<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                                                  CONFORMED COPY

                                    FORM 10-Q

[X]     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       OR

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934 
                      
         For the transition period from ____________ to _____________.

                         COMMISSION FILE NUMBER 0-18583



                             POLYMER SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                       <C>       
                       Nevada, U.S.A.                                                   88-0360526
(State or other jurisdiction of incorporation or organization)            (I.R.S. Employer Identification Number)
</TABLE>


                         410 - 1055 West Hastings Street
                           Vancouver, British Columbia
                                 Canada V6E 2E9
                    (Address of principal executive offices)

                                 (604) 683-3473
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                      Yes [ ]    No [X]


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1998.

                TITLE OF CLASS                              NO. OF SHARES

       Common Shares, par value $0.001                        5,344,950

<PAGE>   2
                             POLYMER SOLUTIONS, INC.
                          Quarterly Report on Form 10-Q
                    For the Three Months Ended June 30, 1998

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item                                                                                                                  Page
Number                                                                                                               Number
<S>      <C>                                                                                                         <C>
                         PART I - FINANCIAL INFORMATION

1.       Financial Statements

                  Consolidated Statements of Operations
                           for the periods ended June 30, 1998 and 1997 ..............................................  3

                  Consolidated Balance Sheets
                           at June 30, 1998 and March 31, 1998........................................................  4

                  Consolidated Statements of Shareholders' (Deficiency) Equity
                           for the periods ended June 30, 1998 and 1997 ..............................................  5

                  Consolidated Statements of Cash Flows
                           for the periods ended June 30, 1998 and 1997 ..............................................  6

                  Notes to Consolidated Financial Statements........................................................... 7

2.       Management's Discussion and Analysis of Financial Condition
                  and Results of Operations .......................................................................... 14


                           PART II - OTHER INFORMATION
4.       Submission of matters to a vote of securities holders ....................................................... 15

5.       Other Information ........................................................................................... 15

6.       Exhibits and Reports on Form 8-K ............................................................................ 15


SIGNATURES ........................................................................................................... 15
</TABLE>


The accompanying interim consolidated financial statements and notes are
unaudited; However, in the opinion of management, they reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the results for the interim periods presented. Results of operations for the
periods ended June 30, 1998 are not necessarily indicative of results expected
for an entire year.

Certain statements in this Quarterly Report on Form 10-Q are not based on
historical facts, but are instead based upon a number of assumptions concerning
future conditions that may ultimately prove to be inaccurate. Actual events and
results may materially differ from anticipated results described in such
statements. The company's ability to achieve such results is subject to certain
risks and uncertainties, including but not limited to, adverse business
conditions in the industries served by the Company and the general economy,
competition, new laws and regulations impacting the products that the Company
provides, and other risk factors affecting the Company's business which are
beyond the Company's control.


                                                                               2
<PAGE>   3
POLYMER SOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                           Three months ended
                                                                June 30
                                                   ---------------------------------
                                                      1998                  1997
                                                   -----------           -----------
<S>                                                <C>                   <C>        
Sales revenue                                      $ 1,735,261           $ 1,643,395

Costs of goods sold (Note 14)                       (1,381,430)           (1,344,576)
                                                   -----------           -----------
                                                       353,831               298,819
                                                   -----------           -----------

Corporate and administrative expenses:
  Marketing and sales                                  189,759               225,271
  General and administrative                           245,047               187,553
  Research and development                              88,882                77,932
                                                   -----------           -----------
                                                       523,688               490,756
                                                   -----------           -----------

Loss from operations                                  (169,857)             (191,937)

Interest expense                                       (66,843)              (40,991)
                                                   -----------           -----------
Loss before provision for income taxes                (236,700)             (232,928)
Provision for income taxes                                  --                    --
                                                   -----------           -----------
Net loss                                           $  (236,700)          $  (232,928)
                                                   ===========           ===========

Basic and diluted net loss per share               $      (.04)          $      (.07)
                                                   -----------           -----------

Weighted average basic and diluted number
 of shares outstanding                               5,344,950             3,566,476
                                                   ===========           ===========
</TABLE>


<PAGE>   4
POLYMER SOLUTIONS, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                         JUNE 30       MARCH 31
                                                          1998           1998
<S>                                                     <C>           <C>
                                     ASSETS

