of the
Company (as defined in the Securities Act and the rules and regulations
thereunder) which will be subject to the limitations of Rule 144 and the
approximately 1,513,636 shares which are subject to the Lock-Up Agreement until
July 15, 1997. All of the remaining 1,105,002 shares are deemed to be
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act, as such shares were issued in private transactions not
involving a public offering. Approximately 790,000 such shares are currently
eligible for sale under Rule 144.

In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person (or persons whose shares are
aggregated under the terms of Rule 144), including an affiliate of the Company,
who has owned restricted shares of Common Stock beneficially for at least one
year, is entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of 1% of the total number of outstanding shares
of the same class, or the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the sale, as reported by all

<PAGE>

national securities exchanges on which the Common Stock is traded and/or the
automated quotation system of a registered securities association, or an
approved consolidated transaction reporting system. A person who has not been an
affiliate of the Company for at least the three months immediately preceding the
sale and who has beneficially owned shares of Common Stock for at least two
years is entitled to sell such shares under Rule 144 without regard to the
volume limitations described above. No prediction can be made as to the effect,
if any, that sales of shares of Common Stock or the availability of shares for
sale will have on the market prices prevailing from time to time.

Current Prospectus and State Blue Sky Registration Required to Exercise
Warrants.

The Warrants are not exercisable unless, at the time of exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants and such shares have been registered, qualified or
deemed to be exempt under the securities or "blue sky" laws of the state of
residence of the exercising holder of the Warrants. Although the Company will
attempt to have all of the shares of Common Stock issuable upon exercise of the
Warrants registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
there is no assurance that it will be able to do so. The value of the Warrants
may be greatly reduced if a current prospectus covering the Common Stock
issuable upon the exercise of the Warrants is not kept effective or if such
Common Stock is not qualified or exempt from qualification in the states in
which the holders of the Warrants reside.

In such event, the Company will be unable to issue shares to those persons
desiring to exercise their Warrants unless and until the shares are qualified
for sale in jurisdictions in which such purchasers reside, or an exemption from
such qualification exists in such jurisdictions, and holders of the Warrants
would have no choice but to attempt to sell the Warrants in a jurisdiction where
such sale is permissible or allow them to expire unexercised. See "Description
of Securities -- Warrants."

Risks of Low Priced Securities.

If the price per share of the Company's common stock is below $5.00, then
unless the Company satisfies certain net asset tests, the Company's securities
will be subject to certain "penny stock" rules under Rule 15g-9 of the Exchange
Act.

The penny stock rules require a broker-dealer, who sells such securities to
persons other than established customers and accredited investors ( generally
persons with net assets in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with their spouse) prior to a transaction in a
penny stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from such rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. Based on the Company's most
recent unaudited financial statement for the quarter ended March 31, 1997 the
Company would currently be classified as a "penny stock". Accordingly, given the
requirements imposed on a broker - dealer under the "penny stock" rules, owners
of the Company's common stock may find it more difficult to sell their shares.

Risks Associated with Forward-Looking Statements Included in this Prospectus.

This Prospectus contains certain forward-looking statements regarding the
plans and objectives of management for future operations, including plans and
objectives relating to the development of the Company's electrostatic separation
products. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. The Company's plans
and objectives are based on a successful execution of the Company's strategy and
assumptions that the Company's electrostatic separation products will be
successfully developed and that there will be no unanticipated material adverse
change in the Company's operations or business. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that its
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Prospectus will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, particularly in view of the
Company's early stage operations, the inclusion of such information should not
be regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved. See "Price Range of Common
Stock," "Management's Discussion and Analysis of Financial Condition and Results
of Operation," "Description of Securities" and "Shares Eligible for Future
Sale."

Dilution.

There will be immediate and very substantial dilution to the purchasers of
the shares issued in connection with the exercise of the Warrants because the
tangible book value per share of Common Stock outstanding upon completion of the
Offering is substantially less than the offering price or price at which the
Warrants are convertible into Common Stock.

Anti-takeover Provisions.

Certain provisions of Delaware law, the Certificate of Incorporation and
the Company's By-laws, as amended (the "By-laws"), could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. These provisions
and the prohibition against certain business combinations could have the effect
of delaying, deferring or preventing a change in control or the removal of
existing management of the Company. See "Description of Securities."

Absence of Dividends.

The Company has never declared or paid cash dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company currently intends to retain future earnings, if any, to fund the
development and growth of its business. See "Dividend Policy."

FOR ALL OF THE FOREGOING REASONS AND OTHERS SET FORTH IN THIS PROSPECTUS,
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. ANY PERSON
CONSIDERING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE AWARE OF
THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS. THOSE SECURITIES SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD A TOTAL LOSS OF THEIR INVESTMENT IN THE
COMPANY.

<PAGE>

USE OF PROCEEDS

The net proceeds of the Offering to be received by the Company upon
exercise of all of the Warrants, after payment of an estimated $54,272 of
offering costs and expenses, are estimated to be $465,021, which amount will be
used for working capital by the Company. Except for the proceeds upon exercise
of the Warrants, the Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Shareholders. The proceeds from the sale
of all of the remaining 2,422,727 shares and the differential, if any, between
the exercise price of the various Warrants and the market price of the common
stock issuable upon exercise of the Warrants will go to the Selling
Shareholders. See "Selling Shareholders."

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been quoted in the OTC Bulletin Board under
the symbol "IMSO" since November 1994. The Company's predecessor closed an
initial public offering of its Common Stock in 1986. The following table sets
forth the high and low closing quotations for the Common Stock, as reported by
NASDAQ for each fiscal quarterly period since November 1994. The quotations as
reported reflect inter-dealer quotations without retail markup, markdown or
commission and do not necessarily represent actual transactions.

High Low
---- ----
November 1994 - December 31, 1994 1.00 1.00
January 1, 1995 - March 31, 1995 2.00 1.00
April 1, 1995 - June 30, 1995 2.00 1.50
July 1, 1995 - September 30, 1995 2.00 1.25
October 1, 1995 - December 31, 1995 2.00 1.25
January 1, 1996 - March 31, 1996 2.50 1.25
April 1, 1996 - June 30, 1996 3.25 1.25
July 1, 1996 - September 30, 1996 3.87 2.25
October 1, 1996 - December 31, 1996 3.25 2.50
January 1, 1997 - March 31, 1997 2.875 1.625
April 1, 1997 - June 30, 1997 2.375 1.625

No dividends have been declared on the Common Stock since the inception of
the Company in 1986 and the Company does not anticipate paying any cash
dividends in the foreseeable future. On July 14, 1997, the Company had
approximately 259 holders of record and believes that it had in excess of 300
beneficial owners, and the closing "bid" price of its Common Stock on July 14,
1997 was $2.25 as reported on the OTC Bulletin Board. A number of shares are
held of record by brokerage and other institutional firms for their customers.

<PAGE>

CAPITALIZATION

The following table sets forth the audited capitalization of the Company as
of December 31, 1996. This table should be read in conjunction with "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's financial statements, including the
notes thereto, included elsewhere in this Prospectus.

Actual
December 31, l996
-----------------
Common Stock,
$.001 par value 15,000,000 shares
authorized 6,092,424 shares issued
and outstanding (1) $ 6,092

Additional
Paid in Capital $ 4,778,089

Accumulated Deficit (2,610,120)

Total Stockholders' Equity $ 2,174,061
-----------

Total Liabilities and
Stockholders' Equity $ 2,251,944

- ----------

(1) Excludes any of the 369,545 shares of underlying common stock being
registered under this Prospectus and issuable upon exercise of the
Warrants; 116,000 shares of Common Stock issuable under other Warrants
outstanding for the exercise price of $.90 per share.

SELECTED FINANCIAL DATA

The selected financial data set forth below is derived from the more
detailed financial statements appearing elsewhere in this Prospectus. Such
information is qualified in its entirety and should be read in conjunction with
such financial statements, including the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company is in the development stage and has no had operating income during the
period from January 1, 1993, to the date of this Prospectus.

<TABLE>
<CAPTION>
Three Months Ended
Years ended December 31 March 31
---------------------------- ---------------------------
1996 1995 1997 1996
----------- ----------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash $ 450,880 $ 8,634 $ 287,228 $ 2,990
Current Assets 2,150,880 8,634 1,751,728 2,990
Total assets 2,251,944 12,980 1,917,022 7,336
Total liabilities 77,883 63,343 65,385 61,297
Accumulated deficit
during development stage (1,989,212) (1,226,454) (2,466,916) (1,250,052)
Total stockholders' equity (deficit) 2,174,061 (50,363) 1,851,637 53,961
</TABLE>

<PAGE>

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

Overview

Since entering the development phase in July, 1992, the Company has devoted
substantially all of its resources to the research and development of its
products and technology and general and administrative expenses. Since entering
the development stage in July, 1992, the Company has not generated any revenue
from product sales, but has an accumulated deficit of $2,610,120 at December 31,
1996.

The Company has not been profitable since inception. The Company's losses
incurred since inception have resulted principally from expenditures under its
research and development programs, and the Company expects to incur significant
operating costs and possible losses therefrom over the next several years due
primarily to expanded research and development efforts in the PLASMA PURE area
and related medical products, preclinical and clinical testing of its product
candidates and the performance of commercialization activities. There can be no
assurance of when and whether the Company will generate significant revenues or
become profitable on a sustained basis, if at all. Although the Company believes
it has substantially completed the research and development of its
decaffeination technology and is anticipating sales thereof to commence in the
first half of 1997, the Company's results of operations may vary significantly
from quarter to quarter due to timing of payments and other factors.

Statements included in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" Section, and in other sections of
this Prospectus, including, without limitation the Sections entitled "Business",
"Summary of the Offering" and "Risk Factors", and in prior and future filings by
the Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made with the approval of an authorized
executive which are not historical or current facts are "forward-looking
statements" made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
presently anticipated or projected. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made. The important factors presented under the section entitled
"Risk Factors", among others, in some cases have affected and in the future
could affect the Company's actual results and could cause the Company's actual
financial and operating performance to differ materially from that expressed in
any expressed in any forward-looking statement. The following discussion and
analysis should be read in conjunction with the Financial Statements and notes
thereto appearing elsewhere in this report.

RESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR THREE MONTHS ENDING MARCH 31, 1997; COMPARED WITH
MARCH 31,1996.

Net losses increased from $23,599 for the three months ending March 31,
1996 to $477,704 for the three months ending March 31, 1997. The Company had no
revenue or operating income for the quarters ended March 31,1996 and March 31,
1997 from continuing operations. The Company has interest income of $3,245 for
the three months ended March 31, 1997 and none in the comparable prior period.
Total general, administrative and development expenses were $480,949 for 1997 in
comparison to $23,599 for 1996, an increase of 1,938%. The increase in these
costs from 1996 to 1997 was in most expense categories, including larger
development expenses which increased from $9,566 in the first quarter of 1996 to
$37,320 in the first quarter of 1997, an 369% increase. Additional increased
expenses were incurred in professional services, which increased from $2,500 in
the first quarter of 1996 to $235,364 in the first quarter of 1997, which
increases were primarily from consulting fees paid in the form of 100,000 shares
of the Company's common stock, having a value of approximately $150,000, issued
to Waldman Biomedical, a biotechnology and biomedical consulting firm for
services rendered by Dr. Alan Waldman, a Vice President and Director of the
Company, over the prior year and additional legal costs and filing fees incurred
in connection with the Company's patent applications for its technology.
Salaries and wages, officers salaries and related payroll taxes were $55,250,
$31,250 and $12,083, respectively, for the first quarter of 1997 in comparison
to $0 in total for the first quarter of 1996. Rent increased from $3,613 for the
three months ended March 31, 1996 to $15,178 for the three months ended March
31, 1997, an increase of $11,565 which was primarily due to the additional
office lease and costs related thereto by the Company of space at 950 Third
Avenue, New York, New York entered into in October 1996. Most of the additional
costs in the first quarter of 1997 in comparison to the first quarter of 1996
were related to further development, refinement and early stage marketing
efforts of the Company's Decaffamatic separation technology. All research and
development costs were expensed currently in the year incurred, rather than
capitalized.

At March 31, 1996, the Company had total assets of $7,336, and at March 31,
1997, the Company had total assets of $1,917,022, an increase of $1,909,686. At
March 31, 1996, the Company had total liabilities of $61,297, and at March 31,
1997 the Company had total liabilities of $65,385. At March 31, 1997 the Company
had an total stock holders' equity of $1,851,637 in comparison to a total
stockholders' deficit of $53,961 at the comparable date in 1996.

14
<PAGE>

Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995

Net losses increased from $406,086 for the year ended December 31, 1995 to
$762,758 for the year ending December 31, 1996, a 149% increase. The Company had
no revenues or operating income for years ended December 31, 1995 and December
31, 1996 from continuing operations. For the year ended December 31, 1995, the
Company earned $3,070 in interest on its interest bearing investment account.
$3,022 in interest was earned for the comparable period in 1996.

Total operating expenses were $408,700 for 1995 in comparison to $757,824
for 1996, an increase of 85%. The increase in these costs from 1995 to 1996 was
primarily due to increased outside consultants' fees, higher costs under
research agreements with outside institutions, and more staffing and wages and
salaries for research and development being performed in 1996 than those
incurred in 1995 as the Company continues further product research, development
and refinement on its Decaffomatic and other separation technologies. All
research and development costs were expensed currently in the year incurred,
rather than capitalized. This resulted in a loss per share of $(.23) for the
year ended December 31, 1996, in comparison to a loss per share of $(.14) for
the comparable year in 1995.

At December 31, l995, the Company had total assets of $12,980. Total
liabilities of $63,343 and total stockholders' equity of $(50,363). At December
31, l996, the Company had total assets of $2,251,944, an increase of $2,238,964
from the comparable period in l995, total liabilities of $77,883 an increase of
$14,540 from l995, and a total stockholders' equity of $2,174,061, in comparison
to a stockholders' deficit of $(50,363) in the prior year.

Year Ended December 31, l995 Compared to the Year Ended December 31, 1994

The Company had a net loss of $406,086 for the year ended December 31, l995
in comparison to a net loss of $514,147 for the year ended December 31, 1994.
The Company had no revenues or operating income for the years ended December 31,
l995 and December 31, 1994 from continuing operations. Total general,
administrative and development expenses were $408,100 for l995 in comparison to
$514,147 for 1994. The decrease in these costs from 1994 to l995 was primarily
due to less research and development being performed in l995, as less capital
was available to the Company. All research and development costs were expensed
currently in the year incurred, rather than capitalized.

At December 31, 1995, the Company had total assets of $12,980, total
liabilities of $63,343 and total stockholders' deficit of $50,363. At December
31, 1994, the Company had total assets of $167,878, total liabilities of $81,168
and total stockholders' equity of $86,710. The decline in assets during fiscal
l995 resulted from available current assets being expended for research and
development and other general and administrative expenses without any operating
income. For year ended December 31, l994, the reduction in total assets by
$99,284 and total stockholders' equity by $121,505 from the amounts earlier
reported for that period resulted from the subscription receivables shown due at
December 31, 1994 under the Regulation S subscription agreements outstanding
from various foreign purchasers, at December 31, 1994 being subsequently offset
by legal expenses incurred in Germany in 1994 which were not accounted to the
Company until 1995, and offering costs and expenses and withdrawals and
non-payments under certain subscription agreements all consequently , being
reclassified as a reduction of paid in capital.

No provision for income taxes has been recorded due to net operating loss
carryforwards.

15
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company had positive working capital as of December 31, l996, in the
amount of $935,497 in comparison to a negative working capital position as of
December 31, l995 of $(54,709). The Company had an accumulated deficit of
$2,610,120 at the period ended December 31, l996, in comparison to an
accumulated deficit of $1,847,362 at the period ended December 31, l995. The
increase in the accumulated deficit is primarily related to continuing operating
costs during the development phase without any operating income.

The Company has financed operations from entering the development phase in
July 1992 (through December 31, 1996) primarily through the private placement of
its stock and, to a lesser extent, through borrowings from notes payable. For
the year ended December 31, l996, the Company's cash requirements were satisfied
primarily from the cash reserves in its operating accounts, a private placement
consisting of a promissory note in the amount of $300,000 and 150,000 shares of
the Company's Common Stock for par value of $.001 per share, made to the company
by a private lender, Hampton Tech Partners, LLC ("HTP-I"), on August 19, 1996.
The promissory note bore interest at the rate of 7% per annum and was due in
full on the earlier of (a) February 19, 1997, or (b) from the proceeds of an
equity or debt placement by the Company prior to that date. Additionally, on
September 20, 1996, the Company entered into the Stock Purchase Agreement and
the separate Media Purchase Agreement to sell an aggregate of 2,272,728 shares
of its common stock, par value $.001, to two purchasers, Hampton Tech Partners
II, LLC, a Colorado limited liability company ("HTP-II"), which purchased
1,136,364 shares, and Proxhill Marketing, Ltd., a private company based in
Colorado ("PML"), which received 1,136,364 shares. The closing under the
agreements occurred in November and December 1996 and the sales price was $1.32
per share and gross proceeds and credits received by the Company were
$3,000,000. The proceeds were paid $1,500,000 in cash by HTP-II under the Stock
Purchase Agreement and $1,500,000 in prepaid media credits paid by PML ("Media
Credits") to be used at the Company's direction under the Media Purchase
Agreement. The Company intends to use the Media Credits during the next 9 months
to market its DECAFFOMATIC products. In both stock sales, the purchasers
represented that they were "Accredited Investors" as that term is defined under
Regulation D promulgated by the Commission pursuant to the Securities Act. Of
the Shares being registered under this Prospectus, 150,000 were sold to HTP-I,
1,136,364 were sold to HTP-II and 1,136,363 were issued to PML. Upon the closing
of the HTP-II Stock Purchase Agreement in November 1996 the Company repaid the
$300,000 promissory note to HTP-I in full.

Media Purchase Agreement

Under the Media Purchase Agreement with PML, PML contractually agreed to
finance $1.5 million of media for the Company's public relations and advertising
campaign through Grow Marketing Services ("GROW"), an independent marketing
company. In exchange for the Company issuing 1,136,363 shares of its common
stock, representing a price of $1.32 per share, the Company acquired the $1.5
million of prepaid, dedicated Media Credits and certain media services.

The media advertising services provided by GROW include conducting market
research services for the purpose of formulating a media plan to optimize the
benefits of the media advertising campaign. Under the Media Purchase Agreement
the Company can also utilize the service of Grow as an advertising and public
relations firm at providing market rates, including creative and design services
and media campaign production costs. Then, GROW secures suitable advertising
time on television, radio, or cable systems, or advertising space in newspapers,
magazines, or other publications of mass appeal. The Company has the right to
select any form of media at prevailing market rates under the Media Purchase
Agreement.

In the Media Purchase Agreement, PML provides the Company with an agreed
amount in media financing as part of the Company's overall media plan, on a
basis of PML paying one-third cash and two-thirds media credit to GROW in
consideration for the prepaid purchase order extended to the Company. At the
closing of the transaction PML delivers cash, media, media credit and/or other
media-related assets to GROW as payment for media credit extended to the
Company. PML then delivers to the Company a pre-paid purchase order
acknowledging the Company's right to purchase media from GROW under the terms
set forth in the Agreement. The Company cannot assign its rights under the Media
Purchase Agreement without PML's consent

The Company intends to use the $1,500,000 of prepaid Media Credits in 1997
to finance the introduction and initial product advertising and marketing
support for the DECAFFOMATIC products in the United States and Canada. The
Company is currently interviewing advertising agencies and public relation firms
who will assist the Company in the design and implementation of an marketing
campaign to introduce DECAFFOMATIC to the public.

