<PAGE>   1

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

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            ------------------------

                                 FORM 10-KSB/A

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934,

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000.

                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                  DELAWARE                                      06-1579072
               (STATE OR OTHER                                 (IRS EMPLOYER
       JURISDICTION OF INCORPORATION)                       IDENTIFICATION NO.)
</TABLE>

<TABLE>
<S>                                            <C>
      119 WEST 23RD STREET, SUITE 508,                             10011
             NEW YORK, NEW YORK                                 (ZIP CODE)
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

                                 (212) 741-8512
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

      SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE

         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

<TABLE>
<CAPTION>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<S>                                            <C>
        COMMON STOCK, PAR VALUE $.001                              NONE
</TABLE>

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.  [X] Yes     [ ] No.

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB.  [ ]

     Issuer's revenues for its most recent fiscal year were: $0.

     The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold is N/A as the securities are not publicly traded.

     The number of shares outstanding of Registrant's common stock, as of March
28, 2001, is 13,750,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

                               See Exhibit Index

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

     Registrant was incorporated in the State of Delaware on March 31, 2000, and
plans to enter the industrial mining business, in part by seeking to acquire not
less than 80% of the issued and outstanding common shares of Hedman Resources
Limited ("Hedman"), a corporation organized under the laws of the Canadian
province of Ontario, which was incorporated in 1956, and whose stock is listed
on the Canadian Venture Exchange Capital market. At the annual meeting of Hedman
held on January 16, 2001, the shareholders of Hedman approved a merger between
Hedman and the Registrant, by which Hedman would become a subsidiary of the
Registrant. This merger is contingent, among other things, upon the approval for
listing on the NASD OTC Bulletin Board of Registrant's shares of common stock,
for which no assurance can be given as of the date of this Annual Report on Form
10-KSB.

     Registrant became a reporting company through the filing of a Registration
Statement on Form 10-SB, which became effective on November 14, 2000.
Registrant's stock has not commenced trading on the NASD OTC Bulletin Board, and
will not trade until the Registration Statement has cleared the United States
Securities and Exchange Commission's comment process, and the application for
listing has been approved.

     Registrant, assuming that it can complete the merger referred to in the
previous paragraph, will be engaged specifically in the mining of vermiculite in
a contiguous block of 3 currently unpatented mining claims in Matheson, in the
province of Ontario, Canada, comprising 35 claim-units, and processing the
resulting ore. (A mining claim in Canada that is unpatented allows a holder to
perform exploration work and prospecting, but no ore removal, whereas a patented
mining claim enables a holder to explore and prospect for, as well as process,
ore.) Vermiculite is the geological name given to a group of minerals, which are
aluminum iron ore magnesium silicates resembling mica in appearance.

     Registrant intends to process the ore by removing rock and other
impurities, and crushing the ore and exposing it to high temperatures. This will
cause the vermiculite ore to exfoliate, or expand, to many times its original
volume, turning flakes of ore into lightweight porous granules containing
millions of minute air layers. This process would make the vermiculite possess
certain thermal, chemical and acoustical insulating properties of economic
value, for use in lightweight concrete, agricultural products, insulation,
construction, metallurgy, chemistry and ceramics. It is Registrant's belief that
it can produce an asbestos-free product which, given recent moves in the
European Union to ban the use of chrysotile (or white) asbestos, and moves by
the United States Environmental Protection Agency and Food and Drug
Administration to sharply limit the presence of asbestos in the environment,
could be of economic value, as industry seeks asbestos substitutes.

     Registrant also intends, aside from being a supplier of processed
vermiculite, to become a supplier of high heat industrial minerals and a
manufacturer of high performance filler for industrial uses, such as lizardite.

     Hedman has historically been a material processing company, which sold a
primary product known as Hedmanite, which it recently ceased producing, owing to
declining demand. Hedman has repositioned itself from an ore supplier, to a
supplier of a processed product, Superfil brand lizardite.

     Registrant has commenced (through Hedman) marketing samples to potential
industrial customers of Superfil, a trade name for a lizardite ore product
produced from lizardite, an ore found on Hedman's mining property. Registrant
believes that Hedman is the only extractor of lizardite ore in Canada, and
possibly in the world. Lizardite has a high tensile strength, flexibility, and
resistance to thermal, chemical and electrical conditions. These properties make
it desirable when used as a formula component in a wide range of industrial and
commercial properties, such as heat resistant industrial mineral filler, brake
linings, construction materials, asphalt, gaskets, and plastics and polymers.
Hedman has created a process which removes white asbestos (chrysotile) from the
finished Superfil product to a level which meets stringent environmental
standards.

     There are a variety of products that could compete with lizardite as an
asbestos substitute, including wollastonite, cellulose, chemically treated wood
fiber, fibrous glass, ceramic fillers, gypsum, rock wool, mineral
                                        1
<PAGE>   3

wool, diatomaceous earth, vermiculite, graphite, cement pipe, calcium silicate,
carbon fiber, glass fiber, steel fiber, wollastonite, and certain types of
organic fibers. At the present time, polyvinyl alcohol (or PVA), aramid and
cellulose are the principal non-asbestos fibers used in industrial applications.

     Registrant, through Hedman, is pursuing a marketing strategy that includes
continued development of Superfil (lizardite) application research and
development, joint venture opportunities and promotion of technical and
specification dominance, based on the primary heat, fire and abrasion
characteristics of Superfil. Registrant has also purchased from Krystar
International, Ltd. (a company organized under the laws of the Bahamas) the
vermiculite claims owned by Krystar in the northeastern part of Ontario
province, Canada. These claims have been shown to contain high grade vermiculite
which is currently available only in substantial quantities from sources in Asia
and Europe. Registrant and Hedman believe that a merger of their two interests
would be beneficial, because it would allow Hedman to create an application
formula combining Superfil/lizardite with Registrant's high-grade vermiculite,
to enhance Superfil's fire, heat and strength performance.

     The three product categories represented by Hedman's targeted marketing
are: (1) Building products, including cement products (pipes, sheets, shingles,
siding, and precast products) and insulation and drywall products, (2) Plastics
products, including Nylon, Polypropylene and PVC plastic products and moulding
compounds used in the electronic, automotive and printing industries, and (3)
Automotive Brake Products, such as heavy truck brake shoes, brake linings, and
clutch facings and industrial linings for equipment and appliances.

     Registrant, through Hedman, will market Superfil through a series of
worldwide distributors, including Kraft Chemical Company, Alliance Financial
Ltd., and Western Reserve Company of the United States, 123 Supply Inc. of
Canada, Ultra Chem Corporation of Taiwan, Aichi Sangyo Company of Japan,
Hindustan Composites Company of India, and Fermel Investment Corporation of
South America. These companies will distribute Superfil to Hedman's current
customers, as well as to customers in Hedman's target markets. Each of these
distributors is believed by the Registrant to have its own highly skilled
technical sales force, which will be compensated based on a commission system
linked to the volume of product sold.

     Hedman has also entered into Sales Agency Agreements and/or Distributor
Agreements with companies in the United States, Canada, the Bahamas, and the
British Virgin Islands. Hedman provides product training to the
agent-distributor sales force, as well as marketing support. The sales force
will be compensated through a mixture of commissions and stock options.

     As of December 31, 2000, and as of March 15, 2001, Registrant had 2 total
employees, neither of whom were full-time employees.

ITEM 2.  DESCRIPTION OF THE PROPERTY

     Registrant does not own any real property. Registrant maintains its
corporate headquarters at 119 West 23rd Street, New York City, New York. The
space consists of approximately 700 square feet, and is leased by Registrant on
a month-to-month basis, at the rate of $1,000 per month.

ITEM 3.  LEGAL PROCEEDINGS

     The Registrant is not a party to, or is involved in, any material
litigation, nor is it aware, to the best of its knowledge, of any pending or
contemplated proceedings against it by any third party or any governmental
authorities.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders of Enviro
Industrial Technologies, Inc. during the fiscal year ended December 31, 2000.

                                        2
<PAGE>   4

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Registrant has authorized capital stock of 50,000,000 shares of common
stock, par value $.001 per share, of which 13,750,000 are issued and outstanding
as of March 15, 2001. Registrant is also authorized to issue 10,000,000 shares
of preferred stock, par value $.001 per share, none of which is outstanding at
the date of this Annual Report on Form 10-KSB.

     Holders.  The approximate number of holders of record of the Registrant's
common stock, as of March 1, 2001, is 28.

     Dividends.  Historically, no dividends have been paid on the Registrant's
common stock, and Registrant does not foresee paying any dividends on its common
stock.

     Recent Sales of Unregistered Securities.  On March 31, 2000, the Registrant
sold an aggregate of 3,750,000 shares of its common stock to its founders
pursuant to Section 4(2) of the Securities Act of 1933, and not in connection
with any public offering. It is the view of the Office of Small Business of the
United States Securities and Exchange Commission that both before and after a
business combination or transaction with an operating entity or other person,
the promoters or affiliates of blank check companies, as well as their
transferees, are underwriters of the securities issued; therefore, resale of
such securities must be registered under the Securities Act of 1933, unless an
exemption is available. It is also the view of the Office of Small Business that
Rule 144 promulgated under the Securities Act of 1933 would not be available for
such resale transactions.

     The purchasers of such 3,750,000 shares were as follows:

<TABLE>
<S>                                                           <C>
TVP Capital Corp. ..........................................  1,165,641
Tom Franzone................................................    823,953
R. DiBattista Investments Inc. .............................    623,953
Delf Investments and Construction Ltd. .....................    623,953
Tunku Mudzaffar Bin Tunku Mustapha..........................    200,000
Bondy & Schloss LLP.........................................    112,500(1)
Vasilik Kalantzkos..........................................    100,000
Romeo DiBattista Jr. .......................................    100,000
</TABLE>

---------------
(1) Issued to Enviro's corporate counsel as compensation for legal services
    rendered.

