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                              UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549
                             _______________

                                FORM 10-K
                             _______________

          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934

              For the fiscal year ended:  December 31, 2001

                    Commission File Number:  0-13817
                             _______________
                        MARGATE INDUSTRIES, INC.
         (Exact Name of Registrant as specified in its Charter)

              DELAWARE                               84-8963939
   State or Other Jurisdiction of                  (IRS Employer
    Incorporation or Organization              Identification Number)

              129 NORTH MAIN STREET, YALE, MICHIGAN  48097
          (Address of Principal Executive Offices)   (Zip Code)

   Registrant's Telephone Number, including area code  (810) 387-4300


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

             NONE                       COMMON STOCK, $.015 PAR VALUE
                                              (Title of Class)
                             _______________

Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
                         Yes   X       No
                             -----        -----

At March 19, 2002, 1,879,542 shares of Common Stock, $.015 par value per
share, were outstanding.  The aggregate market value of the Common Stock
held by non-affiliates of the Registrant on that date was approximately
$603,000.

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
                         Yes   X       No
                             -----        -----

Page 1 of 44 pages                      Exhibits are indexed on page 17.

                   DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement in connection with the Annual
Meeting of Shareholders to be held June 19, 2002 (2002 Proxy Statement)
are incorporated by reference into Part III.

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<PAGE>
                        MARGATE INDUSTRIES, INC.
             ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 2001

                            TABLE OF CONTENTS

PART I.

Item 1.   Business . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Item 2.   Properties . . . . . . . . . . . . . . . . . . . . . . . . . .6
Item 3.   Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .6
Item 4.   Submission of Matters to a Vote of Security Holders. . . . . .6

PART II.

Item 5.   Market Price And Dividends On The Company's Common Equity
          And Related Stockholder Matters. . . . . . . . . . . . . . . .6
Item 6.   Selected Financial Data. . . . . . . . . . . . . . . . . . . .8
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations. . . . . . . . . . . . . . . . . . .8
Item 8.   Financial Statements and Supplementary Data. . . . . . . . . 13
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure . . . . . . . . . . . . . . . . . . 15

PART III.

Item 10.  Directors and Executive Officers of the Registrant . . . . . 16
Item 11.  Executive Compensation . . . . . . . . . . . . . . . . . . . 16
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 13.  Certain Relationships and Related Transactions . . . . . . . 16

PART IV.

Item 14.  Exhibits, Financial Statement Schedules and Reports on
          Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 17
     Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

FINANCIAL STATEMENTS

     Reports of Independent Accountants. . . . . . . . . . . . . . .F-1
     Consolidated Financial Statements . . . . . . . . . . . . . F-2 - F-6
     Notes to Consolidated Financial Statements. . . . . . . . . F-7 - F-20



                                   -i-
<PAGE>
                       FORWARD-LOOKING STATEMENTS

STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K ABOUT OUR ANTICIPATED
FINANCIAL RESULTS AND GROWTH, AS WELL AS ABOUT THE DEVELOPMENT OF OUR
SERVICES AND OUR MARKETS, ARE FORWARD-LOOKING STATEMENTS THAT ARE BASED
ON OUR CURRENT PLANS AND ASSUMPTIONS.  IMPORTANT INFORMATION ABOUT THE
BASIS FOR THESE PLANS AND ASSUMPTIONS AND CERTAIN FACTORS THAT MAY CAUSE
OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE STATEMENTS IS
DISCUSSED IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" BEGINNING ON PAGE 8 BELOW, AND GENERALLY
THROUGHOUT THIS REPORT.

                                 PART I

ITEM 1:  BUSINESS

                              INTRODUCTION

Margate Industries, Inc. (the "Company" or "Margate") was formed under
the laws of the state of Delaware on April 4, 1984 and currently
maintains its headquarters at Yale, Michigan.  Margate performs finishing
operations on iron castings for the foundry industry and machine shops in
central Michigan.  Margate's primary services include finishing, chipping
and grinding, cleaning, shot blasting, final testing and painting of
castings produced by our customers for the automotive industry and other
component manufacturers in the United States and Canada.  Margate has one
wholly owned subsidiary, namely Brown City Casting Corporation, doing
business as Yale Industries.

In recent years, the major automobile manufacturers have begun to require
their suppliers to perform additional finishing work and water testing on
the various castings and other automotive components prior to shipment to
their plants for assembly.  As a result, the major foundries are required
to spend increased time and labor performing the additional finishing and
water testing.  Margate believes that it can provide the additional
finishing work and testing on a more cost effective basis than the
foundries that actually manufacture the castings thereby providing the
foundries with a service, which is expensive for them to provide
in-house.  By concentrating our services on strictly cleaning, testing
and painting it allows us to perform a valuable service to the foundries
and at a lower cost per unit processed.

The Company has attempted in recent years to improve the quality of its
finishing operations, efficiency in the cleaning process, and investments
in new equipment and technology.  Likewise, during the year 2002 an
estimated $200,000 will be expended in capital improvements including the
addition of a Powder Coating Paint System.  As a result, the Company will
be able to offer its customers additional services including an increase
in the number of cylinder heads and other components cleaned, painted and
tested.

Margate has received its ISO 9000 and QS 9000 industry certifications
from Entela, Inc., a quality system registration company, which certifies
Margate's policies and operations on a semi-annual basis.  These
certifications are essential to receive work from the major automotive
companies and foundries as it signifies continuous, high quality
standards in all phases of its operations and customer service.

                                   -1-
<PAGE>
During the fiscal year ended 2001, our major customer, New Haven Foundry,
Inc. ("NHF") ceased business and closed its plant indefinitely.  While
NHF in the past represented 48% of Margate's revenue for the fiscal year
ended 2000 and 57% for the fiscal year ended 2001, Margate believes that
there still exists a significant opportunity for additional sales in its
finishing operations from non-affiliated foundries and component
manufacturers.  Margate and its subsidiary will attempt to grow and
diversify its services to a broader customer base.

                             MAJOR CUSTOMERS

Margate's customers are primarily associated with the automotive industry
and other component manufacturing in the United States and Canada which
require finishing, cleaning, testing, and painting of castings prior to
their assembly into the end product.  As discussed above, Margate's
primary customer was NHF, which ceased operations in 2001, which will
have a significant impact on our sales on an ongoing basis.  During the
year ended 2001, NHF accounted for 57% of Margate's sales totaling
$3,240,638. Due to Margate's heavy reliance on NHF as its principal
customer, management believes that the loss of this customer will have a
material adverse effect on Margate.  Management is actively seeking new
customers and attempting to conduct additional services for our existing
customers including powder coating painting operations.  Our current
customers for whom Margate performs finishing operations are:  Waupaca
Foundry, Inc.; Navistar International; Grede Foundries; and Dalton
Corporation.  Margate's Canadian customers include Eston Manufacturing
and Standard Induction Castings.

Due to the loss of NHF's business, the loss of any of these customers
would also have a material adverse effect on Margate's business.  In
addition, in recent years Margate has a limited customer base in foreign
countries.

                          PRODUCTS AND SERVICES

Margate's primary services are utilized by the automotive industry and
foundries which outsource the cleaning and testing of iron casting, such
as engine blocks, prior to shipment to the manufacturer.  Accordingly our
primary operations consist of:

     *    Grinding and de-fining of all iron castings;
     *    Shot blasting, using multiple spinner hanger & tumble blast
          machines;
     *    Brinell hardness testing; and
     *    Powder coating painting and operations.

Margate continues to evaluate new services which it can provide its
clients, particularly in light of the loss of its major customer, NHF.
For that reason, Margate added its painting operations during the fiscal
year, which allows it to add on additional finishing operations.

                           SALES AND MARKETING

Due to the loss of NHF business the Company has commenced an aggressive
marketing program to add new customers and provide additional services
including powder coat painting operations.  Margate currently has entered
into a commission agreement with Casting Sales, Inc. to locate additional
business.  In addition, Mr. Kenneth Smrstik, a newly appointed director,
is actively seeking out painting business in central Michigan.  Mr.
Smrstik is also in the process of developing a sales program to increase
sales.

                                   -2-
<PAGE>
                               COMPETITION

Margate's domestic competition is limited primarily to other foundries
who perform cleaning operations for the automobile industry.  For the
most part these foundries have higher labor costs and accordingly are
willing to outsource some of their cleaning operations to smaller
independent companies such as Margate.  We believe the current downturn
in the economy will result in less outsourcing of cleaning operations.

Internationally, Margate faces strong competition from companies with
similar operations to its own, located in Europe, South America and
Mexico.  The most serious threat of competition is from state-of-the-art
operations located in Mexico and Brazil.  Margate's Brazilian competitors
present a competitive threat because they receive subsidies from the
Brazilian government, have labor cost advantages and very modern
facilities.  Margate's international competitors include, Linamar, Inc.;
Ford Motor Company; and General Motors, Inc.

                         GOVERNMENTAL REGULATION

Margate is subject to various federal, state and local laws regarding
environmental matters and the discharge of materials into the
environment.  These laws and regulations govern the management of solid
and hazardous waste, the discharge of pollutants into the air and into
surface and ground waters and the storage and disposal of hazardous and
non-hazardous substances generated by ongoing operations.  Margate
believes that it is currently in substantial compliance with the
applicable environmental requirements.  Nevertheless, if a release of
hazardous substances located on Margate's property occurs, Margate may be
held liable and may be required to pay the cost of remedying the problem.
The amount of any such liability and remedial cost could be material.