Given that DPI is newly formed and has conducted no independent market research
or consumer focus groups activities, there can be no assurance that DPI will be
successful in introducing the DECAFFOMATIC technology to the consumer public,
that it will have any commercial level of acceptance by the public or that if
there is some level of commercial acceptance, that it will be sufficient for the
Company of DPI to continue supporting a marketing and advertising program or
that such efforts will ever be profitable.

In connection with the execution of the Media Purchase Agreement on
September 20, 1996, for arranging the transaction the Company paid First Capital
Investments, Inc. a registered securities broker-dealer warrants to purchase
126,364 shares of the Company's common stock at $1.45 per share and agreed to
pay First Capital Investments, Inc. a cash commission equal to 10% of the amount
of the Media Credits acquired ($ 150,000 in the aggregate.

The Company does not currently possess a bank source of financing. Although
the Company believes that the above financing will be adequate to cover its
liquidity requirements over the next 6 months, it cannot be certain that these
sources of capital will be adequate. Should insufficient funds be available from
the foregoing sources, reducing the Company's present rate of expenditures which
might materially adversely affect the ability of the Company to produce
competitive products and services and to market them effectively.

The Company's ability to continue in business as a going concern depends
upon its ability to generate revenues and royalties from the sale of its
technology and products, to conserve liquidity by setting marketing and other
priorities and reducing expenditures, to obtain bank financing and to obtain
additional funds through the placement of its common stock. The Company's
ability to obtain bank financing will require significantly improved operating
results over the Company's results for its past twelve months, the likelihood of
which the Company presently cannot assure. Any such reductions of expenditures
might materially adversely affect the ability of the Company to produce
competitive products and services and to market these effectively.

The Company's long term capital expenditure requirements will depend upon
numerous factors, including the progress of the Company's research and
development programs, the resources that the Company devotes to the development
of self-funded products, proprietary manufacturing methods and advanced
technologies, the ability of the Company to obtain licensing arrangements, and
the demand for its products if and when approved.

16
<PAGE>

The Company believes that its research and development of its
decaffeination technology is substantially complete and it is ready to introduce
its decaffeination products to the commercial institutional user market in 1997.
On September 20, 1996, DPI entered into the Manufacturing and Distribution
Agreement with NEWCO Enterprises, Inc., of St. Charles, Missouri to manufacture
a coffee brew basket, incorporating the decaffeination technology, for DPI's
sales to the institutional coffee maker marketplace in North America (the "NEWCO
Agreement"). Under the NEWCO Agreement, NEWCO was granted the exclusive right to
market and distribute the products incorporating the Company's decaffeination
technology to the so-called "office coffee supply" market segment in North
America for a period of three years. Over the past five months, the Company has
been working with NEWCO to develop, design and test working models, and assist
in the design of moulds for the production of the decaffeination device.
Although there are no assurance, it is anticipated that sales under the NEWCO
Agreement will occur in 1997. NEWCO has agreed under the NEWCO Agreement to
purchase a minimum of 25,000 units the first year, 50,000 units the second year
and 100,000 units the third year of the NEWCO Agreement of the DECAFFOMATIC
device for sales to the "office coffee supply" market. Although there can be no
assurances, the Company intends to license the DECAFFOMATIC technology to
another unrelated company for manufacture, marketing and distribution in the
rest of the world.

The Company believes that its existing cash and cash equivalents, the $1.5
million of prepaid Media Credits, excluding any anticipated cash flow from
operations in the latter part of 1997 will be sufficient to meet its operating
expenses and capital expenditures requirements for at least the next 6 months.
The Company's future capital requirements, however, will depend on numerous
factors, including (i) the progress of its research and product development
programs, including clinical studies, (ii) the effectiveness of product
commercialization activities and marketing agreements, including the development
and progress of sales and marketing efforts and manufacturing operations, (iii)
the ability of the Company to maintain existing marketing agreements and
establish and maintain new marketing agreements, (iv) the costs involved in
preparing, filing, prosecuting, defending and enforcing intellectual property
rights and complying with regulatory requirements, and (v) the effect of
competing technological and market developments. However, if operating expenses
are higher than expected or if cash flow from operations is lower than
anticipated, there can be no assurance that the Company will have sufficient
capital resources to be able to continue as a going concern.

17
<PAGE>

BUSINESS

The Company

General

IMSCO Technologies, Inc. is a development stage company. The Company
develops and is attempting to license and market electrostatic separation
technologies and related products. Electrostatic separation takes advantage of
the fundamental electrical properties of attraction, wherein unlike or opposite
charges attract each other, and repulsion, wherein like or the same charges
repel each other, and uses charged materials to selectively separate other
substances. In the last three years, the Company developed a separation
technology based on electrostatics combined with mechanical separation. This
technology was originally developed by the Company for the specific purpose of
separating viruses and viral particles from human plasma. The Company calls its
plasma separation technology the "PLASMA PURE". The Company conducted basic
early stage research and tests in 1992 and 1993 at the Massachusetts General
Hospital pursuant to a collaborative Research Agreement between the Company and
the hospital. Although further significant research and testing needs to be
conducted, based on the Company's initial research and testing conducted at the
Massachusetts General Hospital and later at the Mayo Clinic, it is the Company's
belief that the PLASMA PURE is capable of removing significant amounts of
infectious viral particles from human plasma without significantly affecting the
other chemical properties of the plasma.

In 1993, the Company designed a electrostatic separation technology which
removes on demand caffeine from brewed liquids, such as coffee and tea. The
Company calls its decaffeination technology the "DECAFFOMATIC." Based on the
Company's internal laboratory testing and research conducted at the University
of Massachusetts from 1993 to 1995 and at the University of Akron under the
collaborative Research Agreements between those universities and the Company,
the Company believes that the DECAFFOMATIC is capable of removing in excess of
95% of the caffeine from brewed beverages such as coffee and tea. In 1993,
separate patent applications were filed by the Company with the U.S. Office of
Patents and Trademarks for the Company's separation technologies. On August 22,
l995, the Company was granted a patent by the United States Patents and
Trademarks Office ("PTO"), Patent No. 5,443,709 for "Apparatus for Separating
Caffeine From a Liquid Containing the Same." On April 2, 1996, the Company was
granted a patent by the PTO , Patent No. 5503724 for "Process for Decaffeinating
Caffeine Containing Liquid". The Company believes that its research and
development of its decaffeination technology is substantially complete and that
the product will be ready for introduction to the institutional coffee brewer
market in 1997.

The Company's strategy is to develop and license or directly sell as an
integral component, its products to third parties which have related or
complementary proprietary and non-proprietary products manufactured by such
companies. In l995, the Company formally established a new subsidiary called
Decaf Products, Inc., which was incorporated in the State of Delaware on April
5, l995, that will directly market the DECAFFOMATIC technology and products in
North America. On September 20, 1996, DPI entered into the Manufacturing and
Distribution Agreement with NEWCO Enterprises, Inc., of St. Charles, Missouri to
manufacture a coffee brew basket, incorporating the decaffeination technology,
for DPI's sales to the institutional coffee maker marketplace in North America.
Under the NEWCO Agreement, NEWCO was granted the exclusive right to market and
distribute the products incorporating the Company's decaffeination technology to
the so-called "office coffee supply" market segment in North America for a
period of three years.

NEWCO has also agreed to purchase a minimum of 25,000 units the first year,
50,000 units the second year and 100,000 units the third year of the NEWCO
Agreement of the DECAFFOMATIC device for sales to the "office coffee supply"
market. Although there can be no assurances, the Company intends to license the
DECAFFOMATIC technology to another unrelated company for manufacture, marketing
and distribution in the rest of the world.

<PAGE>

In December 1995, the Company formally established another subsidiary,
BioElectric Separation and Testing, Inc., a Delaware corporation, to further
conduct research and development on the PLASMA PURE and all related medical
applications of the Company's core electrostatic separation technology. The
PLASMA PURE has not been submitted to the Food and Drug Administration ("FDA")
for approval and there is no assurance that it will be approved. Given the
limited funds available to the Company and consequent delays in conducting the
necessary research and testing, the PLASMA PURE will not likely be submitted to
the FDA until at least 1998. Such submission to the FDA is conditioned upon a
number of events, including obtaining adequate funding to complete the necessary
research and development.

From inception in 1986 until 1991, the Company developed and marketed an
automated, computerized luminometer system which tested the presence of
microorganisms in the food and beverage industry. The Company's products also
included accompanying reagent kits and other ancillary materials. However, from
1988 through 1991 the Company had limited business activity, but because of
operating costs and expenses, had an increase in its accumulated deficit of
approximately $152,163 over the four year period. Given this dormant level of
business activity from 1988 to 1991, the Company realized that it could not
continue with its luminator technology product and discontinued those
operations. Thereafter, the Company was reactivated and entered into a
development stage in July 1992.

The Company had no income from continuing operations for the years' ending
December 31, 1992, 1993, 1994, l995 and 1996. In July 1992, the Company began a
new business area of focus and engaged new engineering and biochemistry
personnel with expertise for the research and development of the electrostatic
separation systems.

The Company was originally formed in 1986 under the laws of the State of
Nevada. The Company determined in 1987 that it was its best interest to change
its corporate domicile from Nevada to Massachusetts since the corporate
operations were relocated to Massachusetts. On June 18, 1987, the stockholders
of IMS, Inc., voted to approve the change of corporate domicile from Nevada to
Massachusetts. On July 1, 1987, IMS, Inc. merged into IMSCO, Inc., its
wholly-owned Massachusetts subsidiary, and there remained one surviving
corporation and the name of the surviving corporation was IMSCO, Inc.

In July 1996, the Company was reincorporated in Delaware as IMSCO
Technologies, Inc. In order to effectuate this change, the Company proposed the
implementation of the following plan. On May 16, 1996, IMSCO, Inc. filed a
Certificate of Incorporation in Delaware incorporating a new wholly-owned
subsidiary, IMSCO Technologies, Inc. The Board of Directors of the Company at a
meeting held in May, 1996 voted, subject to the adoption by the stockholders, to
merge into its wholly-owned subsidiary, IMSCO Technologies, Inc., a Delaware
Corporation. On July 9, 1996, the stockholders of IMSCO, Inc., voted to approve
the change of corporate domicile from Massachusetts to Delaware. Therefore, by
virtue of a Certificate of Merger filed with the Secretary of State for the
State of Delaware on July 18, 1996, there remained one surviving corporation and
the name of this surviving corporation is IMSCO Technologies, Inc. As of the
effective date of the merger, each stockholder of the Company held one share of
Common Stock, for each one share of common stock, par value $.001 per share, of
IMSCO, Inc. previously held by him.

BUSINESS STRATEGY

The Company's objective is to become the leader in the electrostatic
separation market by capitalizing on its proprietary electrostatic technology.
The Company's strategy is to focus initially on commercializing and launching
the DECAFFOMATIC products based on its decaffeination patented technology.
Initial target markets are the institutional coffee brewer market. The Company
is also pursuing the development and commercialization of decaffeination for
home consumers.

Implementing the Company's strategy involves the following activities:

Continue and expand research and development.

The Company intends to increase its research and development staff, expand
its research facilities and acquire additional laboratory and analytical
equipment to conduct further research on the PLASMA PURE. The Company is also
researching other applications of its electrostatic separation technology
including, water and air filtration.

Expand manufacturing capacity.

The Company intends to retain other contract manufacturers for its products
and may expand its manufacturing capacity by adding personnel. In addition, the
Company is researching other processes to improve manufacturing capacity and
efficiency.

Establish marketing partnerships.

The Company seeks to market and distribute its products through recognized
market leaders to take advantage of their resources and distribution channels.
In addition, in the future, as the Company's other Decaffeination products, such
as for the home consumer, progress toward commercialization, the Company intends
to establish a highly focused sales force to market those products.

Advance Technology.

The Company believes it has certain core competencies and patent protected
core technologies in the field of electrostatic separation that can be
leveraged. Management believes it has significant expertise in engineering and
biochemical research pertaining to its core technologies, including method and
process design, apparatus design and configuration and new application
development. The Company plans to build upon its technical base by conducting
further research and development of existing products for enhancement and
improvement of those products and by researching new products.

Broaden Applications.

To date, the Company has focused on the two primary applications the
electrostatic technologies : the DECAFFOMATIC device and the PLASMA PURE
technology. The Company believes there are significant other opportunities to
increase the number of applications for the core electrostatic technology, such
as water filtration, air filtration, other types of blood filtration, and
biological testing of the presence of viral and bacteriologic presence in fluid
samples.

Utilize Multiple Distribution Channels.

Depending upon the product and specific application, the Company will
determine whether to market through its direct sales force, to focus on sales to
several major national accounts, or to market the product or technology by a
licensing arrangement through a licensee-distributor already in the field of the
particular application.

<PAGE>

Products And Technologies

DECAFFOMATIC

TECHNOLOGY RESEARCH AND DEVELOPMENT

In 1993, using its electrostatic separation technology, the Company
designed, researched and developed a successfully working prototype of the
DECAFFOMATIC device. Throughout 1994 and 1995 the Company continued to further
research and develop the DECAFFOMATIC device. To facilitate this development, in
October 1994, the Company entered into a Memorandum of Understanding with the
University of Massachusetts whereunder the Company would use the University's
facilities and engage certain of the University's professors and students to
perform further research and development on the DECAFFOMATIC device as directed
by the Company. Throughout l995, the Company continued to utilize the services
of the University of Massachusetts to conduct its research and development
activities. In 1996, the Company entered into a collaborative Research Agreement
with the Polymer Sciences Division of the University of Akron, for further
development of the electrostatic decaffeination technology. The Company pays
$10,000 per month for the use of the University of Akron's facilities and the
dedication of certain professors to the Company's project. The specific focus of
the Akron Research Agreement was to select the polymers to be utilized in the
decaffeination device. Under the Akron Research Agreement, the Company believes
that it has substantially completed the research and development of its
decaffeination technology.

MARKET

The IMSCO separation technology has enabled the Company to build a
stand-alone decaffeinator which may be used immediately after brewing to
customize the product to individual taste and need. Throughout l995, the Company
continued to further develop and refine the DECAFFOMATIC technology in several
working prototypes that are used for demonstration and testing purposes.
Additionally, in 1996, the Company designed and built a decaffeinator that is
incorporated into the coffee maker brew basket as an integral part of the coffee
brewing process. The customer-user will need to only buy regular coffee or tea
and decaffeinate the brewed beverage on demand for those who want the
decaffeinated product. The Company anticipates that this will result in
considerable cost saving for the consumer. In the institutional marketplace, the
Company believes that such an integrated decaffeinator will produce more
significant cost savings, given the difference in price of decaffeinated ground
coffee beans over regular ground coffee beans. The Company believes that this
benefit is of primary concern to senior citizens who are on a fixed income and
at the same time, are the largest growing segment of the population. This group
is also the one that is most health conscious and concerned about chemical
treatment of coffee in most other decaffeination processes. There is no chemical
treatment in the Company's process.

Management believes that removal of caffeine from coffee and tea is
recognized as a desirable goal for health and other reasons. The Company's
research has revealed that no technology now exists for removal of caffeine from
hot freshly brewed liquids; rather, the current technology removes caffeine from
the beans prior to brewing.

The decaffeination process of coffee and tea has been popular since the mid
1930's. It was initially started by General Foods and then adapted by Nestle's
and other multi-national companies. The first decaffeination process was a
chemical method that used Methylene Chloride. This method is still employed
today, however, not as widely. The Company believes that the chemical extraction
method is not desirable because of the harsh chemicals and health issues raised
by their use. As consumers became more health conscious in the 1980's, the use
of decaffeinated products increased. A method more frequently used utilizes
repetitive washes of the coffee beans with clean water. Although this water
treatment process is the method of choice for most coffee roasters today, the
Company believes that it is more costly and ultimately less convenient for the
consumer.

<PAGE>

The Company is planning to market the DECAFFOMATIC devices directly in the
United States through its DPI subsidiary. The Company intends to have NEWCO
contract manufacture the DECAFFOMATIC device on an OEM basis for the Company's
North American sales.

The Company intends to focus its decaffeination technology marketing on its
recently developed internal decaffeinator for use with the automatic drip coffee
maker for both institutional and home consumer products. This integrated system
has the DECAFFOMATIC separation device directly incorporated into the coffee
maker, such that the decaffeination occurs as the consumer directs on demand as
a normal step in the coffee maker brewing process.

PLASMA PURE

TECHNOLOGY RESEARCH AND DEVELOPMENT

The Company has designed, prototyped and done basic early stage research on
the PLASMA PURE electrostatic/mechanical separation device for the express
purpose of separating virus and viral particles from human plasma. The Company
believes that such a separation device could be extremely important in the
battle against AIDS, Hepatitis and other plasma borne viral infections. Based on
its initial early stage research and test results, although significant further
research needs to be conducted, the Company believes that the PLASMA-PURE will
be capable of removing a substantial amount of the viral population from a unit
of contaminated plasma without adversely affecting the clotting factors. Because
of the high cost of conducting medical research and development testing on the
PLASMA PURE and the Company's limited financial resources, the Company was only
able to conduct limited research on the PLASMA PURE over the past year. However,
assuming that the Company is able to obtain adequate financing to complete its
potential research and development on the PLASMA PURE technology, of which there
can be no assurance, plans are being made to approach the FDA in 1998 to begin
testing for the FDA approval process. The Company believes that PLASMA PURE,
with its potential capability of removing viruses and viral particles, has the
potential to significantly reduce the risk normally associated with transfusion
of plasma or plasma components. Management believes that the use of PLASMA PURE
to filter fresh frozen plasma will not significantly decrease yields of the
clotting components. This is achieved because of the unique electrostatic
internal matrix which enables the plasma and its clotting components to flow
freely through the device, but still remove significant amounts of virus and
viral particles. The methods currently used to inactivate viruses in plasma such
as the use of detergents or extreme heat all have the possible adverse effect of
limiting the yield of final desired procoagulant products.

MARKETS

The Company believes the PLASMA PURE system and its electrostatic
technology offer various growth possibilities for the Company; however, each of
these areas will require significant further research and development and the
financing of such efforts. The Company has also designed and is in the research
and development stage for a new product that is an extension of the PLASMA PURE
separator appropriately called PLASMA PURE PLUS. It would be used only for bulk
plasma fractionation and therefore be larger than PLASMA PURE and priced
differently. Another follow-up product that the Company is currently researching
and developing is a modified white blood cell filter. This device would utilize
the same technology as PLASMA-PURE, and therefore management believes its
introduction could be rapid. Management feels a second version of the white
blood cell filter could then be marketed to the diagnostic reagent market. Given
the numerous uncertainties and risk inherent with medical research in general,
and blood research in particular, there can be no assurance that any of these
plasma products and devices will ever be finally developed, or if completed that
they will receive approval from the FDA or the comparable regulatory authority
of any foreign jurisdiction. The Company

<PAGE>

has not prepared or made application to the FDA or any governmental authority
for approval of its PLASMA PURE device or related products.