     In September, 2000, the Registrant sold, through a Regulation D offering
under Rule 506 promulgated under the Securities Act of 1933, a combination of $1
million in cash and promissory notes to an accredited investor. Pursuant to the
offering, Registrant sold a total of 10 million shares of its common stock, at
$0.10 per share.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     The following is a discussion of certain factors affecting Registrant's
results of operations, liquidity and capital resources. A discussion of Hedman
Resources Limited's financial condition and results of operations for the year
ended December 31, 2000 is also included. You should read the following
discussion and analysis in conjunction with the Registrant's consolidated
financial statements and related notes that are included herein and in
conjunction with the consolidated financial statements and related notes of
Hedman Resources Limited under Item 7 below.

                                        3
<PAGE>   5

        CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS
            OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

     The statements contained in the section captioned Management's Discussion
and Analysis of Financial Condition and Results of Operations which are
historical are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
Registrant's present expectations or beliefs concerning future events. The
Registrant cautions that such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Registrant to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, the uncertainty as to the Registrant's future profitability; the
uncertainty as to whether the vermiculite deposits will be mined and marketed
successfully; the Registrant's ability to obtain financing on acceptable terms
to finance its growth strategy; and the Registrant's ability to develop and
implement operational and financial systems to manage its growth.

            NO OPERATIONS TO DATE OF ENVIRO INDUSTRIAL TECHNOLOGIES

     Enviro was incorporated on March 31, 2000. To date, the Company's
operations have been limited to becoming a reporting company, building an
infrastructure, acquiring three unpatented mining claims in Ontario, Canada
which are in the exploration stage and commencing definitive feasibility
studies. During the period from March 31, 2000 (date of inception) through
December 31, 2000, Enviro incurred research and development expenses and general
and administrative expenses of $150,000 and $132,000, respectively. As a result,
it has incurred a net loss for the period ending December 31, 2000 of
approximately $322,000 or ($.09 per share) based on a weighted average number of
common shares outstanding of 3,773,000. The Company has funded its operations
principally with advances from certain of its stockholders in the amount of
approximately $748,000, approximately $483,000 of which was advanced to Hedman
Resources Limited. As Enviro has not yet begun its operations, it has not yet
begun to generate any revenues and cash flows. Enviro had a working capital
deficiency of approximately $309,000 as of December 31, 2000. Enviro anticipates
that it may not have sufficient cash to meet its operating expenses during the
next 12 months which is currently anticipated to approximate $250,000 and may
have to seek funds through financing activities such as private placements or
traditional bank financing. In September 2000, Enviro received subscriptions for
a private placement of 10,000,000 shares of common stock at $.10 per share.
During the period from January 1, 2001 through March 20, 2001, Enviro received
proceeds of $209,500 attributable to sales and issuances of 209,500 shares,
which reduced the subscription receivable balance from $999,000 at December 31,
2000 to $789,500 at March 20, 2001. However, unless Enviro receives additional
proceeds from that offering or through other financing, it may not be able to
operate as a going concern and it may have to curtail or terminate its
operations and liquidate its business (See Note 1 of the notes to the Financial
Statements).

     Enviro does not plan to conduct any product research or development during
the next 12 months, but plans to further explore the vermiculite claims it
purchased in September 2000 from Krystar International ("Krystar") with Hedman
Management overseeing such exploration. The mining claims purchased from Krystar
by Enviro were transferred to Enviro upon completion of certain administrative
procedures at the Mining Recorder's office in Sudbury, Ontario. While the claims
are in good standing and are held under the Mining Act of Ontario, any
production development must be pursued under the Aggregate Resources Act of
Ontario ("ARA"). The ARA captures all surfaces industrial mineral and sand
gravel operations in Ontario except those on private land in areas undesignated
by the ARA. The ARA requires that an application for an aggregate permit or
license including a surveyed site plan, details of production and a
rehabilitation plan be submitted all of which has been developed by Enviro.
Enviro intends to submit an application to the ARA within the next 60 days. It
is anticipated that it will take approximately three months for Enviro's
application to be cleared by the ARA. What remains is for Enviro to strip the
open pit areas of the vermiculite property exfoliate it and transport it to the
end user. Enviro does not plan to add any significant equipment or to purchase
or sell any plant or other operations during the next 12 months.

     Enviro intends to maintain the current level of its employees during the
next quarter.

                                        4
<PAGE>   6

                            HEDMAN RESOURCES LIMITED

           MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATION

RESULTS OF OPERATIONS -- HEDMAN (ALL RESULTS ARE IN CANADIAN DOLLARS)

HEDMAN RECOGNIZES REVENUES FROM THE SALE OF PRODUCTS OF HEDMAN RESOURCES LIMITED

     Hedman's revenues come from the sale of products of Hedman Resources
Limited including Superfil. Over 85% of all sales are exported to various
countries including Japan, India, South America (Venezuela) and the United
States. As of December 31, 2000, no revenue has been generated from the sale of
Superfil. Hedman has provided small samples to several potential customers for
product analysis evaluations. Certain customers in Canada have expressed
interest in receiving larger quantities of Superfil for test runs in their
production process. With the opening of its new production plant in March, 2001,
Hedman expects larger orders to begin shortly.

  Year Ended December 31, 2000 Compared to Year Ended December 30, 1999

     Assets.  Hedman's total assets were $4,847,680 as at December 31, 2000 as
compared to $3,279,583 in 1999, an increase of 47.8% which was primarily the
result of Hedman's continued construction of its new milling system and its
Firefelt production plant. Deferred development costs related to prior years
were determined to have no value and was written off in 2000, reducing net
assets by $584,123.

     Revenue.  Sales revenues totaled $308,496 for the year ended December 31,
2000 as compared to $394,083 for the year ended December 31, 1999, a decrease of
21.7%. This decrease in sales is due to a lack of demand for Hedman's existing
products.

     Cost of Sales.  The cost of sales decreased commensurately for the year
ended December 31, 2000 from $508,926 to $450,114, a decrease of 11.6%.

     Expenses.  General and administrative expenses increased from $641,879 for
the year ended December 31, 1999 to $770,804 for the year ended December 31,
2000. Main reason for the increase is due to an increase in professional fees
related to the Enviro transaction. Professional fees increased from $32,755 in
1999 to $125,521 in 2000. Hedman wrote off $583,094 in deferred development
costs and $104,825 in equipment during the period which pertained to development
costs and equipment of the previous mill. With the new mill under construction,
Hedman will derive no future benefit from these development costs and equipment.
These deferred development costs of $583,094 were previously written off for US
GAAP purposes. There is no difference in the treatment of deferred development
costs between US and Canadian GAAP after this writeoff. Hedman also settled a
longstanding lawsuit filed against the Company in Florida in 1994 for $106,832.

     Interest Expense.  Interest expense decreased from $66,734 for the year
ended December 31, 1999 to $63,916 for the year ended December 31, 2000.

     Net loss.  Hedman had a loss of $(1,708,408) for the year ended December
31, 2000 as compared to a loss of $(756,722) for the year ended December 31,
1999, an increase of 125.76%. This loss was primarily attributable to the
writeoff of deferred development costs, settlement of the judgment against the
Company, a writeoff or property, plant and equipment and increases in operating
expenses. The net loss per Common Share of the Company's stock, (basic and
diluted) was ($0.06) for the year as compared to ($0.04) for the comparable
period in 1999. The negative gross margins during the last fiscal periods have
been mainly due to low prices charged for Hedmanite. The demand for Hedmanite
has been decreasing as manufacturers around the world have been using substitute
products and Hedman has reduced prices in order to generate sales. With the
production of Superfil, Hedman projects that there will be significant demand
for this product as it is completely free of asbestos. Hedman expects that a
sales level of $1.5-$1.8 million will be required to break even which is
expected to be attained by late 2001.

                                        5
<PAGE>   7

     Cash flows.  The large increase in accounts payable and accrued liabilities
is a result of including the total amount incurred for the new milling system in
accounts payable at December 31, 2000. The amount due the equipment supplier was
approximately $496,054. The increase in accrued liabilities and accounts payable
was also due to amounts advanced to Hedman by Enviro in the amount of $819,812.
The Premix-Marbletite Manufacturing lawsuit was settled in the amount of
$106,832 during the period.

     The results of operations under US GAAP have been adjusted by $1,029 for
the year ended December 31, 2000.

  Year Ended December 31, 1999 as Compared with Year Ended December 31, 1998

     During the year ended December 31, 1999, Hedman's total assets increased
$904,050 or 38% to $3,279,583 as compared to $2,375,533 for the year ended
December 31, 1998. This increase is attributable primarily to an increase in the
net book value of Hedman's property, plant and equipment especially in the
buildings category which increased from $645,519 at year end 1998 to $1,187,719
at year end 1999 due to work beginning on the Firefelt plant.

     Revenue Total.  revenue for Hedman for the year ended December 31, 1999
declined 9.4% to $394,083 as compared to $434,858 for the year ended December
31, 1999. Revenues declined primarily because demand for Hedman's products
decreased during the period as Hedman changed its strategy so that it could
begin to focus on the production and marketing of its new Superfil product.
Hedman's cost of sales declined by 1.2% to $508,926 from $515,298 for the year
ended December 31, 1998. Hedman realized revenues of $354,675 from the sale of
Hedmanite as compared to $369,629 in Hedmanite sales the prior year or a
decrease of .4%. Revenues from the sale of Envirofil declined 39.6% from $65,229
for the year ended December 31, 1998 as compared to $39,408 for the year ended
December 31, 1998.

     Operating Expense.  During the year ended December 31, 1999 Hedman
experienced an increase of approximately 27.3% in operating costs and expenses.
Operating costs increased to $641,879 from $504,287 from the year ended December
31, 1998. The primary reason for the increase was that for the year ended
December 31, 1998, Hedman had a recovery of prior period expenses which was a
credit to operating expenses. Without that credit, Hedman's operating expenses
would have been virtually identical in each of the two years.

     Net Loss.  Hedman had a loss of $(756,722) for the year ended December 31,
1999 as compared to a loss of $(584,727) for the year ended December 31, 1998,
an increase of 29.4%. This loss was primarily attributable to a decrease in
revenue and a simultaneous increase in operating expenses. The net (loss) per
Common Share of the Company's stock,(basic and diluted) was ($0.04) in 1999,
compared to ($0.04) in 1998. Hedman's strategy is to achieve a level of sales
adequate to support its costs structure.