Although, Margate does not believe that its business operations presently
impair environmental quality, compliance with the federal, state and
local environmental laws could have an adverse effect upon its capital
expenditures, earnings and competitive position.  Since its inception,
Margate has not been required to make any material capital expenditures
for environmental control facilities other than that mentioned above, and
the Company does not expect to be required to make any such expenditures
in the near future.  Margate's facilities have dust collecting systems
that contain material within and do not discharge into the environment,
thus Margate is not required to obtain air emissions permits at its
facilities.  However, the 1990 amendments to the federal Clean Air Act
are expected to have a major impact on the compliance costs of many U.S.
companies, including foundries of the type Margate operates.  Until final
regulations implementing those amendments are adopted by the federal and
state governments, it is not possible to estimate these costs.

COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF
1980.

CERCLA, also known as the Superfund Act, addresses cleanup of sites at
which there has been or may be a release of hazardous substances into the
environment.  CERCLA assigns liability for costs of cleanup and damage to
natural resources to any person who, currently or at the time of disposal
of a hazardous substance, owned or operated any facility at which
hazardous substances were deposited; to any person who by agreement or
otherwise arranged for disposal or treatment, or arranged with a
transporter for transport of hazardous substances owned or possessed by
such

                                   -3-
<PAGE>
person for disposal or treatment; and to any person who accepted
hazardous substances for transport to disposal or treatment facilities or
sites from which there is a release or threatened release of hazardous
substances.  CERCLA authorizes the Federal government either to clean up
these sites itself or to order persons responsible for the situation to
do so.  CERCLA created a fund to be used by the Federal government to pay
for the cleanup efforts.  Where the Federal government expends money for
remedial activities, it must seek reimbursement from the potentially
responsible parties.  Where the EPA performs remedial work with superfund
dollars, it frequently sues potentially responsible parties for
reimbursement under the "cost recovery" authority of Section 107 of
CERCLA.  The EPA may also issue an administrative order seeking to compel
potentially responsible parties to perform remedial work with their own
funds under the "abatement" authority of Section 106 of CERCLA.  In lieu
of instigating such actions, the EPA may also seek through negotiations
to persuade such parties to perform and/or pay for any and all stages of
remedial action at a site in discharge of their liabilities under CERCLA.

CERCLA provides that transporters and persons arranging for the disposal
of hazardous waste may be jointly and severally liable for the costs of
remedial action at the site to which the hazardous waste is taken.  While
Margate attempts to minimize such exposure by contracting only with
qualified hazardous waste transporters meeting certain minimum insurance
requirements and by having the generator select the disposal site and
method, there can be no assurances that the Company will be successful in
so limiting such exposure.  Under Section 101(20)(B) of CERCLA, when a
common or contract carrier delivers a hazardous substance to a site
selected by the shipper, the carrier is not considered to have caused or
contributed to any release at such disposal facility resulting from
circumstances or conditions beyond its control.

The Superfund Amendments and Reauthorization Act ("SARA") was enacted in
1986 and authorized increased Federal expenditure and imposed more
stringent cleanup standards and accelerated timetables.  SARA also
contains provisions which expand the enforcement powers of the EPA.

Management believes that industry and governmental entities will continue
to try to resolve hazardous waste problems due to their need to comply
with other statutory requirements and to avoid liabilities to private
parties.  Although the liabilities imposed by CERCLA are more directly
related to Margate's customers, they could under certain circumstances
apply to some of Margate's activities, including failure to properly
design or implement a cleanup, removal or remedial action plan or to
achieve required cleanup standards and activities related to the
transport and disposal of hazardous substances.  Such liabilities can be
joint and several where other parties are involved.

CLEAN AIR ACT AND 1990 AMENDMENTS (THE "CLEAN AIR ACT").

The Clean Air Act requires compliance with ambient air quality standards
and empowers the EPA to establish and enforce limits on the emission of
various pollutants from specific types of facilities.  The 1990
amendments modify the Clean Air Act in a number of significant areas.
Among other things, they establish emissions allowances for sulfur and
nitrogen oxides, establish strict requirements applicable to ozone
emissions and other air toxics, establish a national permit program for
all major sources of pollutants and create significant new penalties,
both civil and criminal, for violations of the Clean Air Act.

Included within the scope of the Clean Air Act are rules issued by the
EPA known as National Emissions Standards for Hazardous Air Pollutants
("NESHAP").  NESHAP specifically

                                   -4-
<PAGE>
regulates the emission of asbestos during manufacturing and waste
disposal operations and the renovation and demolition of certain
facilities.  Authority to implement and enforce NESHAP standards has been
delegated to the various states which have implemented licensing
requirements, notice requirements and procedures with respect to asbestos
abatement and other rules governing the handling and disposal of
asbestos.

CLEAN WATER ACT OF 1972 ("CWA").

Originally enacted as the Federal Water Pollution Control Act, but
renamed as the Clean Water Act in 1977, CWA regulates the discharge of
pollutants into the surface waters of the United States.  CWA established
a system of minimum national efficiency standards on an
industry-by-industry basis, water quality standards, and a discharge
permit program.

OTHER REGULATIONS.

In addition to a broad array of environmental regulations relating to
Margate's operations, the Company's business is subject to a variety of
non-environmental regulations.  Included in the regulations which may
effect its current business are regulations governing occupational safety
and health, wage, overtime and other employment matters and dealings with
state and local governmental agencies.

COMMUNITY DEVELOPMENT GRANT.

Margate agreed to administer the expenditure of $253,000, which the city
of Yale, Michigan received as a community development block grant to
perform an investigation to determine the extent of contamination at the
Company's Yale plant site and to clean-up soil contamination left by the
site's previous owners and operators.  The Company had no responsibility
or liability for any cleanup costs at its Yale, Michigan facility.  As an
inducement for the Company to locate its operations to Yale, it was
granted "a covenant not to sue" from the state of Michigan.  All funds
for the study of the site and cleanup of the site were provided by a
grant before the facility was to be occupied by the Company.  The
Michigan Department of Environmental Quality has since granted a closure
letter that the site's environmental cleanup has been completed.  The
Company initially contributed $50,000 to the project which was rebated to
the Company in the form of tax incentives.  The Company has no continuing
obligation for further cleanup at the plant or the surrounding property.

                                EMPLOYEES

As of December 31, 2001, Margate employed approximately 64 hourly
employees and 20 salaried employees.  None of its employees are
represented by a union.

Salaried employees retiring from the Company are entitled to
post-retirement health and life insurance benefits.  The amount of these
benefits is based on years of credited service and the age of the
employee at retirement.  In addition, the Company maintains a 401K plan
covering all employees and matches 25% (maximum 2% of each employee's
contribution)

                                   -5-
<PAGE>
ITEM 2:  PROPERTIES

Margate's facility consists of its one operating subsidiary, Yale
Industries.  Yale Industries' facility consists of a plant and corporate
offices located in Yale, Michigan, totaling approximately 70,000 square
feet.  As discussed above, the plant site was given to Margate as a block
grant in consideration of Margate administering the expenditure of
$253,000 for the investigation and cleanup of environmental contamination
at the plant site.  Margate believes the Yale facility is suitable for
the present and future needs of this location.

Margate previously had a location in Fort Atkinson, Wisconsin.  Margate
closed this plant permanently during the fiscal year ended 2001.

ITEM 3:  LEGAL PROCEEDINGS

Margate knows of no pending or threatened legal proceeding to which it is
or will be a party which, if successful, might result in a material
adverse change in the business, properties, or financial condition of
Margate or its subsidiary.

ITEM 4:  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

It is anticipated Margate will hold its Annual Meeting of Shareholders
for the year 2002 in June 2002.


                                 PART II

ITEM 5:  MARKET PRICE AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

                       PRINCIPAL MARKET OR MARKETS

The Company's common stock is traded on the over-the-counter market and,
commencing on January 28, 1987, has been listed on the National
Association of Securities Dealers, Inc., Automated Quotation System
("NASDAQ") under the symbol, "CGUL."  The following tables set forth the
range for high and low bid quotations for the Company's common stock, as
reported by NASDAQ for the periods indicated.  These prices are believed
to be representative of inter-dealer quotations, without retail markup,
markdown or commissions, and may not represent actual transactions.

                                                        BID PRICE
                                                    HIGH          LOW
                                                   ------        -----

Calendar Year 2001
------------------
     Quarter ended March 31, 2001                   $2.47        $1.31
     Quarter ended June 30, 2001                    $2.75        $1.20
     Quarter ended September 30, 2001               $2.46        $0.79
     Quarter ended December 31, 2001                $1.46        $0.30

                                   -6-
<PAGE>
Calendar Year 2000
------------------
     Quarter ended March 31, 2000                   $9.50        $1.38
     Quarter ended June 30, 2000                    $5.94        $2.13
     Quarter ended September 30, 2000               $5.97        $3.91
     Quarter ended December 31, 2000                $4.78        $2.03

Calendar Year 1999
------------------
     Quarter ended March 31, 1999                   $1.91        $0.71
     Quarter ended July 30, 1999                    $2.02        $1.43
     Quarter ended September 30, 1999               $1.83        $1.58
     Quarter ended December 31, 1999                $1.97        $1.13

              APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK

The approximate number of holders of record of the Company's common stock
at March 9, 2001 was 399 directly and approximately 1,800 in broker's
street name.

                                DIVIDENDS

The Company began paying quarterly dividends of $.00625 per share in
August of 1991.  Subsequently in August 1992, the Board of Directors
increased the dividend to $.0075 and in August 1993, the quarterly
dividend was increased to $.01 per share.  On November 15, 1993 the
quarterly dividend was increased to $.0125.  On February 15, 1995 the
quarterly dividend was increased to $.0150.  On September 21, 1995 the
quarterly dividend was suspended and will be decided at the Annual
Meeting in June of each year if, or when, the Company will pay a
dividend.  On November 15, 1999 the Company paid a 5% stock dividend to
shareholders of record as of December 15, 1999 and on July 11, 2000, the
Company announced a special cash dividend of $0.50 per share on all
outstanding shares of common stock for those shareholders of record on
July 24, 2000, which was paid on August 25, 2000.