The Company believes that the core electrostatic separation technology
readily lends itself to other markets as well, particularly air filtration for
hospitals, convention centers and airplanes. Although it needs significant
amounts of additional research and testing and the financial resources to
conduct such activities, the Company believes that its electrostatic separation
technology can be applied to extra corporeally based immunotherapies which
involve an improved system for drug administration and improved systems for
removal and/or treatment of cells or other circulating materials (including
byproducts of metabolism). The Company is presently seeking an involvement with
a major pharmaceutical company to initiate such a working partnership, although
there can be no assurance that it will be able to consummate any such
agreements.

Similar to DPI, the Company recently established a new Delaware corporation
subsidiary, BioElectric Separating & Testing, Inc. ("BEST") to conduct the
continued research and development activities and pursue FDA application
relating to the PLASMA PURE and related technologies.

MARKETING

Except for the marketing of the DECAFFOMATIC products in North America
through DPI, the Company's current strategy is to license its products and
technologies to other companies which have pre-existing industry presence in
their respective fields and to enter into collaborative arrangements with such
companies to develop new applications for the technology with the contract
partner's own products. However, the first phase of its marketing of the
DECAFFOMATIC is the institutional brewer market, the Company has entered into
one marketing agreement with NEWCO.

The Company believes that its exclusive agreement with NEWCO in the areas
covered will allow it to establish a presence in the market more quickly and on
a more cost-effective basis than it could achieve by building its own sales,
marketing and service network in the competitive large institution market.
NEWCO's sales and purchase obligations to the Company commence once the Company
has a commercial ready institutional coffee brewer unit ready to model for
demonstration and sales. As of this date, NEWCO is working on a pre-final
working model of the institutional coffeemaker-brewer. After that model is
assembled, it will be further tested and developed to confirm that it has all
the desired specifications, such as brewing and decaffeination speed, ease of
customer removal of the separation device and safety design. Although there can
be no assurances, it is anticipated that such final design refinements to the
large institutional working model will be completed in 1997 and that sales
orders could commence thereafter. Once the final working model has been
designed, NEWCO will create the necessary moulds for parts and assembly line
manufacture.

To create a potential customer awareness of the Company's Decaffeination
System, the Company intends to commence a public relations and advertising
campaign in 1997. The Company will attempt to employ lower cost public relations
at trade shows, in trade publications and at other appropriate food or kitchen
appliance shows and events. Initially, the advertising employed by the Company
will be print media consisting of magazines, newspapers and point of purchase
signage. To finance this public relations and advertising, the Company has the
prepaid Media Credits from PML.

Media Purchase Agreement

In the Media Purchase Agreement, PML provides the Company with an agreed
amount in media financing as part of the Company's overall media plan, on a
basis of PML paying one-third cash and two-thirds media credit to GROW in
consideration for the prepaid purchase order extended to the Company. At the
closing of the transaction ML delivers cash, media, media credit and/or other
media-related assets to GROW as payment for media credit extended to the
Company. ML then delivers to the Company a pre-paid purchase order acknowledging
the Company's right to purchase media from GROW under the terms set forth in the
Agreement. The Company cannot assign its rights under the Media Purchase
Agreement without PML's consent

Research and Development; Collaborative Arrangements

The Company conducts its research and development activities through its
own staff and facilities, as well as through collaborative arrangements with
universities, and independent consultants. However, at present the Company has
only four full-time employees, three of whom are devoted to research and
development, and, accordingly is dependent upon third parties to conduct

<PAGE>

significant research and development, laboratory testing, clinical studies, and
the procedures and processes necessary to apply for and, if possible, obtain FDA
and other regulatory approvals and manufacture and market a finished product.

As is the case with the University of Massachusetts and the University of
Akron, it is believed by the Company that the use of outside collaborative
research agreements is the most efficient method to have certain aspects of its
technology further researched and developed while minimizing the capital
investment such ventures require from the Company.

Although the Company had entered into an agreement with the Massachusetts
General Hospital to conduct collaborative research on the initial PLASMA PURE
separation technology, that agreement expired in June 1993. To facilitate the
development of its DECAFFOMATIC technology, in October 1994 the Company entered
into a Memorandum of Understanding with the University of Massachusetts
whereunder the Company would use the University's facilities and engage certain
of the University's professors and students to perform further research and
development on the DECAFFOMATIC device as directed by the Company. The Company
conducted various research and development activities, primarily pertaining to
the DECAFFOMATIC technology, at the University of Massachusetts facilities
during 1994 and l995.

In 1996, the Company entered into a collaborative Research Agreement with
the University of Akron to further develop and finalize the polymer that the
Company will be using for the DECAFFOMATIC separator. Under the University of
AKRON Research Agreement, which is currently in effect the Company pays $10,000
per month to the University for the services enumerated in the Agreement.

The Company believes that research facilities and arrangements necessary to
continue its further research and development of its electrostatic separation
technologies are readily available. From July 1992 to December 31, l996, the
Company incurred $1,989,212 of development stage expenses. The Company
anticipates incurring significant research and development expenditures in the
future as the Company continues its efforts to develop further applications and
uses for its present separation technologies and as it begins to research other
technologies.

Manufacturing

The Company currently does not own or operate manufacturing facilities for
commercial production of its DECAFFOMATIC or any other products. In addition,
the Company has no intention of acquiring or developing any manufacturing
facilities. Instead, the Company intends to rely on third party contract
manufacturers to manufacture its products. There can be no assurance that such
arrangements will be successful or that the contract manufacturer will be able
to develop or provide adequate manufacturing capabilities for commercial scale
production.

The NEWCO Manufacturing and Distribution Agreement.

On September 20, 1996, the Company entered into the NEWCO Agreement for
certain institutional manufacturing and marketing of the Decaffeination System.
NEWCO is a privately held corporation based in St. Charles, Missouri, and is one
of the largest manufacturers and distributors of institutional coffeemaking
equipment in North America. The Company agreed that NEWCO will have the
exclusive right to sell the DECAFFOMATIC to so-called "Office Coffee Supply"
("OCS") subsection of the institutional coffeemaker market and will be the
manufacturer of the DECAFFOMATIC for the institutional marketplace in North
American for a period of three years. NEWCO further agreed to sell or purchase
from the Company for the OCS market a minimum of 25,000 units of the product for
the first year, 50,000 units for the second year and 100,000 units the third
year. Under the NEWCO Agreement, NEWCO has also agreed to pay the costs of
making final working models, and the cost of creating moulds and related parts
for the DECAFFOMATIC device for the institutional coffeemaker marketplace. All
of the technology and final commercial model designs of the Decaffeination
System will be the property of the Company.

Under the NEWCO Agreement, the Company sells units the Decaffeination
System to NEWCO for a net price to the Company. The Company anticipates that the
price to be paid by NEWCO, which is still being finalized until the final
working and commercial ready components are established, will be in the range of
approximately $10 per unit for small OCS type users, ranging to $200 for large,
high volume institutional coffee brewers. NEWCO takes the Decaffeination System
and in turn incorporates it into its coffeemakers and re-sells it to a variety
of end users in the OCS marketplace. If NEWCO fails to acquire the minimum
amount of units from the Company, the Company can terminate the NEWCO Agreement.
All servicing and customer calls will be performed by NEWCO.

The Company believes that its exclusive agreement with NEWCO in the areas
covered will allow it to establish a presence in the market more quickly and on
a more cost-effective basis than it could achieve by building its own
manufacturing facility or its own sales, marketing and service network in the
relatively fragmented OCS market, that consists primarily of small office users.
As of the date of this Prospectus, NEWCO has make several working models and has
recently completed one pre-final working model of the institutional
coffeemaker-brewer that is being further tested and developed to confirm that it
has all the desired specifications, such as brewing and decaffeination speed,
ease of customer removal of the separation device and safety design. Although
there can be no assurances, it is anticipated that such final refinements to the
final institutional working model will be completed in the middle of 1997 and
that sales orders could commence thereafter. Once the final working model has
been designed, NEWCO will create the necessary moulds for parts and assembly
line manufacture. The Company has also requested NEWCO to manufacture working
models of the decaffeinator which will be sold to the home consumer.

The Company also utilized the facilities at the University of Massachusetts
and University of Akron to conduct development design of the DECAFFOMATIC system
relating to the characteristics of the brewed coffee, including pH, color,
flavor and aroma of the coffee, after it has passed through the DECAFFOMATIC
device. This on-going development of the optimum product that removes caffeine
most efficiently with the minimal impact on color, taste and aroma of the brewed
coffee is being conducted by the Company at the University of Akron. The Company
intends to

<PAGE>

continue working at the University of Akron to further refine and develop new
decaffeination products in the future.

The Company has manufactured and supplied the PLASMA PURE separation
device, on a limited basis, for test purposes only, to research institutions and
certain other potential partners, prospective licensees and others. The Company
has made five prototype PLASMA PURE devices to date which were tested by the
Company from August 1992 through April 1993. The Company's early basic test
results demonstrated that the PLASMA PURE separation technology may be capable
of removing significant amounts of infectious viral particles from plasma.
However, the PLASMA PURE requires significant further research and development
before it can be submitted to the FDA if at all after the further results of
research and clinical trials are obtained.

The Company's electrostatic separation devices are manufactured from
generally available materials, and the Company is not dependent upon any single
supplier. The Company believes that there are numerous third party contract
manufacturers similar to NEWCO available around the world who can manufacture
its products on an OEM basis. The Company currently has insufficient resources
to establish and conduct its own commercial manufacturing activities with
respect to its proposed products. If the Company, in the future, decides to
establish its own manufacturing facilities and capabilities, at least for
certain products, it would require substantial additional funds and personnel.

Government Regulations

The production and marketing of some of the Company's products, including
the PLASMA PURE, will be subject to regulation for safety and efficacy by
numerous federal, state and local agencies, and comparable agencies in foreign
countries. The Company's PLASMA PURE system will be considered a medical device.
As such, the FDA would require the Company to apply for and obtain either a
premarket notification clearance under Section 510(k), or a PMA prior to sales
and marketing of the device in the United States. The 510(k) premarket
notification may be obtained if the medical device manufacturer can establish
that the newly developed product is substantially equivalent to another legally
marketed device. The FDA may also require clinical data or other evidence of
safety and effectiveness. In the United States, the FDA Act, govern or influence
the testing, manufacture, safety, labeling, storage, record keeping, approval,
advertising and promotion of the Company's proposed products and technologies.

Under the FDA Act, the FDA regulates the preclinical and clinical testing,
manufacturing labeling, distribution, sale and promotion of medical devices in
the United States. The FDA prohibits a device, whether or not cleared under a
510(k) premarket notification or approved under a PMA, from being marketed for
unapproved clinical uses.

Non-compliance with applicable requirements can result in fines and other
judicially imposed sanctions including the initiation of product seizures,
injunction actions, mandatory recalls and criminal prosecutions based on
products, promotional practices, or manufacturing practices that violate
statutory requirements. In addition, administrative remedies can involve
voluntary recalls or cessation of sale of products, administrative detention,
public notice, voluntary changes in labeling, manufacturing or promotional
practices. The FDA also has the authority to withdraw approval of instruments
and devices in accordance with statutory procedures.

<PAGE>

The Company has not prepared or made application to the FDA or any
governmental authority for approval of the PLASMA PURE device or related
products. The FDA approval procedure involves completion of pre-clinical studies
and the submission of the results of these studies to the FDA an application.
Preclinical studies involve laboratory evaluation of product characteristics and
animal studies to assess the efficacy and safety of the product. Human clinical
trials are typically conducted in three sequential phases, but the phases may
overlap. Phase I trials consist of testing the product in a small number of
volunteers primarily for safety. In Phase II, in addition to safety, the
efficacy of the product is evaluated in a small patient population. Phase III
trials typically involve additional multi-center testing for safety and clinical
efficacy in an expanded population of patients at geographically dispersed test
sites. A clinical plan, or "protocol," accompanied by the approval of the
institutions participating in the trials, must be submitted to the FDA prior to
commencement of each clinical trial. The FDA may order the temporary or
permanent discontinuation of a clinical trial at any time if adverse safety
effects are observed in volunteers or patients. In addition, the FDA may request
Phase IV trials after approval to resolve any lingering questions.

The results of the pre-clinical and clinical studies on new medical devices
are then submitted to the FDA for approval to commence commercial sales.
Following extensive review, the FDA may grant marketing approval, require
additional testing or information or deny the application. Continued compliance
with all FDA requirements and the conditions in an approved application,
including product specifications, manufacturing process, labeling and
promotional material and record keeping and reporting requirements, is necessary
for all products. Failure to comply, or the occurrence of unanticipated adverse
effects during commercial marketing, could lead to the need for labeling
changes, product recall, seizure, injunctions against distribution or other
FDA-initiated action, which could delay further marketing until the products are
brought into compliance.

The preparation of required applications and subsequent FDA and foreign
regulatory approval process is expensive, lengthy and uncertain. If the
manufacturer cannot establish equivalence or if the FDA determines that the
device requires more extensive review, the FDA will require the submission of
PMA. The PMA must contain nonclinical and clinical investigation results, a
description of the methods, facilities and controls used for manufacturing, and
the proposed labeling for the device. The Company must receive FDA approval for
Phase I, II, and III trials to test the PLASMA PURE device. FDA review of a PMA
would take at least nine months to a year following submission of Phase III test
results, and may take longer. No assurance can be given that approval of the
PLASMA PURE PMA would be granted.

The packaging and labeling of all the Company's proposed PLASMA PURE
products will be subject to FDA regulation. Because of the extensive costs and
time involved, the Company currently intends to rely primarily on licensees and
joint venturers to obtain regulatory approvals and market its PLASMA PURE
products, when developed. No assurance can be given that the Company will reach
agreement with any proposed licensees for such products. Licensees will
generally have the right to terminate funding a product at any time for any
reason without significant penalty. The resources and attention devoted by a
licensee, if obtained by the Company, to a product are not in the Company's
control, and this can result in delays in clinical testing, the preparation and
prosecution of regulatory filings and commercialization efforts. Even if the
Company is successful in finding licensees for its products, these delays would
cause the payment of any royalties to be delayed.

Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities must be obtained in any foreign country prior
to the commencement of marketing of the

<PAGE>

product in that country. The approval procedure varies from country to country,
can involve additional testing, and the time required may differ from that
required for FDA approval. Although some procedures for unified filings exist
for certain European countries, in general each country has its own procedures
and requirements, many of which are time consuming and expensive. Thus,
substantial delays in obtaining required approvals from both the FDA and foreign
regulatory authorities can result after the relevant applications are filed.
After such approvals are obtained, further delays may be encountered before the
products become commercially available.

No assurance can be given that any required FDA or other governmental
approval will be granted, or if granted, will not be withdrawn. Governmental
regulation may prevent or substantially delay the marketing of the Company's
proposed products, cause the Company to undertake costly procedures and furnish
a competitive advantage to the more substantially capitalized companies with
which the Company plans to compete. In addition, the extent of potentially
adverse government regulations which might arise from future administrative
action or legislation cannot be predicted.

Patents and License Rights

The Company's success depends in large part on its ability to obtain
patents, maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. The Company applied for U.S. patents
covering its DECAFFOMATIC separation technology and its PLASMA PURE separation
technology in 1993. On August 22, l995, the Company was issued a patent by the
U.S. Commissioner of Patents and Trademarks, Patent Number 5,443,709, for its
"Apparatus For Separating Caffeine From A Liquid Containing the Same." On April
2, 1996, the Company was issued a patent by the U.S. Patents and Trademarks
Office, Patent No.5503724, for "Process for Decaffeinating Caffeine Containing
Liquid."

The Company believes that patent protection of its technologies, processes
and products is very important to its future operations. The success of the
Company's proposed products may significantly depend upon the Company's ability
to obtain patent protection. No assurance can be given that any patents will be
issued or if issued that they will have commercial value to the Company. If a
patent is granted, the cost of enforcing the Company's patent rights in
lawsuits, if necessary, may be significant and could interfere with the
Company's operations.

Although the Company intends to file additional patent applications as
management believes appropriate with respect to any new products or
technological developments, no assurance can be given that any additional
patents will be issued, or if issued, that they will be of commercial benefit to
the Company. In addition, to anticipate the breadth or degree of protection that
any such patents may afford is impossible. To the extent that the Company relies
on unpatented proprietary technology, no assurance can be given that others will
not independently develop or obtain substantially equivalent or superior
technology or otherwise gain access to the Company's trade secrets, that any
obligation of confidentiality will be honored or that the Company will be able
to effectively protect its rights to proprietary technology. Further, no
assurance can be given that any products developed by the Company will not
infringe patents held by third parties or that, in such case, licenses form such
third parties would be available on commercially acceptable terms, if at all.

Competition

<PAGE>

Product Liability

The development, manufacture and sale of the Company's products involve an
inherent risk of product liability claims and associated adverse publicity. The
Company currently does not maintain liability insurance and may need to acquire
such insurance coverage prior to the commercial introduction of some of its
products. No assurance can be given that the Company will be able to obtain
product liability insurance or, if obtainable, that it will be on financially
reasonable terms. It is anticipated that the liability insurance for the types
of products to be marketed by the Company, if available, will be very expensive.
If such insurance is not obtained and maintained at sufficient levels, or if any
product liability claim were brought against the Company and were sustained for
a sufficient amount, it could have a material adverse affect on the business or
financial condition of the Company.

Employees

As of the date hereof, the Company has four full time employees, one in
management, two in research and development and one in administration. None of
the Company's employees is represented by a labor union. The Company considers
its relations with its employees to be satisfactory. See "Management".

Environmental Quality

The Company believes that it is now in compliance with all Federal, State
and local laws relating to the protection of the environment. The Company does
not generate, store, transport or dispose of any hazardous waste, and that
management believes that none of the Company's products is regarded as a
hazardous material by the applicable regulations for the protection of the
environment. The Company does not anticipate making any capital expenditures in
the current or succeeding fiscal year for environmental control efforts
regarding its products.

Properties

The Company's principal offices are currently located at 40 Bayfield Drive,
North Andover, Massachusetts and consists of approximately 1,276 square feet.
The Company had an initial three year lease which commenced on August 12, 1993
and ended on August 11, 1996. The Company extended this lease for one additional
year. The Company pays an annual rent of $14,450.00. The Company's headquarters,
and research and development facilities are located therein.

<PAGE>

Upon the end of the current lease, the Company expects to be able to either
negotiate a new lease with the current landlord or locate suitable premises
elsewhere for comparable fair market rent to that now being paid. The Company
believes that its property and equipment are in good operating condition and are
adequate for existing and immediately foreseeable needs.

Legal Proceedings

Edmund Abramson v. IMSCO Technologies, Inc., Case No. 97-12340 CA23,
Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida.
In May 1997, the Company terminated the Consulting Agreement of Edmund Abramson,
then a business consultant to the Company, alleging cause for such termination.
In June 1997, the Company was served with a complaint filed by Edmund Abramson
alleging breach of contract and claiming damages of $400,000, plus attorneys
fees. The Company has not yet answered and discovery in the case has not yet
commenced. Accordingly, although the Company believes it has meritorious
defenses to the plaintiff's claims, the Company is not able to assess its
potential exposure in this case. However, the Company intends to vigorously
defend the lawsuit and intends to file meritorious counterclaims and seek money
damages. If the Company is unsuccessful in defending the lawsuit, it could have
a material adverse effect on the Company.