     The results of operations are adjusted by $1,633, for US GAAP reconciling
items for the year ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 2000 Hedman had a deficit of $9,235,940 as compared to
$7,527,532 for the comparable period of 1999, an increase of 22.7% mainly
attributable to unprofitable operations for the period. Hedman has experienced
net losses of $1,045,364 from October 1, 1999 through December 31, 2000 and has
also experienced non-operating losses totaling $782,091 for the nine months
ended December 31, 2000 pertaining to writedowns and the settlement of a
lawsuit.

     The Company's ability to continue as a going concern is dependant upon its
ability to obtain additional debt and/or equity financing and to increase the
size of its revenues through products sold domestically and abroad.

                                        6
<PAGE>   8

CAPITALIZATION

     As of the year ended December 31, 2000, Hedman had 28,631,368 issued and
outstanding shares of its Common Shares as compared to 22,667,716 issued and
outstanding shares as of December 31, 1999 having issued 5,963,652 shares
including 210,000 issued in connection with the exercise of options and warrants
during the period. As of the year ended December 31, 2000, Hedman had 10,000
remaining options which had been granted to employees and directors at the fair
market value or greater than fair market value as 185,000 options expired during
the period and 100,000 were exercised.

  Year Ended December 31, 1999 as Compared with Year Ended December 31, 1998

     During the year ended December 31, 1999, Hedman's total assets increased
$904,050 or 38% to $3,279,583 as compared to $2,375,533 for the year ended
December 31, 1998. This increase is attributable primarily to an increase in the
net book value of Hedman's property, plant and equipment especially in the
buildings category which increased from $645,519 at year end 1998 to $1,187,719
at year end 1999 due to work beginning on the Firefelt plant.

     Revenue.  Total revenue for Hedman for the year ended December 31, 1999
declined 9.4% to $394,083 as compared to $434,858 for the year ended December
31, 1999. Revenues declined primarily because demand for Hedman's products
decreased during the period as Hedman changed its strategy so that it could
begin to focus on the production and marketing of its new Superfil product.
Hedman's cost of sales declined by 1.2% to $508,926 from $515,298 for the year
ended December 31, 1998. Hedman realized revenues of $354,675 from the sale of
Hedmanite as compared to $369,629 in Hedmanite sales the prior year or a
decrease of .4%. Revenues from the sale of Envirofil declined 39.6% from $65,229
for the year ended December 31, 1998 as compared to $39,408 for the year ended
December 31, 1998.

     Operating Expense.  During the year ended December 31, 1999 Hedman
experienced an increase of approximately 27.3% in operating costs and expenses.
Operating costs increased to $641,879 from $504,287 from the year ended December
31, 1998. The primary reason for the increase was that for the year ended
December 31, 1998, Hedman had a recovery of prior period expenses which was a
credit to operating expenses. Without that credit, Hedman's operating expenses
would have been virtually identical in each of the two years.

     Net Loss.  Hedman had a loss of $(756,722) for the year ended December 31,
1999 as compared to a loss of $(584,727) for the year ended December 31, 1998,
an increase of 29.4%. This loss was primarily attributable to a decrease in
revenue and a simultaneous increase in operating expenses. The net (loss) per
Common Share of the Company's stock,(basic and diluted) was ($0.04) in 1999,
compared to ($0.04) in 1998. Hedman's strategy is to achieve a level of sales
adequate to support its costs structure.

     The results of operations are adjusted by $1,633, for US GAAP reconciling
items for the year ended December 31, 1999.

ITEM 7.  FINANCIAL STATEMENTS

     Enviro's Balance Sheet as of December 31, 2000 and Statements of
Operations, Stockholders' Equity and Cash Flows for the year ended December 31,
2000, together with the reports of J.H. COHN LLP, Independent Public
Accountants, begin on page F-1 of this Annual Report on Form 10-KSB 1A. The
Financial Statements of Hedman Resources Limited follow immediately thereafter.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     There have been no changes in, or disagreements with, the accountants of
Registrant since its inception.

                                        7
<PAGE>   9

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

     The following Table sets forth certain information regarding the executive
officers and directors of Enviro Industrial Technologies, Inc. as of December
31, 2000.

<TABLE>
<CAPTION>
NAME                                 TITLE       AGE          FIVE YEAR BUSINESS EXPERIENCE
----                             -------------   ---   -------------------------------------------
<S>                              <C>             <C>   <C>
Teodosio V. Pangia.............  Chairman, CEO   42    Teodosio V. Pangia has been a Director of
                                 and Director*         Enviro Industrial Technologies, Inc. since
                                                       July 2000. Mr. Pangia is also the Chairman
                                                       of TVP Capital Corp., a U.S.-based,
                                                       recently formed, venture capital company
                                                       which has provided consulting services to
                                                       the Company since its inception. Since June
                                                       1997, Mr. Pangia has been President of
                                                       Tyler Dylan, an Ontario based investment
                                                       company. In June 1997, Mr. Pangia
                                                       co-founded Environmental Solutions
                                                       Worldwide, a company that has developed and
                                                       patented a catalytic converter that does
                                                       not require precious metals. Mr. Pangia
                                                       remained at Environmental Solutions
                                                       Worldwide until July 1999. From July 1995
                                                       through July 1997, Mr. Pangia was Director
                                                       and Chief Executive Officer of Ecology Pure
                                                       Air International, a Canadian company
                                                       engaged in developing an automobile fuel
                                                       catalyst. A recent venture of Mr. Pangia is
                                                       Diamond Discoveries International
                                                       Corp.("DDII") of which he is Chairman and
                                                       Chief Executive Officer. DDII is a junior
                                                       exploration company whose primary focus is
                                                       developing the company's mining claims for
                                                       the potential of diamonds in Northern
                                                       Quebec Canada.
                                                       From 1992 to 1995, Mr. Pangia was a
                                                       Director and Chief Executive officer of EPA
                                                       Enterprises, a Canadian company engaged in
                                                       developing pre-combustion fuel technology.
                                                       In 1997, a petition in bankruptcy was
                                                       brought against Mr. Pangia in the Ontario
                                                       Court of Justice. That petition, and a
                                                       related order, were dismissed.

Thomas Franzone................  President,      44    Thomas Franzone has been the President and
                                 CFO and               Director of Enviro Industrial Technologies,
                                 Director              Inc. since its formation in March 2000.
                                                       From 1998 until he joined Enviro, he was
                                                       the President of Franzone Consulting Corp.,
                                                       a sole proprietorship located in Long
                                                       Island, New York. From 1996 to 1999 Mr.
                                                       Franzone held the position of Controller at
                                                       Direct Approach Marketing. He had joined
                                                       Direct Approach Marketing after being
                                                       employed at Patient Education Media/Time
                                                       Life Medical from March 1995 until March
                                                       1996 in the position of Accounting Manager.
                                                       From November 1989 to February 1995, Mr.
                                                       Franzone was the Controller of Empire
                                                       Diamond Corp.
</TABLE>

                                        8
<PAGE>   10

<TABLE>
<CAPTION>
NAME                                 TITLE       AGE          FIVE YEAR BUSINESS EXPERIENCE
----                             -------------   ---   -------------------------------------------
<S>                              <C>             <C>   <C>
                                                       Currently Mr. Franzone is also secretary
                                                       and treasurer of Diamond Discoveries
                                                       International Corp.
</TABLE>

---------------
* Each Director shall hold office until the next annual meeting of stockholders
  and until his successor shall have been elected and qualified.

     Both Teodosio V. Pangia and Thomas Franzone, the Directors of Enviro, hold
directorships in Diamond Discoveries International Inc. a reporting company.
There are no family relationships among the directors or persons nominated or
chosen by the Company to become a director.

     Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Exchange Act requires the Company's director's and executive officers, and
persons who own more than 10% of the Company's outstanding common stock, to file
with the SEC, initial reports of beneficial ownership and reports of changes in
beneficial ownership of the Company's common stock and other equity securities
of the Company. To the Company's knowledge, for the fiscal year ended December
31, 2000, the Company's officers, directors and holders of more than 10% of the
Company's outstanding common stock each reported one transaction on a Form 3
after the reporting deadline.

ITEM 10.  EXECUTIVE COMPENSATION

     No compensation is paid to any officers, directors or employees of Enviro.

                                        9
<PAGE>   11

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of March 1, 2001, the number of shares of the Registrant's common stock
beneficially owned by all persons known to be holders of more than fiver per
cent. (5%) of the common stock, and by all executive officers of the Registrant
individually and as a group, was as follows:

<TABLE>
<S>                                                        <C>          <C>
TVP Capital Corp.........................................  1,165,641     8.5% of common stock
  119 W. 23rd Street
  New York, NY 10011
Thomas Franzone..........................................    823,953     6.0% of common stock
  63 Probst Drive
  Shirley, NY 11967
All directors and officers as a group....................  1,989,594    14.5% of common stock
</TABLE>

     TVP Capital Corp.'s stock is wholly owned by Mr. Teodosio V. Pangia; see
the discussion below under Item 12.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As noted above, in Item 11, Teodosio Pangia, the Chairman of registrant, is
also the sole shareholder of TVP Capital Corp., which is the owner of 8.4% of
the Registrant's total issued and outstanding shares. Mr. Pangia is also the
Chairman of TVP Capital Corp.

ITEM 13.  EXHIBITS, LIST AND REPORTS ON FORM 8-K

     Registrant filed no Current Reports on Form 8-K for the quarter ended
December 31, 2000.

     The following is a list of the Exhibits required by Item 601 of Regulation
S-B, and an indication of where such exhibits may be found.