Current assets:
  Cash                                               $      1,119    $     1,177     
  Accounts receivable, net                                932,247        976,201
  Inventories                                           1,082,339      1,267,751
  Prepaid expenses                                        139,500         33,841
                                                     ------------    -----------
                                                        2,155,205      2,278,970

Fixed assets, net                                       1,177,549        982,774
Other assets                                                9,121          9,386
                                                     ------------    -----------
                                                     $  3,341,875    $ 3,271,130
                                                     ============    ===========

               LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY

Current liabilities:
  Accounts payable                                   $  1,214,939    $ 1,356,162
  Salaries payable                                        257,018        262,035
  Professional fees payable                                41,136         70,681
  Operating line of credit                                969,793        879,967
  Current portion of capital lease obligations             83,471         67,738
  Current portion of mortgage payable                      21,379         21,062
                                                     ------------    -----------
                                                        2,587,736      2,657,645
Long-term liabilities:
  Capital lease obligations                               480,558        402,456
  Due to related parties                                  114,965         88,895
  Mortgage payable                                         27,490         31,188
  Convertible note payable                                 78,588         72,000
  Subscription received                                   272,108             --
                                                     ------------    -----------
                                                        3,561,445      3,252,184
                                                     ------------    -----------

  Minority interest                                       225,036        225,783
                                                     ------------    -----------

Commitments and contingencies (Note 9)

Shareholders' (deficiency) equity:
Preferred stock, $0.001 par value;
  Authorized - 4,000,000 shares; issued and 
    outstanding - nil
Common stock, $0.001 par value;
  Authorized - 20,000,000 shares; issued and 
  outstanding, 6/30/98 - 5,344,950 shares and
  12/31/98 - 5,344,617 shares                               5,345          5,345

Additional paid-in capital                              9,774,104      9,775,173

Accumulated deficit                                   (10,224,055)    (9,987,355)
                                                     ------------    -----------
                                                         (444,606)      (206,837)
                                                     ------------    -----------
                                                     $  3,341,875    $ 3,271,130
                                                     ============    ===========
</TABLE>




                                       4
<PAGE>   5
POLYMER SOLUTIONS, INC.


                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED JUNE 30
                                                         1998            1997
<S>                                                   <C>             <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
  Net loss (Note 14)                                  $(236,700)      $(232,928)
  Adjustments to reconcile net loss to net
  cash used in operating activities
    Depreciation and amortization                        53,843          22,336
    Accounts receivable                                  43,954        (226,004)
    Inventories (Note 14)                               185,412          (4,621)
    Prepaid expenses and other assets                  (105,659)        (51,940)
    Accounts payable                                   (175,785)        374,190
                                                      ---------       ---------
Net cash used in operating activities                  (234,935)       (118,967)

CASH FLOWS USED IN INVESTING ACTIVITIES:
  Capital additions                                    (248,353)        (13,666)
Net cash used in investing activities                  (248,353)        (13,666)
                                                      ---------       ---------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
  Cost of financing                                      (1,815)             --
  Proceeds from subscription received                   272,108              --
  Proceeds from (payments on) due to related
    parties, net                                         26,070          76,975
  Proceeds from (payments on) mortgage payable           (3,381)         (4,653)
  Proceeds from convertible debt-interest                 6,588
  Borrowings on operating line of credit, net            89,826          59,221
  Payment of capital lease obligations                   93,834              --
                                                      ---------       ---------
Net cash provided by financing activities               483,230         131,543
                                                      ---------       ---------

Increase (decrease) in cash                                 (58)         (1,090)
Cash, beginning of period                                 1,177           2,538
                                                      ---------       ---------
Cash, end of period                                   $   1,119       $   1,448
                                                      =========       =========
</TABLE>



                                       5
<PAGE>   6
POLYMER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIENCY) EQUITY

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED JUNE 30,
                                                      1998                                     1997
                                           COMMON                                   COMMON
                                           SHARES              AMOUNT               SHARES              AMOUNT   
<S>                                     <C>                 <C>                  <C>                 <C>         

COMMON STOCK:
  Balance, beginning of period             5,334,617        $      5,345            3,762,505        $      3,763

  Shares issued, pursuant to -
   Private placement and other                   333                  --                5,767                   5
                                        ------------        ------------         ------------        ------------

  Balance, end of period                   5,334,950               5,345            3,768,272               3,768
                                        ------------        ------------         ------------        ------------