The Company does not anticipate the payment of any dividends during the
upcoming fiscal year and will use any retained earnings for use in the
Company's business.  We intended to review our policy with respect to the
payment of dividends from time to time; however, there can be no
assurance that any dividends will be paid in the future.



                                   -7-
<PAGE>
ITEM 6:  SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data with
respect to the Company.

(In Thousands, Except for Share Data)

                                         YEAR ENDED DECEMBER 31
                                      ----------------------------
                                   2001      2000      1999      1998
                                  ------    ------    ------    ------

Net sales                        $ 5,657   $10,757   $ 9,615   $ 9,628

Net income (loss)                $(2,396)  $   695   $   332   $ 1,971

Net income (loss) per
     common share                $ (1.28)  $   .40   $   .22   $   .30

Stock dividend declared
     per common share            $     0   $     0        5%   $     0

Dividends declared per
     common share                $     0   $  0.50   $     0   $     0

Total assets                     $ 4,732   $ 7,924   $ 7,896   $ 7,562

Long-term debt                   $    35   $    81   $   125   $   192

Stockholders' equity             $ 3,881   $ 6,277   $ 6,103   $ 5,716

ITEM 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

            FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE

STATEMENTS MADE IN THIS REPORT WHICH ARE NOT BASED ON HISTORICAL FACTS
ARE FORWARD-LOOKING AND, ACCORDINGLY, INVOLVE RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
DISCUSSED.  FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING WORDS SUCH AS "BELIEVES," "MAY," "INTENDS,"
"ANTICIPATES," "PLANS," "ESTIMATES" AND ANALOGOUS OR SIMILAR EXPRESSIONS.
ANY FORWARD-LOOKING STATEMENTS ARE INTENDED TO BE AS OF THE DATE ON WHICH
SUCH STATEMENTS ARE MADE.  IN CONNECTION WITH THE SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE ARE PROVIDING
A NUMBER OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM PROVIDED FORWARD-LOOKING INFORMATION.  THESE IMPORTANT
FACTORS INCLUDE FUTURE ECONOMIC CONDITIONS IN THE REGIONAL AND NATIONAL
MARKETS, STATE AND FEDERAL REGULATION, FINANCIAL MARKET CONDITIONS
(INCLUDING, BUT NOT LIMITED TO, CHANGES IN INTEREST RATES), INFLATION
RATES, INCREASED COMPETITION (INCLUDING, BUT NOT LIMITED TO, THE ENTRY OF
NEW COMPETITORS), ABILITY TO CARRY OUT MARKETING AND SALES PLAN, ABILITY
TO ACHIEVE PLANNING GOALS, ABILITY TO ENTER NEW MARKETS SUCCESSFULLY AND
CAPITALIZE ON GROWTH OPPORTUNITIES, ADVERSE CHANGES IN APPLICABLE LAWS,
REGULATIONS OR RULES GOVERNING THE AUTOMOTIVE

                                   -8-
<PAGE>
SERVICE INDUSTRY AND TAX OR ACCOUNTING MATTERS.  THIS LIST OF FACTORS MAY
NOT BE ALL-INCLUSIVE SINCE IT IS NOT POSSIBLE FOR US TO PREDICT ALL
POSSIBLE FACTORS.

The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial condition
and results of operations during the periods included in the accompanying
consolidated financial statements.

                            BUSINESS OVERVIEW

Margate performs finishing, cleaning testing, and painting operations on
iron castings for the automotive industry and component manufactures.
Margate currently conducts its operations through its one wholly owned
subsidiary, Brown City Casting Corporation, doing business under the name
Yale Industries. Margate had another subsidiary, Fort Atkinson Industries
which permanently ceased operations during 2001.  Yale performs cleaning,
grinding, testing and painting of castings prior to shipment to end
purchasers.  Margate has benefited in recent years from the increased
finishing and testing requirements of automotive suppliers, leading many
of those suppliers to move their finishing operations to outside
providers, such as Margate which can perform these services at a higher
quality and at a lower cost.

                           RECENT DEVELOPMENTS

On October 2, 2000, Margate sent Notices of Default to Wesley Industries,
Inc. ("Wesley") and New Haven Foundry, one of Margate's primary
customers.  The Notice of Default and Acceleration sent to Wesley stated
that Wesley was in default under the terms of a Seller Note dated March
24, 1998, for failure to pay the quarterly principal payment of $35,000
due on September 1, 2000.  As a result of the default, Margate
accelerated the maturity of the Seller Note and, accordingly, the
remaining balance of $420,000 was due and payable. Interest at a rate of
18% per annum was due from September 1, 2000, with respect to the
quarterly principal payment due, and interest at a rate of 18% per annum
was due and payable from October 2, 2000 on the entire principal balance
of $420,000.  The Notice of Default sent to NHF stated that NHF was in
default under the terms of a Cleaning Contract dated March 24, 1998, for
the failure to pay the quarterly service fees of $140,000 due on July 1,
2000 and October 1, 2000.

On April 10, 2001 and April 12, 2001, Margate received a payment from
Wesley for all of the past due amounts on the quarterly payments with
interest at 18%. Margate also received payments for another note which
became past due and all past due accounts receivables over 45 days. The
total cash received was approximately $900,000. The cleaning contract
with NHF was revised with payments beginning April 1, 2002 through
January 1, 2005 and the cleaning contract was extended one year after the
last payment in 2005 in consideration of restructuring the payments.

On August 31, 2001, Margate permanently closed its operation in Fort
Atkinson, Wisconsin due to a lack of business.  The Company did not feel
it could replace major customers who took their cleaning, grinding and
testing back in house.

On October 24, 2001, Margate received notification that New Haven
Foundry, a major customer, had laid-off its entire hourly workforce and
ceased operations for an indefinite period of time.  Margate believes the
loss of this business will have a significant negative impact on our
results of operation over the short term until we can find additional
customers.  In this regard, Margate

                                   -9-
<PAGE>
will attempt to retain a portion of business being contracted to other
foundries.  New Haven Foundry represented 57% of Margate's revenues for
the fiscal year ended December 31, 2001.  NHF failed to meet its monthly
payments pursuant to the extended contract described above.  The Company
is evaluating its options with regard to collecting the past due amounts
from NHF.

On September 28, 2001, the Company announced that it had terminated
negotiations for a proposed merger with USA Teleport, Inc. ("USA
Teleport"), a Miami-based telecommunications firm providing broadband
wireless and Internet solutions.  The Company will not renew the letter
of intent with USA Teleport which was entered into between the parties on
June 12, 2001.  The Company intends to take a one-time pre-tax write down
of approximately $212,000 in 2001 for expenses related to the proposed
transaction.  The Company determined that the merger with USA Teleport
would not provide long-term value to its shareholders and was not in its
best interests of the shareholders or the Company.

On January 22, 2002, the Company's Board of Directors appointed Kenneth
R. Smrstik, age 59, to its Board of Directors.  Mr. Smrstik fills a
vacancy on the Board left by the recent death of Mr. Frederick Schriever,
a long time member of the Company's Board.  Mr. Smrstik has over
twenty-five years of executive management and marketing/sales experience
in the metals industry.  His prior employment has emphasized corporate
strategic planning and improvement programs.  Mr. Smrstik will also serve
on the Company's audit committee joining Mr. Denis LeDuc as the Company's
two independent members of that committee.

                          RESULTS OF OPERATIONS

The following is an overview of our results of operations for the last
three years (in thousands):

                                       Year Ended December 31
                                  -------------------------------
                                    2001        2000        1999

     Total sales . . . . . . . . .$ 5,657     $10,757     $ 9,615

     Cost of sales . . . . . . . .$ 5,558     $ 8,959     $ 8,568

     Selling, general and
      administrative expenses. . .$ 1,073     $ 1,065     $   813

     Dividend and interest
      income . . . . . . . . . . .$    77     $   147     $    72

     Other income (expense)
      excluding interest . . . . .$(2,562)    $   215     $     0

     Net income(loss). . . . . . .$(2,396)    $   695     $   332

                                  -10-
<PAGE>
YEAR ENDED DECEMBER 31, 2001 VS. YEAR ENDED DECEMBER 31, 2000

Sales decreased by $5,100,153 or 47.4% from December 31, 2000 to December
31, 2001. The Company's net income decreased by $3,091,506 over the prior
year's net income of $695,402.  Decreased net sales, caused by the
recession in the Auto Industry, causing the closing of the Ft. Atkinson
Plant and the loss of the company's major customer (NHF) were the major
reasons for the loss.

Cost of sales as a percentage of sales was 98.3% for the year ending
December 31, 2001 as compared to 83.3% for the year ending December 31,
2000.  The major reason for the decrease was the reduction in sales.

Selling, General and Administrative expenses as a percentage of sales was
19.0% for the year ending December, 2001 as compared to 9.9% for the year
ending December 31, 2000.  The major reason for the increase is that
these costs are in the most part fixed.

Interest income (net of interest expense) for the year ending December
31, 2001 decreased $70,904.  The decrease is the result of decreased
interest income from notes receivable from NHF and decrease bank rates
paid on deposits.

Other Income excluding interest income for the year ending December 31,
2001 decreased by $2,776,401. The decrease was primarily the result of
write-off of notes and  receivables of $1,673,316 from NHF and its parent
company; disposal of fixed assets with the closing of Fort Atkinson of
$759,513;  loss of investment in stock of $100,000, and write-off of
acquisition costs of $212,224.