<TABLE>
<C>         <S>
 (2)(i)(1)  Articles of Incorporation of Registrant(1)
(2)(ii)(1)  Bylaws of Registrant(1)
 (4)(i)(1)  Form of Subscription Agreement(1)
 (4)(i)(2)  Demand Promissory Note, dated September 1, 2000 between
            Louis Lilling (as maker) and Registrant as Holder(1)
 (6)(i)(1)  Option Agreement by and between Registrant and Krystar
            International Ltd.(1)
 (6)(i)(2)  Lease by and between Brovi Investments Limited and Hedman
            Resources Limited(2)
 (8)(i)(1)  Letter of Intent for Acquisition of Hedman Resources
            Limited(1)
 (8)(i)(2)  Amalgamation Agreement by and among Registrant, Hedman
            Resources Limited, and Enviro Industrial Technologies
            (Canada), Inc.(2)
(10)(i)(1)  Form of Subscription Agreement(2)
(10)(i)(2)  Demand Promissory Note(2)
(10)(i)(3)  Letter of Intent for Acquisition of Hedman Resources
            Limited(2)
(10)(i)(4)  Option Agreement(2)
(99)(i)(1)  Map of the location of vermiculite mining claims(2)
</TABLE>

---------------
(1) Filed with Registration Statement on Form 10-SB, filed September 15, 2000.

(2) Filed with Amendment No. 1 to Registration Statement on Form 10-SB, filed
    December 13, 2000.

(3) Filed with Amendment No. 2 to Registration Statement on Form 10-SB, filed
    January 31, 2001.

                                        10
<PAGE>   12

                                   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.

                                          ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                                          (Registrant)

                                          By: /s/  TEODOSIO V. PANGIA
                                            ------------------------------------
                                                     Teodosio V. Pangia
                                                 Chairman, CEO and Director

Date: May 1, 2001

     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 and on the second day of May, 2001.

<TABLE>
<CAPTION>
                     SIGNATURE                                              TITLE
                     ---------                                              -----
<C>                                                    <S>

              /s/ TEODOSIO V. PANGIA                   Chairman, CEO and Director
---------------------------------------------------
                Teodosio V. Pangia

                /s/ THOMAS FRANZONE                    President, CFO and Director
---------------------------------------------------
                  Thomas Franzone
</TABLE>

                                        11
<PAGE>   13

                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                               PAGE
                                                              ------
<S>                                                           <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS....................     F-2
BALANCE SHEET
  DECEMBER 31, 2000.........................................     F-3
STATEMENT OF OPERATIONS
  PERIOD FROM MARCH 31, 2000 (DATE OF INCEPTION)
  TO DECEMBER 31, 2000......................................     F-4
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
  PERIOD FROM MARCH 31, 2000 (DATE OF INCEPTION)
  TO DECEMBER 31, 2000......................................     F-5
STATEMENT OF CASH FLOWS
  PERIOD FROM MARCH 31, 2000 (DATE OF INCEPTION)
  TO DECEMBER 31, 2000......................................     F-6
NOTES TO FINANCIAL STATEMENTS...............................  F-7/10
</TABLE>

                                     * * *

                                       F-1
<PAGE>   14

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
  Enviro Industrial Technologies, Inc.

     We have audited the accompanying balance sheet of ENVIRO INDUSTRIAL
TECHNOLOGIES, INC. (An Exploration Stage Company) as of December 31, 2000, and
the related statements of operations, changes in stockholders' deficiency and
cash flows for the period from March 31, 2000 (date of inception) to December
31, 2000. 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 Enviro Industrial
Technologies, Inc. as of December 31, 2000, and its results of operations and
cash flows for the period from March 31, 2000 (date of inception) to December
31, 2000, in conformity with accounting principles generally accepted in the
United States of America.

     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As further discussed in Note 1 to the
financial statements, the Company had not generated any revenues from its
operations, and it had working capital and stockholders' deficiencies as of
December 31, 2000. Such matters raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 1. The accompanying financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.

                                          J.H. COHN LLP

Roseland, New Jersey
March 20, 2001

                                       F-2
<PAGE>   15

                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                                 BALANCE SHEET
                               DECEMBER 31, 2000

<TABLE>
<S>                                                           <C>
ASSETS
Current assets:
  Cash......................................................  $   6,354
  Advances to Hedman Resources Limited......................    483,080
                                                              ---------
          Total.............................................  $ 489,434
                                                              =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
  Accounts payable..........................................  $  49,994
  Advances from stockholders................................    748,311
                                                              ---------
          Total liabilities.................................    798,305
                                                              ---------
Stockholders' deficiency:
  Preferred stock, par value $.001 per share; 10,000,000
     shares authorized; none issued.........................         --
  Common stock, par value $.001 per share; 50,000,000 shares
     authorized; 13,750,000 shares issued and outstanding...     13,750
  Additional paid-in capital................................    998,750
  Deficit accumulated during the exploration stage..........   (322,371)
  Subscriptions receivable for 9,990,000 shares of common
     stock..................................................   (999,000)
                                                              ---------
          Total stockholders' deficiency....................   (308,871)
                                                              ---------
          Total.............................................  $ 489,434
                                                              =========
</TABLE>

                       See Notes to Financial Statements.

                                       F-3
<PAGE>   16

                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                            STATEMENT OF OPERATIONS
                 PERIOD FROM MARCH 31, 2000 (DATE OF INCEPTION)
                              TO DECEMBER 31, 2000

<TABLE>
<S>                                                             <C>
Revenues....................................................    $      --
                                                                ---------
Operating expenses:
  Exploration costs.........................................      190,228
  General and administrative expenses.......................      132,143
                                                                ---------
          Total.............................................      322,371
                                                                ---------
Net loss....................................................    $(322,371)
                                                                =========
Basic net loss per share....................................    $    (.09)
                                                                =========
Basic weighted average common shares outstanding............    3,773,000
                                                                =========
</TABLE>

                       See Notes to Financial Statements.

                                       F-4
<PAGE>   17

                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                 PERIOD FROM MARCH 31, 2000 (DATE OF INCEPTION)
                              TO DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                                       DEFICIT
                                                                                     ACCUMULATED
                            PREFERRED STOCK          COMMON STOCK       ADDITIONAL   DURING THE
                          --------------------   --------------------    PAID-IN     EXPLORATION   SUBSCRIPTIONS
                            SHARES     AMOUNT      SHARES     AMOUNT     CAPITAL        STAGE       RECEIVABLE       TOTAL
                          ----------   -------   ----------   -------   ----------   -----------   -------------   ---------
<S>                       <C>          <C>       <C>          <C>       <C>          <C>           <C>             <C>
Issuance of shares to
  founders effective as
  of March 31, 2000.....          --   $    --    3,637,500   $ 3,638    $ (3,638)
Issuance of shares as
  payment for legal
  services..............                            112,500       112      12,388                                  $  12,500
Subscription for
  purchase of common
  stock.................                          9,990,000     9,990     989,010                    $(999,000)
Proceeds from issuance
  of common stock.......                             10,000        10         990                                      1,000
Net loss................                                                              $(322,371)                    (322,371)
                          ----------   -------   ----------   -------    --------     ---------      ---------     ---------
Balance, December 31,
  2000..................          --   $    --   13,750,000   $13,750    $998,750     $(322,371)     $(999,000)    $(308,871)
                          ==========   =======   ==========   =======    ========     =========      =========     =========
</TABLE>

                       See Notes to Financial Statements.

                                       F-5
<PAGE>   18

                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                            STATEMENT OF CASH FLOWS
                 PERIOD FROM MARCH 31, 2000 (DATE OF INCEPTION)
                              TO DECEMBER 31, 2000

<TABLE>
<S>                                                           <C>
Operating activities
  Net loss..................................................  $(322,371)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Common stock issued for services.......................     12,500
     Changes in operating assets and liabilities -- accounts
      payable...............................................     49,994
                                                              ---------
       Net cash used in operating activities................   (259,877)
                                                              ---------
Investing activities -- advances to Hedman Resources
  Limited...................................................   (483,080)
                                                              ---------
Financing activities:
  Proceeds from issuance of common stock....................      1,000
  Advances from stockholders................................    748,311
                                                              ---------
       Net cash provided by financing activities............    749,311
                                                              ---------
Net increase in cash........................................      6,354
Cash, beginning of period...................................         --
                                                              ---------
Cash, end of period.........................................  $   6,354
                                                              =========
</TABLE>

                       See Notes to Financial Statements.

                                       F-6
<PAGE>   19

                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- BUSINESS:

     Enviro Industrial Technologies, Inc. (the "Company") was incorporated in
the State of Delaware on March 31, 2000. The Company is in the process of
developing a mineral exploration and industrial mining business. The core of the
Company's business will be comprised of the mining of vermiculite from a block
of three unpatented mining claims in Canada, covering a total of 25 vermiculite
claim units. Vermiculite is the geological name given to a group of minerals
which are aluminum iron ore magnesium silicates resembling mica in appearance.
Vermiculite is used as a filler in lightweight concrete, agricultural products,
insulation, construction, metallurgy, chemistry and ceramics.

     The Company plans to become the legal acquirer of 100% but not less than
80% of the issued and outstanding shares of common stock of Hedman Resources
Limited ("Hedman"), a Canadian publicly-traded company listed on the Canadian
Venture Exchange ("CDNX"). This business combination is expected to be accounted
for as a "reverse acquisition" in which Hedman will be the accounting acquirer
(see Note 8).

     As of December 31, 2000, the Company's operations had been limited to
organizational activities, the acquisition of mining claims and the negotiation
of agreements related to the business combination with Hedman. It had not
generated any revenues from operations as of that date. Accordingly, it is
considered a "development stage company" for accounting purposes. The Company's
year-end will be December 31st.

     Hedman is a mineral processing company whose principal product had been
"Hedmanite," which is a high heat industrial filler similar to asbestos.
However, Hedman has been focusing its activities on the development and
production of "Superfil," an asbestos-free, high heat industrial mineral filler
that blends well with most industrial fillers and is used in manufactured
products such as brake linings and construction materials. Superfil is derived
from a mineral known as "lizardite." Hedman is believed to be the only producer
of lizardite in North America. Hedman intends to enhance the performance of
Superfil by creating a formula that combines it with vermiculite.

     The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. However, as of December 31, 2000, the
Company had not generated any revenues from its operations and, as a result, it
had a working capital and a stockholders' deficiency of $308,871. Management
believes that the Company will not generate any revenues until the reverse
acquisition with Hedman is consummated. However, Hedman has also been sustaining
operating losses and, as a result, it had a working capital deficiency as of
December 31, 2000 and needed additional debt or equity financing to be able to
continue its operations. Management believes that the Company will need total
additional financing of approximately $250,000 to continue to operate as planned
during the twelve-month period subsequent to December 31, 2000. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.