WRA Consulting, Inc., v. IMSCO Technologies, Inc., Case No. 97-12336 CA21,
Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida.
In May 1997, the Company terminated the Consulting Agreement of WRA Consulting,
Inc., then a financial consultant to the Company, alleging cause for such
termination. In June 1997, the Company was served with a complaint filed by WRA
Consulting, Inc., alleging breach of contract, for among other reasons failure
of the Company to deliver 150,000 registered shares of common stock and 150,000
warrants to purchase common stock to WRA Consulting, Inc., and claiming damages
on account thereof in the amount of $800,000, plus attorneys fees. The Company
has not yet answered and discovery in the case has not yet commenced.
Accordingly, although the Company believes it has meritorious defenses to the
plaintiff's claims, the Company is not able to assess its potential exposure in
this case. However, the Company intends to vigorously defend the lawsuit and
intends to file meritorious counterclaims and seek money damages. If the Company
is unsuccessful in defending the lawsuit, it could have a material adverse
effect on the Company.

The Company is not a party to any other legal proceedings.

29
<PAGE>

MANAGEMENT

The following table sets forth information with respect to each executive
officer and director of the Company. Each executive officer or director has been
appointed as of this year to serve for a term of one year.

Directors and
Executive Officers Age Position
------------------ --- --------

Sol L. Berg 62 President and Director

Dr. Alan Waldman 51 Vice President and Director

James Crose 63 Vice President--Engineering

Gloria Berg 60 Secretary

Mr. James Yurak 60 Director

Victor Bauer 53 Director

Scott Robinson 35 Director

Sol L. Berg

Since the latter part of 1984, Mr. Berg has devoted his full-time efforts
to the business of the Company and has served as its President since such date.
From 1982 to 1984, Mr. Berg was the Project Director and Product Manager for
United Technologies Packard in Chicago, Illinois, which is a manufacturer of
precision instrumentation. From 1980 to 1982, Mr. Berg was Product Manager for
the Hamilton Company in Reno, Nevada. Hamilton Company is a manufacturer of
precision scientific equipment. From 1974 to 1980, Mr. Berg, was the National
Accounts Manager for Bio-Rad Laboratories in Richmond, California, which
manufactures diagnostic materials and equipment. Mr. Berg received a Bachelor of
Science in Chemistry from New York University. Sol L. Berg is the husband of
Gloria Berg.

Alan Waldman, Ph.D

Dr. Alan A. Waldman, Ph.D. joined IMSCO as Executive Vice President and a
Director in 1992. Since 1988, Dr. Waldman has served as President of Waldman
Biomedical Consultancy, an international advisory group. From 1981 to 1988, Dr.
Waldman was the Technical Director for the New York Blood Center, which is the
largest blood bank in the world having annual sales in excess of $100 million.
Dr. Waldman is an authority in planning, development and automation of serologic
and diagnostic testing related to immunologic and viral markers. He is the
author of over 60 reports

<PAGE>

and publications. Dr. Waldman also became Chief Executive Officer of the
Company's BioElectric Separation & Testing, Inc. subsidiary in January 1996. Dr.
Waldman received his Ph.D. in Biochemistry from Tufts University.

James G. Yurak

Mr. Yurak was elected to the Board in l995 and serves as President and
Chief Executive Officer of the Decaf Products, Inc. subsidiary of the Company,
which was formed in l995 for the express purpose of manufacturing, marketing and
distributing products incorporating the Company's patented electrostatic
decaffeination separation technologies. He brings 20 years of direct experience
in the marketing and sales of coffee makers and coffee products to the Company
and DPI. He joined Mr. Coffee, Inc. in 1976 as Vice President of Sales, from
1986 to 1994 served as its Executive Vice President, where he helped direct the
growth of Mr. Coffee from a concept to a company with sales of approximately
$200 million per year. Mr. Yurak is a graduate of Colgate University.

James Crose

Mr. Crose has been Vice President of Engineering for the Company since
1992. Mr. Crose earned a B.S. in Mechanical Engineering from Northeastern
University. His areas of expertise include: Fluidics, Vacuum Process Control,
Heat Transfer in Electronics and AutoCad 1-4. He has experience in cryogenic
technology as applied to the Titan III program at launch complexes 43 and 44 at
Cape Kennedy. He holds several electrostatic patents applying internal coatings
to two-piece cans for the canning industry. Mr. Crose has held key engineering
positions with Raytheon, Martin Marietta, Corning Glass, Sanders Assoc. and
Sweetheart Cup Corp.

Gloria Berg

Gloria Berg has served as Secretary for the Company since late l984. From
1982 to l984, she was a bookkeeper and accountant for Hidden Lake Village
Condominiums, Illinois. From 1975 to 1982, she was a department manager for four
departments for Famous Barr department stores. Gloria Berg is the wife of Sol L.
Berg.

Victor Bauer

Mr. Bauer became a Director in 1996. Mr. Bauer has over 25 years experience
in establishing product sales, marketing and distribution organizations. He is
also the President and Chief Executive Officer of Universal Sales, Inc., which
is a sales and marketing firm based in New York. Since 1994, he has been
President and chief Executive Officer of BIJ Enterprises, Ltd., St. James, New
York, which entity serves as an Agent/Broker for Stone Container Corporation and
Formosa Plastics. From 1991 to 1994, he was President and Chief Executive
Officer of Royal Beverages of New York, Ltd., which was the exclusive franchised
bottler and distributor of Royal Crown Cola Company for the New York and Long
Island metropolitan area, excluding Manhattan. At Royal Beverages, Mr Bauer
recruited and supervised management teams consisting of sales manager, directors
of chain sales, controller and operations specialists, warehouse managers plus
in excess of 100 additional employees. From 1971 to 1991, Mr. Bauer was the
President of wholesale beverage distribution companies. He received a Bachelor
of Science in Business Administration from New York University in l964 and a
Masters Degree in Education from Brooklyn College in 1967.

31
<PAGE>

Scott Robinson

Mr. Robinson became a Director in 1997. Mr. Robinson currently co-owns and
operates one of the largest retail liquor operations in Colorado. Since
returning to Denver, Colorado in 1988, he has doubled the size of this family
owned business. Prior to that time, Mr. Robinson spent several years in the
mortgage banking and real estate brokerage business in Dallas, Texas. A graduate
of the University of Colorado, he also earned an MBA from Southern Methodist
University in 1985.

Directors do not receive any compensation for services as directors. During
fiscal year 1996, the Company's Board of Directors performed the functions of a
compensation committee of the Board in reviewing the compensation paid to
employees, and of an audit committee in reviewing financial statements,
management and internal audits. IMSCO does not have a separate Nominating or
Compensation Committee.

Executive Compensation

Summary Compensation Table

The following table sets for the annual and long-term compensation of the
chief executive officer and other executive officers for services in all
capacities for the fiscal years ended December 31, 1994, 1995 and 1996, Whose
total annual salary and bonus exceeded $100,000 in any of those fiscal years.

SUMMARY COMPENSATION TABLE

Capacity in which Additional
Name of Individual served Year Salary Compensation
- --------------------------------------------------------------------------------
Executive Officer 1996 $100,000
Sol. L. Berg President and Chief 1995 $ 75,300 $ 75,000(1)
Executive Officer 1994 $ 51,944

James G. Yurak Director and 1996 -- $100,000(2)
President of
DPI Subsidiary 1995 --
Executive Officer 1994 --

Dr. Alan D. Waldman Director, 1996 -- $132,000(3)
Vice President 1995 --
and President 1994 --
of BEST Subsidiary

- ----------

(1) Consists of 150,000 shares of the Company received by Mr. Berg pursuant to
the general exchange of the Company's shares for shares of DPI conducted in
May 1996. In November of 1995, Mr. Berg had received 250,000 shares of DPI
for assigning his patent to the decaffeination technology and for other
services rendered. In 1995, the Board of Directors determined, without
independent valuation, that the fair market value of each share of DPI to
be approximately $.50 per share, based on the fact that (i) DPI was a newly
formed, start-up entity with no assets or revenue, (ii) DPI was a closely
held, non-public company with no established market for its shares, and
(iii) the DPI shares were issued with restrictive legends on transfer. When
all of the shares of DPI not owned by the Company were exchanged by the
respective DPI shareholders in May 1996 for Company shares on a 0.6 Company
shares to DPI share basis, Mr. Berg received the 150,000 shares of the
Company. At the Board's estimated value of $.50 per share, Mr. Berg's
150,000 shares were worth approximately $75,000.

(2) In connection with the signing of his amended employment agreement in
September 1996, Mr. Yurak was granted 75,000 shares of unregistered common
stock of the Company. Using the same $1.32 price per share the shares were
sold to HTP-II and PML, the shares granted to Mr. Yurak would have a value
of $100,000.

(3) For his services the Company agreed to issue Dr. Waldman 100,000 shares of
common stock in October 1996 which shares did not vest and were not
delivered until January 1997. Using the same $1.32 price per share that
shares were sold to HIP-II and PML, the shares issued to Dr. Waldman would
have a value of $132,000.

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

<PAGE>

There are no arrangements known to the Company which may at a subsequent
date result in a change in control of the Company.

Employment Arrangements

Effective as of September 1, 1996, the Company entered into an employment
agreement with Sol L. Berg providing for Mr. Berg's employment as the Company's
President for a three year term. Mr. Berg's salary under this agreement is
$125,000 per year. Mr. Berg is also eligible to receive an annual bonus equal to
3.5% of the "Net Earnings" in excess of $1 million per year from the Company's
"Heal & Seal" Division. The term "Net Earnings" shall mean the earnings of the
Company's "Heal & Seal" Division before taxes for each given fiscal year and
shall be conclusively determined to be those shown on the income statement for
such fiscal year by the Company in its Annual Report on Form 10-KSB as filed
with the Commission; or, if the Company shall not be subject to the reporting
requirements of Sections 13 or 15 of the Securities Exchange Act of l934, as
shown on the Company's income statement audited and certified by an independent
certified public accountant. The annual bonus shall be paid within 90 days after
the end of the Company's fiscal year end. For purposes of calculating the bonus,
the Company shall be charged in the aggregate no more than 10% of its gross
revenues by Company for royalties on licenses from Company to the Division and
for administration and management fees. The agreement also provides that Mr.
Berg shall be provided with a car by the Company and be reimbursed for
automobile insurance. Mr. Berg shall also be entitled to medical insurance,
vacation and other benefits provided to the Company's employees generally. In
the event that Mr. Berg's employment with the Company is terminated by the
Company other than for cause, Mr. Berg shall receive one year's base salary. In
connection with the exchange of his DPI stock for the Company's Common Stock,
Mr. Berg received 150,000 shares of the Company's Common Stock.

Effective as of February 26, 1997, DPI entered into a consulting agreement
with Mr. James G. Yurak to provide marketing and sales consulting services and
advice to DPI through December 31, 1999. Under Mr. Yurak's agreement, he is paid
a base retainer of $12,000 per year and will be paid a per diem fee of $1,000
when specific services are expressly requested by DPI. Additionally, for sales
orders generated by Mr. Yurak within North America, excluding Hughes, Edwards &
Price, Inc., he will be paid commission of 3% of the first $5 million in sales,
2% of the next sales between $5 million and $15 million and 1% of all sales in
excess of $15 million. the commissions shall be paid when received by the
Company. From February 23, 1996 through February 26, 1997 Mr. Yurak served as
President and Chief Executive Officer of DPI. As total compensation for such
services Mr. Yurak was also granted 75,000 shares of the Company's Common Stock
upon signing his employment agreement and 75,000 shares after one full year of
employment.

Effective as of September 1, 1996, the Company entered into an employment
agreement with James Crose providing for Mr.Crose's employment as the Company's
Vice President of Engineering for a two year term. Mr. Crose's salary under this
agreement is $75,000 per year. Mr. Crose shall also be entitled to medical
insurance, vacation and other benefits provided to the Company's employees
generally.

On August 13, 1996, the Company entered into a Business Consulting
Agreement with Mr. Edmund Abramson for a period of three years at an annual cash
compensation of $200,000, excluding benefits. The services to be rendered by
Abramson under his Consulting Agreement consist of advice and opinions to the
Company concerning business and financial problems in connection with the
operation and management of the Company, capital structuring and private and
public equity and debt financing, shareholder relations (including assistance in
the preparation of the Company's Annual Report), acquisitions, mergers, and
other similar business combinations. Abramson is obligated to render such
services as are reasonably necessary to pursue the transactions contemplated
therein, provided, however, that Consultant shall have sole discretion as to the
form, manner and place in which said advice shall be given under this Agreement.
At no time is Abramson under any obligation whatsoever to render written
opinions or reports in connection with any advice he may give to the Company.
Abramson is obligated to devote to the Company only such time as he may deem
necessary, and when reasonably requested by the Company, and shall not be
prevented or barred from rendering services of any nature whatsoever for or on
behalf of persons, firms or corporations other than the Company, provided
however that Consultant agrees not to such a third party engagement during the
term of the agreement with any company or entity that competes in the same line
or lines of business as the Company or its subsidiaries. Consequently,
Consultant shall not be an employee of the Company but shall be an independent
contractor to the extent permitted by applicable law. Edmund Abramson was
Chairman of the Board and a director of Ferrara Food Company, Inc., from May,
1992, until March 1996. From April 1990 to September 1992, Mr. Abramson was
President of Adelaide Holdings, Inc., a public company. From August 1990 to
December 1992, Mr. Abramson was Chairman of the Board of Restaurant Enterprises,
Inc., a company that owns and operates restaurants in South Florida. From 1984
to 1990, Mr. Abramson was on the Board of Directors of International Recovery
which is now trading on the New York Stock Exchange. The agreement also provides
that Mr. Abramson shall be provided with a car by the Company and be reimbursed
for automobile insurance. Mr. Abramson shall also be entitled to medical
insurance. In the event that Mr. Abramson's agreement with the Company is
terminated by the Company, Mr. Abramson shall receive two year's base cash
compensation. Mr. Abramson was also granted 100,000 shares of the Company's
Common Stock and an option to purchase 100,000 shares of Common Stock at $1.50
per share. In May 1997, the Company notified that it was terminating Mr.
Abramson's Consulting Agreement for cause and intended to seek monetary damages
from Mr. Abramson. See "Legal Proceedings."

<PAGE>

See "Stock Option Plan". For fiscal year ended December 31, 1996, Mr.
Abramson received total consulting fees having a value of $291,666 from the
Company, which consisted of the described 100,000 shares of common stock and
cash and accrued payments of $141,666. In May 1997, based on the advice of
special counsel, the Company advised Mr. Abramson that it was terminating his
Consulting Agreement for cause and it belived that no further compensation is
due. See "Legal Proceedings".

On August 13, 1996, the Company entered into a three year Consulting
Agreement with WRA Consulting, Inc. a corporation having Willa Rose Abramson,
wife of Edmund Abramson ("WRA") as its sole director and shareholder. Under the
agreement, if WRA finds $1 million in capital financing for the Company, the
Company shall grant WRA 150,000 shares of Common Stock and warrants or options
to acquire an additional 150,000 shares of Common Stock at $1.50 per share. If
within six months after the initial $1 million financing WRA arranges a
transaction with a third party introduced by WRA which has a consideration or
value to the Company of $5 million or greater, whether through a merger,
acquisition, business combination or security placement for the benefit of the
Company, it shall receive an additional 250,000 shares of the Company's Common
Stock and 250,000 warrants to purchase Common Stock, exercisable at $1.50 per
share for a period ending December 31,1999. If the transaction is assisting in
arranging capital for the Company, it shall also receive an investment banking
fee equal to five percent of amounts in excess of $5 million. WRA introduced
HTP, HTP-II an PML to the Company and assisted in the Company's sale of the $3
million of common stock to such parties in November and December 1996. The
agreement also grants WRA a bonus equal to 5% of the "Net Earnings" in excess of
$3 million per year from the Company if WRA is successful in arranging an equity
or debt placement for the Company, or a transaction which has a consideration or
value to the Company of $5 million or greater. In May 1997, the Company advised
WRA Consulting, Inc. that its agreement was terminated and that it intended to
seek monetary damages incurred as a result of WRA's conduct. See "Legal
Proceedings".

Effective as of September 1, 1996, Universal Sales, Inc., also entered into
a Sales Administration and Servicing Agreement ("Universal Agreement") with the
Company for a seven year term, providing a broad scope of sales administration
and services to the Company. As compensation for its services, Universal shall
receive an amount equal to 2.5% of the Company's gross revenues from operations
in excess of $5 million per annum. Mr. Victor Bauer, a Director of the Company,
is also the President and a 50% shareholder of Universal Sales. Additionally,
under the Universal Agreement, Universal shall be entitled to a sales commission
equal to 2.5% of the gross revenues resulting from all sales generated through
the efforts of Universal. Universal also received $31,500 as compensation for
services rendered to the Company in 1996. In May 1997, the Company advised
Universal Sales that its agreeement was terminated.

34
<PAGE>

The Company currently provides medical insurance to all its employees.
Except as described above, there are presently no pension or other plans or
arrangements pursuant to which renumeration is proposed to be paid in the future
to any of the officers or directors of the Company other than as set forth
above. At the present time, the directors do not receive compensation of any
form. Except as provided, the Company does not provide life, health or medical
plans to officers that are not available to all employees. Except as provided
above, the Company has no other employment contracts with any executive officers
or other employees.

Certain Limited Liability, Indemnification and Anti-Takeover Provisions

The Company's Articles of Incorporation limit the liability of its
directors to the fullest extent permitted by the Delaware Business Corporation
Law. Specifically, directors of the Company will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except for liability
for (i) any breach of the duty of loyalty to the Company or its shareholders,
(ii) acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) dividends or other distributions of
corporate assets that are in contravention of certain statutory or contractual
restrictions, (iv) violations of certain securities law, or (v) any transaction
from which the director derives an improper personal benefit. Liability under
Federal securities laws are not limited by the Articles of Incorporation.

The Delaware Business Corporation Law requires that the Company shall
indemnify any director, officer or employee made or threatened to be made a
party to a proceeding, by reason of the former or present official capacity of
the person, against judgments, penalties, fines, settlements and reasonable
expenses incurred by the person in connection with the proceeding if certain
statutory standards are met. "Proceeding" means a threatened, pending or
completed civil, criminal, administrative, arbitration or investigative
proceeding, including a derivative action in the name of the Company. Reference
is made to the detailed terms of the Delaware indemnification statute for a
complete statement of such indemnification rights. The Company's Restated Bylaws
require the Company to provide indemnification to the fullest extent of the
Indemnification statute.

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

Stock Option Plan

In July 1996, the Company adopted a Non-Qualified Stock Option Plan (the
"Plan"). An aggregate of 1,500,000 shares of Common Stock are authorized for
issuance under the Plan. The Plan provides that incentive and non-qualified
options may be granted to officers, directors, consultants and key employees to
the Company for the purpose of providing an incentive to those persons to work
for the Company. The Plan may be administered by either the Board of Directors
or a committee of three directors appointed by the Board ("Committee"). The
Committee has wide latitude in determining the

<PAGE>

recipients of options and numerous other terms and conditions of the options.
The Board or Committee determines, among other things, the persons to whom stock
options are granted, the number of shares subject to each option, the date or
dates upon which each option may be exercised and the exercise price per share.

Options granted under the Plan are exercisable for a period of up to ten
years from the date of grant. Options terminate upon the optionee's termination
of employment or consulting arrangement with the Company, except that under
certain circumstances an optionee may exercise an option within the three-month
period after such termination of employment. An optionee may not transfer any
options except that an option may be exercised by the personal representative of
a deceased optionee within the three-month period following the optionee's
death.

