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

                                    FORM 10-K


[X]       Annual report pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934.

                    FOR THE FISCAL YEAR ENDED MARCH 31, 1999

[ ]       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)

       Nevada, U.S.A.                                      88-0360526
(State or other jurisdiction                             (I.R.S. Employer
      of incorporation)                                 Identification No.)

                                1569 Dempsey Road
                        North Vancouver, British Columbia
                                 Canada V7K 1S8
                            Telephone: (604) 683-3473

                    (Address of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act:

TITLE OF EACH CLASS:                                      NO. OF SHARES:

Common Shares, par value $0.001                           6,410,833

Indicate by checkmark 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock (Common Shares) held by
non-affiliates of the Registrant on June 24, 1999 was Cdn$3,911,596 and
US$1,856,770 computed by reference to the closing sale price of the Common
Shares on the Vancouver Stock Exchange and the Over the Counter Bulletin Board,
respectively, on such date. The aggregate number of Common Shares outstanding
on June 24, 1999 was 6,475,785.

                       DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the Proxy Statement prepared for the Company's Annual General
 Meeting of Shareholders to be held are incorporated by reference in Part III.
                    The Exhibit Index is located on page 37.



                                     Page 1
<PAGE>   2

                             POLYMER SOLUTIONS, INC.
                           Annual Report on Form 10-K
                    For the Fiscal Year Ended March 31, 1999

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM                                                                                 PAGE
NUMBER                                                                              NUMBER
<S>     <C>                                                                         <C>
                                     PART I

1.      Description of Business........................................................ 3

2.      Properties..................................................................... 9

3.      Legal Proceedings..............................................................10

4.      Submission of Matters to a Vote of Security Holders............................10

                                     PART II

5.      Market for Registrant's Common Equity and Related Stockholder Matters..........11

6.      Selected Financial Data........................................................12

7.      Management's Discussion and Analysis of Financial Condition and Results of
        Operation......................................................................13

8.      Financial Statements and Supplementary Data....................................16

9.      Changes in and Disagreements With Accountants on Accounting and Financial
        Disclosure.....................................................................32

                                    PART III

10.     Directors and Executive Officers of the Registrant.............................32

11.     Executive Compensation.........................................................32

12.     Security Ownership of Certain Beneficial Owners and Management.................32

13.     Certain Relationships and Related Transactions.................................32

                                     PART IV

14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K...............32

SIGNATURES.............................................................................36

EXHIBIT INDEX..........................................................................37
</TABLE>

 Unless otherwise indicated, all dollar amounts in this report are U.S. dollars.



                                     Page 2
<PAGE>   3

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

Polymer Solutions, Inc. (the "Registrant" or "PSI") develops, manufactures and
distributes paints, coatings and adhesives to various industries, primarily in
California. During the past year, PSI constructed a new production facility in
Chico, California that allows the Company significant growth opportunities both
internally and by way of acquisition. Presently, the new facility has excess
production capacity and with the addition of a minor amount of capital equipment
and some additional labor, capacity can be increased to over $50 million per
year.

The Registrant conducts all of its product development, manufacturing and
marketing/sales through its wholly-owned operating subsidiary, Alternative
Materials Technology, Inc. ("AMT USA"), which is based in Chico, California.
Additionally, public-company management and regulatory reporting for the
Registrant has been the responsibility of its office located at 1569 Dempsey
Road, North Vancouver, British Columbia V7K 1S8. The telephone number is (604)
683-3473 or toll-free 1-800-377-8323. The Company also has a web site at
"polysolutions.com". During fiscal year 1999, these activities were partially
transferred to the new corporate headquarters in Chico, California.

The Registrant holds its investment in AMT USA through two British
Columbia-resident holding companies, AMT Environmental Products Inc. ("AMT") and
PSI Acquisitions Corp. ("PAC"). PSI is a Nevada corporation incorporated in July
1996. By a reorganization completed February 26, 1997, PSI 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 PSI and 155,130 preferred shares of
PSI's 99.9% owned subsidiary, PSI Acquisitions Corp., a British Columbia
corporation.

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. Shareholders approved the reorganization at a Special Meeting
held on November 12, 1996.

The Registrant and its subsidiaries, PAC, AMT and AMT USA are herein referred to
together as "Polymer Solutions, Inc.", "PSI" or the "Company".

The market for paints and coatings in the USA is estimated at US$17.2 billion
and the market is expected to track the growth of US GDP. The Company's primary
target market is the five western states, which include California, Nevada,
Oregon, Washington and Arizona. There are about 250 paint companies operating in
this region with combined revenue estimated at US$3.4 billion. Revenue per
company ranges from the multi-million dollar company with 500 or more employees,
to the cottage industry companies with revenue of several hundreds of thousand
dollars and fewer than 10 employees. Revenue per company in these five western
states is estimated to average US$13.5 million.

PSI's growth strategy is twofold. First, to identify and acquire several
companies that have profitable revenue in complimentary product lines with
established distribution channels. In addition, management believes that this
growth strategy will accrete to margins, which, due to PSI's size, should
provide an above average industry level of EBITDA.

And, second, the growth rate of the Company's high-performance low volatile
organic compound (VOC) coating products is expected to accelerate due to a
number of environmental issues that these proprietary products address and
satisfy.