     Management plans to obtain such financing through private offerings of debt
and equity securities. As of December 31, 2000, the Company had subscriptions
receivable of $999,000 for the purchase of shares of its stock (see Note 7).
However, management cannot assure that the Company will be able to obtain any or
all of the additional financing it will need if the reverse acquisition is not
consummated, or any or all of the additional financing Hedman and the Company
will need if the reverse acquisition is consummated, in order to continue to
operate through at least December 31, 2001 or that, ultimately, it will be able
to generate any profitable mining operations. If the Company is unable to obtain
the required financing, it may have to curtail its operations or terminate its
operations and liquidate its remaining assets and liabilities.

     The accompanying financial statements do not include any adjustments
related to the recoverability and classifications of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue its operations as a going concern.

                                       F-7
<PAGE>   20
                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

  Use of estimates:

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates.

  Concentrations of credit risk:

     The Company maintains its cash in bank deposit accounts, the balances of
which, at times, may exceed Federal insurance limits. Exposure to credit risk is
reduced by placing such deposits with major financial institutions and
monitoring their credit ratings.

  Exploration costs:

     Exploration and evaluation costs are expensed as incurred. Management's
decision to develop or mine a property will be based on an assessment of the
viability of the property and the availability of financing. The Company will
capitalize mining and other related costs attributable to reserves in the event
that a definitive feasibility study establishes proven and probable reserves.
Capitalized mining costs will be expensed using the units of production method.

  Impairment of long-lived assets:

     The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). Under SFAS 121, impairment
losses on long-lived assets, such as mining claims, are recognized when events
or changes in circumstances indicate that the undiscounted cash flows estimated
to be generated by such assets are less than their carrying value and,
accordingly, all or a portion of such carrying value may not be recoverable.
Impairment losses are then measured by comparing the fair value of assets to
their carrying amounts.

     On September 27, 2000, the Company acquired certain mining claims at a cost
of $135,135 ($200,000 Canadian) which are in the exploration stage. As of
December 31, 2000, the Company had not completed its definitive feasibility
study and had not established any proven and probable reserves. Based on the
uncertainties related to the start-up nature of the Company's business, its
inability to established any proven and probable reserves and its financial
condition, the Company wrote off the cost of the these mining claims as of
December 31, 2000 in accordance with SFAS 121.

  Income taxes:

     The Company accounts for income taxes pursuant to the asset and liability
method which requires deferred income tax assets and liabilities to be computed
annually for temporary differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. The income tax provision or credit is the tax
payable or refundable for the period plus or minus the change during the period
in deferred tax assets and liabilities.

                                       F-8
<PAGE>   21
                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  Net earnings (loss) per share:

     The Company presents "basic" earnings (loss) per share and, if applicable,
"diluted" earnings per share pursuant to the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). Basic
earnings (loss) per share is calculated by dividing net income or loss by the
weighted average number of common shares outstanding during each period. The
calculation of diluted earnings per share is similar to that of basic earnings
per share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if all potentially
dilutive common shares, such as those issuable upon the exercise of stock
options, were issued during the period. The Company did not have any potentially
dilutive common shares outstanding during the period from March 31, 2000 (date
of inception) to December 31, 2000.

  Recent accounting pronouncements:

     The Financial Accounting Standards Board and the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
had issued certain accounting pronouncements as of December 31, 2000 that will
become effective in subsequent periods; however, management of the Company does
not believe that any of those pronouncements would have significantly affected
the Company's financial accounting measurements or disclosures had they been in
effect during the period from March 31, 2000 to December 31, 2000, and it does
not believe that any of those pronouncements will have any significant impact on
the Company's financial statements at the time they become effective.

NOTE 3 -- ADVANCES TO AND FROM RELATED PARTIES:

     As of December 31, 2000, the Company had a receivable of $483,080 as a
result of advances made to Hedman and a payable of $748,311 as a result of
advances from stockholders. Advances of $189,000 made to Hedman were subject to
a note receivable that is due on demand and bears interest at the prime rate.
The balance of the advances receivable from Hedman of $294,080 and all of the
advances payable to stockholders were noninterest bearing and due on demand.

     Although management does not believe that there is a practical method that
can be used to specifically determine the fair value of the advances to Hedman
and the advances from stockholders because of the relationship of the Company
and those related parties, it believes that the advances will be repaid on a
short-term basis and, accordingly, the carrying values of the advances
approximated their respective fair values as of December 31, 2000.

NOTE 4 -- PREFERRED STOCK:

     As of December 31, 2000, the Company was authorized to issue up to
10,000,000 shares of preferred stock with a par value of $.001 per share. The
preferred stock may be issued in one or more series with dividend rates,
conversion rights, voting rights and other terms and preferences to be
determined by the Company's Board of Directors, subject to certain limitations
set forth in the Company's Articles of Incorporation. No shares of preferred
stock had been issued by the Company as of December 31, 2000.

NOTE 5 -- COMMON STOCK ISSUED FOR SERVICES:

     During the period from March 31, 2000 to December 31, 2000, the Company
issued 112,500 shares of common stock as payment for legal services.
Accordingly, the Company recorded a charge to professional fees and an increase
in stockholders' equity of $12,500, which was equal to the estimated fair value
of the shares at the date of issuance.

                                       F-9
<PAGE>   22
                      ENVIRO INDUSTRIAL TECHNOLOGIES, INC.
                         (AN EXPLORATION STAGE COMPANY)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- INCOME TAXES:

     As of December 31, 2000, the Company had net operating loss carryforwards
of approximately $322,000 available to reduce future Federal taxable income
which will expire in 2020. The Company had no other material temporary
differences as of that date. Due to the uncertainties related to, among other
things, the changes in the ownership of the Company, which could subject those
loss carryforwards to substantial annual limitations, and the extent and timing
of its future taxable income, the Company offset the deferred tax assets of
approximately $129,000 attributable to the potential benefits from the
utilization of those net operating loss carryforwards by an equivalent valuation
allowance as of December 31, 2000 and did not recognize a credit for Federal
income taxes for the period from March 31, 2000 (date of inception) to December
31, 2000.

NOTE 7 -- PRIVATE PLACEMENT:

     On September 2, 2000, the Company entered into agreements to sell a total
of 10,000,000 shares of common stock for total consideration of $1,000,000 or
$.10 per share through private placements intended to be exempt from
registration under the Securities Act of 1933. As of December 31, 2000, it had
received aggregate gross proceeds of $1,000 and had issued 10,000 shares. It
also had a balance receivable of $999,000 attributable to the sales of the
remaining 9,990,000 shares which must be paid no later than September 1, 2001.
The balance receivable has been included in common stock and offset by a
subscription receivable in the same amount in the accompanying balance sheet as
of December 31, 2000.

     During the period from January 1, 2001 through March 20, 2001, the Company
received proceeds of $209,500 attributable to sales and issuances of 209,500
shares, which reduced the subscription receivable to $789,500 as of March 20,
2001.

NOTE 8 -- PLAN OF REORGANIZATION AND MERGER:

     Pursuant to the terms of a letter of intent dated May 19, 2000 and a
proposed plan of reorganization and merger (the "Plan"), the Company will become
the legal acquirer of up to 100% but not less than 80% of the issued and
outstanding shares of Hedman's common stock by issuing one share of its common
stock for every two shares of Hedman's common stock outstanding on the date of
consummation. As explained in Note 1, Hedman is a mineral processing company.
Its shares are publicly traded in Canada. The consummation of the Plan is
subject to, among other things, stockholder, regulatory and exchange approvals.
Management expects that after the consummation of the Plan, Hedman will not be
listed on the CDNX and its shares will not be publicly traded. However, it also
expects that the Company's shares will be publicly traded in the over-the-
counter market.

     If the Plan is consummated based on the proposed terms, management expects
that the present stockholders of Hedman will own in excess of 50% of the
outstanding shares of the combined companies. Since Hedman is an operating
company and its stockholders will control the combined companies, the merger
will be accounted for as a purchase business combination and a "reverse
acquisition" in which the Company will be the legal acquirer and Hedman will be
the accounting acquirer. Accordingly, the financial statements of the combined
companies will reflect the operations of Hedman before and after the
consummation of the Plan and the accompanying financial statements will not be
comparable to the financial statements of the combined companies after the
merger.

                                       F-10
<PAGE>   23

                            FINANCIAL STATEMENTS OF

                            HEDMAN RESOURCES LIMITED

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999

                                       F-11
<PAGE>   24

                       AUDITORS' REPORT TO THE DIRECTORS

     We have audited the balance sheets of HEDMAN RESOURCES LIMITED as at
December 31, 2000 and December 31, 1999 and the statements of operations and
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

     We conducted our audit in accordance with Canadian generally accepted
auditing standards and United States generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.

     In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2000 and
December 31, 1999 and the results of its operations and cash flows for each of
the years in the three year period ended December 31, 2000 in accordance with
Canadian generally accepted accounting principles.

     Canadian generally accepted accounting principles vary in certain
significant respects from accounting principles generally accepted in the United
States. Application of accounting principles generally accepted in the United
States would have affected results of operations for the years December 31, 2000
and 1999 and shareholders' equity as at December 31, 2000 and 1999 to the extent
summarized in note 21 to the financial statements.

[KPMG SIG]
Chartered Accountants

Sudbury, Canada
February 14, 2001

    COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCE

     In the United States, reporting standards for auditors require the addition
of an explanatory paragraph when the financial statements are affected by
conditions and events that cast substantial doubt on the company's ability to
continue as a going concern, such as those described in note 1 to the financial
statements. Our report to the directors dated March 31, 2001 is expressed in
accordance with Canadian reporting standards which do not permit a reference to
such events and conditions in the auditor's report when they are adequately
disclosed in the financial statements.