ADDITIONAL PAID -IN CAPITAL:
  Balance, beginning of period                    --           9,775,173                   --           8,674,356
  Shares issued, pursuant to -
   Private placement and other                    --                 746                   --              12,925
   Cancellation of debt                           --              (1,815)                  --                  --
                                        ------------        ------------         ------------        ------------
  Balance, end of period                          --           9,774,104                   --           8,687,281
                                        ------------        ------------         ------------        ------------

DEFICIT:
  Balance, beginning of period                    --          (9,987,355)                  --          (9,117,265)
  Net loss                                        --            (236,700)                  --             (80,664)
                                        ------------        ------------         ------------        ------------

  Balance, end of period                          --         (10,224,055)                  --          (9,197,929)
                                        ------------        ------------         ------------        ------------

TOTAL SHAREHOLDERS' (DEFICIENCY)
 EQUITY                                    5,334,950        $   (444,606)           3,768,272        $   (506,880)
                                        ============        ============         ============        ============
</TABLE>


                                                                               6
<PAGE>   7
POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Three Months Ended June 30, 1998
--------------------------------------------------------------------------------

1.    NATURE OF OPERATIONS

      Polymer Solutions, Inc. ("PSI" or "Company") is a Nevada corporation
      incorporated in July 1996. Through its wholly-owned subsidiary,
      Alternative Materials Technology, Inc. ("AMT USA"), PSI is engaged in the
      development and sale of water-based coatings, sealants and adhesives to
      industrial users in California and neighboring states, including
      manufacturers of furniture, cabinets, doors and moldings. One customer
      accounted for 10% of net revenue in the prior fiscal year.

      These consolidated financial statements have been prepared on the basis of
      accounting principles applicable to a going concern which assumes the
      realization of assets and discharge of liabilities in the normal course of
      business. The Company's significant losses from operations and capital
      deficiency raise substantial doubt about its ability to continue as a
      going concern and these consolidated financial statements do not include
      any adjustments that may result from the outcome of this uncertainty. The
      Company is negotiating with financing institutions regarding both
      short-term and senior equity financing.

2.    SIGNIFICANT ACCOUNTING POLICIES

      GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
      The consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States.
      Differences with respect to accounting principles generally accepted in
      Canada are disclosed in Note 16.

      BASIS OF CONSOLIDATION
      The Company's consolidated financial statements include its wholly-owned
      active subsidiary, AMT USA; wholly-owned inactive subsidiary, AMT
      Environmental Products Inc. ("AMT"); and 99.9%-owned inactive subsidiary,
      PSI Acquisitions Corp. ("PAC"). Intercompany transactions and accounts are
      eliminated in consolidation.

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

      CONCENTRATION OF CREDIT RISK
      Financial instruments that potentially subject the Company to significant
      concentrations of credit risk consist primarily of trade accounts
      receivable from wood coatings customers. Concentrations of credit risk
      with respect to trade accounts receivable are limited due to the large
      number of customers. The Company, and its lender of the operating line of
      credit, perform credit evaluations of its customers' financial condition
      and generally do not require collateral on accounts receivable. The
      Company maintains an allowance for doubtful accounts on its receivables
      based on expected collectibility. Allowance for doubtful accounts was
      $41,530 at both June 30, 1998 and March 31, 1998.

      INVENTORIES
      Inventories are valued at the lower of cost, determined on the first-in
      first-out basis, and net realizable value. The Company maintains a reserve
      for slow-moving or obsolete inventory as well as the related disposal
      costs.

      FIXED ASSETS
      Equipment is recorded at cost and depreciated on a straight-line basis
      over its estimated life, which varies between five and seven years.
      Building and related improvements are recorded at cost and amortized on a
      straight-line basis over an estimated life of 39 years.


                                                                               7
<PAGE>   8
      OTHER ASSETS
      Other assets consist of patent and trademark costs, representing the costs
      incurred for the acquisition. Capitalized costs are amortized on a
      straight-line basis over seven years commencing with production of related
      products. When it is determined that a particular technology will no
      longer be used, or a patent application is abandoned, related unamortized
      costs are written off.