YEAR ENDED DECEMBER 31, 2000 VS. YEAR ENDED DECEMBER 31, 1999

Sales increased by $1,141,572 or 11.9% from December 31, 1999 to December
31, 2000.  The Company added the Waupaca Foundry as a new major customer.
This customer generated sales of approximately $2.1 million in new sales
during the year.  The Company's net income increased by $363,563 over the
prior year's net income of $331,839.  Increased net sales, improved
efficiency with the use of more automated equipment, and cost reductions
with less employees are the primary reasons for the increase along with
interest income.

Cost of sales as a percentage of sales was 83.3% for the year ending
December 31, 2000 as compared to 89.1% for the year ending December 31,
1999.  The major reason for the decrease was increased efficiency in
labor costs, the use of more automated equipment which has improved the
quality of the Company's cleaning operations and additional sales which
carry a lower labor cost.

Selling, General and Administrative expenses as a percentage of sales was
9.9% for the year ending December, 2000 as compared to 8.5% for the year
ending December 31, 1999.  The major reasons for the increases were
higher accounting fees due to new requirements by the SEC which now
require a quarterly review, and an increase in the cost of professional
services and travel costs associated with obtaining new customers.  In
prior years, the Company utilized outside sales representatives to obtain
new customers on a commission basis.  The Company now utilizes its own
salesperson who is responsible for monitoring existing customers and
locating new business opportunities.

                                  -11-
<PAGE>
Interest income (net of interest expense) for the year ending December
31, 2000 increased $75,237.  The increase is the result of increased
interest income from notes receivable from NHF.

Related party services and sales commissions decreased from $1,966 in
1999 to $0 in 2000.  The decrease was in sales volume from customers from
outside sales representatives.  As noted above, the Company now employs
its own salesperson to serve this function.

YEAR ENDED DECEMBER 31, 1999 VS. YEAR ENDED DECEMBER 31, 1998

Sales decreased by $12,040 from December 31, 1998 to December 31, 1999.
The Company's net income before deduction of an extraordinary item
relating to sale of equity investee increased by $351,937 over the prior
year's net loss of  $(20,098).  Improved efficiency and cost reductions
are the primary reasons along with interest income.

Cost of sales as a percentage of sales was 89.1% for the year ending
December 31, 1999 as compared to 91.9% for the year ending December 31,
1998.  The major reasons for the decrease was increased efficiency in
labor costs.

Selling, general and administrative expenses decreased by $22,134 from
1998 to 1999.

Interest income (net of interest expense) for the year ending December
31, 1999 increased by $52,201 from 1998.  This increase is the result of
the pay down of debt.  The Company had very minor borrowings on its line
of credit during 1999.

Related party services and sales commissions decreased from $4,232 in
1998 to $1,966 in 1999.  This decrease was in sales volume from customers
from outside sales representatives.

                     LIQUIDITY AND CAPITAL RESOURCES

The Company assesses its liquidity in terms of overall ability to
generate sufficient cash to support business needs and to fund growth.
The Company relies primarily upon cash flow from operations and lines of
credit.

The current and quick ratios, which provide an indication of the
Company's short-term assets in relation to its short-term obligations,
for the comparable periods are as follows:

                                        2001           2000

     Working Capital                 $1,856,497     $3,120,123

     Current Ratio                    9.24 : 1       4.97 : 1

     Quick Assets (Cash, Securities
     and Receivables)                $1,256,056     $3,281,825

     Quick Ratio                      5.58 : 1       4.18 : 1

                                  -12-
<PAGE>
As noted by the above computations, the current ratio has increased from
4.97:1 to 9.24:1 and working capital has decreased by $1,263,626 for the
period from December 31, 2000 to December 31, 2001.  The quick ratio has
increased from 4.18:1 to 5.58:1.  The largest factor contributing to the
decrease in working capital was the loss reported by the Company which
was partially offset by refundable income tax versus income tax due in
the prior year.

Trade receivables decreased by $1,750,979 from December 31, 2000 to
December 31, 2001.  The decrease was due primarily to decreased sales and
the write-off of $560,768 in receivables from New Haven Foundry

The Company has a facility line of credit of $1,300,000, with monthly
interest payments at 1/2 below the prime rate.  This line of credit is
collateralized by substantially all the assets of the Company.  The
Company's borrowings as of December 31, 2000 were $70,000.

The Company believes its cash flow from operations is sufficient to fund
its current level of operations.

                      EFFECTS OF CHANGES IN PRICES

When possible, the Company attempts to adjust the selling prices of its
services in response to increases or decreases in its costs of labor, raw
materials and capital.  However, the market served by the Company is
highly competitive and that competition has limited the Company's
abilities to decrease overall prices.

During the fiscal years ended December 31, 2001, 2000 and 1999 there were
no significant changes in prices due to the market factors discussed in
the preceding paragraph.

ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information with respect to this item is contained in the financial
statements appearing on Item 14 of this Report.  Such information is
incorporated herein by reference.


                              CERTAIN RISKS

The following risks pertain to Margate and its cleaning and finishing
operations.

MARGATE DEPENDS UPON THE STRENGTH OF THE AUTOMOTIVE INDUSTRY, AND MAY
SUFFER FROM ANY DECLINE IN AUTOMOBILE PRODUCTION.

Margate's principal operations are directly related to domestic
automotive vehicle production.  Automotive sales and production are very
cyclical and somewhat seasonal and can be affected by the strength of a
country's general economy and other potential factors outside of the
Company's control.  In addition, automotive production and sales can be
affected by labor relations issues (including strikes and other work
stoppages), regulatory requirements, trade agreements, consumer spending
trends and other factors.  A sustained decline in overall automotive
sales and their production could result in a decline in Margate's
finishing and cleaning operations thereby effecting the Company's results
of operations or financial condition.

                                  -13-
<PAGE>
MARGATE'S BUSINESS IS CYCLICAL AND ITS ANNUAL RESULTS WILL FLUCTUATE AS A
RESULT OF GENERAL ECONOMIC CONDITIONS AND CHANGES IN AUTOMOBILE AND TRUCK
PRODUCTION LEVELS.

Margate's business is subject to cyclical fluctuations based on general
economic conditions, including interest rates, fuel costs, and inflation
factors specific to the automobile industry.  For example, a downturn in
the economy or a rise in interest or fuel costs has the effect of
decreasing the demand for automobiles and trucks.  If consumer demand
goes down for high price consumer items, the automotive industry will
decrease production and will decrease their need for Margate's cleaning
operations.

MARGATE FACES STRONG COMPETITORS AND MAY NOT BE EFFECTIVE IN COMPETING IN
ITS MARKETS.

Margate faces strong competitors for cleaning and furnishing services in
most of its markets.  Significant competitive factors include price,
delivery and quality of furnished product.  However, breadth of
capabilities and attention to customers service needs have become
increasingly important in remaining competitive.  Some of Margate's
competitors have greater financial resources and have the ability to
offer lower costs.  Existing or potential competitors may substantially
increase their resources devoted to automation and labor to be
competitive.  Competitors in regions such as Mexico, South America and
Europe may have lower costs, including labor costs which gives them a
competitive advantage over companies operating in the United States.

ANY ADVERSE DEVELOPMENT IN MARGATE'S RELATIONSHIP WITH THE SMALL NUMBER
OF CUSTOMERS ON WHICH MARGATE DEPENDS MAY PREVENT ITS CONTINUING
PROFITABILITY.

Historically, a small number of customers accounted for a substantial
percentage of Margate's net revenues.  This continues to be the case.  In
the fiscal year ended December 31, 2001, NHF, a former subsidiary of
Margate, accounted for approximately 57% of Margate's total revenue.  In
October 2001, NHF ceased all of its operations because of a loss of its
major customer, Daimler Chrysler Corporation. This was the major factor
in the loss for Margate in 2001.

THE COST OF COMPLIANCE WITH ENVIRONMENTAL AND OTHER LAWS MAY BE
PROHIBITIVE.

Margate is subject to numerous laws and regulations that govern
environmental issues, workplace safety, equal employment opportunities
and other aspects of its business.  Margate believes that it complies
with the applicable environmental laws and regulations and is not aware
of any outstanding violation or citations with respect to environmental
matters at its operating facility.  The Company's operations entail the
continued risk of future noncompliance with environmental and other
governmental regulations.  The chief environmental issues for the
Company's cleaning operation are air emissions and waste disposal.  The
cost of complying with various environmental regulations is likely to
increase over time, and the cost of compliance may cause the Company to
suffer losses or reduced levels of profitability.

MARGATE DEPENDS ON ITS KEY PERSONNEL TO MANAGE ITS BUSINESS, AND MAY BE
UNPROFITABLE IF IT FAILS TO ATTRACT AND RETAIN EFFECTIVE MANAGERS.

Margate depends on certain key personnel, including William H. Hopton and
David A. Widlak to manage the Company.  However, Margate's ability to
maintain its competitive position will depend on the Company's ability to
retain key personnel and to attract and retain other highly

                                  -14-
<PAGE>
qualified managerial and manufacturing personnel.  Should Margate fail to
recruit and retain such personnel, it may not be profitable.

MARGATE'S LABOR RELATIONS AND THOSE OF ITS MAJOR CUSTOMERS ARE IMPORTANT
TO ITS BUSINESS SUCCESS.

Although Margate believes that its labor relations are good, attempts to
unionize its  operations and possible work stoppages may occur in the
future.  Any work stoppages would reduce Margate's revenues and ability
to serve its customers.  There can also be no assurance that labor
problems at its customers, or a work stoppage, would not have a material
adverse effect on Margate's financial condition and results of
operations.

MARGATE HAS A LIMITED PUBLIC MARKET AND PRICES OF SHARES OF ITS COMMON
STOCK ARE VOLATILE.