Employees as well as other individuals, such as outside directors, who
provide necessary services to the Company, are eligible to participate in the
Plan. Non-employees and part-time employees may receive only non-qualified stock
options. The maximum number of shares of Common Stock for which options may be
granted under the Plan is 1,500,000 shares. On August 13, 1996, 100,000 shares
of Common Stock were issued under the Plan and options to acquire 100,000 shares
of Common Stock exercisable at a price of $1.50 per share for a period of five
years were issued to Edmund Abramson a business consultant for the Company for
services rendered pursuant to his Consulting Agreement with the Company. On
October 10, 1996, 60,000 shares of Common Stock were authorized for Dr. Alan
Waldman, an executive officer and consultant to the Company, for services
rendered through 1996. Dr. Waldman's 60,000 shares of Common Stock vested and
were issued on January 2, 1997. Mr. Vernon Oberholtzer, a former Director of the
Company who resigned in February 1997 was granted stock options under the Plan
to acquire 10,000 Shares of the Company's Common Stock for a price of $1.32 per
Share, exercisable over a period ending December 31, 1999.

Each Director serves until the next annual meeting of shareholders, or
until his successor is elected and qualified. The term of each officer is at the
discretion of the Board of Directors. The by-laws provide that the Chairman of
the Board of Directors has a second vote in the event that a majority vote of
the Board of Directors is not obtained.

<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table identifies each person known to the Company to be the
beneficial owner of more than five percent of the Company's Common Stock, each
director of the Company and all directors and officers of the Company as a
group, and sets forth the number of shares of the Company's Common Stock
beneficially owned by each such person and such group and the percentage of the
shares of the Company's outstanding Common Stock owned by each such person and
such group. In all cases, the named person individually or together with his
spouse has sole voting power and sole investment power over the securities.

Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
- ---------------- -------------------- ----------------

Hampton Tech Partners II, LLC
8400 East Prentice Avenue
Englewood, CO 80111 (1) 1,117,424 18.3%

Hampton Tech Partners, LLC
8400 East Prentice Avenue
Englewood, CO 80111 (2) 150,000 2.5%

Proxhill Marketing, Inc.(3)(4) 1,263,635 20.7%
9250 E. Costilla Avenue
Englewood, CO 80112

Sol L. Berg (5) 385,000(6) 6.3%
11 Royal Crest Drive
North Andover, MA 01845

Gloria Berg 165,250(7) 2.7%
11 Royal Crest Drive
North Andover, MA 01845

Dr. Alan Waldman (5) 170,000 2.8%
184 Seiffert Court
Oceanside, NY 11572

Mrs. Alexander T. Hoffman 369,900 6.0%
1660 Old Country Road
Plainview, NY 11803

Vic Bauer (5)(8) 10,000(4) .001%
c/o IMSCO, Inc.
40 Bayfield Drive
North Andover, MA 01845

<PAGE>

James Yurak (5)(9)
c/o IMSCO, Inc.
40 Bayfield Drive
North Andover, MA 01845 150,000 2.4%

All Officers and Directors 955,250 14.5%
as a group (6 persons)

- ---------------
(1) The members of Hampton Tech Partners II, LLC ("HTP-II") who indirectly and
beneficially own these shares of the Company are:

Steven Demby, Equitrust Mortgage Corporation, David McCall, Scott Robinson,
Kent Lovelace, Bennett Aisenberg, Gerald Gray, Tyler Runnels, Andrew
Telsey, Breverly Morton, Grant Street Joint Venture, Andrew Telsey,
SEP/IRA, David Sprang, James Curtis, Mark Rosenberg, Charles McKenney,
Michael Geller, Hampton Partners Investments, LLC, 181 Realty, Inc.,
Capital Market Solutions, Inc. Clifford Greenbaum, Jolie Robinson, Henrik
Oerbekker, Russell Scott, Joseph Scott, Suzanne Robinson, Doug Hickok, Bob
Sanderman, Mark Bradford, Stanley Cohen, and Mark Lampirski. Mr. Scott
Robinson, a Director of the Company, is a member of HTP-II and is the
brother of Mr. Jeffrey Robinson, who is the President of Hampton Partners
Investments, Inc., the Managing Member of HTP-II. No member of HTP-II has a
controlling interst in HPT-II and no member would indirectly and
beneficially own 5% or greater of the outstanding Shares of the Company.
Except for Hampton Partners Investment, Inc.'s role as the Managing Member
of HTP-II, no person has any direct or indirect control of HTP-II. Mr.
Jeffrey Robinson is the only person who has any control over the Managing
Member of HPT-II.

(2) The members of Hampton Tech Partners, LLC ("HTP-I") who indirectly and
beneficially own these shares of the Company are:

Hampton Partners Investments, Inc., Kent Lovelace, David McCall, Scott
Robinson, Jack Robinson, Wexler & Burkhart, Del Morton, David Strang, and
Henrik Oerbekker. Mr. Scott Robinson, a Director of the Company, is a
member of HTP-I and is the brother of Mr. Jeffrey Robinson, who is the
President of Hampton Partners Investments, Inc., the Managing Member of
HTP-I. No member of HTP-I has a controlling interest in HTP-I and no member
would indirectly and beneficially own 5% or greater of the outstanding
Shares of the Company. Except for Hampton Partners Investment, Inc.'s role
as the Managing Member of HTP-I, no person has any direct or indirect
control of HTP-II. Mr. Jeffrey Robinson is the only person who has any
control over the Managing Member of HPT-I.

(3) The unrelated person who beneficially owns 100% of the Proxhill Marketing
Limited shares is Julie A. Graham.

(4) Does not include 127,272 Shares issuable to Proxhill Marketing, Ltd., upon
exercise of the Class D Warrants for the exercise price of $1.32 per Share.

(5) Denotes a director of the Company.

(6) The shares shown as owned by Sol L. Berg do not include either (i) 165,250
shares owned by his wife, Gloria Berg, or (ii) 150,000 shares owned
directly by Sol L. Berg's three adult children, since Mr. Berg has
disclaimed any interest and may not be deemed to have voting or investment
power over these shares.

(7) The shares shown as owned by Gloria Berg do not include either (i) 235,000
shares owned by her husband, Sol L. Berg, or (ii) 150,000 shares owned
directly by Sol L. Berg's three adult children, since Mrs. Berg may not be
deemed to have shares voting or investment power over these shares.

(8) Includes 10,000 Shares that are directly owned by Mr. Bauer's sons, Ian and
Jason Bauer.

(9) Includes the 150,000 shares of Common Stock granted to Mr. Yurak in
connection with his former employment agreement as President and Chief
Executive Officer of DPI.

(10) Excludes options to purchase 10,000 shares at a price of $1.50 per share.

* Less than 1%

There are no arrangements known to the Company which may, at a subsequent
date, result in a further change in control of the Company.

<PAGE>

CERTAIN TRANSACTIONS

In August 1996, Hampton Tech Partners, LLC ("HTP") acquired $300,000 in
promissory notes from the Company and 150,000 shares of Common Stock for the
total consideration of $300,000. The notes were repaid in full on October 22,
1996. On September 20, 1996, the Company entered into a Purchase Agreement with
HTP-II wherein HTP-II acquired 1,136,363 shares of Common Stock for $1,500,000
in cash or $1.32 per share. The proceeds of the $1.5 million sale of stock to
HTP-II were used to repay the $300,000 note to HTP. Shares acquired by HTP and
HTP-II are being registered pursuant to this Registration Statement.

On September 20, 1996, the Company entered into the Media Purchase
Agreement with PML, wherein PML agreed to sell $1,500,000 of media credits to
the Company in consideration for the Company issuing 1,136,363 shares of Common
Stock, representing a price of $1.32 per share. The Shares acquired by PML are
being registered pursuant to this Registration Statement. In connection with the
private placement of the Shares to HTP, HTP-II and PML, First Capital
Investments, Inc., a broker-dealer which is a member of the National Association
of Securities Dealers, Inc. ("NASD"), received the 242,273 Class A Warrants
entitling it to acquire Common Stock for the price of $1.45 per Share
exercisable over a period ending July 31, 2001. For advertising and marketing
services rendered to the Company in 1996 and 1997, PML also received the 127,272
Class D Warrants, entitling it to acquire Common Stock for the price of $1.32
per Share for a period ending July 31, 2001.

In 1996, Mr. Sol L. Berg, a Director and President of the Company, received
150,000 shares of Common Stock in exchange for the DPI shares owned by Mr. Berg
which were issued in 1995 as compensation for services rendered. In 1996, Mr.
James G. Yurak, a Director and then President of the DPI subsidiary, received
75,000 shares of Common Stock for services rendered. In 1997, Mr. Yurak received
an additional 75,000 shares of Common Stock for services rendered. In 1996, Dr.
Alan Waldman entered into an understanding that he shall receive 100,000 shares
of Common Stock representing payment for services due him under his consulting
agreement through December 31, 1996, with the shares vesting and being issued on
January 2, 1997. In l996, David E. Fleming, a member of Epstein, Becker & Green,
P.C., counsel to the Company, received 90,000 shares of the Company's Common
Stock for various legal services rendered to the Company over the prior two
years, which shares will vest on January 1, 1997. In 1996, Mr. Vernon
Oberholtzer, a Director of the Company, received stock options to acquire 10,000
Shares for a price of $1.32, exercisable over a period ending December 31, 1999.
In 1996, Universal Sales, Inc. ("Universal"), a sales and marketing company of
which Mr. Victor Bauer, a Director of the Company, is President and a 50%
shareholder, received cash compensation in the amount of $31,500. Mr. Sol Berg
borrowed the amount of $25,000 from the Company in January 1997, which amount is
evidenced by a promissory note bearing interest at 9% per annum and is due in
full on December 31, 1997.

SELLING SHAREHOLDERS

All of the Common Shares registered are to be offered for the account of
the following shareholders (the "Selling Shareholders"). The following sets
forth certain information with respect to the Selling Shareholders. The Company
has no knowledge of the intentions of any of the Selling Shareholders to
actually sell any of the shares listed under the column "Shares to be Sold."

<PAGE>

Shares Ownership
Ownership to be After Percentage of
Prior Registered and Offering and Class Owned
Selling Shareholder to Offering Sold Shares Sold Prior to Offering
- ------------------- -------------- ---- -------- -----------------

<S> <C> <C> <C> <C>
Hampton Tech Partners, LLC 150,000 150,000 0 2.5%

Hampton Tech Partners II, LLC(1) 1,136,363 1,136,363 0 18.6%

Proxhill Marketing, Limited(2) 1,263,635 1,263,635 0 18.6%

First Capital Investments, Inc.(3) 242,272 242,272 0 0

</TABLE>
- ----------
(1) Of the 1,136,363 Shares reflected by HTP-II, 18,940 are being registered on
behalf of Mr. Bernard L. Shaw, and 100,000 on behalf of Limpos Financial
who elected to directly purchase Shares at $1.32 per Share under
HTP-II's Stock Purchase Agreement with the Company.

(2) Includes 127,272 Shares issuable upon exercise of the Class D Warrants. The
percentage of class reflects the 1,136,363 Shares outstanding and held at
the date of this Prospectus.

(3) Includes 242,272 Shares issuable upon exercise of the Class A Warrants.
None of these Shares are currently outstanding

HTP-II, PML and First Capital Investments, Inc., the holders of an
aggregate of 2,623,339 of the outstanding Shares and Shares underlying the Class
A and Class C Warrants being registered hereunder, have agreed under the
respective Stock Purchase Agreements and the Media Purchase Agreement with the
Company to contractually have the Shares restricted on sale under a "lock-up"
agreement. Under the lock-up agreement, one-third (1/3) of the Shares will be
released at any time after the effective date of the Registration Statement.
After the release of the initial one-third of the Shares, the remaining
two-thirds (2/3) of the Shares shall be locked-up until July 15, 1997. The
Company currently intends to enforce the lock-up arrangements and has no plan or
current intentions to modify or release the lock-up requirements. During the
"lock-up" period, after this Prospectus has become effective, HTP-II shall have
the right to distribute its Shares to its shareholder-members, provided that
each shareholder-member shall be individually subject to the "lock-up" time
periods. After the respective "lock-up" has expired, each holder, including the
various shareholder-members of HTP-II, have agreed with the Company to only sell
Shares at the same rate as permitted under Rule 144.

PLAN OF DISTRIBUTION

Any or all of the Shares may be sold from time to time directly to
purchasers by the Selling Shareholders. The sale of the Shares by the Selling
Shareholders may be effected from time to time in transactions (which may
include block transactions) in the over-the-counter market, in negotiated
transactions, or a combination of such methods of sale, at fixed prices which
may be changed, at

<PAGE>

market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Shareholders may
effect such transactions by selling shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Shareholder and/or the
purchasers of Shares for whom such broker-dealers may act as agent or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).

The Selling Shareholder and any broker-dealers that act in connection with
the sale of the Shares hereunder may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any discounts, concessions
or commissions received by them and any profit on the resale of Shares as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act.

At the time a particular offer of Shares is made, to the extent required, a
supplement to this Prospectus will be distributed which will set forth the terms
of the offering, including the name or names of any underwriters, dealers or
agents, the purchase price paid by any underwriter for shares purchased from the
Selling Shareholder and any discounts, concessions or commissions and other
items constituting compensation from the Selling Shareholder and any discounts,
concessions or commissions allowed or reallowed or paid to dealers, including
the proposed selling price to the public.

The Company is paying certain expenses (other than commissions and
discounts of underwriters, dealers or agents) incident to the offering and sale
for the Shares to the public, which are estimated to be approximately $54,000.
If the Company is required to update this Prospectus during such period, it may
incur additional expenses in excess of the amount estimated above.

In order to comply with certain states' securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states the Shares may not be sold unless they
have been registered or qualify for sale in such state or an exemption from
regulation or qualification is available and is complied with.

<PAGE>

DESCRIPTION OF SECURITIES

General

The Company is authorized to issue an aggregate of 15,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock. The Preferred Stock may be
issued in such series, and with such rights, designations and privileges as the
Board of Directors of the Company may, from time to time, authorize.

Common Stock

Holders of the Common Stock are entitled to one vote per share and, subject
to the rights of the holders of the Preferred Stock (discussed below), to
receive dividends when and as declared by the Board of Directors and share
ratably in the assets of the Company legally available for distribution in the
event of the liquidation, dissolution or winding up of the Company.

Holders of the Common Stock do not have subscription, redemption or
conversion rights, nor do they have any preemptive rights. In the event the
Company were to elect to sell additional shares of its Common Stock following
this Offering, investors in this Offering would have no right to purchase
additional shares of such stock and consequently, their percentage of equity
interest in the Company would be diluted.

The shares of Common Stock offered hereby will be, when issued and paid
for, fully paid and not liable for further call or assessment.

Holders of the voting stock do not have cumulative voting rights, which
means that the holders of more than half of the shares of voting stock can elect
all of the Company's Directors, if they choose to do so, and in such event the
holders of the remaining shares would not be able to elect any Directors. The
Board is empowered to fill any vacancies on the Board created by the resignation
of Directors.

Except as otherwise required by the Delaware Corporation Law, all
shareholder action (other than the election of Directors, who are elected by a
plurality vote) is taken by vote of a majority of shares of voting stock present
at a meeting of shareholders at which a quorum (a majority of the issued and
outstanding shares of the Company's voting stock) is present in person or by
proxy.

Preferred Stock

Pursuant to its Certificate of Incorporation, the Company is authorized to
issue a maximum of 1,000,000 shares of Preferred Stock in such series and with
such rights, designations and privileges (including voting rights and dividends)
as the Board of Directors may, from time to time, authorize. To date, no
Preferred Stock has been issued or designated as to terms. The Company currently
has no plans, arrangements, commitments or intentions to issue any of the
Preferred Stock.

42
<PAGE>

Warrants and Options

As of December 31, 1996, there were warrants and stock options outstanding
to purchase an aggregate of approximately 1,005,773 shares of Common Stock at
exercise prices ranging from $1.45 to $2.00 per share. The warrants and options
contain provisions for the adjustment of the exercise prices in certain events,
including sales of Common Stock at less than the exercise price, stock
dividends, stock splits, reorganizations, reclassifications or mergers. The
warrants and options expire on various dates between February 1999 and October
2001. The holders of the Class A Warrants and Class D Warrants which are
outstanding on the date of this Prospectus are entitled to registration rights
for the underlying Common Stock, which underlying shares represent 242,272
Shares and 127,272 Shares, respectively.

The 242,272 Class A Warrants entitle the registered holder thereof to
purchase one share of Common Stock at a price of $1.45 per share, subject to
adjustment in certain circumstances. The Class A Warrants will expire at 5:00
p.m., New York City time, on July 31, 2001.

The 127,272 Class D Warrants entitle the registered holder thereof to
purchase one share of Common Stock at a price of $1.32 per share, subject to
adjustment in certain circumstances. The Class D Warrants will expire at 5:00
p.m., New York City time, on July 31, 2001.

The exercise price and number of shares of Common Stock issuable on
exercise of the Warrants are subject to adjustments under certain circumstances,
including in the event of a stock dividend, recapitalization, reorganization,
merger or consolidation of the Company. However, the Warrants are not subject to
adjustment for issuances of Common Stock at a price below their respective
exercise prices. The warrantholders do not have the rights or privileges of
holders of Common Stock, including, without limitation, the right to vote on any
matter presented to stockholders for approval.

Transfer Agent

The Transfer Agent and Registrar for the Company's Common Stock is
Progressive Transfer Company. The Company acts as its own transfer registrar for
the Warrants.

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of this offering based on the shares outstanding on
July 14, 1997, the Company will have 6,167,424 shares of Common Stock
outstanding. Of these shares, approximately 4,987,422 outstanding shares,
including the 2,422,727 outstanding shares being registered in this Prospectus,
excluding 369,545 shares issuable upon exercise of the Warrants, will be freely
tradable without restriction or further registration under the Securities Act,
except for any shares held by an "affiliate" of the Company (as defined in the
Securities Act and the rules and regulations thereunder) which will be subject
to the limitations of Rule 144.

All of the remaining 1,180,002 shares are deemed to be "restricted
securities", as that term is defined under Rule 144 promulgated under the
Securities Act, as such shares were issued in private transactions not involving
a public offering. Approximately 790,000 such shares are currently eligible for
sale under Rule 144.

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

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

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

The By-laws of the Company provide for the indemnification of the directors
and officers of the Company, for certain liabilities and costs incurred by them
in connection with performance of their duties. This indemnification may include
indemnification for liabilities arising under the Securities Act.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.

<PAGE>

LEGAL MATTERS

The law firm of Epstein Becker & Green, P.C., 250 Park Avenue, New York,
New York 10177 has acted as counsel for the Company in connection with the
validity of the Common Stock offered hereby. Mr. David Fleming, a member of
Epstein, Becker & Green, P.C., owns approximately 115,000 Shares of the
Company's Common Stock.

EXPERTS

The financial statements for each of the two years ended December 31, l995,
and l996 appearing in this Prospectus and Registration Statement have been so
included in reliance on the reports of Gordon Harrington & Osborn, P.C.,
independent accountants, given on the authority of said firms as experts in
auditing and accounting. Gordon Harrington & Osborn, P.C., has not examined or
expressed any view on the unaudited financial statements of the Company
appearing elsewhere herein.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement with the Commission under
the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and this offering, reference is made to the Registration Statement,
including the exhibits and schedules filed therewith, copies of which may be
obtained at prescribed rates from the Commission at its principal office at 450
Fifth Street N.W., Washington, D.C. 20549, and at the following regional offices
of the Commission: 75 Park Place, New York 10007, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400 Chicago, Illinois, 60604.
Descriptions contained in this Prospectus as to the contents of any agreement or
other documents filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to such
agreement or document.