      LONG-LIVED ASSETS
      Long-lived assets are recorded at the lower of amortized cost or fair
      value. As part of an ongoing review of the valuation of long-lived assets,
      management assesses the carrying value of such assets if facts and
      circumstances suggest they may be impaired. If this review indicates that
      the carrying value of these assets may not be recoverable, as determined
      by a nondiscounted cash flow analysis over the remaining useful life, the
      carrying value would be reduced to its estimated fair value. There have
      been no material impairments recognized in these financial statements.

      STOCK OPTIONS
      The Company accounts for its stock option plan in accordance with the
      intrinsic value method, under which no compensation expense is recognized
      in the financial statements except where the fair market value of the
      stock exceeds the exercise price of the options granted on the date of the
      grant. The pro forma disclosures of the compensation expense under the
      fair value method of Statement of Financial Accounting Standard No. 123,
      "Accounting for Stock-Based Compensation" are included in Note 12.

      ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
      The Financial Accounting Standards Board issued Statement of Financial
      Accounting Standard No. 128, "Earnings per Share", which changes the basis
      upon which earnings (or loss) per share is calculated. As required by this
      statement, the Company adopted its provisions for the quarter ended June
      30, 1998, and retroactively for each quarter presented in the financial
      statements.

      Basic net loss per share is computed on the weighted average number of
      common shares outstanding during each period. Diluted net loss per share
      is the same as basic net loss per share because the diluted weighted
      average shares outstanding do not include stock options, warrants and
      convertible long-term debt because they are anti-dilutive.

      RESEARCH AND DEVELOPMENT COSTS
      Research and development costs are expensed as they are incurred.

      REVENUE RECOGNITION
      Revenue from the sale of products is recognized upon shipment.

      FOREIGN CURRENCY TRANSLATION
      The Company's operations are primarily conducted in the United States and
      the United States dollar is the Company's functional currency. The Company
      and its subsidiaries are considered to be integrated operations and the
      accounts are translated as follows:

      Monetary assets and liabilities at the rates of exchange in effect at the
      balance sheet date; non-monetary assets at historical rates; revenue and
      expense items (except depreciation and amortization) at the average rates
      for the period; depreciation and amortization at the same rates as for the
      assets to which they relate. The net effect of the foreign currency
      translation is included in current operations.

      INCOME TAXES
      The Company uses the asset and liability method of accounting for income
      taxes. Deferred tax assets and liabilities are recognized for the future
      tax consequences attributable to temporary differences between the
      financial statement carrying amounts of existing assets and liabilities
      and their respective tax bases. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable income in
      the years in which those temporary differences are expected to be
      recovered or settled.

      FAIR VALUE OF FINANCIAL INSTRUMENTS
      The fair value of the Company's financial instruments for cash, accounts
      receivable, accounts payable, salaries payable and professional fees
      payable approximate carrying value due to their short-term nature. The
      fair value of the operating line of credit approximates carrying value due
      to the floating rate interest terms. The fair value of the mortgage
      payable approximates carrying value as its interest rate approximates
      market for borrowings with similar 


                                                                               8
<PAGE>   9
      terms. The fair value of Due to related parties cannot be estimated
      because of the nature of the relationships involved.

      RECLASSIFICATIONS
      Certain prior year balances have been reclassified to conform to the
      current presentation.


              
3.   INVENTORIES

<TABLE>
<CAPTION>
                                                         JUNE 30,               MARCH 31,
                                                          1998                    1998
<S>                                                   <C>                     <C>         

Raw materials and supplies                            $    725,079            $    830,174
Finished goods                                             604,185                 684,502
Less allowance for a slow-moving inventory                (246,925)               (246,925)
                                                      ------------            ------------
                                                      $  1,082,339            $  1,267,751
</TABLE>

4.    FIXED ASSETS

<TABLE>
<CAPTION>
                                                                        JUNE 30, 1998
                                                                         ACCUMULATED
                                                       COST              DEPRECIATION               NET
<S>                                                <C>                   <C>                   <C>         

Land                                               $    110,000          $         --          $    110,000
Laboratory equipment                                     89,614                65,510                24,104
Office equipment                                        175,713                76,836                98,877
Production Equipment - owned and leased                 962,816               283,197               679,619
Building                                                177,935                14,785               163,150
Leasehold improvements                                  104,425                 2,626               101,799
                                                   ------------          ------------          ------------
                                                   $  1,620,503          $    442,954          $  1,177,549
                                                   ============          ============          ============
</TABLE>

<TABLE>
<CAPTION>
                                                                       MARCH 31, 1998
<S>                                                <C>                   <C>                   <C>         