                                     Page 3
<PAGE>   4

Over the past ten years, PSI has developed and produced a suite of high
performance low VOC compliant products with high quality and performance
characteristics. These products satisfy specific environmental requirements and
they compete with industry standard solvent-based products that have much higher
levels of VOCs. Management's assessment of the environmental arena is that the
trend towards reduction or elimination of VOCs and certain hazardous solvents
will accelerate in the next few years. The Company is in position to benefit, as
its low VOC products are formulations based on proprietary polymer chemistry.
These products are established in the marketplace and it is expected that the
growth rate of this market segment will be much higher than traditional coating
products and much higher than the GDP growth rate.

THE COMPANY

PSI develops and manufactures proprietary coatings and adhesives and markets
them to a wide range of users. The Company utilizes polymer chemistry and
in-house developed techniques. The primary thrust of the technology is to
provide competitively priced products that meet or exceed all proposed
governmental clean-air regulations, while delivering performance characteristics
equal or superior to existing products.

The Company's focus is the refinement and marketing of its low VOC coatings in
the five-state western region. The product group consists of stains, sealers and
a wide variety of topcoats suitable for use by industrial and retail customers.
The Company also produces a water-based adhesive, which is sold to the aerospace
and motor home industries.

The Company's 45 employees operate out of a fully integrated new manufacturing
plant located in Chico, California. The facility is capable of producing and
shipping 4.8 million gallons of coatings per year. This equates to revenue in
excess of US$50 million per annum.

PSI's products have demonstrated superior performance and gained significant
market share in targeted California markets. PSI's team of chemists continues to
extend the Company's lead in new developments in the industry through advanced
research.

THE INDUSTRY

Worldwide paints and coatings shipments are valued at approximately $50 billion,
with sales in the USA of $17.2 billion. The adhesive and sealant markets are
valued at $18 billion, with the USA generating a third of all sales, or about $6
billion. The Original Equipment Manufacturing (OEM) segment typically includes
the higher value-added products within this diverse industry.

OEM coatings and adhesives products are performance-driven markets. The
successful products are designed to provide a particular combination of
properties at acceptable costs and application ease. PSI expects the markets for
many of its performance coatings to grow at 15-25% per year.

The Company's depth of knowledge in polymer chemistry has enabled it to develop
its current line of low VOC high-performance coatings applicable to several
media including wood, metal, glass and aggregate. In addition, it is developing
leading edge coatings and adhesives ahead of the industry's largest,
most-established firms. The Company's formulated coating and adhesive products
are significant intellectual property assets. This proprietary position reflects
a technology and expertise that enables the Company to provide products that
meet and exceed customer and regulatory expectations, especially where
competitors have been unsuccessful.

THE PRODUCTS

High VOC solvent-based coatings have been the accepted standard within the wood
furnishings industry for decades, despite their high solvent content. However,
water-based coatings and drastically VOC



                                     Page 4
<PAGE>   5

reduced solvent-based coatings offer a higher solids content, with the water or
very low VOC solvents, rather than traditional high VOC solvents, acting as the
carrier for these solids. PSI's low VOC coatings and water-based products means
that less material evaporates during spray or brush-on applications and the
materials that do evaporate are much less hazardous than traditional
solvent-based products.

PSI's research chemists have developed products that satisfy expected government
environmental guidelines while maintaining important quality standards. The
Company's low-VOC products offer several additional advantages such as increased
yield per gallon, more durability with better clarity and decreased health risks
to employees.

The Company's line of water-based and low-VOC wood coatings includes first coat
stains, sealers and topcoats for furniture manufactures. The Company also
produces and markets water-based industrial adhesives and a line of metal and
concrete coatings. Several other coating formulations are in the development
stage, such as polymeric coatings suitable for a variety of plastic substrates,
polymer-based floor coatings and ultra-violet curable coatings.

The Company markets its products under the trade marked brand name AMT.

THE MARKET

There has been resistance to change among long time users of solvent-based
coatings. Their concerns are similar to almost every industry that has been
doing things in a given way for a long time. They have a reluctance to try
something new when what they have works well for their purposes, even if what
they now use provokes environmental, health or safety concerns. Also, other
manufacturers have presented numerous sub-standard and relatively poorly
performing low VOC and water-based products to the market during the past
decade. The negative environmental and health aspects of traditional
solvent-based products have not been enough of an incentive to encourage
manufacturers and users to change technologies.

The wood coatings market is just one segment of the multi-billion dollar paint
and coatings industry. This industry can be characterized as changing rather
than growing, as more research and development effort is spent on water-based
coatings, high-solid liquid finishes, 100% solids powder coatings and radiation
curable materials for a variety of end uses including machinery, aluminum
products and wood furnishings.

The competitive nature of the paint industry results in continual acquisitions
and consolidations. The total number of US companies within the industry has
decreased steadily from 1,977 to an estimated less than 1,400 companies today.
The ten largest producers have over 50% of the U.S. market for coatings. There
are several companies, such as PPG Industries, DuPont and BASF, with national
distribution but, generally, the paint and coatings industries remain a highly
regional business.