The prices of securities of publicly traded corporations, including
Margate, tend to fluctuate widely and as of the date of this Report the
general market conditions have been in a steep decline.  It can be
expected that trading in Margate's common stock may continue to have wide
fluctuations in price due to the limited volume in the Company's stock
and limited number of market makers.  The limited market for Margate's
common stock, fluctuations in trading interest and changes in Margate's
operating results, financial condition and future prospects in the
automotive industry could have a significant impact on the market prices
for Margate's common stock.

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

None.









                                  -15-
<PAGE>
                                PART III

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to our directors and executive officers may be
found in the sections appearing in our 2002 Proxy Statement.  Such
information is incorporated herein by reference.

ITEM 11:  EXECUTIVE COMPENSATION

Information with respect to our executive officers may be found in the
sections appearing in our 2002 Proxy Statement.  Such information is
incorporated herein by reference.

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to security ownership may be found in our 2002
Proxy Statement.  Such information is incorporated herein by reference.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to this item may be found in our 2002 Proxy
Statement.  Such information is incorporated herein by reference.









                                  -16-
<PAGE>
                                 PART IV

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

(a)  DOCUMENTS FILED AS PART OF FORM 10-K
     1.   Financial Statements
          -    Independent Auditors' Report
          -    Consolidated Balance Sheet, December 31, 2001 and 2000
          -    Consolidated Statement of Operations, Years ended December
               31, 2001, 2000 and 1999
          -    Consolidated Statement of Changes in Stockholders' Equity,
               Years ended December 31, 2001, 2000 and 1999
          -    Consolidated Statement of Cash Flows, Years ended December
               31, 2001, 2000 and 1999
          -    Notes to Consolidated Financial Statements

     2.   Financial Statement Schedules
          -    Schedules have been omitted since they are either not
               required, not applicable, or the information is otherwise
               included.

     3.   Exhibits
          None

(b)  REPORTS ON FORM 8-K

The Company filed an 8-K on October 1, 2001 reporting pursuant to Item 5.

(c)  EXHIBITS

None.

(d)  FINANCIAL STATEMENT SCHEDULES

None



                                  -17-
<PAGE>










                                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                                                                 ________

                                                 FINANCIAL STATEMENTS AND
                                             INDEPENDENT AUDITORS' REPORT
                                                                 ________

                                                        DECEMBER 31, 2001









<PAGE>









                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                                ________

                          FINANCIAL STATEMENTS
                                   AND
                      INDEPENDENT AUDITORS' REPORT
                                ________

                            DECEMBER 31, 2001









<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES


                              - CONTENTS -










                                                              PAGE NUMBER
                                                              -----------

Independent Auditors' Report                                        1


Financial Statements:

Consolidated Balance Sheet                                          2

Consolidated Statement of Operations                                3

Consolidated Statement of Changes in Stockholders' Equity           4

Consolidated Statement of Cash Flows                              5 & 6

Notes to Consolidated Financial Statements                        7 - 20









<PAGE>
                      Independent Auditors' Report
                      ----------------------------


To the Board of Directors
Margate Industries, Inc. and Subsidiaries
Yale, Michigan


We have audited the accompanying consolidated balance sheet of MARGATE
INDUSTRIES, INC. AND SUBSIDIARIES as of December 31, 2001 and 2000, and
the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years ended
December 31, 2001, 2000 and 1999.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of MARGATE
INDUSTRIES, INC. AND SUBSIDIARIES at December 31, 2001 and 2000 and the
results of its operations and its cash flows for each of the three years
ended December 31, 2001, 2000 and 1999 in conformity with auditing
standards generally accepted in the United States of America.




PERRIN, FORDREE & COMPANY, P.C.


Troy, Michigan
February 4, 2002
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEET





                                 ASSETS
                                 ------

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                 ----------------------------
                                                                    2001             2000
                                                                 -----------      -----------

<S>                                                              <C>              <C>
CURRENT ASSETS:
  Cash and cash equivalents                                      $ 1,108,092      $ 1,099,082
  Accounts receivable:
    Trade (net of allowance for doubtful accounts
      of $206,000 in 2001 and $81,000 in 2000)                       147,964        1,898,943
    Other                                                                -            283,800
  Current portion of notes receivable                                    -            509,132
  Inventories                                                         29,416           32,000
  Prepaid expenses and other                                         103,100           75,112
  Refundable taxes                                                   660,970              -
  Deferred tax assets                                                 32,200            8,000
                                                                 -----------      -----------
          Total current assets                                     2,081,742        3,906,069

PROPERTY, PLANT AND EQUIPMENT - at cost,
  net of accumulated depreciation and
  amortization of $2,260,149 and $2,333,824 at
  December 31, 2001 and 2000, respectively                         2,420,777        3,530,156

OTHER ASSETS:
  Long-term notes receivable                                             -            324,726
  Capitalized acquisition costs                                          -            149,911
  Deposits                                                               -             13,041
  Deferred tax asset                                                 229,200              -
                                                                 -----------      -----------
                                                                     229,200          487,678


                                                                 $ 4,731,719      $ 7,923,903
                                                                 ===========      ===========

</TABLE>

<PAGE>
                  LIABILITIES AND STOCKHOLDERS' EQUITY
                  ------------------------------------

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                 ----------------------------
                                                                    2001             2000
                                                                 -----------      -----------

<S>                                                              <C>              <C>
CURRENT LIABILITIES:
  Line-of-credit                                                 $    70,000      $       -
  Current portion of long- term debt                                  45,501           43,720
  Current portion of capital lease obligations                           -              4,408
  Accounts payable:
    Trade                                                             61,647          280,672
    Other                                                              8,739           19,597
  Accrued expenses:
    Salaries and wages                                                32,955          106,941
    Income taxes                                                         -            259,300
    Other                                                              6,403           71,308
                                                                 -----------      -----------
          Total current liabilities                                  225,245          785,946

LONG-TERM DEBT                                                        35,270           80,771

DEFERRED TAX LIABILITY                                                   -            236,800

OTHER POSTRETIREMENT BENEFITS                                        589,914          542,992

STOCKHOLDERS' EQUITY:
  Common stock - $.015 par value:
    Authorized - 5,000,000 shares
    Issued and outstanding - 1,879,542
      at December 31, 2001 and 2000                                   28,193           28,193
  Paid-in for common stock in excess of
    par value                                                      7,942,716        7,942,716
  Accumulated deficit                                             (4,089,619)      (1,693,515)
                                                                 -----------      -----------
                                                                   3,881,290        6,277,394
                                                                 -----------      -----------

                                                                 $ 4,731,719      $ 7,923,903
                                                                 ===========      ===========

The accompanying notes are an integral part of the financial statements.
                                   -2-
</TABLE>
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF OPERATIONS
              YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999


<TABLE>
<CAPTION>
                                                         2001           2000           1999
                                                       --------       --------       --------
<S>                                                   <C>            <C>            <C>
NET SALES                                             $ 5,656,889    $10,757,042    $ 9,615,470

COST OF SALES                                           5,558,066      8,959,043      8,568,312
                                                      -----------    -----------    -----------

GROSS PROFIT                                               98,823      1,797,999      1,047,158

SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES                                               1,072,460      1,065,076        813,439

RELATED PARTY SERVICES AND SALES
 COMMISSIONS                                                  -              -            1,966
                                                      -----------    -----------    -----------

OPERATING INCOME (LOSS)                                  (973,637)       732,923        231,753

OTHER INCOME (EXPENSE):
  Dividend and interest income                             81,613        156,902        103,643
  Interest expense                                         (5,082)        (9,467)       (31,445)
  Loss on write off of note receivable                   (343,201)           -              -
  Write off of management fees                           (839,500)           -              -
  Write off of accounts receivable                       (490,615)           -              -
  Write off of capitalized acquisition costs             (212,224)           -              -
  Loss on disposal of fixed assets                       (759,513)           -              -
  Loss on investment                                     (100,000)           -              -
  Other income                                            183,380        214,728        210,588
                                                      -----------    -----------    -----------
                                                       (2,485,142)       362,163        282,786
                                                      -----------    -----------    -----------

INCOME (LOSS) FROM OPERATIONS
  BEFORE INCOME TAXES                                  (3,458,779)     1,095,086        514,539

PROVISION (BENEFIT) FOR FEDERAL
INCOME TAXES                                           (1,062,675)       399,684        182,700
                                                      -----------    -----------    -----------

NET INCOME (LOSS)                                     $(2,396,104)   $   695,402    $   331,839
                                                      ===========    ===========    ===========

BASIC EARNINGS (LOSS) PER SHARE:

NET INCOME (LOSS)                                     $     (1.28)   $       .40    $       .22
                                                      ===========    ===========    ===========



 The accompanying notes are an integral part of the financial statements
                                   -3-
</TABLE>
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
              YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999




<TABLE>
<CAPTION>
                               COMMON STOCK         PAID-IN FOR
                           --------------------     COMMON STOCK                    TOTAL
                           NUMBER OF                IN EXCESS OF   ACCUMULATED   STOCKHOLDERS'
                            SHARES      AMOUNT       PAR VALUE       DEFICIT        EQUITY
                           --------    --------     -----------     ---------      --------
<S>                       <C>         <C>          <C>             <C>            <C>
Balance - December 31,
  1998                    1,489,214      22,338     7,345,038       (1,651,010)    5,716,366

Shares issued to directors   25,000         375        44,125              -          44,500

Shares issued for services    6,000          90        10,425              -          10,515

Stock dividend - 5%          77,328       1,156       124,086         (125,242)          -

Net income                      -           -             -            331,839       331,839
                         ----------   ---------    ----------      -----------    ----------
Balance - December 31,
  1999                    1,597,542      23,959     7,523,674       (1,444,413)    6,103,220