[KPMG SIG]
Chartered Accountants

Sudbury, Canada
March 31, 2001

                                       F-12
<PAGE>   25

                            HEDMAN RESOURCES LIMITED

                                 BALANCE SHEET
                    DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

<TABLE>
<CAPTION>
                                                                 2000           1999
                                                              -----------    -----------
<S>                                                           <C>            <C>
ASSETS
Current assets:
  Cash......................................................  $    44,644    $   450,086
  Accounts receivable.......................................       37,515         62,218
  Inventory (notes 2 and 3).................................      144,952         91,769
  Supplies and prepaid expenses.............................       87,871         79,280
                                                              -----------    -----------
                                                                  314,982        683,353
Property, plant and equipment (net of depreciation)(note
  4)........................................................    4,345,483      1,877,825
Mining properties (note 5)..................................      187,215        134,282
Deferred development costs (note 6).........................           --        584,123
                                                              -----------    -----------
                                                              $ 4,847,680    $ 3,279,583
                                                              ===========    ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities (note 7).........  $ 2,160,462    $   248,625
  Advances from shareholders (note 8).......................      390,000             --
  Current portion of long-term debt (note 9)................      492,800        572,000
                                                              -----------    -----------
                                                                3,043,262        820,625
Long-term debt (note 9).....................................           --             --
Advances from related parties...............................           --         13,083
Shareholders' equity:
  Share capital (note 10)...................................    9,255,269      7,305,946
  Subscriptions.............................................           --        882,372
  Contributed surplus.......................................    1,785,089      1,785,089
  Deficit...................................................   (9,235,940)    (7,527,532)
                                                              -----------    -----------
                                                                1,804,418      2,445,875
Going concern (note 1)......................................
Contingent liabilities (note 2).............................
Subsequent events (note 6)..................................
Commitments (note 19).......................................
                                                              -----------    -----------
                                                              $ 4,847,680    $ 3,279,583
                                                              ===========    ===========
</TABLE>

On behalf of the Board:

------------------------------ Director

------------------------------ Director

                See accompanying notes to financial statements.

                                       F-13
<PAGE>   26

                            HEDMAN RESOURCES LIMITED

                      STATEMENT OF OPERATIONS AND DEFICIT
     YEARS ENDED DECEMBER 31, 2000, DECEMBER 31, 1999 AND DECEMBER 31, 1998
                               (IN CANADIAN $'S)

<TABLE>
<CAPTION>
                                                           2000           1999          1998
                                                        -----------    ----------    ----------
<S>                                                     <C>            <C>           <C>
Sales (note 14).......................................  $   308,496       394,083       434,858
Cost of sales.........................................      450,114       508,926       515,298
                                                        -----------    ----------    ----------
                                                           (141,618)     (114,843)      (80,440)
Expenses:
  Depreciation and amortization.......................      111,885       175,452       158,408
  Administration wages and benefits...................      174,535       133,837       156,763
  Administration (note 18)............................      159,221       126,206       104,832
  Interest on long-term debt..........................       63,916        66,734        68,284
  Municipal taxes.....................................       50,311        61,625        59,820
  Professional fees...................................      125,521        32,755        23,602
  Travel..............................................       33,481        24,716         5,599
  Sales, marketing and research.......................       31,934        20,554        68,441
  Mine reclamation....................................       20,000            --            --
  Recovery of prior period expenses...................           --            --      (141,462)
                                                        -----------    ----------    ----------
                                                            770,804       641,879       504,287
                                                        -----------    ----------    ----------
Loss before undernoted items..........................     (912,422)     (756,722)     (584,727)
Other expenses:
  Write-off of deferred development costs (note 6)....      583,094            --            --
  Loss on disposal of equipment.......................        1,235            --            --
  Judgement (note 22).................................      106,832            --            --
  Write-down of equipment.............................      104,825            --            --
                                                        -----------    ----------    ----------
                                                            795,986            --            --
                                                        -----------    ----------    ----------
LOSS FOR THE YEAR.....................................   (1,708,408)     (756,722)     (584,727)
Deficit, beginning of year............................   (7,527,532)   (6,770,810)   (6,186,083)
                                                        -----------    ----------    ----------
DEFICIT, END OF YEAR..................................  $(9,235,940)   (7,527,532)   (6,770,810)
                                                        ===========    ==========    ==========
LOSS PER SHARE (note 15)..............................  $     (0.06)        (0.04)        (0.04)
                                                        ===========    ==========    ==========
</TABLE>

                See accompanying notes to financial statements.

                                       F-14
<PAGE>   27

                            HEDMAN RESOURCES LIMITED
                            STATEMENT OF CASH FLOWS

     YEARS ENDED DECEMBER 31, 2000, DECEMBER 31, 1999 AND DECEMBER 31, 1998
                               (IN CANADIAN $'S)

<TABLE>
<CAPTION>
                                                             2000          1999         1998
                                                          -----------    ---------    --------
<S>                                                       <C>            <C>          <C>
Cash flows from operating activities:
  Loss for the year.....................................  $(1,708,408)    (756,722)   (584,727)
  Adjustments for:
     Depreciation and amortization......................      111,885      175,452     158,408
     Loss on disposal of equipment......................        1,235           --          --
     Write-off of deferred development costs (note 6)...      583,094           --          --
     Write-down of equipment............................      104,825           --          --
                                                          -----------    ---------    --------
                                                             (907,369)    (581,270)   (426,319)
  Change in non-cash working capital:
     Accounts receivable................................       24,703      (26,600)     70,815
     Inventory..........................................      (53,183)      14,779      57,829
     Supplies and prepaid expenses......................       (8,591)      19,508      13,348
     Accounts payable and accrued liabilities...........      923,480     (422,062)     49,696
                                                          -----------    ---------    --------
                                                              (20,960)    (995,645)   (234,631)
Cash flows from financing activities:
  Issue of share capital................................    1,949,323    1,302,934     164,316
  Subscriptions.........................................     (882,372)     882,372          --
  Advances from related parties.........................      (13,083)    (102,472)     87,283
  Payments on long-term debt............................      (79,200)          --     (28,000)
  Advances from shareholders............................      390,000           --          --
                                                          -----------    ---------    --------
                                                            1,364,668    2,082,834     223,599
Cash flows from investing activities:
  Change on working capital related to investing
     activities.........................................      988,357           --          --
  Purchase of property, plant and equipment.............   (2,686,574)    (638,481)    (21,060)
  Proceeds on disposal of property, plant and
     equipment..........................................        2,000           --          --
  Purchase of mining properties.........................      (52,933)          --          --
                                                          -----------    ---------    --------
                                                           (1,749,150)    (638,481)    (21,060)
                                                          -----------    ---------    --------
NET INCREASE (DECREASE) IN CASH.........................     (405,442)     448,708     (32,092)
Cash, beginning of year.................................      450,086        1,378      33,470
                                                          -----------    ---------    --------
CASH, END OF YEAR.......................................  $    44,644      450,086       1,378
                                                          ===========    =========    ========
Supplemental disclosure of cash flow information:
  Interest paid.........................................  $    84,371       95,112      68,284
                                                          ===========    =========    ========
</TABLE>

                See accompanying notes to financial statements.

                                       F-15
<PAGE>   28

                            HEDMAN RESOURCES LIMITED
                         NOTES TO FINANCIAL STATEMENTS

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

     Hedman Resources Limited is an Ontario incorporated public company and its
principal business activity is the production of heat resistant fillers.

1. GOING CONCERN:

     These financial statements have been prepared on a going concern basis and
do not include any adjustments to the measurement and classification of the
recorded asset amounts and classification of liabilities that might be
necessary, should the Company be unable to continue as a going concern. The
Company has experienced several continuous years of operating losses, is in a
negative working capital position and has significant capital purchase
commitments which will come due within the next year. The Company's ability to
realize its assets and discharge its liabilities in the normal course of
business is dependent upon continued support from its lenders and creditors
including new financing. The Company is also dependent on an infusion of equity
from potential shareholders. The Company is currently attempting to obtain
additional financing from its existing shareholders and other strategic
investors to continue its operations. However, there can be no assurance that
the Company will obtain sufficient additional funds from these sources.

     During the year the Company has entered into a binding letter of intent
with Enviro Industrial Technologies Inc. ("Enviro"), a U.S. company. Enviro
agreed to acquire up to all of the issued and outstanding common shares of the
Company in exchange for common stock of Enviro on a one for one basis after a
two for one share consolidation by the Company. Enviro was incorporated in the
State of Delaware on March 31, 2000 and plans to enter the mining and industrial
mineral processing business.

2. SIGNIFICANT ACCOUNTING POLICIES:

     The financial statements are prepared by management in accordance with
Canadian generally accepted accounting principles and, except as described in
note 21, conform in all material respects with the accounting principles
generally accepted in the United States. This summary of significant accounting
policies is a description of the accounting methods and practices that have been
used in the preparation of these financial statements and is presented to assist
the reader in interpreting the statements contained herein.

  (a) Revenue recognition:

     Revenue from sales is recognized when goods are shipped to customers and
title transfers.

  (b) Mining properties and deferred development costs:

     Mining properties represent the cost of acquisition, less recoveries, of
non-producing resource properties. These costs will be charged against income if
the properties are brought into commercial production. The carrying values of
non-producing properties are periodically assessed by management and if
management determines that the carrying values cannot be recovered, the
unrecoverable amounts are written-off against current earnings.

     Deferred development costs represent costs incurred to bring the operation
into commercial production. These costs are being amortized on a unit of
production basis.

  (c) Inventory:

     Inventories of broken ore and refined and converted products are valued at
the lower of average cost and net realizable value.

                                       F-16
<PAGE>   29
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

  (d) Supplies and prepaid expenses:

     Consumable supplies and spares are valued at the lower of weighted average
cost or replacement value.

  (e) Property, plant and equipment:

     Property, plant and equipment are being amortized on a straight-line basis
using the following annual rates:

<TABLE>
<CAPTION>

<S>                                                           <C>
Buildings...................................................    4%
Equipment...................................................    4%
Office equipment............................................   20%
Vehicles....................................................   30%
Computers...................................................   30%
</TABLE>

     Assets are carried at cost. Costs of additions and improvements are
capitalized. When assets are retired or sold, the resulting gains and losses are
reflected in current earnings. Maintenance and repair expenditures are charged
to cost of production. The carrying values of property, plant and equipment are
periodically assessed by management and if management determines that the
carrying values cannot be recovered, the unrecoverable amounts are written-off
against current earnings.