THE GROWTH STRATEGY

The primary reason for the historical growth of the Company has been due to the
dynamics of the Company's marketing, manufacturing operations and growth
strategy. As revenues increase the incremental cost of goods sold decreases,
which positively impacts on the gross margins of incremental revenue.

PSI has historically limited its marketing and sales activities primarily to
California area but is now in position to implement a more aggressive growth
strategy. The Company is now planning the expansion of its marketing and sales
efforts to extend the market focus for its state-of-the-art coatings products to
new markets. The Company's wood coating markets include manufacturers of solid
and laminate wood furniture, rattan, cabinets, doors, windows, moldings, signs,
sporting goods and sundry smaller articles such as picture frames. The total
available target market within the California region is estimated at over US$100
million. This market can be serviced by both of PSI's Chico and El Monte
locations.



                                     Page 5
<PAGE>   6

Competitive forces and environmentally driven changes will decrease the number
of competitors in the coatings industry (particularly the mid-size companies).
The survivors will be companies that can operate globally and focus their
efforts directly on regional markets.

There are just under 1,400 firms in the United States that make paint and
coatings. Almost two-thirds of the plants are located east of the Mississippi
River. Manufacturers are typically close to population centers due to logistics.
The top 15 companies accounted for more than 60% of the US domestic coatings
market by volume in 1994.

There are many companies with revenues of less than US$15 million operating in
the marketplace. The paint business traditionally has had very few barriers to
entry and it was relatively easy to start a regional, fully integrated paint
company. However, recently introduced environmental legislation has made the
entry into the coatings business a more strenuous and expensive proposition.
These regulations are being applied to existing small manufacturers who face the
expense of upgrading their operations. In many cases, the businesses are too
small or have limited growth opportunities to offset the cost of upgrading the
manufacturing facility to achieve regulatory compliance. This economic fact
provides PSI with an opportunity to purchase existing businesses as the owners
have limited exit strategies.

There are about 215 companies that have fewer than 50 employees in the Company's
target market. These companies share some common elements such as outdated
facilities, older coating technologies and lack of growth opportunities.
Combined, however, they also have established significant distribution channels
and a large diversified customer base.


THE COMPETITION

AMT USA's major domestic competitors include AKZO Nobel, The Sherwin-Williams
Company, Guardsman/Lilly Industries, U.S. Cellulose Company, Inc., MacLac,
Cardinal Paints, Rudd Coatings, Performance Coatings, Triangle Paints and Kelly
Moore.



SALES BREAKDOWN BY MAJOR CATEGORIES OF ACTIVITY

<TABLE>
<CAPTION>
                                                                               Other
        For the Fiscal Year Ended           Wood                              Coatings            Total
        March 31                          Coatings          Adhesives         and Misc.           Sales
<S>                                      <C>               <C>               <C>               <C>
        1999                             $7,123,214        $  167,553        $  516,524        $7,807,291

        1998                             $6,640,785        $  142,459        $  545,703        $7,328,947

        1997                              4,325,930           248,587           421,458         4,995,975

        1996                              2,989,015           198,527           210,771         3,398,313

        1995                              2,175,861           170,461           168,639         2,514,961

        1994                                531,747           169,366           127,894           829,007

        1993                                 89,444           161,460            38,633           289,537
</TABLE>



                                     Page 6
<PAGE>   7

RAW MATERIALS

AMT USA's raw materials are widely available from a number of sources; thus the
Company is not dependant upon any one supplier. AMT USA carries on a program of
continual evaluation of new or improved raw materials in order to ensure that
the Company is aware of any new technology or raw material offering, improved
performance or a more cost effective way of making its products.

SEASONALITY OF THE U.S. FURNITURE INDUSTRY

Furniture manufacturers traditionally produce most of their furniture during the
period from May to October, immediately following the Spring furniture buyers'
shows in North Carolina and California.

GOVERNMENT REGULATIONS

In 1970 the U.S. Federal Government created the Environmental Protection Agency
("EPA"). The EPA was formed from the combination of existing government agencies
including the Departments of Interior, Health, Education and Welfare and Public
Welfare. The EPA administers some fourteen different statues, each of which
mandates some form of pollution control and abatement. Two of the key statutes
that affect the coatings and adhesive industries are the 1990 Clean Air Act and
the Toxic Substance Control Act.

The above-mentioned legislation applies on a U.S. national level resulting in
the establishment of National Ambient Air Quality Standards ("NAAQS"), which in
turn produced ceilings for VOC emissions. A region not complying with the NAAQS
is classified as a Non-Attainment Area and is required to develop rules that
limit emissions.

A state which contains a Non-Attainment Area receives the Control Technology
Guidelines issued by the EPA and must submit a State Implementation Plan
("SIP"), for approval by the EPA, which outlines the state's plan to meet NAAQS
emission standards. The EPA has the authority to withhold federal transfer
payments for state highway construction if the emission standards are not met.

There are 51 regions in the United States which have been classified as
Non-Attainment Areas, the most significant of which is the Los Angeles Basin in
California. The Los Angeles Basin is a major manufacturing, industrial and
population center which, in combination with its topographic and atmospheric
characteristics, produces an inversion layer conducive to retaining pollutants
(i.e. "smog"). The South Coast Air Quality Management District ("SCAQMD") was
created by the California State Legislature in 1977 with a mandate to restrict
the emissions of photochemically-reactive, smog-producing chemicals and
solvents. These chemicals and solvents often contain VOCs.