The Company intends to furnish to its stockholders annual reports
containing financial statements audited and reported upon by its independent
public accountants.

<PAGE>

GORDON, HARRINGTON & OSBORN, P.C.
Certified Public Accountants

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
of Imsco Technologies, Inc.:

We have audited the accompanying consolidated balance sheet of Imsco
Technologies, Inc. (a development stage enterprise) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statement of operations
and deficit and cash flows for the years ended December 31, 1996 and 1995 and
the cumulative amounts from July 9, 1992 (inception of the current development
stage) to December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 Imsco Technologies,
Inc. (a development stage enterprise) and subsidiaries as of December 31, 1996
and 1995 and the results of their consolidated operations and their consolidated
cash flows for the years ended December 31, 1996 and 1995 and the cumulative
amounts from July 9, 1992 (inception of the current development stage) to
December 31, 1996 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $762,758 during the year ended December 31,
1996. As discussed in Notes 1, 8 and 9, the Company has suffered continuing
losses from now discontinued losses and development stage operations. The
continuing losses raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/S/ GORDON, HARRINGTON & OSBORN, P.C.
North Andover, MA
April 2, 1997

(Except as to Notes 13 and 14 which are as of May 28, 1997)

30 Massachusetts Avenue, North Andover, Massachusetts 01845-3413.
Tel. (508) 689-0601

F-1
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET

As of December 31, March 31,
--------------------------- ---------
1996 1995 1997
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 450,880 $ 8,634 $ 287,228
Prepaid advertising 1,500,000 1,464,500
Miscellaneous receivable 200,000 -
----------- ----------- ----------
Total current assets 2,150,880 8,634 1,751,728
----------- ----------- ----------

Property and equipment:
Equipment & furniture 151,717 76,672 190,945
Leasehold improvements 5,845 4,900 5,845
Less accumulated depreciation (78,246) (78,246 (78,246)
----------- ----------- ----------
Net property & equipment 79,316 3,326 118,544
----------- ----------- ----------

Other assets:
Organization costs, net of
amortization of $28,060 100 100 -0-
Deposits 21,648 390 21,650
Due from officer 530 25,000
Other Assets -0- -0- -0-
----------- ----------- ----------
Total other assets 21,748 1,020 100
----------- ----------- ----------
Total assets $ 2,251,944 $ 12,980 $1,917,022
=========== =========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 28,877 $ 52,927 $ 27,377
Accrued payroll taxes 10,550 2,044 8
Accrued expenses 38,456 8,372 38,000
----------- ----------- ----------
Total current liabilities 77,883 63,343 65,385
----------- ----------- ----------

Minority interest -0- -0- -0-

Stockholders' equity (deficit):
Common stock, par value $.001 per
share, 15,000,000 shares
authorized; 6,092,425 issued and
outstanding and 3,000,000 shares
authorized; 2,994,839 issued and
outstanding, respectively 6,092 2,995 6,192

Preferred stock, par value $.001 per
share, 1,000,000 shares authorized,
-0- shares issued and outstanding 0 0 0

Additional paid-in capital 4,778,089 1,794,004 4,933,269

Accumulated deficit:
Development stage (1,989,212) (1,226,454) (2,466,916)
Discontinued operations (620,908) (620,908) (620,908)
----------- ----------- -----------
Total accumulated deficit (2,610,120) (1,847,362) (3,087,824)
----------- ----------- -----------
Total stockholders' equity (deficit) 2,174,061 (50,363) 1,851,637
----------- ----------- -----------
Total liabilities and
stockholders equity (deficit) $ 2,251,944 $ 12,980 $1,917,022
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-2
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT

Year Ended Three Months
December 31, Ended March 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Operating expenses:
Development expense $ 53,838 $ 30,759 $ 37,320 $ 9,566
Salaries and wages 42,087 82,645 55,250 0
Officers' salaries 61,375 110,458 31,250 0
Payroll taxes 10,006 20,407 12,083 0
Outside labor 0 0
Professional services 458,483 116,434 235,364 2,500
Public relations 1,800 0 0
Rent 22,470 15,088 15,178 3,613
Insurance 22,344 12,553 7,481 3,267
Travel & business meetings 35,222 8,754 16,110 928
Auto expense 3,716 2,580 441 448
Telephone & utilities 9,199 4,226 6,163 1,482
Office expense 25,905 3,468 7,662 619
Equipment rental 4,883 7,949 0
Contributions 0 375
Corporate fees 6,496 1,328 9,648 802
Advertising 39,050 0
----------- ----------- ----------- -----------
Total operating expenses 757,824 408,700 480,949 23,599

Other income (expense):
Interest & dividend income 3,022 3,070 3,245 0
Interest expense (7,500) 0 0 0
----------- ----------- ----------- -----------

Loss before provision
for income taxes (762,302) (405,630) (477,704) (23,599)

Provision for income taxes (456) (456) 0 0
----------- ----------- ----------- -----------

Net loss from development (762,758) (406,086) (477,704) (23,599)

Accumulated deficit-development
stage at beginning of year (1,226,454) (820,368)
----------- -----------

Accumulated deficit-development
stage at end of year (1,989,212) (1,226,454)
----------- -----------

Accumulated deficit-discontinued
operations (620,908) (620,908)
----------- -----------
Total accumulated deficit $(2,610,120) $(1,847,362)
=========== ===========

Net loss per common share $ (.23) $ (.14) $ (.08) $ (.01)
=========== =========== =========== ===========

Weighted average number of
shares outstanding 3,274,954 2,899,790
=========== ===========

</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
1996 1995 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows for operating activities:
Cash received from dividends and interest $ 3,022 $ 3,070 $ 3,245
Cash received from customers
Cash received from research and testing
Cash received from unemployment taxes
Cash received from travel reimbursements
and other rebates 408
Cash paid to suppliers and employees (758,406) (320,126) (327,667) ($ 25,645)
----------- ----------- ----------- -----------
Net cash used by operating activities (755,384) (316,648) (324,422) (25,645)
----------- ----------- ----------- -----------

Cash flows form investing activities:
Purchase of Fixed Assets (75,990) (39,229)
----------- ----------- ----------- -----------

Net cash provided (used) by investing activities (75,990) (39,229)
----------- ----------- ----------- -----------

Cash flows from financing activities:
Interim Loan financing 300,000
Proceeds from issuance of common stock 973,620 162,000 20,000
----------- ----------- ----------- -----------
Net cash provided by financing activities 1,273,620 162,000 0 20,000
----------- ----------- ----------- -----------

Net increase (decrease) in cash and cash equivalents 442,246 (154,648) (363,651) (5,645)
Cash and cash equivalents at beginning of period 8,634 163,282 450,879 8,634
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 450,880 $ 8,634 $ 87,228 $ 2,990
=========== =========== =========== ===========
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Net loss $ (762,758) $ (406,086) ($ 506,601) ($ 23,599)
----------- ----------- -----------
Increase in prepaid advertising (1,500,000) 35,500
Increase in miscellaneous receivable (200,000)
Decrease in Due from Officers 530 (25,000)
Contract Services paid with common stock 213,562 107,013 155,280
Prepaid advertising paid with common stock 1,500,000 (1,500) (1,500)
Increase (decrease) in accounts payable (24,050) (14,798) 17,899 (546)
Increase (decrease) in accrued payroll taxes 8,506 (11,399)
Increase in accrued expenses 30,084 8,372
Decrease (increase) in deposits (21,258) 150
Decrease in accounts receivable
Decrease in inventory and assets 100
----------- ----------- ----------- -----------
Total adjustments 7,374 89,438 182,179 (2,046)
----------- ----------- ----------- -----------

Net cash used by operating activities $ (755,384) $ (316,648) ($ 324,422) ($ 25,645)
=========== =========== =========== ===========

</TABLE>
See accompanying notes to consolidated financial statements.

F-4
<PAGE>

IMSCO TECHNOLOGIES, INC.
(A Development Stage Enterprise)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
and the three months ended March 31, 1997

<TABLE>
<CAPTION>
Total
Additional Stockholders'
Common Paid-in Accumulated Equity
Stock Capital Deficit (Deficit)
----- ------- ------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $ 2,751 $ 1,525,235 $(1,441,276) $ 86,710

Issuance of shares of $.001 par
value for $1.25 per share 97 120,403 20,500

Issuance of shares of $.001 par
value for contract services performed 119 106,894 107,013

Issuance of shares of $.001 par
value for 1.55 per share 11 16,989 17,000

Issuance of shares of $.001 par
value for $1.50 per share 17 24,483 24,500

Loss from development for the year
ended December 31, 1995 (406,086) (406,086)
----------- ----------- ----------- -----------
Balance at December 31, 1995 2,995 1,794,004 (1,847,362) (50,363)

Issuance of subsidiary stock 10,000 10,000

Issuance of shares of $.001 par value
for $2.00 per share 10 19,990 20,000

Issuance of shares of $.001 par value 197 (197)

Issuance of shares of $.001 par value
for contract services 284 213,278 213,562

Issuance of shares of $.001 par value
in payment of loan 227 299,773 300,000

Issuance of shares of $.001 par value
for prepaid advertising 1,136 1,498,864 1,500,000

Issuance of shares of $.001 par value
at $1.32 per share 775 942,845 943,620

Issuance of shares of .001 par value
for subsidiary stock 468 (468)

Loss from development for the year
ended December 31, 1996 (762,758) (762,758)
----------- ----------- ----------- -----------
Balance at December 31, 1996 $ 6,092 $ 4,778,089 $(2,610,120) $ 2,174,061
=========== =========== =========== ===========

Issuance of shares of $.001 par value
in consulting service 100 149,900 150,000
Stock subscription receivable 5,280 5,280
Loss from development for the
three months ended March 31, 1997 (unaudited) (371,601) (371,601)
----------- ----------- ----------- -----------
Balance at March 31, 1997 (unaudited) $ 6,192 $ 4,933,269 $(2,981,721) $ 1,957,740
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

1. Summary of Significant Accounting Policies:

Organization:

In July 1996, IMSCO, Inc. was reincorporated in Delaware as IMSCO
Technologies, Inc., the Company filed a Certificate of Incorporation in
Delaware incorporating a new wholly-owned subsidiary, IMSCO Technologies,
Inc. The Board of Directors of the Company at a meeting held in May 1996
voted, subject to the adoption by the stockholders, to merge into its
wholly-owned subsidiary, IMSCO Technologies, Inc., a Delaware corporation.
On July 9, 1996, the stockholders of IMSCO, Inc., voted to approve the
change of corporate domicile from Massachusetts to Delaware. Therefore, on
July 18, 1996, there remained one surviving corporation and the name
surviving corporation became IMSCO Technologies, Inc. As of the effective
date of the merger, each stockholder of the Company held one share of
common stock, par value $.001 per share, of IMSCO Technologies, Inc. for
each one share of common stock, par value $.001 per share, of IMSCO, Inc.
previously held by him.

Imsco Technologies, Inc., a Delaware corporation, is currently a
development stage enterprise which has developed a core technology that
achieves molecular separation with innovative applications of
electrostatics. Until July 7, 1992, the Company was engaged in the sale of
an automated luminometer and an accompanying reagent system that measures
raw material for microbiogical contamination. The Company discontinued
operations and liquidated the remaining inventory of reagents on April 16,
1993. Due to a lack of demand for the technology developed, the Company
changed its focus and began applying its engineering and medical talents to
the development of a separation system. No revenue has been received from
current products to date. The technology developed has two prototypes.
Tests of the Company's decaffeination technology have successfully removed
caffeine from coffee. In addition, The Plasma Pure has been tested and can
remove viruses from plasma.

There are 15,000,000 shares of common stock and 1,000,000 shares of
preferred stock authorized, of which 6,092,425 and -0-, respectively are
issued and outstanding at December 31, 1996 and 6,192,425 and -0-,
respectively, were issued and outstanding at March 31, 1997.

The Company's subsidiaries, Decaf Products, Inc. (DPI) and BioElectric
Separation and Testing, Inc.; (BEST) (the subsidiaries) were formed in
1995. DPI was formed to market a unique proprietary technology to
decaffeinate coffee. BEST was founded to create systems to improve human
therapy, by developing new diagnostics and improved methods for production
and use of drugs, biologics, and extracorporeal devices. As of December 31,
1996 and December 31, 1995 the subsidiaries had minimal activity, did not
own any assets and are not liable for any liabilities.

F-6
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

1. Summary of Significant Accounting Policies: (Cont.)

Principles of Consolidation:

The consolidated financial statements include the accounts of the Company
and its subsidiaries Decaf Products, Inc. (DPI) and BioElectric Separation
and Testing, Inc, (BEST). All significant intercompany accounts and
transactions have been eliminated in consolidation.

Property and Equipment:

Property and equipment are stated at cost. Significant additions or
improvements extending asset lives are capitalized; normal maintenance and
repair costs are expended as incurred. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets ranging
from five to ten years. No depreciation expense was charged to development
stage operations for the years ended December 31, 1996 and 1995.

Cash Equivalents:

The Company considers all highly liquid investments with an original
maturity of less than three months to be cash equivalents.

Loss per Common Share:

Loss per common share is based on the weighted average number of common
shares and common equivalent shares outstanding during the year ended
December 31, 1996 and 1995.

Estimates:

Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were assumed in preparing the financial statements.

F-7
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

2. Leases:

In 1993, the Company entered into an operating lease for office space which
expired in August, 1996. The Company is currently leasing the premises as a
tenant-at-will. Rental expense for the operating lease was $14,050 and
$15,088 for the years ended December 31, 1996 and 1995, respectively.
Rental expense for this operating lease was $3,612 and $3,613 for the three
months ended March 31, 1997 and 1996, respectively. Under the terms of the
lease the Company is responsible for 15% of operating expense and
maintenance costs of the leased property, including 15% of any increase in
real estate taxes. The Company is responsible for all utilities.

In September 1996, the Company established an office at 950 Third Avenue,
New York, New York, consisting of approximately 2,500 square feet of space,
with the intention of conducting its sales, marketing and finance related
activities. The Company has decided that it will be more efficient and cost
effective to run all of its activities from the North Andover office for
the near future and is negotiating to sub-lease or assign the lease at 950
Third Avenue to an unrelated party. The lease at 950 Third Avenue, New
York, New York, is for a term of five years at an annual base rental of $32
per square foot. The lease contains standard pass-throughs by the
unaffiliated landlord of increase in real estate taxes and operating
expenses after the first year of occupancy. The 950 Third Avenue lease
expires on January 31, 2002. Rental expense for the above lease was $8,020
for the year ended December 31, 1996. Rental expense for the above lease
was $11,566 for the three months ended March 31, 1997.

Minimum future lease payments under noncancelable operating leases as of
December 31, 1996 are as follows:

Year ending December 31:
1997 $78,575
1998 78,575
1999 78,575
2000 78,575
2001 78,575
2002 6,548

The Company entered into various leases for equipment during the year
ended December 31, 1996. Minimum future lease payments under these
noncancelable operating leases as of December 31, 1996 are as follows:

1997 $14,676
1998 14,676
1999 11,045

Rental expense for the above leases were $4,883 for the year ended December
31, 1996. Rental expense for the above leases were $7,949 and $0 for the
three months ended March 31, 1997 and 1996, respectively.

F-8
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

3. Federal and State Income Taxes:

As of December 31, 1996, the Company had net operating loss carryforwards
for federal income tax purposes which expire as follows:

2000 $ 4,180
2001 181,180
2002 233,280
2003 88,125
2004 70,850
Thereafter 2,032,140
----------
$2,609,755
==========

The deferred tax asset from the benefit of the losses is $391,460 and
$277,050 for the years ending December 31, 1996 and 1995, respectively
which is offset by an equivalent reserve account each year.

As of December 31, 1996, the Company had net operating loss
carryforwards for state income tax purposes which expire as follows:

1997 $ 259,185
1998 40,825
1999 513,690
2000 405,630
2001 762,300
----------
$1,981,630
==========

The deferred tax asset from the benefit of the losses is $188,250 and
$115,800 for the years ending December 31, 1996 and 1995, respectively
which is offset by an equivalent reserve account each year.

State excise tax expense amounted to $456 for the years ended December
31, 1996 and 1995.

4. Related Party Transactions:

In August 1996, Hampton Tech Partners, LLC acquired $300,000 in promissory
notes from the Company and 150,000 shares of Common Stock for the total
consideration of $300,000. On September 20, 1996, the Company entered into
a Purchase Agreement with Hampton Tech Partners II, LLC wherein Hampton
Tech Partners II, LLC acquired 761,000 shares of Common Stock for
$1,004,520 in cash or $1.32 per share. Private placement expenses of
$77,400 were incurred during this transaction, reducing net cash proceeds
to $927,120. Hampton Tech Partners II received 227,273 shares in repayment
of the $300,000 promissory notes with Hampton Tech Partners, LLC and
129,151 shares in payment of private placement fees. Mr. Scott Robinson, a
recently elected director of the Company, is a member of Hampton Tech
Partners and Hampton Tech Partners II, LLC. Mr. Robinson's brother, Mr.
Jeffrey Robinson is the sole shareholder of Hampton Partners Investments,
Inc., the Managing Member of Hampton Tech Partners and Hampton Tech
Partners II, LLC.

F-9
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

4. Related Party Transactions: (Continued)

On September 20, 1996, the Company entered into the Media Purchase
Agreement with Proxhill Marketing Ltd., wherein Proxhill Marketing Ltd.
Agreed to sell $1,500,000 of media credits to the Company in consideration
for the Company issuing $1,136,364 shares of Common Stock, representing a
price of $1.32 per share. In connection with the private placement of the
Shares of Hampton Tech Partners II, LLC, Hampton Tech Partners and Proxhill
Marketing Ltd., First Capital Investments, Inc. a broker-dealer which is a
member of the National Association of Securities Dealers, Inc. ("NASD"),
received 242,272 Class A Warrants entitling it to acquire Common Stock for
the price of $1.45 per Share exercisable over a period ending July 31,
2001. For advertising and marketing services rendered to the Company in
1996 and 1997, Proxhill Marketing Ltd. Also received 127,262 Class D
Warrants, entitling it to acquire Common Stock for the price of $1.32 per
share for a period ending July 31, 2001. As of December 31, 1996, the
registration statement for the Class A Warrant Common Stock and Class D
Warrant Common Stock had not been declared effective.