  (f) Foreign currency translation:

     Foreign currencies are translated to Canadian dollars as
follows -- monetary assets and liabilities at the rates of exchange prevailing
at the balance sheet date, non-monetary assets and liabilities are translated at
historical exchange rates and revenue and expenditures at the rate of exchange
prevailing on the dates of transactions. The resulting gains and losses are
included in income.

  (g) Reclamation costs:

     Estimated future reclamation costs, including site restoration where
reasonably determinable, will be charged against earnings as incurred.

  (h) Future income taxes:

     In December 1997, the Accounting Standards Board of the Canadian Institute
of Chartered Accountants ("CICA") issued Section 3465 of the CICA Handbook,
Income Taxes ("Section 3465"). Effective January 1, 1999, the Company adopted
Section 3465. Section 3465 requires a change from the deferral method of
accounting for income taxes to the asset and liability method of accounting for
income taxes.

     Under the assets and liability method of Section 3465, future tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Future tax assets and
liabilities are measured using enacted or substantively enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Section 3465, the
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

     Pursuant to the deferral method, which was applied in 1999 and prior years,
deferred income taxes are recognized for income and expense items that are
reported in different years for financial reporting purposes

                                       F-17
<PAGE>   30
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

and income tax purposes using the tax rate applicable for the year of the
calculation. Under the deferral method, deferred taxes are not adjusted for
subsequent changes in tax rates.

     There is no effect of this change in accounting for income taxes on prior
periods. Prior years' financial statements have not been restated to apply the
provisions of Section 3465.

  (i) Use of estimates:

     The preparation of financial statements in accordance with Canadian
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reported
period. These estimates are reviewed periodically, and, as adjustments become
necessary, they are reported in earnings in the period in which they become
known.

  (j) Comparative figures:

     Certain of the 1999 figures have been restated to conform with the
presentation adopted in 2000.

3. INVENTORY:

     The inventory consists of:

<TABLE>
<CAPTION>
                                                                2000       1999
                                                              --------    -------
<S>                                                           <C>         <C>
Raw material................................................  $144,352    $84,079
Processed ore...............................................       600      7,690
                                                              --------    -------
                                                              $144,952    $91,769
                                                              ========    =======
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT:

<TABLE>
<CAPTION>
                                                       2000                         1999
                                            --------------------------    -------------------------
                                                          ACCUMULATED                   ACCUMULATED
                                               COST       DEPRECIATION       COST       DEPRECATION
                                            ----------    ------------    ----------    -----------
<S>                                         <C>           <C>             <C>           <C>
Land......................................  $    5,236     $       --     $    5,236    $       --
Buildings.................................   1,067,624        519,452      1,067,624       476,747
Equipment.................................   2,602,542      2,078,955      2,696,344     2,024,951
Office equipment..........................       4,173          4,029          3,283         3,283
Vehicles..................................      21,060         15,795         21,060         9,477
Computers.................................      18,677         10,731          8,541         6,647
Buildings not available for use...........   1,088,286             --        596,842            --
Equipment not available for use...........   2,166,847             --             --            --
                                            ----------     ----------     ----------    ----------
                                             6,974,445     $2,628,962      4,398,930    $2,521,105
                                                           ----------                   ----------
Less accumulated depreciation.............   2,628,962                     2,521,105
                                            ----------                    ----------
                                            $4,345,483                    $1,877,825
                                            ==========                    ==========
</TABLE>

                                       F-18
<PAGE>   31
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

5. MINING PROPERTIES:

     The mining properties consist of:

<TABLE>
<CAPTION>
                                                           2000        1999
                                                         --------    --------
<S>                                                      <C>         <C>
Township of Warden and Munro, Ontario -- 21 leased
  mining claims........................................  $134,282    $134,282
Township of Horwood, Ontario -- 2 leased mining
  claims...............................................    52,933          --
                                                         --------    --------
                                                         $187,215    $134,282
                                                         ========    ========
</TABLE>

6. DEFERRED DEVELOPMENT COSTS:

     The amount reported as deferred development costs relate to costs incurred
to bring the operation into commercial production. Commencing in 1972, the
deferred development expenditures were being amortized using a
units-of-production method based on tons of product shipped. During the period
the costs were written-off as they were deemed to have no value with the
substantial investment the Company was making in the new mill production system.

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

     Accounts payable and accrued liabilities includes $819,812 (1999 - $nil)
advanced from Enviro Industrial Technologies Inc. which is unsecured, bears no
interest and has no specified terms of repayment.

8. ADVANCES FROM SHAREHOLDERS:

     The advances from shareholders are unsecured, bear interest at 9.25% and
are to be repaid within one year.

9. LONG-TERM DEBT:

<TABLE>
<CAPTION>
                                                   INTEREST      DUE
                                                     RATE        DATE      2000        1999
                                                  -----------    ----    --------    --------
<S>                                               <C>            <C>     <C>         <C>
                                                     Floating
Business Development Bank of Canada.............  Base + 2.50%   2005    $492,800    $572,000
Current portion of long-term debt...............                          492,800     572,000
                                                                         --------    --------
                                                                         $     --    $     --
                                                                         ========    ========
</TABLE>

     The loan payable to the Business Development Bank of Canada ("BDC") is
secured by a first mortgage on land, buildings and equipment, a first mortgage
on the mining leases and by an assignment of $600,000 insurance on the life of
the President of the Company.

     At December 31, 2000, the Company was in contravention of the covenants
imposed by the BDC. Subsequent to year-end, the BDC has provided a waiver for
this covenant contingent upon loan payments remaining current and no other
events occurring to adversely affect loan security. The entire balance
outstanding has been classified as a current obligation as the waiver does not
extend beyond one year.

                                       F-19
<PAGE>   32
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

     Principal payments required to retire the outstanding long-term debt are as
follows:

<TABLE>
<S>                                                         <C>
2001......................................................  $105,600
2002......................................................   105,600
2003......................................................   105,600
2004......................................................   105,600
2005 and subsequent years.................................    70,400
                                                            --------
                                                            $492,800
                                                            ========
</TABLE>

10. SHARE CAPITAL:

     (a) Authorized:

        Unlimited common shares

        Unlimited special shares

     (b) Issued -- common:

<TABLE>
<CAPTION>
                                                      NUMBER OF
                                                        SHARES        AMOUNT
                                                      ----------    ----------
<S>                                                   <C>           <C>
Balance, December 31, 1998..........................  13,834,382    $6,003,012
Issued during fiscal year 1999:
  Issued during the year for cash consideration (net
     of issuance costs of $58,706)..................   8,608,334     1,269,184
  Options exercised.................................     225,000        33,750
                                                      ----------    ----------
Balance, December 31, 1999..........................  22,667,716     7,305,946
Issued during fiscal year 2000:
  Issued during the year for cash consideration (net
     of issuance costs of $50,000)..................   5,305,319     1,798,156
  Options exercised.................................     210,000        61,500
  Warrants exercised................................     448,333        89,667
                                                      ----------    ----------
Balance, December 31, 2000..........................  28,631,368    $9,255,269
                                                      ==========    ==========
</TABLE>

     (c) The Company has a stock option plan available to its employees,
officers and directors which options may be granted on a maximum of 1,200,000
common shares.

     The number of shares reserved for issuance to any one insider, within a
one-year period, pursuant to options must not exceed 5% of the outstanding
issue.

     The number of shares reserved for issuance to insiders, within a one year
period, pursuant to options must not exceed 10% of the outstanding issue.

     The option price of the shares shall be fixed by the Board but must not be
less than the maximum discount permitted by the Canadian Venture Exchange.

     Options have a maximum term of five years and vest immediately.

     The stock options outstanding at December 31, 2000 expire at various dates
to May 30, 2004.

                                       F-20
<PAGE>   33
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

     A summary of the status of the Plan and changes during the periods then
ended is presented below:

<TABLE>
<CAPTION>
                                                             2000                   1999
                                                     --------------------    -------------------
                                                                 WEIGHTED               WEIGHTED
                                                                 AVERAGE                AVERAGE
                                                                 EXERCISE               EXERCISE
                                                     OPTIONS      PRICE      OPTIONS     PRICE
                                                     --------    --------    -------    --------
<S>                                                  <C>         <C>         <C>        <C>
Outstanding, beginning of year.....................   405,000     $0.48           --     $  --
Granted during the year............................        --        --      405,000      0.48
Exercised during the year..........................  (210,000)     0.22           --        --
Expired............................................  (185,000)     0.60           --        --
                                                     --------     -----      -------     -----
Outstanding, end of year...........................    10,000     $0.75      405,000     $0.48
                                                     ========     =====      =======     =====
</TABLE>

     (d) The following table summarizes information about the stock options
outstanding at December 31, 2000.

<TABLE>
<CAPTION>
                          WEIGHTED
                           AVERAGE     WEIGHTED
RANGE OF    NUMBER OF     REMAINING    AVERAGE
EXERCISE     OPTIONS     CONTRACTUAL   EXERCISE
 PRICES    OUTSTANDING      LIFE        PRICE
--------   -----------   -----------   --------
<S>        <C>           <C>           <C>
0$.75..      10,000        1 year       $0.75
 -----       ------        ------       -----
</TABLE>

     (e) As at December 31, 2000, there are 13,465,320 (1999 - 8,608,334) share
purchase warrants outstanding as follows:

<TABLE>
<CAPTION>
                                                                     NO. OF
EXPIRY DATE                                                PRICE     SHARES
-----------                                                -----    ---------
<S>                                                        <C>      <C>
July 12, 2001............................................  $0.20    8,360,001
February 22, 2002........................................  $0.40    5,105,319
                                                           -----    ---------
</TABLE>

     During the year, no warrants expired (1999 - 456,924).

11. RELATED PARTY TRANSACTIONS:

     During the year, the Company incurred office expenses of $nil
(1999 - $3,000) and also incurred $52,933 (1999 - $nil) of expenses for site
preparation and maintenance with a corporation controlled by a director of
Hedman Resources Limited.