Rule 1136 was adopted in 1983 by the SCAQMD to regulate users of wood coatings
containing VOCs. The Rule describes specific grams per liter and pounds per
gallon limits for each type of coating: top coats, stains(undercoats) and
sealers. These limits were to have decreased over a six-year period from July 1,
1990 to July 1, 1996. Effective June 14, 1996, the Board of the SCAQMD resolved
to amend the timing of the implementation of reductions in allowable levels of
VOCs in top coats from July 1, 1996 to July 31, 1997, in favor of an incentive
program to reward furniture and cabinet manufacturers who make the switch to
compliant coatings in advance of the new date. Similar limits pertaining to
sealers (undercoats) and stains will also become effective July 31, 2005.

Rule 1401 was adopted during 1990 by the SCAQMD and lists six solvents typically
used in wood finishes as carcinogenic air contaminants. As such, the use of
these six substances is permitted only on a case-by-case basis. This restricts
the end user's ability to expand production using traditional solvent-based
coatings.



                                     Page 7
<PAGE>   8

RESEARCH AND DEVELOPMENT

The Company's current research and development activities include product
refinement and color development, analyzing and testing of new and competitive
products, and identification of new applications.

The Company expenses research and development costs as they are incurred. During
the fiscal year ended March 31, 1999, the Company incurred research and
development costs of $507,643 (1998 - $332,066; 1997 - $428,682 ; 1996 -
$443,592).

PRODUCT PROTECTION

The Company develops and manufactures products of a proprietary nature, as
management believes that the Company's future growth and profitability will be
closely linked to its research and development capabilities. The Company
therefore strictly maintains policies and procedures including, but not limited
to; strict internal confidentiality, patent protection (where appropriate) and
binding non-disclosure agreements. During the course of customer testing and
where total non-disclosure is not practicable, secrecy agreements are used for
further protection. AMT USA has one registered trademark WaterMaster(TM),
related to its water-based wood coating products.

MANAGEMENT

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 other
opportunities that could result in a meaningful increase in shareholder value.

Chairman of the Board - Gordon Ellis

Mr. Ellis is a Professional Engineer and Economist with a Master in Business
Administration in finance. He has over 21 years experience in development,
finance and management of diversified companies and projects.

CEO and President - E. Laughlin Flanagan

Mr. Flanagan is a senior management executive with over 20 years of broad
technology company experience, from start-up to a Fortune 500 subsidiary to a
$250 million publicly traded company. His background includes CFO, COO and CEO
positions at several leading-edge firms including National Micronetics, Inc. and
ITT Corporation. His experience encompasses the acquisition of capital and
financing, the expansion of firms through internal growth, strategic alliances
and acquisitions.

CEO & President, AMT - William A. Maligie

Mr. Maligie has a Bachelor of Science, Polymer Technology from California State
University, Chico, California and a Masters in Business Administration from the
University of Texas, Dallas. Prior to joining the Company in 1989, he managed
product development, marketing and sales for Texas Instruments and the Dynachem
Division of Morton Thiokol.

Ryan Oates, General Manager

Mr. Oates is one of PSI's leading chemists. His knowledge and ability in the
development and adaptation of wood coatings to specific situations is excellent
and has greatly contributed to PSI's product line expansion



                                     Page 8
<PAGE>   9

Craig Pollock, Vice President Marketing & Sales

Craig has over 14 years of sales management experience including Duckback
Products, Inc. and Olympic Stain. He was responsible for the establishment of
national distributor programs which helped in increasing volume by almost
10-fold in less than 6 years.

Wade Potter, Director of Research & Development

Wade Potter has both a Bachelors and a Masters degree in Chemistry and Polymer
Chemistry respectively, from the State University of New York in Syracuse, New
York. In addition, he has 19 years experience in development and market
application chemistry, including extended periods in the well-established
laboratories of Morton Thiokol Inc. and Ablestik Laboratories. Mr. Potter is
responsible for directing PSI's research and development efforts.

PSI also has additional technical sales support, manufacturing, research and
development and logistical support staff in the offices in Chico.

Secretary/Treasurer - Darryl Jones

Darryl F. Jones is a Chartered Accountant and has many years of experience in
financial management, and reporting. Mr. Jones has been on the Board of
Directors for the Company and its predecessor since January 1994. Previously,
Mr. Jones was President, CEO and a Director of a publicly-held company, listed
on the NASDAQ, which manufactures and sells absorbent products for the
industrial and animal care markets. In early 1997, Mr. Jones became Vice
President, Finance for a technology company which developments and operates a
computer network providing EDI and electronic financial services to financing
institutions.


1.12  Personnel

As of June 11, 1999, the Company has 45 full-time employees. The Company and its
subsidiaries also contract a small number of temporary employees and contractors
to provide administration or marketing services on specific, short-term
projects.