In 1996, Mr. Sol L. Berg, a Director and President of the Company, received
150,000 shares of Common Stock in exchange for shares of common stock in
Decaf Products, Inc. (DPI) based on a conversion of .60 IMSCO Technologies,
Inc. shares for 1.00 Decaf Products, Inc. shares. In 1996, Mr. James G.
Yurak, a Director and President of the DPI subsidiary, received 75,000
shares of Common Stock in exchange for shares of common stock in Decaf
Products, Inc. (DPI) based on a conversion of .60 IMSCO Technologies, Inc.
shares for 1.00 Decaf Products, Inc. shares. Mr. Yurak received another
75,000 shares of Common Stock in February 1997 upon the one year
anniversary of his employment agreement with DPI. In 1996, Dr. Alan Waldman
entered into an understanding that he shall receive 100,000 shares of
Common Stock representing payment for services due him under his consulting
agreement through December 31, 1996, with the shares vesting and being
issued on January 1, 1997. In 1996, David E. Fleming, a member of Epstein,
Becker & Green, P.C., counsel to the Company, was granted 90,000 shares of
the Company's Common Stock in exchange for shares of Common Stock in Decaf
Products, Inc. (DPI) based on a conversion of .60 IMSCO Technologies, Inc.
shares for 1.00 Decaf Products, Inc. shares, which shares will vest on
January 1, 997. In 1996, Mr. Vernon Oberholtzer, a former Director of the
Company who resigned in February 1997, received stock options to acquire
10,000 shares for a price of $1.32, exercisable over a period ending
December 31, 1999. In 1996, Universal Sales, Inc. ("Universal"), a sales
and marketing company of which Mr. Victor Bauer, a Director of the Company,
is President and a 50% shareholder, received cash compensation in the
amount of $31,500 for services rendered to the Company, including the
recruitment of the services of Mr. Abramson for the Company.

F-10
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

4. Related Party Transactions: (Continued)

During the year ended December 31, 1995, a director of the Company, David
E. Fleming, Esquire was also a partner with Campbell and Fleming, P.C., a
law firm which provides certain services for the Company. As of July 31,
1995, David E. Fleming had resigned as a director of the Company.

In April 1994, the Company entered into a "best efforts" placement letter
agreement with D.H. Vermogensverwaltungs-und Beteiligungsgesellschaft mbH,
a German investment company ("DH"), for 500,000 shares of common stock at a
minimum of $.90 per share. This placement letter agreement was amended on
August 29, 1994. DH also arranged the placement of another 80,000 shares of
Common Stock as a supplement to the Regulation S placement. Mr. Dirk Hagee,
a former director of IMSCO is the managing director and majority
shareholder of DH. Upon closing of the offering in 1994, the Company paid
DH a commission of $52,200 which is at the rate of ten percent (10%) of all
monies raised in that offering and also granted to DH warrants to 116,000
shares of common stock of the Company. These warrants are exercisable for
up to five years after issuance at the same price paid by purchasers of the
placement.

5. Agreements:

F-11
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

5. Agreements: (Continued)

Effective February 23, 1996, as amended effective as of September 1, 1996,
the Company entered into an employment agreement with James G. Yurak
providing for Mr. Yurak's employment as the DPI's President and Chief
Executive Officer for a three year term. Mr. Yurak's salary under this
agreement is $75,000 for the first year, $125,000 for the second year and
$150,000 for the third year. Mr. Yurak is also eligible to receive an
annual bonus. Mr. Yurak was also granted 75,000 shares of the Company's
Common Stock upon signing his employment agreement and 75,000 shares after
one full year of employment which shares were issued in February 1997.

F-12
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

5. Agreements: (Continued)

On August 13, 1996, the Company entered into a three year Consulting
Agreement with WRA Consulting, Inc. a corporation having Willa Rose
Abramson, wife of Edmund Abramson ("WRA") as its sole director and
shareholder. Under the agreement, if WRA finds $1 million in capital
financing for the Company, the Company shall grant WRA 150,000 shares of
Common Stock and warrants or options to acquire an additional 150,000
shares of Common Stock at $1.50 per share. If WRA arranges a transaction
with a third party introduced by WRA which has a consideration or value to
the Company of $5 million or greater, whether through a merger,
acquisition, business combination or security placement for the benefit of
the Company, it shall receive an additional 250,000 shares of the Company's
Common Stock and 250,000 warrants to purchase Common Stock, exercisable at
$1.50 per share for a period ending December 31,1999. If the transaction is
assisting in arranging capital for the Company, it shall also receive an
investment banking fee equal to five percent of amounts in excess of $5
million. In consideration of its arranging the $3 million sale and exchange
of Common Stock to Hampton Tech Partners, Hampton Tech Partners II and
Proxhill Marketing Ltd., WRA has asserted that it is entitled to receive
150,000 shares of common stock and 150,000 Class B Warrants entitling it to
acquire Common Stock for $1.50 per Share for a period ending December 31,
1999. As of March 31, 1997, the 150,000 shares of common stock and the
150,000 Class B Warrants had not been issued and the registration statement
for the Class B Warrant Common Stock had not been declared effective.

Effective as of September 1, 1996, Universal Sales, Inc., also entered into
a Sales Administration and Servicing Agreement ("Universal Agreement") with
the Company for a seven year term, providing a broad scope of sales
administration and services to the Company. As compensation for its
services, Universal shall receive an amount equal to 2.5 % of the Company's
gross revenues from operations in excess of $5 million per annum. Mr.
Victor Bauer, a Director of the Company, is also the President and a 50%
shareholder of Universal Sales. Additionally, under the Universal
Agreement, Universal shall be entitled to a sales commission equal to 2.5 %
of the gross revenues resulting from all sales generated through the
efforts of Universal. Universal also received $31,500 as compensation for
services rendered to the Company in 1996.

F-13
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

6. Research and Development Costs:

During the year ended December 31, 1996 and 1995, the Company charged
$53,838 and $30,759, respectively to research and development expense.
During the three months ended March 31, 1997 and 1996, the Company charged
$37,320 and $9,556 respectively to research and development expenses.

7. Nonmonetary Transactions:

During the years ended December 31, 1996 and 1995, the Company issued
common stock for services rendered based upon the fair market value of
services received. During the three months ended March 31, 1997, the
Company issued 100,000 shares of common stock to Dr. Waldman for consulting
services received, valued at $150,000. The following summarizes the capital
stock issued in lieu of cash for services received:

<TABLE>
<CAPTION>
Description of
Assets/Liabilities/ Shares Common Paid in Charged Charged to
Service Issued Stock Capital to Expense Expense
------- ------ ----- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
1996
Prepaid adv. 1,136,364 1,136 1,498,864 1,500,000
Loan repayment 227,273 227 299,773 300,000
Finance consultants 140,000 140 202,660 202,800
Private placement fees 129,151 129 (129)
Legal fees 15,000 15 10,747 5,138 5,624
</TABLE>

<TABLE>
<CAPTION>
Description of Shares Common Paid in Charged
Service Issued Stock Capital to Expense
------- ------ ----- ------- ----------
<S> <C> <C> <C> <C>
1995
Research 22,000 $22 $21,978 $22,000
Accounting &
auditing 74,790 $75 $60,971 $61,046
Other
professional 9,510 $10 $11,004 $11,014
</TABLE>

In addition, the Company issued 12,923 shares in payment of a prior
obligation valued at $12,953.

8. Commitments:

The Company entered an agreement with the University of Massachusetts to
provide certain services in connection with the testing and development of
materials for use in a decaffeinator device for the period November 1, 1994
through December 31, 1994. During the year ended December 31, 1995, the
University of Massachusetts continued to provide research services to the
Company for which it received 10,000 shares of common stock.

F-14
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

8. Commitments: (Continued)

In 1996, the Company entered into a collaborative Research Agreement with
the Polymer Sciences Division of the University of Akron, for further
development of the electrostatic decaffeination technology. The Company
pays $10,000 per month for the use of the University of Akron's facilities
and the dedication of certain professors to the Company's project.

On September 20, 1996, the Company entered into the Hughes Marketing
Agreement for certain large institutional marketing of the Decaffeination
System. Hughes is a privately held corporation, based in Traverse City,
Michigan, and is one of the larger marketers of institutional coffee making
equipment and supplies in North America. The Company agreed that Hughes
will have the exclusive right to sell the DECAFFOMATIC to so-called "large
institution" coffeemaker market in North American for a period of three
years. The "large institutional" marketplace is dominated by major hotel
chains and major restaurant and fast-food chains. In exchange for these
exclusive rights, Hughes agreed to sell or purchase from the Company a
minimum of $3 million worth of units for the first year, $5 million worth
of units for the second year and $7 million worth of units the third year.

Under the Hughes Agreement, the Company sells units of the Decaffeination
System to Hughes' customers for a stated price of $199 per unit for the
institutional coffeemakers. If Hughes fails to sell the minimum amount it
must purchase the difference for its own account to maintain the Agreement
in force. All servicing and customer calls will be performed by Hughes. In
addition to other legal remedies, the parties can terminate the Hughes
Agreement if Hughes fails to make the specified minimum amount of
Decaffeination System purchases.

Under a Media Purchase Agreement with Proxhill Marketing Ltd., it
contractually agreed to finance $1.5 million of media for the Company's
public relations and advertising campaign through Grown Marketing Services
("GROW"), an independent marketing company. In exchange for the Company
issuing 1,136,363 shares of its common stock, representing a price of $1.32
per share, the Company acquired the $1.5 million of prepaid, dedicated
media credits (the "Media Credits") and certain media services. The Media
Purchase Agreement expires at the end of sixty (60) months or upon the
depletion of the prepaid media credits.

F-15
<PAGE>

IMSCO TECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

8. Commitments: (Continued)

On September 20, 1996, the Company entered into an agreement with NEWCO for
certain institutional manufacturing and marketing of the Decaffeination
System. NEWCO is a privately held corporation based in St. Charles,
Missouri, and is one of the larger manufacturers and distributors of
institutional coffeemaking equipment in North America.

The Company agreed that NEWCO will have the exclusive right to sell the
DECAFFOMATIC to so-called "Office Coffee Supply" ("OCS") subsection of the
institutional coffeemaker market and will be the manufacturer of the
DEFAFFOMATIC for the institutional marketplace in North American for a
period of three years. NEWCO further agreed to sell or purchase from the
Company for the OCS market a minimum of 25,000 units of the product for the
first year, 50,000 units for the second year and 100,000 units the third
year. Under the NEWCO Agreement, NEWCO has also agreed to pay the costs of
making final working models, and the cost of creating moulds and related
parts for the DECAFFOMATIC device for the institutional coffeemaker
marketplace. All of the technology and final commercial model designs of
the Decaffeination System will be the property of the Company.

Under the NEWCO Agreement, the Company sells units of the Decaffeination
System to NEWCO for a net price to the Company. The Company anticipates
that the price to be paid by NEWCO, which is still being finalized until
the final working and commercial ready components are established, will be
in the range of approximately $10 per unit for small OCS type users,
ranging to $200 for large, high volume institutional coffee brewers. NEWCO
takes the Decaffeination System and in turn incorporates it into its
coffeemakers and re-sells it to a variety of end users in the OCS
marketplace. The terms of the minimum purchase by NEWCO are mandatory and
are not subject to, or conditioned upon, NEWCO's ability to sell the units
acquired. All servicing and customer calls will be performed by NEWCO. In
addition to other legal remedies, the parties can terminate the NEWCO
Agreement if NEWCO fails to make the specified minimum number of
Decaffeination System purchases.

9. Going Concern:

As shown in the accompanying financial statements, the Company incurred a
net loss of $762,758 during the year ended December 31, 1996 . The Company
incurred a net loss of $506,601 during the three month period ended March
31, 1997. The significant operating loss as well as the uncertain
conditions that the Company faces regarding sources of financing, create an
uncertainty about the Company's ability to continue as a going concern.
Management of the Company has developed a business plan to finance the
Company through licensing of its technology and individual patent rights to
its subsidiaries. The plan calls for the subsidiaries to seek partners for
manufacturing and marketing. The subsidiaries will also seek financing
through a public offering. The ability of the Company to continue as a
going concern is dependent on the plan's success. The financial statements
do not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.

F-16
<PAGE>

IMSCO TECHNOLOGIES, INC. and
SUBSIDIARIES (A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
Information with respect to the three months ended March 31, 1997 is unaudited.

10. Development Stage Enterprise

On July 7, 1992, the Company discontinued regular operations relating to
the sale of an automated luminometer. On July 22, 1992, the company and The
General Hospital Corporation, doing business as Massachusetts General
Hospital, entered a research agreement for $45,100, to perform the research
and evaluation using the Company's electro-static filter. As defined by the
Financial Accounting Standards board Statement No. 7, the Company is now a
development stage enterprise and it has been devoting substantially all of
its efforts to developing, engineering and obtaining patents for new
technologies relating to separation technologies for the medical and
consumer product sectors. The Company applied for United States Patents
covering its decaffeination and Plasma Pure separation technologies in
1993. With a prototype, marketing of this product began in December, 1993.
Although no income has been received, letters of interest and royalty
agreement negotiations have begun. The cumulative deficit during the
development stage is $1,989,212 for the period July 7, 1992 through
December 31, 1996 and the cumulative deficit is $2,495,813 for the period
July 7, 1992 through March 31, 1997.

11. Advertising

The costs of advertising are expensed the first time the advertising takes
place. There was no advertising expense for the years ended December 31,
1996 and 1995, respectively. At December 31, 1996 and 1995, $1,500,000 and
$ -0-, respectively, of advertising was reported as a prepaid asset. For
the three months ended March 31, 1997 and 1996, the advertising expense was
$39,050 and $0, respectively

12. Employee Incentive Stock Options

On May 21, 1996, the Board of Directors adopted the Employee Incentive
Stock Option Program (the "Option Program"), which provides for the
issuance of up to the lesser of 24% of the issued and outstanding Common
Stock or 1,500,000 shares of Common Stock through the grant of incentive
and non-qualified stock options. Stock options will be issued by action of
the Board of Directors or its Compensation Committee (the "Administrator")
to key employees of the Company as a long-term incentive. Key employees
will be designated by the Administrator in its sole discretion; there are
currently three employees so designated.

Stock options under the Option Program will provide for an exercise price
per share determined by the Administrator (but not less than the par value
of $.001), subject to tax requirements in connection with incentive stock
options. No payment will be required from participants in connection with
grants. The options will be exercisable as specified by the Administrator
at the time of grant, although the tax benefits of incentive stock options
described below will be unavailable if the option is exercised less than
one year after grant. Options will be exercisable for a period determined
by the Administrator but not in excess of 10 years after grant. As of March
31, 1997 an option to purchase 100,000 shares of common stock at $1.50 per
share was issued and outstanding. The weighted average fair value of
options granted during 1996 is $0.

13. Stock Options

The following summarizes the warrants and stock options of IMSCO:

<TABLE>
<CAPTION>
Number of Exercise Cost
Options/ Per Share of Termination
Holder Description Warrants Common Stock Date
------ ----------- --------- -------------- -----------
<S> <C> <C> <C> <C>
First Capital Investments *Class A Warrants 242,272 1.45 7/31/01
Proxhill Marketing Ltd *Class D Warrants 127,262 1.32 7/31/01
Vernon Oberholtzer ***Stock options 10,000 1.32 12/31/99
DH Ver.Bet. MbH **Warrants 116,000 0.90 8/29/99 (5 years
after issuance)
Edmund Abramson ***Employee Incentive 100,000 1.50 5/14/01
stock options
</TABLE>

*As of December 31, 1996, these securities had not been issued and the
registration statement for these securities had not been declared effective by
the Securities and Exchange Commission.

**The warrants given to DH were awarded in 1994 at an option price which was the
same as the price paid by purchasers of the placement it arranged. Therefore no
compensation expense was recorded.

***During 1996, there were two major sales of stock at a price of $1.32 per
share. The option price of these two securities are the same or higher than the
price per share of the two placements which is considered the fair value of the
common stock. Therefore the fair value of these warrants and options are $-0-
and compensation or consulting expense has not been recorded.

14. Changes to Notes of Financial Statements

Subsequent to our report dated April 2, 1997, certain facts came to our
attention which required the revision of Notes 4 and 12 and additional
disclosures described in Notes 13 and 14. The following summarizes the
subsequent revisions and disclosures:

o Note 4 has been revised to indicate that Dirk Hagge is a former
director of IMSCO.

o Note 12 includes additional information in compliance with (SFAS) No.
123.

o Note 13 and 14 have been added.

The above changes did not effect our opinion dated April 2, 1997 nor the
accompanying financial statements.

F-17
<PAGE>

================================================================================

No dealer, salesman or other person has been authorized to give any
information or to make any representation in connection with this offering other
than those contained in this Prospectus, and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of these securities in any state to any person to whom it
is unlawful to make such offer or solicitation in such state. The delivery of
this Prospectus at any time does not imply that information herein is correct as
of any time subsequent its date.

----------

TABLE OF CONTENTS

Page
----

Available Information ..................................................... (ii)
Prospectus Summary......................................................... 1
Risk Factors .............................................................. 4
Use of Proceeds ........................................................... 11
Price Range of Common Stock ............................................... 11
Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................................... 13
Business .................................................................. 17
Management ................................................................ 29
Security Ownership of Certain Beneficial
Owners and Management .................................................... 36
Certain Transactions ...................................................... 38
Selling Shareholders ...................................................... 38
Plan of Distribution ...................................................... 39
Description of Securities ................................................. 41
Shares Elible for Future Sale ............................................. 42
Indemnification for Securities Act Liabilities ............................ 43
Legal Matters ............................................................. 44
Experts ................................................................... 44
Financial Statements ...................................................... F-1

Until _______, 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

================================================================================

2,792,272

Common Shares

IMSCO TECHNOLOGIES, INC.

July __, 1997

================================================================================

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

IMSCO Technologies, Inc. (the "Company") is incorporated in Delaware. Under
Section 145 of the General Corporation Law of the State of Delaware, a Delaware
corporation has the power, under specified circumstances, to indemnify its
directors, officers, employees and agents in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any action, suit or
proceeding. Article Tenth of the Certificate of Incorporation and Article III of
the Bylaws of the Company provide for indemnification of directors and officers
to the fullest extent permitted by the General Corporation Law of the State of
Delaware. Reference is made to the Certificate of Incorporation of the Company,
filed as Exhibit 3.1 hereto.

Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (relating to liability for unauthorized acquisitions or redemptions
of, or dividends on, capital stock) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Ninth of the Company's Certificate of
Incorporation contains such a provision.

Item 25. Other Expenses of Issuance and Distribution.

The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Commission and to NASDAQ.

Filing Fee--Securities and Exchange Commission ............... $ 3,270.00
Fees and Expenses of Accountants ............................. 2,500.00
Fees and Expenses of Counsel ................................. 40,000.00
Printing and Engraving Expenses .............................. 2,000.00
Blue Sky Fees and Expenses ................................... 5,000.00
Transfer Agent fees .......................................... 500.00
Miscellaneous Expenses ....................................... 1,000.00
-------------
Total ................................................ $ 54,272.00
=============

II-1
<PAGE>

Item 26. Recent Sales of Unregistered Securities.

On September 20, 1996, the Company sold to Hampton Tech Partners II, LLC
("HTP-II"), 1,136,363 shares of Common Stock for $1.32 per share, which was paid
in cash by October 18, 1996. Also, on September 20, 1996, the Company sold an
aggregate of 1,136,363 shares of Common Stock to Proxhill Marketing Limited
("PML"), pursuant to a Media Purchase Agreement in exchange for prepaid media
credits having an aggregate value of $1.5 million. Both the $1.5 million cash
equity placement of the 1,136,363 shares of Common Stock to HTP-II and the $1.5
million media credit purchase and exchange of 1,136,363 shares of Common Stock
to PML. Both placements were arranged by First Capital Investments, Inc., a
broker-dealer which is a member of the National Association of Securities
Dealers, Inc., ("FCI") received a commission in the amount of 10% of the amount
received by the Company from the sale of the Common Stock. Additionally, FCI,
received a warrant to acquire an amount of shares equal to 10% of the total
amount of Common Stock placed by them on behalf of the Company, exercisable for
the price of $1.45 per share over a period of five years. In August 1996, the
Company sold 150,000 shares of Common Stock at a price of $0.01 per share and a
$300,000 in promissory note to Hampton Tech Partners, LLC ("HTP"). In April
1996, the Company sold 10,000 shares of Common Stock to one "accredited
investor" in a private placement for the aggregate consideration of 20,000. All
four of the purchasers in 1996 represented to the Company that they were
"accredited investors" as such term is defined in Regulation D promulgated by
the Commission pursuant to the Securities Act. To the Company's knowledge, none
of these investors, nor any of their affiliates, were, at the time of their
investment in the Company, nor currently are, affiliated or associated with FCI,
or any other broker-dealer. The Company issued all such securities in reliance
upon the exemption from the registration requirements of the Securities Act
contained in Section 4(2) thereof.