Shares reacquired           (10,000)       (150)      (20,854)             -         (21,004)

Stock options exercised     280,000       4,204       420,752              -         424,956

Stock issued for services    12,000         180        19,144              -          19,324

Dividends paid                  -           -             -           (944,504)     (944,504)

Net income                      -           -             -            659,402       695,402
                         ----------   ---------    ----------      -----------    ----------
Balance - December 31,
  2000                    1,879,542      28,193     7,942,716       (1,693,515)    6,277,394

Net loss                        -           -             -         (2,396,104)   (2,396,104)
                         ----------   ---------    ----------      -----------    ----------

Balance - December 31,
  2001                    1,879,542   $  28,193    $7,942,716      $(4,089,619)   $3,881,290
                         ==========   =========    ==========      ===========    ==========



The accompanying notes are an integral part of the financial statements.
                                   -4-
</TABLE>
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF CASH FLOWS
              YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999



<TABLE>
<CAPTION>
                                                         2001           2000           1999
                                                       --------       --------       --------
<S>                                                   <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers                        $ 8,079,282    $ 9,917,972    $ 9,489,334
  Cash paid to suppliers and employees                 (8,291,125)    (9,521,359)    (8,758,215)
  Interest and dividends received                          83,013        169,312         98,404
  Interest paid                                            (5,228)       (10,467)       (32,104)
  Income taxes paid                                      (296,000)      (317,584)           -
                                                      -----------    -----------    -----------
          Net cash (to) from operating activities        (430,058)       237,874        797,419

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of equipment                          26,749         11,801            -
  Payments received on notes receivable                   494,457        333,999         80,714
  Deposits refunded                                        13,041         21,792          4,967
  Purchase of investment                                 (100,000)           -              -
  Capitalized acquisition costs paid                          -         (149,911)           -
  Purchase of property, plant and equipment               (17,051)      (175,666)      (337,782)
                                                      -----------    -----------    -----------
          Net cash from (to) investing activities         417,196         42,015       (252,101)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Purchase of treasury stock                                  -          (21,004)           -
  Issuance of common stock                                    -          444,280            -
  Dividend payments                                           -         (944,504)           -
  Net borrowings (repayments) on line-of-credit            70,000       (217,000)      (368,212)
  Principal payments under long-term
    obligations                                           (48,128)       (62,699)       (61,711)
                                                      -----------    -----------    -----------
          Net cash from (to) financing activities          21,872       (800,927)      (429,923)
                                                      -----------    -----------    -----------

NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS                                    9,010       (521,038)       115,395

CASH AND CASH EQUIVALENTS:
  BALANCE - beginning of year                           1,099,082      1,620,120      1,504,725
                                                      -----------    -----------    -----------

  BALANCE - end of year                               $ 1,108,092    $ 1,099,082    $ 1,620,120
                                                      ===========    ===========    ===========


 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING TRANSACTIONS
 -----------------------------------------------------------------------

ISSUANCE OF STOCK DIVIDEND                            $       -      $       -      $   124,816
                                                      ===========    ===========    ===========



The accompanying notes are an integral part of the financial statements.
                                   -5-
</TABLE>
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
              YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999





   RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
   ------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                         2001           2000           1999
                                                       --------       --------       --------
<S>                                                   <C>            <C>            <C>
NET INCOME (LOSS)                                     $(2,396,104)   $   695,402    $   331,839
  Adjustments to reconcile net income (loss)
    to net cash from operating
    activities:
      Depreciation and amortization                       340,168        374,904        366,881
      (Gain) loss on disposal of property, plant
        and equipment                                     759,513         (6,392)           -
      Bad debt write-off                                1,673,316            -              -
      Loss on investment                                  100,000            -              -
      Deferred income tax provision                      (490,200)       (24,200)         8,000
      Provision for losses on accounts receivable         125,000         81,000            -
      Stock issued for directors fees
        and services                                          -              -           55,015
  Changes in assets and liabilities which
    (increase) decrease cash flows:
      Accounts receivable                                 573,097     (1,040,996)      (340,891)
      Inventories                                           2,584         10,000          1,000
      Prepaid expenses                                    124,690         (8,403)       (19,070)
      Accounts payable                                   (229,883)           559         87,404
      Accrued income tax                                 (920,270)       106,300        174,700
      Accrued expenses                                   (138,891)           (10)        91,334
      Accrued retiree health benefits                      46,922         49,710         41,207
                                                      -----------    -----------    -----------

NET CASH (TO) FROM OPERATING ACTIVITIES               $  (430,058)   $   237,874    $   797,419
                                                      ===========    ===========    ===========




The accompanying notes are an integral part of the financial statements.
                                   -6-
</TABLE>
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                      NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2001




NOTE 1 -  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

          This summary of significant accounting policies of Margate
          Industries, Inc. (the Company) is presented to assist in
          understanding the Company's financial statements.  The
          financial statements and notes are representations of the
          Company's management which is responsible for their integrity
          and objectivity.  These accounting policies conform to
          generally accepted accounting principles and have been
          consistently applied in the preparation of the financial
          statements.

          BUSINESS ACTIVITY
          -----------------

          Margate Industries, Inc. is a holding company for subsidiaries
          involved in the cleaning of small and medium-sized grey iron
          castings that are sold primarily to the North American
          automobile industry.

          PRINCIPLES OF CONSOLIDATION
          ---------------------------

          The consolidated financial statements include the accounts of
          the Company and its wholly-owned subsidiaries Margate Land
          Acquisition Company, Brown City Castings Corporation d/b/a Yale
          Industries (Yale), and Fort Atkinson Industries, Inc. (FAI).
          All intercompany accounts and transactions have been eliminated
          in the accompanying consolidated financial statements.

          CASH AND CASH EQUIVALENTS
          -------------------------

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

          INVENTORIES
          -----------

          Inventories, consisting primarily of grinding wheels, are
          stated at the lower of cost or market, determined by the
          first-in, first-out (FIFO) method.

          PROPERTY, PLANT AND EQUIPMENT
          -----------------------------

          Property, plant and equipment are recorded at cost.  Costs of
          maintenance and repairs that do not materially extend the life
          of the asset are charged to expense when incurred.

                                   -7-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001





NOTE 1 -  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -
          CONTINUED:

          PROPERTY, PLANT AND EQUIPMENT - CONTINUED
          -----------------------------------------

          Depreciation and amortization of plant and equipment is
          recorded using the straight-line method over the estimated
          useful lives of the assets.  Depreciation and amortization
          expense totaled $340,168, $374,904 and $366,881 in 2001, 2000
          and 1999, respectively.  Estimated useful lives of assets in
          the various classes of property, plant and equipment are as
          follows:

          Buildings and improvements                             40 years
          Machinery and equipment                           10 - 12 years
          Furniture and fixtures                                 12 years
          Automobiles                                             5 years

          INCOME TAXES
          ------------

          Income taxes are provided for the tax effects of transactions
          reported in the financial statements and consist of taxes
          currently due plus deferred taxes.  Deferred taxes are
          recognized for differences between the basis of assets and
          liabilities for financial statements and income tax purposes.

          The deferred tax assets and liabilities represent the future
          tax return consequences of those differences, which will either
          be taxable or deductible when the assets and liabilities are
          recovered or settled.  Temporary differences giving rise to the
          deferred tax liabilities consist primarily of the excess of
          depreciation and amortization for tax purposes over the amount
          for financial reporting purposes.  Differences giving rise to
          the deferred tax assets consist of net operating loss
          carryforwards, allowance for bad debt, accrued liabilities  and
          alternative minimum tax credit carryforwards.

          REVENUE RECOGNITION
          -------------------

          Revenues derived from the cleaning of castings are recognized
          as services are provided.

          Sales commissions are recognized as revenue when earned.

                                   -8-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001




NOTE 1 -  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -
          CONTINUED:

          USE OF ESTIMATES
          ----------------

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

          RECLASSIFICATIONS
          -----------------

          Certain amounts in 1999 have been reclassified to conform with
          the 2000 and 2001 financial statement presentation.


NOTE 2 -  PROPERTY, PLANT AND EQUIPMENT:

          Property, plant and equipment are summarized as follows as of
          December 31:

<TABLE>
<CAPTION>
                                                              2001                2000
                                                            --------            --------
          <S>                                              <C>                 <C>
          Building and improvements                        $1,414,135          $1,780,495
          Machinery and equipment                           3,014,447           3,818,412
          Automotive equipment                                112,052             121,532
          Furniture and fixtures                              140,292             143,541
                                                           ----------          ----------
            Total cost                                      4,680,926           5,863,980
          Less accumulated depreciation and
            amortization                                    2,260,149           2,333,824
                                                           ----------          ----------

            Net property, plant and
              equipment                                    $2,420,777          $3,530,156
                                                           ==========          ==========
</TABLE>

                                   -9-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO FINANCIAL STATEMENTS-CONTINUED
                            DECEMBER 31, 2001

NOTE 3 -  NOTES RECEIVABLE:

          Notes receivable - consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                              2001                2000
                                                            --------            --------
          <S>                                              <C>                 <C>

          Wesley Industries, Inc. - collateralized note
          receivable, as a result of the sale of 45% of
          New Haven Foundry non-interest bearing,
          due in monthly installments of $35,000 of
          principal payments through March 2003.
          (Net of discount at an effective interest
          rate of 6.0%). $231,245 of this note was
          was written off - refer to Note 15.              $      -            $  293,571

          NHF - unsecured note receivable, due in
          monthly installments of $32,250, including
          interest at 8%, through February 2002.  $111,956
          of this note was written off - refer to Note 15.        -               415,743

          Stockholders - unsecured notes receivable,
          due in quarterly installments of $3,000 each
          including interest at 6%, through June 2007
          These notes were received in full in 2001.              -               124,544
                                                           ----------          ----------
                                                                  -               833,858
          Less current portion                                    -               509,132
                                                           ----------          ----------

                                                           $      -            $  324,726
                                                           ==========          ==========
</TABLE>

          Interest earned on these notes amounted to $36,343, $65,172 and
          $29,524 for the years ended December 31, 2001, 2000 and 1999
          respectively.