ITEM 2. PROPERTIES

Chico, CA - New Manufacturing and Administration Facility

 In fiscal year 1999, AMT USA relocated to a new leased state-of-the-art
manufacturing and administrative facility in Chico, California. The facility as
presently configured approximates 50,000 square feet. This new facility brings
the capacity of the Company to approximately $50 million of revenue per year,
with adequate room to expand at this location. This facility houses operations,
materials management, research, finance and administrative functions. The lease
requires monthly payments of $17,145 to $20,307 during the ten-year term.

During fiscal year 1999, the Company sold the 20,000 square foot facility in
Chico, California, which formerly housed the manufacturing, laboratory and
administration functions of the Company.

Los Angeles, CA -  Sales & Technical Service Facility

AMT USA has leased an office and warehouse unit of approximately 5,300 square
feet in South El Monte, California, which is located within the County of Los
Angeles. The facility has easy access to interstate highways.



                                     Page 9
<PAGE>   10

This facility serves as a warehouse, regional sales office and laboratory for
minor color matching/shading as required by wood coating customers. This
facility has improved the Company's turn-around time in development of samples
for test runs on customers' equipment. The lease has a term which expires August
31, 2001, with an option held by AMT USA to continue for an additional five-year
term at prevailing rental rates. Monthly lease payments of approximately $3,450
are required.

Vancouver, Canada Principal Executive Office

The Registrant shares 1,250 square feet of office space with related companies
at 1569 Dempsey Road, North Vancouver, British Columbia, Canada, V7K 1S8. The
terms of the rental agreement call for total monthly payments of Cdn$1,000,
which includes the use of office equipment and furniture. (See Part III, Item 13
"Certain Relationships and Related Transactions").

ITEM 3. LEGAL PROCEEDINGS

At the present time there are no material pending legal proceedings to which the
Company or any of its subsidiaries is a party, or of which any of their
properties is the subject.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1999.



                                    Page 10
<PAGE>   11

                                     PART II

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

MARKET INFORMATION

The Common Shares of the Company are listed on the OTC Bulletin Board under the
trading symbol PYSU, and on the Vancouver Stock Exchange ("VSE") under the
trading symbol PYM. The trading volumes of the Company's shares on the OTC
Bulletin Board have been very small. The VSE is the principal trading market.
Shown below are the high and low sale prices for the Common Shares for each of
the fiscal years ending March 31, 1999, 1998, and 1997, adjusted to a
post-reorganization basis (i.e. 1 new share for 3 old shares; completed February
26, 1997).

Canadian Dollars:

<TABLE>
<CAPTION>
                           FISCAL 1999                 FISCAL 1998                 FISCAL 1997
                       HIGH          LOW           HIGH          LOW           HIGH          LOW
<S>                   <C>           <C>           <C>           <C>           <C>           <C>
First quarter         $1.05         $0.75         $1.00         $0.70         $3.57         $2.13

Second quarter        $1.00         $0.60         $1.12         $0.70         $3.15         $2.13

Third quarter         $0.70         $0.40         $1.25         $0.71         $2.97         $1.80

Fourth quarter        $0.89         $0.40         $1.00         $0.70         $2.00         $1.00
</TABLE>

SHAREHOLDERS

The Company has 455 registered shareholders as at June 17, 1999. The articles
and by-laws of the Company do not contain any restrictions on the right to hold
or vote the Company's Common Shares.

DIVIDENDS

The Company has not paid any dividends to its common shareholders since
inception. The decision to pay dividends and the amount thereof is at the
discretion of the Board of Directors of the Company and will be governed by such
factors as earnings, capital requirements and the operating and financial
condition of the Company. Upon achieving profitability, the Company intends to
retain its earnings to finance growth of its business and, thus, does not intend
to pay dividends in the foreseeable future.



                                    Page 11
<PAGE>   12

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data regarding the Company's
consolidated operating results and financial position. This data has been
derived from the Company's consolidated financial statements which have been
prepared in accordance with accounting principles generally accepted in the
United States. THE FOLLOWING SELECTED FINANCIAL DATA IS QUALIFIED IN ITS
ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO (PART II, ITEM 8 FINANCIAL STATEMENTS), AND THE
MANAGEMENT'S DISCUSSION AND ANALYSIS (PART II, ITEM 7) INCLUDED ELSEWHERE IN
THIS ANNUAL REPORT ON FORM 10-K.

<TABLE>
<CAPTION>
                                                                   Year ended March 31
                                       1999              1998              1997              1996              1995
<S>                                 <C>               <C>               <C>               <C>               <C>
Sales revenue                       $ 7,807,291       $ 7,328,947       $ 4,995,975       $ 3,398,313       $ 2,514,961
Cost of goods sold                   (5,750,127)       (5,904,797)       (3,768,510)       (2,602,423)       (1,844,067)
                                    -----------       -----------       -----------       -----------       -----------
                                      2,057,164         1,424,150         1,227,465           795,890           670,894

Corp./Admin. expenses                 2,377,592        (2,102,042)       (2,029,422)       (1,982,965)       (1,462,186)

Loss from operations                   (320,428)         (677,892)         (801,957)       (1,187,075)         (791,292)
Interest expense (net)                 (280,456)         (189,382)          (96,335)          (81,611)          (11,822)
Other items                              74,594            (2,816)          (19,890)               --                --
Reorganization costs                                                       (185,449)