In 1995, the Company sold 125,000 shares of common stock to three (3)
accredited investors for the aggregate consideration of $161,875 representing an
average price of $1.30 per shares. All of the purchasers in the 1995 private
placement represented to the Company that they were "accredited investors" as
such term is defined in Regulation D promulgated by the Commission pursuant to
the Securities Act. To the Company's knowledge, none of these investors, nor any
of their affiliates, were, at the time of their investment in the Company, nor
currently are, affiliated or associated with FCI, or any other broker-dealer The
Company issued all such securities in reliance upon the exemption from the
registration requirements of the Securities Act contained in Section 4(2)
thereof.

For the year ended December 31, 1994, the Company received subscriptions
for 580,000 shares of its common stock in a non-United States private placement
to non-U.S. persons pursuant to Regulation S for a price of $.90 per share
through D.H. Vermogensverwaltungs-und Beteiligungsgesselschaft mbH ("DH") a
German investment banking firm. In connection with the DH placement agreeement,
DH received additional warrants to purchase 116,000, exercisable for the price
of $.90 per share for a period of five years. Additionally, in 1994 the Company
sold 141,140 shares of common stock to five investors for aggregate
consideration of $120,570 pursuant to Regulation D.

Item 27. Exhibits.

3.1 -- Amended and Restated Certificate of Incorporation. (1)

3.2 -- Bylaws of the Company. (2)

4.1 -- Form of Common Stock Certificate. (3)

*4.2 -- Form of Class A Common Stock Purchase Warrant.

*4.3 -- Form of Class D Common Stock Purchase Warrant.

**5 -- Opinion of Epstein, Becker & Green, P.C.

10.1.-- Stock Purchase Agreement between the Company and Hampton Tech Partners
II, LLC dated September 20, 1996 (Filed on Form 8-K dated October 1,
1996 -- Commission No. 0-24520).

10.2.-- Media Purchase Agreement between the Company and Proxhill Marketing,
Ltd., dated September 20, 1996 (Filed on Form 8-K dated October 1, 1996
-- Commission No. 0-24520).

10.3.-- Manufacturing and Distribution Agreement between the Company and NEWCO
Enterprises, Inc., dated September 20, 1996 (Filed on Form 8-K dated
October 1, 1996 -- Commission No. 0-24520).

10.4.-- Marketing Agreement between the Company and Huhes Edwards & Price, Inc.,
dated September 20, 1996 (Filed on Form 8-K dated October 1, 1996 --
Commission No. 0-24520).

10.5.-- Consulting Agreement between the Company and Edmund Abramson dated
August 13, 1996 ( Filed on Form 10- KSB for year ended December 31, 1996
-- Commission No. 0-24520).

II-2
<PAGE>

10.6.-- Consulting Agreement between the Company and WRA Consulting, Inc., dated
August 13, 1996 ( Filed on Form 10-KSB for year ended December 31, 1996
-- Commission No. 0-24520).

10.7-- Sales and Marketing Administration Agreement between the Company and
Universal Sales dated as of September 1, 1996 ( Filed on Form 10-KSB for
year ended December 31, 1996 -- Commission No. 0-24520).

23.1-- Consent of Gordon Harrington & Osborn, P.C. (Included at page II-_).
23.1 -- Consent of Epstein, Becker & Green, P.C. (Included in Exhibit
5).

**24 -- Power of Attorney (Included at page II-_).

- --------------------
(1) Filed as Exhibit 3.1 to Registrant's Proxy Statement and Notice of 1996
Annual Meeting on Form 14-A (Commission No. 0-24520).

(2) Filed as Exhibit 3.2 to Registrant's Proxy Statement and Notice of 1996
Annual Meeting on Form 14-A (Commission No. 0-24520).

(3) Filed as Exhibit 3.3 to Registrant's Proxy Statement and Notice of 1996
Annual Meeting on Form 14-A (Commission No. 0-24520).

* Previously filed.
** To be filed by Amendment.

Item 28. Undertakings.

The undersigned small business issuer hereby undertakes:

(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;

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

II-3
<PAGE>

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

(d) The undersigned small business issuer hereby undertakes to provide
to the underwriters at the closing specified in the underwriting
agreements, certificates in such denominations and registered in such names
as required by the underwriters to permit prompt delivery to each
purchaser.

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

(f) The undersigned registrant hereby undertakes that:

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

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

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 16th day of July,
1997.

IMSCO Technologies, Inc.

By: /s/ Sol L. Berg
-----------------------------
Sol L. Berg, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Sol L. Berg
- --------------------------- President, Director July 16, 1997
Sol L. Berg Principal Executive Officer and
Principal Accounting Officer

/s/ Gloria Berg
- --------------------------- Secretary July 16, 1997
Gloria Berg

/s/ Alan Waldman
- --------------------------- Vice President, Director July 14, 1997
Alan Waldman

/s/ James G. Yurak
- -------------------------- Director July 14, 1997
James G. Yurak

/s/ Scott Robinson
- -------------------------- Director July 14, 1997
Scott Robinson

- -------------------------- Director July __, 1997
Victor Bauer

* /s/ Sol L. Berg
- --------------------------
Attorney-in Fact

II-5
<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

IMSCO Technologies, Inc.
North Andover, Massachusetts

We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated April 2, 1996,(except as to Notes 13
and 14 which are as of May 28, 1997), relating to the financial statements of
IMSCO Technologies, Inc., as of December 31, 1995 and December 31, 1996 , which
is contained in that Prospectus.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/
Gordon Harrington & Osborn, P.C.

North Andover, Massachusetts
July 15, 1997

II-6

July 15, 1997

IMSCO Technologies, Inc.
40 Bayfield Drive
North Andover, MA 01845

Re: Registration Statement on Form SB-2
IMSCO Technologies, Inc.

Ladies and Gentlemen:

We refer to the registration for resale by stockholders of up to 2,792,272
shares (the "Shares") of Common Stock (the "Common Stock") of IMSCO
Technologies, Inc., a Delaware corporation (the "Company"), pursuant to the
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission on January 13, 1997 (Registration No. 333-19707)(the "Registration
Statement") as subsequently amended from time to time. Of the Shares, 2,422,727
are presently issued and outstanding, 242,273 are issuable upon the exercise of
outstanding Class A Warrants at $1.45 per share, and the remaining 127,272 are
issuable upon the exercise of outstanding Class D Warrants at $1.32 per share,
as described in the Registration Statement.

We have examined copies of said Registration Statement on Form SB-2 under
the Securities Act of 1933, as amended. We have conferred with officers of the
Company and have examined the originals, or photostatic, certified or conformed
copies, of such

<PAGE>

IMSCO Technologies, Inc.
July 15, 1997
Page 2

records of the Company, certificates of officers of the Company, certificates of
public officials, and such other documents as we have deemed relevant and
necessary, as a basis for the opinions set forth herein. In connection with such
examinations, we have assumed the authenticity of all documents submitted to us
as originals or duplicate originals, the conformity to original documents of all
document copies, the authenticity of the respective originals of such latter
documents, and the correctness and completeness of such certificates. Finally,
we have obtained from officers of the Company such assurances as we have
considered necessary for the purposes of this opinion.

On the basis of the foregoing, and such other matters of fact and questions
of law as we have deemed relevant in the circumstances, and in reliance thereon,
it is our opinion that the 2,422,727 issued and outstanding Shares have been
duly authorized, and are fully paid and non-assessable; and upon the exercise of
the outstanding Class A Warrants and Class D Warrants in accordance with their
respective terms, and all such other 369,545 Shares will be duly authorized,
fully paid and non-assessable.

The undersigned hereby consent to the use of their name in the Registration
Statement and in the Prospectus forming a part of the Registration Statement,
and to references to this opinion contained therein under the caption of the
Prospectus entitled "Legal Matters."

This opinion is limited to the matters herein, and may not be relied upon
by any other person or for any other purpose other than in connection with the
corporate authority for the issuance of Common Stock.

Very truly yours,

EPSTEIN BECKER & GREEN, P.C.

By: /s/ David E. Fleming
--------------------

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 450,880
<SECURITIES> 0
<RECEIVABLES> 200,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,150,880
<PP&E> 157,562
<DEPRECIATION> (78,246)
<TOTAL-ASSETS> 2,251,944
<CURRENT-LIABILITIES> 77,883
<BONDS> 0
0
0
<COMMON> 6,092
<OTHER-SE> 2,167,969
<TOTAL-LIABILITY-AND-EQUITY> 2,251,944
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 757,824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,500
<INCOME-PRETAX> (762,302)
<INCOME-TAX> 456
<INCOME-CONTINUING> (762,758)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (762,758)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> 0

</TABLE>

IMSCO TECHNOLOGIES, INC.

MEMORANDUM OF RESPONSES TO SEC COMMENT
LETTER DATED MAY 9, 1997

The following responses of IMSCO Technologies, Inc. (the "Company") to your
comment letter of May 9, 1997 have been numbered to correspond to the paragraphs
of your letter. Also , pleased be advised generally that the Company has reduced
the number of shares being registered under the Form SB-2 by 637,500, from a
previous total of 3,429,772 to a new proposed registration of 2,792,272. Also,
please note that the Hughes Marketing Agreement has been terminated by mutual
agreement of the parties and all references to it have been accordingly deleted.

General

Noting your comment, the interim unaudited financial statements for the period
ended March 31, 1997 have been included.

Prospectus Cover

As requested, a new sentence has been added to the second full paragraph of the
cover to refelect the estimated costs the Company will incur from the offering.

Risk Factors

The reference in the "Shares Eligible for Future Shares" section has been
corrected to reflect the referenced Rule 144 holding period as now two years
instead of three years.

The reference to "the Commission" in the "Risk of Low Price Securities" section
has been deleted and the word "current" in the penny stock rule discussion has
also been deleted. Please note that the final two sentences of the same
paragraph have been modified to reflect that the Company's tangible assets at
March 31, 1997 are less than $2 million and consequently the Company's shares
will not be excluded from the "penny stock" definition.

Management's Discussion

The second paragraph of "Year Ended December 31, 1995 Compared to Year Ended
December 31, 1994" has been redrafted to clarify that against the subscription
receivables reflected on the financial statements at December 31, 1994, there
were in 1995 subsequent subscription withdrawals and nonpayments, charges for
legal fees in Germany which were accounted to the Company in 1995 but related to
the services performed in 1994 in connection with the private placement of
shares by DH in 1994 and other miscellaneous offering costs and expenses. The
Company permitted these items to be set-off in against the subscription
receivables from DH reflected on the financial statement at December 31, 1994
and when the current auditors, Gordon Harrington 7 Osborn, P.C., became the
Company's auditors in 1995, they felt it appropriate to restate that
subscription receivables category on the Company's fiscal 1994 financial
statement, with a corresponding adjustment to paid in capital and stockholders'
equity, to reflect the actual net receivable paid.

Please be advised that the 150,000 shares issued to HTP-I is reported on the
Consolidated Statement of Stockholders' Equity as part of the $197 transaction
under common stock. See the supplemental schedule titled "Grouping for
Consolidated Statement of Stockholders' Equity" which shows the 150,000 shares
included as part of 196,667 (197,000) shares that had the effect of increasing
common stock and

<PAGE>

decreasing paid in capital. The 150,000 shares were issued related to the
financing and private placement. The cost of issuing stock is deducted from the
proceeds of the issue and is not reported as an asset nor expense. Since this is
a nonmonetary transaction and not a cash disbursement, the transaction was
recorded as an offset to paid in capital in order for the common stock to be
stated properly based upon the number of shares issued and outstanding times the
stated par value of $.001 per share.

As requested in the same paragraph , it has been clarified that it was PML that
paid for the shares in Media Credits under the Media Purchase Agreement.

As suggested, the second to last sentence has been corrected to properly reflect
HTP-I and HTP-II.

Business

To avoid confusion and difficulty in obtaining its consent as an expert, the
Company has elected to delete the reference to Lapuck Laboratories.

Management

Note 4 to the financial statements has been revised to report that Dirk Hagge as
a former director. Mr. Hagge also has no further rights to designate directors
to the Company's board of directors.

Security Ownership

Noting your comment, Footnote (1) has been expanded to clarify the relative
degree of ownership and any direct or indirect control of HTP-II

As requested, the individual controlling person in footnote (2) has been
identified.

As requested, the individual controlling person in footnote (3) has been
identified.

Selling Shareholders

As requested, the table has been modified to reflect shares owned prior to the
offering (which it should be noted are all of the selling shareholders
outstanding shares owned), shares being registered and the shares to be owned
after the offering shares that are being registered are sold.

Noting your comment, the relationships among HTP-I and HTP-II have been
clarified.

REGISTRATION STATEMENT PART II

Item 27. Exhibits

The opinion of counsel and consent of counsel are filed herewith.

FINANCIAL STATEMENT COMMENTS

Media Credits

1. As requested the "Management's Discussion and Analysis" Section contain more
informative

<PAGE>

description of the Media Purchase Agreement, Media Credits and prior experience
of PML and GROW.

2. Management expects to use this asset over 1997 and has added this intent to
the section.

3. The description has been expanded to reflect that, although the marketing
plan is still being developed, the Media Credits may be used for any form of
media advertisement, including print, radio, television and cable TV. Further,
at the Company's option, the Media Credits may be used to cover the creative,
design and implementation costs of the Company's marketing campaign.

4. Noting your comment, the reference on page 23 has been clarified to reflect
that it is PML, not the Company, who provides the one-third cash component to
GROW and two-thirds media or media credit to GROW, which, in turn, implements
the final media purchase. The Company has a prepaid purchase order allowing it
to acquire the up to $1.5 million worth of media from GROW. A sentence has been
added reflecting that the Company's sole cash obligation in connection with the
Media Purchase Agreement was the 10% selling commission payable to First Capital
Investments, Inc., a registered securities broker-dealer on account of arranging
the Media Purchase Agreement.

5. As requested, it has been added that the Company does not have the ability to
transfer of assign its rights under the Media Purchase Agreement without PML's
consent. However, considering that the Media Credits can be used to acquire any
form of print, radio, television or cable TV at prevailing market published
rates, the Company believes that asset value of the Media Credits owned under
the Media Purchase Agreement, are equal to the prevailing market value into
which any unused Media Credits are usable.

HTP-I Loan

6. The $300,000 loan shares in payment of the loan is based upon $1.32 per share
price. This is the fair value based upon shares issued for cash to Hampton Tech.
Partners, LLC at December 31, 1996. 761,000 shares were issued at net cash
proceeds of $927,120. 227,273 shares were issued on December 31, 1996 to pay off
the loan. See supplemental schedule titled "IMSCO Technologies, Inc. Equity"
which summarizes the equity transactions. Also see Note 7 which also reports the
shares issued in loan repayment.

7. DPI, Inc. Exchange

As stated in Financial Statement Note 1, DPI is a subsidiary of IMSCO. Note 4
describes the exchange transaction. DPI, Inc. was a corporation which was
originally established with the intent to be a separate division. The Company
owned 80% or more of the DPI shares since its formation so there was no
acquisition of DPI to report. Mr. Berg, Mr. Yurak, Mr. Fleming and others were
rendering services to DPI and received their stock in DPI in 1995 for services
rendered thereto. Indeed, Mr. Yurak's only compensation was derived from the
shares of DPI by whom he was employed. As stated in the Proxy Statement and
Notice of 1996 Annual Meeting held in July 1996, in 1995 the Board of Directors
of the Company determined, without independent valuation, the fair market value
of each share of DPI to be approximately $.50 per share, based on the fact that
(i) DPI was a newly formed, start up entity with no assets or revenue, (ii) DPI
was a closely held, non-public company with no established market for its shares
and (iii) the DPI shares were issued with restrictive legends on transfer. The
IMSCO for DPI stock exchange described in Note 4 was discussed in detail in the
Proxy Statement and Notice of 1996 Annual Meeting held in July 1996. Disclosure
about the exchange transaction was reviewed by the SEC in connection with its
review of the 1996 Annual Meeting Proxy

<PAGE>

Statement.

In connection with the Company's merger with IMSCO, Inc., in July 1996, set
forth in the 1996 Proxy Statement which was approved by the shareholders at the
Company's annual meeting in July 1996, Mr. Berg, Mr. Yurak, Dr. Waldman and
others agreed to return the shares of DPI owned by each of them to DPI in
exchange for shares of the Company such that DPI would become a wholly-owned
subsidiary of the Company. Upon the issuance of the shares of the Company to
Messrs. Berg, Yurak and Waldman and others they were deemed to receive
additional value equal to the difference between the fair market value of the
DPI shares, which was estimated by Imsco's Board of Directors to be $.50 per
share in 1995, and the Company's shares issued to them in 1996, which were
unregistered under the Securities Act of 1933, as amended, and were estimated by
the Board of Directors, without indepndent appraisal, to have a discounted fair
market value of approximately $1.25 per share (based on the then current market
value of the Company's registered common stock, less a discount of approximately
30% due to their unregistered, restricted nature.

Stock Options and Warrants

8. See Note 13 which has been added to describe the Class C Warrants.

9. Your comment is duly noted.

10. As requested the notes to the financial statements have revised to reflect
that the Comapny has adopted SFAS 123, with the additional disclosures.

Prior Period Adjustment

11. The ($17,970) in the course of being EDGARIZED was incorrectly placed in the
wrong year column in the prior SB-2 version. The ($17,970) is now in the proper
year column in both the September 30, 1996 Form 10-QSB/A and the December 31,
1996 Form 10-KSB. There was no prior period adjustment in 1995. The 1994
financial statements were revised and reissued by the predecessor accountant and
included in the December 31, 1995 10KSB filing.

Nonmonetary Transactions

12. See our response under the second paragraph of Management's Discussion
above. The 129,151 shares issued for private placement fees is part of the cost
of issuing stock, which is usually deducted from the proceeds of the stock
issue. This transaction was recorded similar to the 150,000 shares issued
related to financing and private placement as an offset to paid in capital in
order for common stock to be properly stated. The components of the 197,000
shares included 150,000 shares as discussed in paragraph 1 and 47,000 shares
issued due to the exercise of warrants. The cash proceeds received upon exercise
of these warrants were received in a previous year. The 47,000 shares were not
issued until 1996. See supplemental schedules which summarize the equity
transactions.

The stock of the Company is very thinly traded. Two major placements to Hampton
Tech Partners I & II and Proxhill Marketing, Ltd. in 1996 comprise 70% of the
1996 shares issued. The trading price for these placements were based upon $1.32
per share fair market value. Since net cash proceeds of $927,120 were received
at $1.32 per share from the Hampton Tech Partners placements, $1.32 per share
was considered fair value for recording

<PAGE>

nonmonetary transactions.