Land                                               $    110,000          $         --          $    110,000
Laboratory equipment                                     84,830                63,298                21,532
Office equipment                                        113,567                70,766                42,801
Production equipment - owned and leased                 842,401               241,526               600,875
Building and improvements                               177,935                13,426               164,509
Leasehold improvements                                   43,419                   362                43,057
                                                   ------------          ------------          ------------
                                                   $  1,372,152          $    389,378          $    982,774
                                                   ============          ============          ============
</TABLE>


      At June 30, 1998, the Company is in the process of selling the land and
      building of its previous operations facility. The carrying value of this
      facility is $274,509 and the facility is expected to be sold by the second
      quarter of fiscal year 1999.

5.    OPERATING LINE OF CREDIT
      The Company has a short-term line of credit for up to $1,000,000, which is
      secured by accounts receivable, inventories and other assets. Funds
      available to be advanced are limited to 80% of accounts receivable, to a
      maximum of $750,000, and 25% of inventories, to a maximum of $250,000.
      Interest is payable on funds advanced at the rate of 1.71% per month.
      Terms of the line of credit require repayment from collections of accounts
      receivable. This line of credit expires on May 1, 1999. On May 26, 1998,
      the Company increased its inventory credit line to $300,000. The Company
      also obtained a $100,000 loan, which bears interest at a variable 


                                                                               9
<PAGE>   10
      rate payable in monthly payments of interest only, and is secured by the
      Company's land and building. Principal is due upon the sale of the
      Company's old operations facility (Note 4).

6.    LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
      Long-term debt at June 30, 1998 and March 31, 1998 consisted of the
      following:


<TABLE>
<CAPTION>
                                                                                          6/30/98            3/31/98
<S>                                                                                    <C>                 <C>         

Capital lease obligations bearing interest ranging from 12 1/2%                        $    564,029        $    470,194
 to 18 2/3%, payable in monthly principal and interest payments
 and secured by the related equipment

Mortgage payable bearing interest of 9%, payable in monthly
 principal and interest payments of $2,075 and secured by the
 related property and equipment                                                        $     48,869              52,250

Convertible note bearing simple interest of 10%, payable in a balloon
 payment of principal and interest in June, 1999; note is
 convertible at US$.72 per common share                                                      78,588              72,000
                                                                                       ------------        ------------
                                                                                            691,486             594,444

Less current portion                                                                        104,850              88,800
                                                                                       ------------        ------------

                                                                                       $    586,636        $    505,644
                                                                                       ------------        ------------
</TABLE>


7.    RELATED PARTY TRANSACTIONS
      At June 30, 1998, $114,965 was due to entities owned by a director of the
      Company.

8.    INCOME TAXES
      The Company and its subsidiaries have operating loss carry-forwards in
      excess of $5,000,000 expiring at various dates through 2013, as well as
      federal and state tax credits of $188,000 and $87,000, which are
      indefinite. These operating loss carry-forwards and tax credits are
      available for offset against future taxable incomes arising from Canadian
      and United States operations. There are no other material temporary
      differences. Considering the Company's cumulative losses, the Company has
      provided a valuation allowance of 100% against all available loss
      carry-forwards and tax credits.

9.    COMMITMENTS AND CONTINGENCIES

      OPERATING LEASES
      The Company leases certain facilities under arrangements which contain
      renewal options and provide for periodic cost of living adjustments. The
      Company's operating lease for its primary operating facility includes an
      option to purchase the facility which can be exercised prior to February
      1, 2000.

      LEGAL MATTERS
      The Company is party to legal proceedings and potential claims arising in
      the ordinary course of business. In the opinion of management, the Company
      has adequate legal defense or insurance coverage with respect to these
      matters so that the ultimate resolution of these matters will not have a
      material adverse effect on its financial position, results of operations,
      or cash flows.

 10.  PREFERRED STOCK

      AUTHORIZED
      The Company is authorized to issue up to 4,000,000 shares of preferred
      stock, which is divided into four series of 1,000,000 shares each. With
      respect to each series, the Company's Board of Directors determines all
      rights and preferences including rights related to dividends, conversion,
      and voting.