Loss for the year                      (526,290)         (870,090)       (1,103,631)       (1,268,686)         (803,114)
Loss per share                             (.09)            (0.21)            (0.31)            (0.40)             0.32)
Dividends per share                          --                --                --                --                --
Working capital                         926,847           501,292           477,034           875,706           438,875
Total assets                          3,206,480         3,271,130         2,368,291         2,220,570         1,276,183
Long term debt/loans                  1,815,542         1,474,506         1,126,423           400,437           157,711
Shareholders' equity (deficit)         (197,874)         (206,837)         (439,146)          651,075           275,395
</TABLE>



                                    Page 12
<PAGE>   13

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

RESULTS FROM OPERATIONS

Sales revenues for the fiscal year ended March 31, 1999 were $7,807,289, an
increase of almost 7% over the fiscal 1998 total of $7,328,947, which was an
increase of 47% over the fiscal 1997 total of $4,995,975. The increases in both
fiscal 1999 and 1998 were due to the continued growth in the number of customers
converting to the Company's wood coating products, to continued market
acceptance of the Company's new water-based mill work primer products, to
increases in sales of the traditional, well-accepted higher-VOC (volatile
organic compounds) wood coatings, and to increases in sales of the Company's
other products. The lower percentage increase from fiscal 1998 to fiscal 1999
was the result of focusing on relocation to the Company's new manufacturing
facility and improving manufacturing margins.

Gross profit for the fiscal year ended March 31, 1999 increased to $2,057,164
from $1,424,150 for fiscal 1998. This increase in gross profit was due to the
aforementioned sales increase, which accounted for an approximate $98,664
increase in margins; an approximate $624,620 of material cost reductions, and
hence, improved margins, which were achieved through a combination of negotiated
material purchase price reductions and reformulation of the Company's products;
and were offset somewhat by the increase in manufacturing overhead due to the
higher costs of the new building, by approximately $90,272. Gross profit for the
fiscal year ended March 31, 1998 increased to $1,424,150 from $1,227,465 for
fiscal 1997. This increase in gross profit was due to the aforementioned sales
increase, offset to some extent by several factors. First, a $246,925 reserve
for excess and obsolete inventory was established in accordance with prudently
conservative inventory management practices being implemented by the Company.
Second, a $96,063 non-recurring product warranty expense was incurred. Third,
$292,571 was expended for production contract labor, primarily in solvent-based
coatings.

Marketing and sales expenses in fiscal 1999 represent an 8% increase to $934,019
over the fiscal 1998 total of $864,739. This increase was caused by an
additional $38,341 in commissions expense and an additional $30,939 in
additional compensation, travel and other expenses related to the increase in
the Company's marketing and sales efforts.

Marketing and sales expenses for the fiscal year ended March 31, 1998 totaled
$864,739, an increase of 10% from the fiscal 1997 total of $784,158. The
increase was due primarily to rising commissions expense due to the increase in
sales volume.

General and administrative expenses were $935,930 for the year ended March 31,
1999 versus $905,237 in fiscal 1998 and $816,582 in fiscal 1997. The increase in
fiscal 1999 and fiscal 1998 were due primarily to one-time costs of amalgamating
personnel into one location during fiscal 199 and associated with bringing
aboard a new CEO/President for the Company and higher audit and legal fees in
fiscal 1998.

Research and development expenses were $507,643 for fiscal year ending March 31,
1999 versus $332,066 for 1998 and $428,682 in fiscal 1997. The $175,577 increase
in fiscal 1999 was due principally to additional headcount and the efforts
associated with reformulation of the Company's products to achieve higher
manufacturing margins. The 23% decrease in fiscal 1998 was due primarily to a
reallocation of personnel to customer services, combined with a greater focus on
expanding the customer base with existing products.

Interest expense, net of interest income, totaled $280,456 for the fiscal year
ended March 31, 1999 compared to $189,382 in fiscal 1998 and $96,335 in fiscal
1997. The increase in fiscal year 1999 was caused by the increase in the use of
the Company's line of credit and an increase in capital lease obligations
related to the new credit facility; these higher interest costs were offset
somewhat by the significantly lower interest rate and other charges on the new
credit facility. The increase in fiscal 1998



                                    Page 13
<PAGE>   14

was due to the increased use of the Company's operating line of credit obtained
in the beginning of fiscal 1996, and the addition of capital lease obligations
in fiscal 1998.

Other income of $74,594 for 1999 was obtained through the sale of the Company's
previous manufacturing and administration facilities. Losses in fiscal 1998
and fiscal 1997 of $2,816 and $19,890 respectively were due to the sale of
equipment disposed of at a loss.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1999, the Company had $39,303 in cash compared to $1,177 at the end
of fiscal 1998. Cash flow used in operating activities totaled $660,371 in
fiscal 1999 versus $850,261 in fiscal 1998 and $704,225 in fiscal 1997. These
requirements in fiscal 1999 were financed primarily from Private Placements of
$244,722, increased borrowing on the Company's line of credit of $406,506, the
settlement of debt reached by creditors, including related parties, of $289,785
in consideration for common shares of the Company and additional capital lease
financing of $239,127, offset by repayment of debt.