     At December 31, 2000, the Company was indebted to related parties in the
amount of $30,000 (1999 - $23,846).

     The Company leased its office space from a company controlled by a
shareholder of the Company (note 20(b)).

12. CONTINGENT LIABILITIES:

     The Company has been named as a co-defendant in a number of class action
suits in the United States relative to sales of product made between 1974 and
1979. To date, the Company's insurance companies have paid for legal and
settlement amounts in relation to these matters. Should the total indemnity
limits of the Company's insurance policies become exhausted, it is the position
of the insurance company that its defence obligation will come to an end. The
total amount of claims outstanding significantly exceeds the remaining

                                       F-21
<PAGE>   34
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

insurance coverage. However, it is not possible to estimate the amount, if any,
of the Company's liability exposure.

13. INCOME TAXES:

     The Company has available non-capital losses for income tax purposes in the
aggregate of $5,853,522 which are available to reduce future years earnings for
income tax purposes. No tax benefit pertaining to the losses has been recognized
in the accounts. These losses will expire, if not utilized, as follows:

<TABLE>
<S>                                                        <C>
2001.....................................................  $  510,521
2002.....................................................     871,174
2003.....................................................     576,921
2004.....................................................     933,177
2005.....................................................     426,319
2006.....................................................     581,270
2007.....................................................   1,954,140
                                                           ----------
                                                           $5,853,522
                                                           ==========
</TABLE>

     The tax effects of temporary differences that give rise to significant
portions of the future tax assets and future tax liabilities at December 31,
2000 and 1999 are presented below.

<TABLE>
<CAPTION>
                                                                 2000           1999
                                                              -----------    -----------
<S>                                                           <C>            <C>
Deferred tax assets:
  Net operating loss carryforwards..........................  $ 2,369,285    $ 1,998,625
  Less valuation allowance..................................   (2,334,046)    (1,848,695)
                                                              -----------    -----------
                                                              $    35,239    $   149,930
                                                              ===========    ===========
Future tax liabilities:
  Plant and equipment, principally due to differences in
     depreciation...........................................  $   (35,239)   $   (77,829)
  Future development costs, due to differences in
     amortization...........................................           --        (72,101)
                                                              -----------    -----------
                                                              $   (35,239)   $  (149,930)
                                                              ===========    ===========
</TABLE>

     In assessing the realizability of future tax assets, management considers
whether it is more likely than not that some portion or all of the future tax
assets will not be realized. The ultimate realization of future tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of future tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. In order to fully realize
the future tax asset, the Company will need to generate future taxable income of
approximately $5,853,522 prior to the expiration of the net operating loss
carryforwards.

                                       F-22
<PAGE>   35
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

14. SEGMENTED INFORMATION:

     Details of the Company's financial information segmented geographically is
as follows:

<TABLE>
<CAPTION>
                                                           2000        1999
                                                         --------    --------
<S>                                                      <C>         <C>
Segmented revenue:
  Canada...............................................  $ 34,677    $ 25,441
  Other................................................   273,819     368,642
                                                         --------    --------
                                                         $308,496    $394,083
                                                         ========    ========
</TABLE>

     All assets of the Company are located in Canada.

15. LOSS PER SHARE AMOUNTS:

     Basic earnings per share are based on the weighted average number of common
shares outstanding calculated on an annual basis. The effects of the exercise of
the options and warrants outstanding at December 31, 2000 and 1999 are
antidilutive; therefore, the fully diluted loss per share is not presented.

16. SUBSEQUENT EVENTS:

     Subsequent to year end, 100,000 warrants were exercised for proceeds of
$20,000

17. FUTURE SITE RESTORATION AND REMOVALS:

     The Company, in conjunction with the Ministry of Northern Development and
Mines, has agreed to a future site restoration plan. The plan requires the
Company to make an initial payment of $20,000, pledge certain equipment assets
as security and make payments of $2.25 per ton milled to a maximum of
approximately $262,000.

18. ADMINISTRATION COSTS:

     The administration costs consist of finders fees ($4,000) regarding the
private placement and interest charges on unremitted payroll taxes ($16,560),
over and above normal administration costs. The Company is now current with all
government agencies.

     The municipal taxes with the Corporation of The Township of Black River
Matheson are in arrears. As part of the loan agreement with the Business
Development Bank of Canada, ("BDC") property taxes must remain current. However,
the Company has obtained a waiver from the BDC (see note 9).

19. COMMITMENTS:

     (a) The Company has signed a contract to acquire a firefelt production
plant from an overseas supplier for an estimated cost of $3,200,000. The Company
has advanced approximately $900,000 of the estimated cost to the supplier and is
awaiting delivery and installation of the plant in late 2001. The Company has
negotiated to finance a maximum of 75%, or $2,250,000 CDN of the sales contract
from the supplier. The proposed credit facility is to be repayable in ten equal
semi-annual instalments, commencing six months after the plant is put into
production. The proposed initial rate is based on a floating interest rate of
three month LIBOR plus 1.5% payable quarterly on the drawn-down balance of the
credit facility. Upon full drawing of the credit facility, the Company has the
option to switch to a fixed interest rate to be negotiated at such time.

                                       F-23
<PAGE>   36
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

     (b) The Company has leased office space in North York, Ontario for a period
of five years ending August 2005. The annual rent, excluding common area costs
and municipal taxes, to be paid for this space is $22,000.

20. FINANCIAL INSTRUMENTS:

     The fair values of the accounts receivable and accounts payable and accrued
liabilities approximate their carrying values due to the short period to
maturity. The carrying value of the long-term debt approximates its fair value
based on borrowing rates presently available to the Company for loans with
similar terms and maturities.

21. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES:

     The financial statements of the Company are expressed in Canadian dollars
in accordance with Canadian generally accepted accounting principles (Canadian
GAAP). The following adjustments and disclosures would be required in order to
present these financial statements in accordance with accounting principles
generally accepted in the United States (US GAAP).

     (a) Reconciliation of loss in accordance with Canadian GAAP to loss
determined in accordance with US GAAP.

<TABLE>
<CAPTION>
                                                        2000          1999
                                                     -----------    ---------
<S>                                                  <C>            <C>
Net loss under Canadian GAAP.......................  $(1,708,408)   $(756,722)
Add (deduct) adjustments for:
  Amortization of deferred developments costs......        1,029        1,633
  Write-off of deferred developments costs.........      583,094           --
                                                     -----------    ---------
Net loss under US GAAP.............................  $(1,124,285)   $(755,089)
                                                     ===========    =========
Net loss per share under US GAAP...................  $     (0.04)   $   (0.04)
                                                     ===========    =========
</TABLE>

                                       F-24
<PAGE>   37
                            HEDMAN RESOURCES LIMITED
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

              YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
                               (IN CANADIAN $'S)

     (b) Comparison of balance sheet items determined in accordance with
Canadian GAAP to balance sheet items determined in accordance with US GAAP.

<TABLE>
<CAPTION>
                                           2000                          1999
                                         CANADIAN          US          CANADIAN          US
                                           GAAP           GAAP           GAAP           GAAP
                                        -----------    -----------    -----------    -----------
<S>                                     <C>            <C>            <C>            <C>
Current assets........................  $   314,982    $   314,982    $   683,353    $   683,353
Property, plant and equipment.........    4,345,483      4,345,483      1,877,825      1,877,825
Mining properties.....................      187,215        187,215        134,282        134,282
Deferred development costs............           --             --        584,123             --
                                        -----------    -----------    -----------    -----------
          Total assets................  $ 4,847,680    $ 4,847,680    $ 3,279,583    $ 2,695,460
                                        -----------    -----------    -----------    -----------
Current liabilities...................  $ 3,043,262    $ 3,043,262    $   327,825    $ 1,702,997
Long-term debt........................           --             --        492,800             --
Advances from related parties.........           --             --         13,083         13,083
                                        -----------    -----------    -----------    -----------
                                          3,043,262      3,043,262        833,708      1,716,080
Shareholders' equity:
  Share capital.......................    9,255,269      9,255,269      8,188,318      7,305,946
  Contributed surplus.................    1,785,089      1,785,089      1,785,089      1,785,089
  Deficit.............................   (9,235,940)    (9,235,940)    (7,527,532)    (8,111,655)
                                        -----------    -----------    -----------    -----------
                                          1,804,418      1,804,418      2,445,875        979,380
                                        -----------    -----------    -----------    -----------
Total liabilities and shareholders'
  equity..............................  $ 4,847,680    $ 4,847,680    $ 3,279,583    $ 2,695,460
                                        ===========    ===========    ===========    ===========
</TABLE>

     (c) The effects of these adjustments would result in the consolidated
statements of cash flows reporting the following:

<TABLE>
<CAPTION>
                                                        2000           1999
                                                     -----------    ----------
<S>                                                  <C>            <C>
Cash provided by operations........................  $   (20,960)   $ (995,645)
Cash provided by (used in) financing...............    1,364,668     2,082,834
Cash provided by (used in) investing...............   (1,749,150)     (638,481)
                                                     ===========    ==========
</TABLE>

     There is no change to consolidated statement of cash flows.

     (d) Write-down of mining properties:

     Under both Canadian and US GAAP, property, plant and equipment must be
assessed for potential impairment. Under Canadian GAAP, the impairment loss is
the difference between the carrying value of the asset and its recoverable
amount calculated as undiscounted estimated future net cash flows. Under US
GAAP, if the undiscounted estimated future net cash flows are less than the
carrying value of the asset, the impairment loss is calculated as the amount by
which the carrying value of the asset exceeds its fair value. Fair value has
been calculated as the present value of estimated future net cash flows. The
resulting difference in the write-down between US and Canadian GAAP causes a
change in the amount of depreciation, depletion and reclamation costs charged to
earnings. During fiscal 2000, the deferred development costs were written-off
which eliminated any difference between US and Canadian GAAP.

22. JUDGEMENT:

     A judgement against the Company has been issued in the state of Florida
regarding a lawsuit filed against the Company in 1994. The Company incurred
costs in the amount of $106,832 to settle the claim.

                                       F-25