                                                                              10
<PAGE>   11
11.   COMMON STOCK

      REORGANIZATION
      By a reorganization completed February 26, 1997, the Company acquired all
      11,752,907 common shares of the issued share capital of AMT in
      consideration for the issue of 3,762,505 common shares of the Company and
      155,130 preferred shares of PSI's 99.9% owned subsidiary, PAC. The purpose
      of the reorganization was to consolidate the issued share capital on a 1:3
      basis and to redomicile the publicly-listed parent company from British
      Columbia, Canada to the United States. PSI and PAC were organized by AMT
      for purposes of the reorganization and had no businesses or operations of
      their own prior thereto. The reorganization was accounted for in a manner
      similar to a pooling of interests and certain comparative amounts relating
      to share capital, loss per share, outstanding stock options and
      outstanding warrants were restated on a post-reorganization basis.

      MINORITY INTEREST
      In completing the Reorganization, the Company consolidated its shares on
      the basis of one common share of PSI, in exchange for three previously
      existing common shares of AMT. Canadian shareholders holding 465,388
      common shares of AMT elected to receive 155,130 non-transferable preferred
      shares of PAC in order to defer the tax consequences of receiving a U.S.
      security. The preferred shares of PAC are convertible or redeemable into
      common shares of PSI on a 1:1 basis at any time and have certain rights
      and benefits of PSI common shares, particularly relating to the
      declaration of dividends and proceeds from liquidation, dissolution or
      wind-up of the Company. PAC preferred shares are non-voting and the
      Company may redeem the PAC preferred shares for common shares of PSI at
      any time after September 1, 2001. During fiscal 1998, 54,431 preferred
      shares were exchanged or redeemed for 54,431 shares of the Company's
      common stock.

      FOUNDERS' SHARES
      An aggregate of 197,774 shares were held in escrow by the Company's
      transfer agent at March 31, 1998. These were issued at a price of US$0.13
      (Cdn$0.18) per share in March 1987, pursuant to AMT's incorporation and
      initial public offering. These shares will be released on the basis of one
      share for each US$10.27 (Cdn$14.22) of accumulated "cash flow" of the
      Company, as defined in the Escrow Agreement. Any of the 197,774 shares
      that are not released from escrow on or before December 15, 1997 may be
      canceled. The Company is currently awaiting a response from the Vancouver
      Stock Exchange to review and further extend the expiration date. No
      founders' shares have been released or canceled from escrow.

12.   STOCK OPTION PLANS AND WARRANTS
      Management of the Company, in the Proxy relating to the August 6, 1998
      Annual General Meeting of the Company, is seeking shareholder approval of
      a resolution to adopt a 1998 Economic Value Added Incentive Compensation
      Plan (EVA Plan). This Plan would authorize the grant of options for the
      purchase of 1,000,000 Common shares of the Company and reservation of the
      1,000,000 Common shares.

13.   FINANCING
      On June 4, 1998, the Company entered into a Letter of Engagement with a
      brokerage firm to market up to 900,000 special warrants. Each special
      warrant will entitle the holder to receive one common share and one-half
      of one share purchase warrant. Exercise of each full warrant will entitle
      the holder to purchase one additional common share for a period of two
      years following the closing of placement. The warrant exercise price will
      be Cdn$1.00 for the first twelve months and Cdn$1.25 for the second twelve
      months.

      Additionally, finders' fees are payable in common shares and agents
      arranging the placement of the warrants will be entitled to receive
      additional warrants equal to 20% of those placed. The agents' warrants
      have the same components, terms and conditions as the special warrants.


                                                                              11
<PAGE>   12
14.   FOURTH QUARTER ADJUSTMENT TO FISCAL YEAR 1998 (UNAUDITED)

      In the fourth quarter of fiscal 1998, the Company recorded an adjustment
      of approximately $590,000 to increase cost of goods sold to properly state
      obsolete and slow moving inventory, to reflect other inventory costing
      adjustments and to increase the estimated warranty expense. The Company
      has analyzed the timing of the adjustments, and has determined that an
      appropriate restatement of the application of the $590,000 adjustment to
      the four quarters of fiscal year 1998 is as follows:

<TABLE>
<CAPTION>
                                                    Adjustment
                                                    ----------
<S>                                                 <C>     
                        First quarter               $152,264
                        Second quarter              $214,059
                        Third quarter               $121,863
                        Fourth quarter              $101,814
                                                    --------
                        Total                       $590,000
</TABLE>

      For comparison with quarterly data for fiscal year 1999, the cost of goods
      sold and inventories for each quarter of 1998 will be adjusted as depicted
      above in order to reflect the impact of the $590,000 adjustment on a
      quarterly basis.