The Company expects to complete equity financing of at approximately $1,100,000
during the first quarter (ended June 30) of fiscal 2000. The Company's reliance
upon equity issues will continue until sales revenues have reached a consistent
level where adequate positive cash flow is generated from operations.

The Company has a positive working capital of $926,847 at March 31, 1999, versus
$501,292 at the end of fiscal 1998. The current ratio at March 31, 1999 was
1.7:1 and 1.3:1 for the fiscal 1998 year-end ratio. Increases in cash and
accounts receivable and a reduction in inventories and accounts payable were the
primary reasons for the increase in working capital position and current ratio,
which was mostly due to the renegotiated raw material prices, increased sales
volume and increased inventory turnover.

Capital additions during the year ended March 31, 1999 consisted of $440,459
offset by proceeds from disposal of the old facility of $346,517. This compares
to fiscal 1998 in which there was $72,610 in purchases of fixed assets along
with $488,992 of equipment acquired under capital leases, for a total of
$561,602, and a total of $159,137 in fiscal 1997. The investments in fiscal 1999
and 1998 were associated with the new plant.

ACQUISITION OF U.S. CELLULOSE AND RELATED FINANCING

The Company, through its subsidiary, AMT USA, has entered into a Letter of
Intent to acquire all the issued and outstanding shares of U.S. Cellulose Co.,
Inc. ("USC") a California-based company for consideration of (US)$1 million in
cash, plus a commitment by the Company to negotiate an employment severance
and/or benefit program, not to exceed (US)$400,000, for the current employees of
USC (excluding the owners). The acquisition price was determined as a result of
arm's length negotiations between the parties.

The Company intends to acquire USC for its existing customer base, the goodwill
and brand recognition of its products, and USC's established distribution
networks. As a result of the acquisition, the Company expects to benefit from
overall cost synergies. The Company will continue to sell USC's products under
the USC brand name because of their product recognition, at least for the short
term, and will further utilize the distribution network obtained from USC to
increase the placement of its own line of products. USC's sales, marketing,
administration and operational staff will be absorbed by the Company and
streamlined with respect to any redundancy.

To finance the transaction, the Company repriced certain warrants to encourage
exercise. In addition, on June 16, 1999, the Company signed an offering
agreement to issue up to 800,000 shares at Cdn$.80 with transferable warrants.
The Company is concurrently working on a private placement of up to 1,250,000
shares at Cdn$.80 with nontransferable warrants.



                                    Page 14
<PAGE>   15

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.

YEAR 2000

Certain computerized systems have historically used two digits rather than four
to define a year, which could result in the recognition of "00" as the year 1900
rather than the year 2000. This could result in system failures and
miscalculations. This is generally referred to as the "year 2000 issue".

With regard to the state of readiness regarding the year 2000 issue, the Company
has finished the evaluation and risk assessment relating to the potential impact
of the Year 2000 issue in the areas of plant systems, external parties and
information technology. As to plant systems, it has been determined that none of
the Company's plant operating machinery is triggered by date, with the exception
of the time clock. With regard to external parties, the Company has surveyed its
key suppliers and service providers to determine their year 2000 readiness and
their ability to provide raw materials and supplies and services without
interruption and continually accessing the potential risk. With regard to
information technology, the Company has upgraded its plant operation system
software and accounting system software to year 2000 compliant. The Company
believes that with these computer system software upgrades, the Year 2000 issue
will not pose significant plant operation system or accounting system problems.
The production Company has utilized both internal and external resources to
implement the aforementioned upgrades and has manual back-up systems available
to implement.

The total cost of the Company's year 2000 activities, including the
aforementioned computer system software upgrades, did not exceed $20,000. Future
additional costs are not expected to be material to the Company's operations,
liquidity or capital resources.

Failure to address a year 2000 issue could result in business disruptions that
may materially affect the company's operations, liquidity, or capital resources.
The Company continues to access contingency plans to address year 2000 issues
which may have a material effect. Typically these contingency plans address the
results of single events while the scope of year 2000 issues may cause multiple
events for longer durations. It is not possible for the Company to anticipate
all multiples of events which may occur. The Company will plan for multiple
events to the best of its ability and resources.

There is still uncertainty about the scope of the year 2000 issues. At this time
the Company cannot quantify the potential impact of these failures. The
Company's year 2000 program and contingency plans are being developed to address
issues within the Company's control. The program minimizes, but does not
eliminate the issues of external parties.

Note to Readers

Certain statements identified as "forward-looking statements" in this Annual
Report on Form 10-K 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.



                                    Page 15
<PAGE>   16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                      INDEX



<TABLE>
<S>                                                                     <C>
Consolidated Financial Statements:

        Report of Independent Accountants                               Page 18

        Consolidated Balance Sheets                                     Page 19

        Consolidated Statements of Operations                           Page 20

        Consolidated Statements of Shareholders' Deficit                Page 21

        Consolidated Statements of Cash Flows                           Page 22


Notes to Consolidated Financial Statements                              Page 23
</TABLE>



                                    Page 16
<PAGE>   17




POLYMER SOLUTIONS, INC.

CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998



                                    Page 17
<PAGE>   18

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and
Shareholders of Polymer Solutions, Inc.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' deficit and of cash
flows present fairly, in all material respects, the financial position of
Polymer Solutions, Inc. and its subsidiaries at March 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1999 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.