NOTE 4 -  LINE-OF-CREDIT:

          The Company maintains a bank line-of-credit of $1,300,000 for
          working capital requirements which is renewable annually on May
          31.  The interest rate on this line is at 1/2% below the bank's
          prime rate, and was 4.75% and 9.0% at December 31, 2001 and
          2000, respectively.  The line-of-credit is secured by all
          accounts receivable, inventories and equipment of the Company.
          The Company had borrowings against the line of $70,000 and $-0-
          at December 31, 2001 and 2000, respectively.  The Company is
          required to maintain a working capital balance of at least
          $1,500,000 and maintain a ratio of its total liabilities to
          tangible net worth of at least .75 as covenants under this
          credit agreement.  For the years ended December 31, 2001 and
          2000, the Company was in compliance with its covenants.

                                  -10-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001

NOTE 4 -  LINE-OF-CREDIT - CONTINUED:

          The Company also maintains a $350,000 equipment purchase
          line-of-credit.  The interest rate is negotiated with each
          equipment purchase for a term up to 60 months.  This line is
          secured by the same assets as the working capital
          line-of-credit.

NOTE 5 -  LONG-TERM DEBT:

          Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
                                                              2001                2000
                                                            --------            --------
          <S>                                              <C>                 <C>
          Note payable, due in monthly installments
          of $3,992, including interest at 4% through
          July 2003, collateralized by equipment.          $   80,771          $  124,491

          Less current portion                                 45,501              43,720
                                                           ----------          ----------

                                                           $   35,270          $   80,771
                                                           ==========          ==========

          Maturities of long term debt obligations are as follows:

          Year ending December 31:
            2002                                           $   45,501
            2003                                               35,270
                                                           ----------

                                                           $   80,771
                                                           ==========
</TABLE>

NOTE 6 -  EARNINGS PER SHARE:

          In November 1998, the Company announced a reverse stock split,
          effectively reducing the number of shares outstanding by
          one-third and increasing the par value from $0.005 to $.015 per
          share of common stock.  The weighted average number of shares,
          total shares outstanding and earnings per share have been
          adjusted for 1998.  Earnings  per  share (EPS)  for  the  years
          ended December 31, 2001, 1999 and 1998 are computed as follows:
<TABLE>
<CAPTION>
                                                                                      PER-SHARE
                                                       INCOME         SHARES           AMOUNT
                                                       ------         ------           ------
          <S>                                        <C>             <C>            <C>
          December 31, 1999 -
          Net income                                 $   331,839      1,512,670      $      .22
                                                     ===========     ==========      ==========

          December 31, 2000 -
          Net income                                 $   695,402      1,758,316      $      .40
                                                     ===========     ==========      ==========

          December 31, 2001 -
          Net loss                                   $(2,396,104)     1,879,542      $    (1.28)
                                                     ===========     ==========      ==========
</TABLE>

                                  -11-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001


NOTE 6 -  EARNINGS PER SHARE - CONTINUED:

          For the year ended December 31, 1999, options on 280,000 shares
          of common stock were not included in computing diluted EPS
          because their effect was antidilutive.


NOTE 7 -  FAIR VALUE OF FINANCIAL INSTRUMENTS:

          The estimated fair values of the Company's financial
          instruments, none of which are held for trading purposes, are
          as follows at December 31, 2001 and 2000.

          The carrying values of cash and equivalents approximate fair
          values.  The notes receivable in 2000 bear interest at a rate
          that approximates prime rate, and therefore, the carrying
          values of these notes approximate fair value.

          It is currently not practicable to estimate the fair value of
          the long-term debt obligations.  Because these note agreements
          contain unique terms, conditions, covenants and restrictions
          which were negotiated at arm's-length with the Company's
          lenders, there is no readily determinable similar instrument on
          which to base an estimate of fair value.  Accordingly, no
          adjustment to fair value has been determined.

          The postretirement benefits obligation has been determined by
          an outside actuary based on the actuarial present value of the
          expected benefits' liability.  As such, the carrying value
          approximates the fair value of this financial instrument.


NOTE 8 -  INCOME TAXES:

          As of December 31, 2001 and 2000, the components of deferred
          income taxes consisted of the following:
<TABLE>
<CAPTION>
                                                              2001                2000
                                                            --------            --------
          <S>                                              <C>                 <C>
          Current deferred taxes:
            Gross assets                                   $  32,200           $  14,100
            Gross liabilities                                    -                (6,100)
                                                           ---------           ---------
              Net current deferred tax assets                 32,200               8,000

          Noncurrent deferred taxes:
            Gross assets                                     549,900             210,100
            Gross liabilities                               (320,700)           (446,900)
                                                           ---------           ---------
              Net noncurrent deferred tax
                assets (liabilities)                         229,200            (236,800)
                                                           ---------           ---------

          Total deferred tax assets (liabilities)          $ 261,400           $(228,800)
                                                           =========           =========
</TABLE>

                                  -12-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001




NOTE 8 -  INCOME TAXES - CONTINUED:

          Deferred income taxes, included in the accompanying balance
          sheet, result from temporary differences related to the
          following items which are treated differently for financial
          reporting and tax reporting purposes.

<TABLE>
<CAPTION>
                                                              2001                2000
                                                            --------            --------
          <S>                                              <C>                 <C>
          Depreciation and amortization                    $(320,700)          $(438,700)
          Installment gain on the sale of NHF                    -               (14,300)
          Net operating loss carryforward                    279,300                 -
          Other postretirement benefits                      200,600             184,600
          Allowance for doubtful accounts                     70,000              25,500
          AMT taxes paid                                      21,000                 -
          Accrued vacation                                    11,200              14,100
                                                           ---------           ---------

              Total                                        $ 261,400           $(228,800)
                                                           =========           =========
</TABLE>

          The components of the provision for income taxes are as follows
          for the years ended December 31:
<TABLE>
<CAPTION>
                                             2001           2000           1999
                                            ------         ------         ------
          <S>                             <C>            <C>            <C>

          Current tax expense (benefit)   $  (572,475)   $   423,884    $   203,600
          Deferred tax expense               (490,200)       (24,200)         8,000
          Capital and operating loss
            carryforwards                         -              -          (28,900)
                                          -----------    -----------    -----------

          Provision for income taxes      $(1,062,675)   $   399,684    $   182,700
                                          ===========    ===========    ===========
</TABLE>

          A reconciliation of the statutory tax rate to the effective tax
          rates recorded as follows:

<TABLE>
<CAPTION>
                                              2001         2000         1999
                                             ------       ------       ------
          <S>                                 <C>          <C>          <C>

          Statutory rate                      (34)%          34%          34%
          Recognition of capital and operating
            loss carryforward                   -             -           (4)
          AMT taxes                            (2)            -            -
          Non-deductible capital losses         5             -            -
          Penalties                             -             1            3
          Other                                 -             1            3
                                              -----        -----        -----

          Effective rate                      (31)%          36%          36%
                                              =====        =====        =====
</TABLE>

                                  -13-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001


NOTE 8 -  INCOME TAXES - CONTINUED:

          The Company has available at December 31, 2001, unused
          operating loss carryforwards in the amount of approximately
          $848,000 which may be applied against future taxable income,
          that expire December 31, 2021, and $263,000 of capital loss
          carryforwards which expire December 31, 2006.

          The Company also has available at December 31, 2001,
          alternative minimum tax credits in the amount of $21,000 which
          may be applied against future tax liabilities.  These credits
          have no expiration date.


NOTE 9 -  STOCK OPTIONS:

          In 1999, the Company adopted a fixed director and employee
          stock-based compensation plan.  Under the Plan, the Company
          granted options for 280,000 shares of common stock, 130,000 to
          employees and 150,000 to directors, vesting immediately.  The
          exercise price of each option is equal to the market price of
          the Company's stock on the date of the grant.  The term for all
          of the options is 5 years, expiring on November 15, 2004.

          The fair value of each option granted is estimated on the grant
          date using the Black Scholes Model.  The following assumptions
          were used in estimating fair value:

            Assumption                                         Fixed Plan
            ----------                                         ----------

            Dividend yield                                          -   %
            Risk-free interest rate                                 5.57%
            Expected life                                         5 years
            Expected volatility                                       20%

          The Company applies APB Opinion 25 in accounting for its stock
          compensation plans.  Accordingly, no compensation has been
          recognized for the Plan in 1999.  Had cost been determined on
          the basis of fair value pursuant to SFAS No. 123, net income
          and basic earnings per share would have been reduced as
          follows:


          Net income                                               1999
          ----------                                             --------

          As reported                                            $331,839
                                                                 ========

          Pro forma                                              $241,550
                                                                 ========

          Basic earnings per share
          ------------------------

          As reported                                            $   0.22
                                                                 ========

          Pro forma                                              $   0.16
                                                                 ========

                                  -14-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001




NOTE 9 -  STOCK OPTIONS - CONTINUED:


<TABLE>
<CAPTION>
                                   2001                     2000                    1999
                            -------------------      --------------------    --------------------
                                       EXERCISE                  EXERCISE                EXERCISE
                            NUMBER      PRICE        NUMBER       PRICE      NUMBER       PRICE
                            ------     -------       ------      -------     ------      -------
<S>                        <C>         <C>          <C>          <C>        <C>          <C>

Stock options outstanding
  at the beginning of the
  year                          -     $    -         280,000     $ 1.625         -      $    -

Stock options granted           -          -             -           -       280,000       1.625

Stock options exercised         -          -        (280,000)      1.625         -           -

Stock options outstanding
  at the end of the year        -     $    -             -       $   -       280,000    $  1.625
                           ========   ========      ========     =======    ========    ========

  Weighted average fair value
  of options granted                                                                    $    .50
                                                                                        ========

At December 31, 2001 and 2000, there were no outstanding stock options.
</TABLE>



                                  -15-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001



NOTE 10 - LEASE COMMITMENTS:

          The Company leases the building for the Fort Atkinson
          subsidiary under an operating lease agreement that expires in
          December, 2005.  This lease requires the Company to pay all
          maintenance and insurance expenses.  The Company also leases
          certain vehicles under two or three year agreements.