15.   DIFFERENCES BETWEEN UNITED STATES AND CANADIAN ACCOUNTING PRINCIPLES AND
      PRACTICES
      The consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States ("U.S.
      basis") which differ in certain respects from those principles and
      practices that the Company would have followed had its consolidated
      financial statements been prepared in accordance with accounting
      principles and practices generally accepted in Canada ("Canadian basis").

      Had the Company followed the Canadian basis, the balance sheets contained
      within the consolidated financial statements would have been reported as
      follows:

<TABLE>
<CAPTION>
                                                             JUNE 30,                                MARCH 31,
                                                               1998                                     1998
                                                     U.S.              CANADIAN                U.S.             CANADIAN
                                                    BASIS                BASIS                BASIS               BASIS
                                                ------------         ------------         ------------         ------------
<S>                                             <C>                  <C>                  <C>                  <C>         
ASSETS
Current assets                                  $  2,155,205         $  2,155,205         $  2,278,970         $  2,278,970
Fixed assets (a)                                   1,177,549            1,162,325              982,774              967,550
Other assets                                           9,121                9,121                9,386                9,386
                                                ------------         ------------         ------------         ------------
                                                $  3,341,875         $  3,326,651         $  3,271,130         $  3,255,906
                                                ============         ============         ============         ============

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities                             $  2,587,736         $  2,587,736         $  2,657,645         $  2,657,645
Long term liabilities                                973,709              973,709              594,539              594,539
Minority interest                                    225,036              225,036              225,783              225,783
Common shares                                          5,345                5,345                5,345                5,345
Additional paid-in capital (a) (c)                 9,623,681            8,821,038            9,624,750            8,822,110
Deficit (a) (c)                                  (10,073,632)          (9,286,213)          (9,836,932)          (9,049,516)
                                                ------------         ------------         ------------         ------------
                                                $  3,341,875         $  3,326,651         $  3,271,130         $  3,255,906
                                                ============         ============         ============         ============
</TABLE>


                                                                              12
<PAGE>   13
      Had the Company followed the Canadian basis, the Statements of Operations
      contained within the consolidated financial statements would have been
      reported as follows:


<TABLE>
<CAPTION>
                                                          1998                    1997
<S>                                                   <C>                     <C>         

Net loss under U.S. basis                             $  (236,700)            $  (232,928)
Effect of change in reporting currency (a)                     --                      --
Effect of Arrangement costs (c)                                --                      --
                                                      -----------             -----------  

Net loss under Canadian basis                         $  (236,700)            $  (232,928)
                                                      ===========             =========== 

Basic and diluted net loss per share under
 U.S. basis                                           $      (.04)            $      (.07)
                                                      ===========             =========== 
Basic and diluted net loss per share under
 Canadian basis (b)                                   $      (.04)            $      (.06)
                                                      ===========             =========== 
</TABLE>


      (a)   For Canadian purposes, the Company adopted the U.S. dollar as the
            functional currency for the consolidated financial statements
            effective January 1, 1995. The comparative amounts reported in
            Canadian dollars for share capital and non-monetary assets and
            liabilities were translated into U.S. dollars at the December 31,
            1994 exchange rate of one U.S. dollar equal to Cdn $1.4018.
      
      (b)   On a U.S. basis, common shares returnable to the issuer if specified
            conditions are not met are excluded from the determination of
            weighted average number of common shares used for calculation of
            earnings per share if those conditions are not currently being
            attained. On a Canadian basis, the 197,774 common shares currently
            escrowed for release pursuant to cumulative cash flow earned from
            operations would have been included for reporting loss per share.

      (c)   On a U.S. basis, expenses related to a pooling of interests are
            charged to income in the period the expenses are incurred. On a
            Canadian basis, the costs of the Reorganization are treated as a
            capital transaction, charged to paid-in capital.


                                                                              13
<PAGE>   14
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                    For the Three Months ended June 30, 1998

RESULTS FROM OPERATIONS

Sales revenues for the quarter ended June 30, 1998 were $1,735,261, an increase
of 6% over the same quarter a year ago, reflecting continued growth in demand
for the Company's coatings and other products.