          Minimum payments under these leases are as follows:

          Year ending December 31:
            2002                                    $163,075
            2003                                     155,096
            2004                                     153,750
            2005                                     153,750
                                                    --------

                                                    $625,671
                                                    ========

          Rental expense in 2001, 2000 and 1999, was approximately
          $182,257 $177,064 and $170,328, respectively.


NOTE 11 - OTHER POSTRETIREMENT BENEFITS:

          Salaried employees retiring from the Company are entitled to
          postretirement health and life insurance benefits.  The amount
          of these benefits is based on years of credited service and the
          age of the participant.  The Company may amend or change the
          Plan periodically.

          The Company accounts for these benefits in accordance with
          Statement of Accounting Standards No. 106, "Accounting for
          Postretirement Benefits Other Than Pensions."  A Plan amendment
          effective January 1, 1998 resulted in a negative prior service
          cost of $109,240 being amortized over 20 years.  The amount of
          annual amortization is $5,462.



                                  -16-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001


NOTE 11 - OTHER POSTRETIREMENT BENEFITS - CONTINUED:

          The following table sets forth the Plan's funded status as of
          December 31, 2001 and 2000:
<TABLE>
<CAPTION>
                                                              2001                2000
                                                            --------            --------
          <S>                                              <C>                 <C>

          Accumulated postretirement benefit
            obligation:
              Fully-eligible active Plan
                participants                               $ 178,531           $ 181,010
              Fully-eligible retirees                         85,535
              Other active Plan participants                 286,223             278,040
                                                           ---------           ---------

          Accrued postretirement benefit
            obligation in excess of Plan assets              550,289             459,050
          Unrecognized net gain (loss)                       (47,767)             (8,912)
          Unrecognized prior service costs
            from Plan amendment                               87,392              92,854
                                                           ---------           ---------

          Accrued postretirement benefit cost              $ 589,914           $ 542,992
                                                           =========           =========
</TABLE>

          The Company's postretirement healthcare and life insurance plan
          is unfunded as the Company provides benefits on a pay as
          incurred basis. The cash benefits paid under this Plan were
          $7,086 and $-0- for 2001 and 2000, respectively.

          Net periodic postretirement benefit costs included the
          following components for the years ended December 31, 2001 and
          2000:

<TABLE>
<CAPTION>
                                                              2001                2000
                                                            --------            --------
          <S>                                              <C>                 <C>
          Service cost - benefits earned                   $  26,315           $  28,697
          Interest cost                                       32,885              26,463
          Amortization of net gain (loss)                        270                  12
          Amortization of prior service costs                 (5,462)             (5,462)
                                                           ---------           ---------
          Net periodic other postretirement
            benefit cost                                   $  54,008           $  49,710
                                                           =========           =========
</TABLE>

          For measurement purposes, a 5.9% and 6.25% annual rate of
          increase in the per capita cost of covered healthcare benefits
          was assumed for 2001 and 2000, respectively. The rate was
          assumed to drop to 4.5% by 2005 and remain at that level
          thereafter.  The healthcare cost trend rate assumption has a
          significant effect on the amounts reported.  To illustrate,
          increasing the assumed healthcare cost trend rate by 1
          percentage point in each year would increase the accumulated
          postretirement benefit obligation as of December 31, 2001 and
          2000 by $131,315 and $112,185, respectively, and the aggregate
          of the service and interest cost components of net periodic
          postretirement benefit cost for  the years then ended by
          $16,457 and $15,500, respectively.

                                  -17-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001


NOTE 11 - OTHER POSTRETIREMENT BENEFITS - CONTINUED:

          The discount rate used in determining the accumulated
          postretirement benefit obligation was 6.5% as of December 31,
          2001 and 2000.


NOTE 12 - EMPLOYEE BENEFIT PLANS:

          The Company maintains a 401(k) plan covering all employees that
          satisfy the Plan's eligibility requirements.  The Company is
          required to match 25% (maximum 2%) of each employee's
          contribution, not to exceed 8% of the participant's
          compensation. The employer's contribution, including
          administrative expenses, for the years ended December 31, 2001,
          2000 and 1999 was $33,560, $32,938 and $29,543, respectively.

          The Company also maintains a Defined Contribution Plan covering
          substantially all employees that satisfy the Plan's eligibility
          requirements.  Under the provisions of the Plan, Margate is
          required to make an annual contribution of 5% of each
          participant's eligible compensation.  Plan contributions for
          the years ended December 31, 2001, 2000 and 1999, were $82,321,
          $65,154, and $49,867, respectively.


NOTE 13 - CONCENTRATIONS OF CREDIT RISK:

          The Company has cash deposits in financial institutions in
          excess of the amount insured by agencies of the federal
          government in the approximate amounts  of  $1,089,420  and
          $1,033,174  for   the   years ended December 31, 2001 and 2000
          respectively.

          The Company performs grinding and blasting services.  Credit is
          granted to certain customers, which is made up of entirely
          commercial establishments.  The Company performs periodic
          credit evaluations of customers' financial condition and
          generally does not require collateral.  Amounts due from one
          customer represented approximately -0-% and 67% of trade
          accounts receivable  as of December 31, 2001 and 2000,
          respectively.

          The Company's customers include several foundries which account
          for a significant percentage of sales volume as follows:

                                    2001       2000       1999
                                    ----       ----       ----

          New Haven Foundry          57%        48%        60%
          Waupaca                     6%        19%         -
          Arrowcast                  18%        13%         9%
          Brillion                    -         12%         3%
          Navistar                   13%         7%         8%

                                  -18-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001




NOTE 14 - PLANT CLOSING - FT. ATKINSON FACILITY:

          In August 2001, the Company ceased operations at the Ft
          Atkinson, WI facility.  The work previously performed at that
          location was move to the Yale, Michigan facility.  All
          equipment was disposed of resulting in a loss of $759,513.


NOTE 15 - LOSS OF MAJOR CUSTOMER:

          The Company's largest customer, New Haven Foundry (NHF) ceased
          operations in October 2001.  The sales to NHF for the past
          three years were $3,240,638, $5,200,111 and $5,733,668.  The
          outstanding accounts receivable balances for this customer were
          $-0-, $1,266,212 and $1,226,700 for the years ended December
          31, 2001, 2000 and 1999, respectively.  The Company wrote off
          $560,768 of accounts receivable and $111,956 of notes
          receivable from this customer in 2001.

          The Parent Company of NHF also defaulted on the management fee
          and note receivable owed to Margate Industries.  The NHF Parent
          owed $839,500 in management fees and $231,245 on a note
          receivable that were written off in 2001.  Annual management
          fees of $560,000 were recorded for the years ended December 31,
          2001, 2000 and 1999.


NOTE 16 - ALLOWANCE FOR DOUBTFUL ACCOUNTS:

          The changes in the allowance for doubtful accounts are as
          follows:

<TABLE>
<CAPTION>
                                             2001           2000           1999
                                            ------         ------         ------
          <S>                             <C>            <C>            <C>
          Balance Jan 1,                  $    81,000    $       -      $       -
          Charged to costs and
            expenses                        1,033,816         81,000            -
          Deductions                         (908,816)           -              -
                                          -----------    -----------    -----------

          Balance Dec 31,                 $   206,000    $    81,000    $       -
                                          ===========    ===========    ===========
</TABLE>




                                  -19-
<PAGE>
                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 2001




NOTE 17 - TERMINATION OF MERGER:

          In March 2000, the Company initiated a merger with USA Teleport
          Inc. (formerly C-Spectra, Inc.,), a telecommunications company.
          The Company terminated negotiations in September 2001.  Costs
          of $212,224 including costs of $149,911 incurred in the year
          2000, related to this potential merger were written off in
          2001.










                                  -20-
<PAGE>
                               SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized on the
20th day of March 2002.

                                   MARGATE INDUSTRIES, INC.

                                   By: /s/ William H. Hopton
                                      ---------------------------------
                                      William H. Hopton
                                      Chief Financial Officer, President
                                      and Treasurer

                            POWER OF ATTORNEY

We, the undersigned officers and directors of Margate Industries, Inc.,
hereby severally constitute William H. Hopton and David A. Widlak, and
each of them singly, our true and lawful attorney's with full power to
them, and each of them singly, to sign for us and in our names in the
capacities indicated below any and all subsequent amendments to this
report, and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact
may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated below.

<TABLE>
<CAPTION>
     Signature                             Title                        Date
     ---------                             -----                        ----
<S>                           <C>                                     <C>
/s/ William H. Hopton         President, Chief Financial Officer,     March 20, 2002
---------------------------   Treasurer and Director
William H. Hopton


/s/ David A. Widlak           Secretary and Director                  March 20, 2002
---------------------------
David A. Widlak

/s/ Kenneth Smrstik           Director                                March 20, 2002
---------------------------
Kenneth Smrstik

/s/ Denis R. LeDuc            Director                                March 20, 2002
---------------------------
Dennis R. LeDuc
</TABLE>