Gross profit for the quarter ended June 30, 1998 increased to $353,831 from
$298,819 for the same period a year ago. Cost of goods sold for the year-ago
quarter has been adjusted as described in Note 14 of the Notes to Financial
Statements in order to reflect the impact of a year-end $590,000 adjustment on
each quarter of the fiscal year ended March 31, 1998.

Marketing and sales expense for the three months ended June 30, 1998 totaled
$189,759, a decrease of 16% from $225,271 in the comparable period a year ago.
In spite of the decrease, due primarily to reduced marketing wages, the Company
was able to generate sales in the quarter ended June 30, 1998 which were 6% over
the year-ago quarter.

General and administrative expense totaled $245,047 for the quarter ended June
30, 1998, a 31% increase from $187,553 for the year-ago period. The increase was
due primarily to the costs associated with bringing aboard a new CEO/President
for the Company.

Research and development expenses were $88,882 for the three months ended June
30, 1998, up 14% from $77,932 in the year-ago comparable period, due primarily
to increased laboratory wages.

Interest expense totaled $66,843 for the quarter ended June 30, 1998, compared
to $40,991 for the same quarter a year ago. The 63% increase was due to the
increased use of the Company's operating line of credit and the addition of
capital lease obligations.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1998, the Company had $1,119 in Cash compared to $1,177 at the end
of fiscal 1998. Cash flow used in operating activities totaled $234,935 in the
current quarter of 1998 versus $118,967 in the comparable quarter in 1997.
Additionally, capital additions were $248,353 in the three months ended June 30,
1998 compared to $13,666 for the same quarter a year ago. These requirements
were financed primarily from a $272,108 subscription received and borrowings on
the Company's line of credit.

The Company has a working capital deficiency of $432,531 at June 30, 1998 versus
$378,675 at the end of fiscal 1998. The current ratio at June 30, 1998 was 0.8
versus 0.9 for the fiscal 1998 year-end ratio.

OUTLOOK

At the end of fiscal 1998, the Company's Board of Directors made strategic
organizational changes and key senior management additions to the Company in
order to provide an infrastructure of experienced management professionals
dedicated to maximizing shareholder value. Their tasks include strengthening
controls and achieving profitability with the present Company base, along with
growing the Company externally through joint ventures, acquisitions, product
licenses, new product development, synergistic strategic alliances and any other
opportunities that could result in a meaningful increase in shareholder value.

Note to Readers

Certain statements identified as "forward-looking statements" in this Quarterly
Report on Form 10-Q are not based on historical facts, but are instead based
upon a number of assumptions concerning future conditions that may ultimately
prove to be inaccurate. Actual events and results may materially differ from
anticipated results described in such statements. The company's ability to
achieve such results is subject to certain risks and uncertainties, including
but not limited to, adverse business conditions in the industries served by the
Company and the general economy, competition, new laws and regulations impacting
the products that the Company provides, and other risk factors affecting the
Company's business beyond the Company's control.


                                                                              14
<PAGE>   15
PART II - OTHER INFORMATION
--------------------------------------------------------------------------------

4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

      The Company will hold its 1998 Annual General Meeting of Shareholders on
      August 6, 1998. The shareholders will be asked to approve:

      a)    the appointment of Price Waterhouse LLP, Sacramento, California as
            auditors for fiscal 1999;
      b)    the election of directors;
      c)    the adoption of the Polymer Solutions, Inc. 1998 Economic Value
            Added Incentive Compensation Plan.

5.    OTHER INFORMATION
      
      Directors as at June 30, 1998

                Gordon L. Ellis                             Darryl F. Jones
                Stephen H. Silbernagel                      John J. Sutherland
                Gerald A. Habib                             William A. Maligie
                E. Laughlin Flanagan

6.    EXHIBITS AND REPORTS ON FORM 8-K 
      
      No exhibits.
      No reports on Form 8-K were filed during the three month period ended June
      30, 1998.


SIGNATURES

Pursuant to the requirements 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.

                                       POLYMER SOLUTIONS, INC.
                                       (Registrant)



Date:     August 5, 1998               /s/ Gordon L. Ellis
                                       -----------------------------------------
                                           GORDON L. ELLIS
                                           CHAIRMAN



Date:    August 5, 1998                /s/ Stephen Silbernagel
                                       -----------------------------------------
                                           STEPHEN SILBERNAGEL
                                           DIRECTOR


                                                                              15