/s/PricewaterhouseCoopers, LLP


Sacramento, California
June 16, 1999



                                    Page 18
<PAGE>   19

POLYMER SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
(U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                                            MARCH 31,
                                                                      1999              1998
<S>                                                               <C>               <C>
                                ASSETS
Current assets:
  Cash                                                            $     39,303      $      1,177
  Accounts receivable, net                                           1,143,919           976,201
  Inventories, net                                                   1,009,754         1,267,751
  Prepaid expenses                                                      97,647            33,841
                                                                  ============      ============
                                                                     2,290,623         2,278,970
Fixed assets, net                                                      907,533           982,774
Other assets                                                             8,324             9,386
                                                                  ------------      ------------
                                                                  $  3,206,480      $  3,271,130
                                                                  ============      ============
                 LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
  Accounts payable                                                $    992,532      $  1,426,843
  Salaries and commissions payable                                     244,332           262,035
  Current portion of capital lease obligations                         126,912            67,738
  Current portion of mortgage payable                                       --            21,062
                                                                  ------------      ------------
                                                                     1,363,776         1,777,678
Long-term liabilities:
  Operating line of credit                                           1,286,473           879,967
  Capital lease obligations                                            482,719           402,456
  Due to related parties                                                46,350            88,895
  Convertible note payable                                                  --            72,000
  Mortgage payable                                                          --            31,188
                                                                  ------------      ------------
                                                                     3,179,318         3,252,184
                                                                  ------------      ------------
Minority interest                                                      225,036           225,783
                                                                  ============      ============
Commitments (Note 9)

Shareholders' deficit:
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,
  1999 - 6,410,833 and 1998 - 5,344,617 shares                           6,410             5,345
Additional paid-in capital                                          10,309,361         9,775,173
Accumulated deficit                                                (10,513,645)       (9,987,355)
                                                                  ------------      ------------
                                                                      (197,874)         (206,837)
                                                                  ------------      ------------
                                                                  $  3,206,480      $  3,271,130
                                                                  ============      ============
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                    Page 19
<PAGE>   20

POLYMER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
(U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                           YEARS ENDED MARCH 31,
                                                 1999             1998             1997
<S>                                           <C>              <C>              <C>

Sales revenue                                 $ 7,807,291      $ 7,328,947      $ 4,995,975

Costs of goods sold                            (5,750,127)      (5,904,797)      (3,768,510)
                                              -----------      -----------      -----------
                                                2,057,164        1,424,150        1,227,465
                                              -----------      -----------      -----------

Corporate and administrative expenses:
  Marketing and sales                             934,019          864,739          784,158
  General and administrative                      935,930          905,237          816,582
  Research and development                        507,643          332,066          428,682
                                              -----------      -----------      -----------
                                                2,377,592        2,102,042        2,029,422
                                              -----------      -----------      -----------

Loss from operations                             (320,428)        (677,892)        (801,957)

Interest expense                                 (280,456)        (189,382)         (96,335)
Other income (expense)                             74,594           (2,816)         (19,890)
Reorganization costs                                   --               --         (185,449)
                                              -----------      -----------      -----------
Loss before provision for income taxes           (526,290)        (870,090)      (1,103,631)

Provision for income taxes                             --               --               --
                                              -----------      -----------      -----------
Net loss                                      $  (526,290)     $  (870,090)     $(1,103,631)
                                              ===========      ===========      ===========

Basic and diluted net loss per share          $      (.09)     $      (.21)     $      (.31)
                                              ===========      ===========      ===========
Weighted average basic and diluted number
 of shares outstanding                          5,711,797        4,182,591        3,561,118
                                              ===========      ===========      ===========
</TABLE>



   The accompanying notes are an integral part of these financial statements.



                                    Page 20
<PAGE>   21



POLYMER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
--------------------------------------------------------------------------------
(U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                                            YEARS ENDED MARCH 31,
                                                     1999                            1998                           1997
                                             COMMON                         COMMON                         COMMON
                                             SHARES         AMOUNT          SHARES         AMOUNT          SHARES        AMOUNT
<S>                                       <C>            <C>             <C>            <C>             <C>            <C>
COMMON STOCK:
  Balance, beginning of year                 5,344,617   $      5,345       3,762,505   $      3,763       3,755,943   $      3,756

  Shares issued, pursuant to -
     Private placement                         432,000            432         960,500            961              --             --
     Exercise of warrants                           --             --              --             --           6,562              7
     Conversion of debt for common
      stock                                    633,883            633         424,324            424              --             --
     Acquisition of limited partnership             --             --         142,857            143              --             --
     Minority interest shareholder
      exchange of shares                           333             --          54,431             54              --             --
                                          ------------   ------------    ------------   ------------    ------------   ------------
  Balance, end of year                       6,410,833          6,410       5,344,617          5,345       3,762,505          3,763
                                          ------------   ------------    ------------   ------------    ------------   ------------
ADDITIONAL PAID-IN CAPITAL:
  Balance, beginning of year                        --      9,775,173              --      8,674,356              --      8,660,953
  Shares issued, pursuant to -
     Exercise of warrants                           --             --              --             --              --         13,403
     Private placement                              --        244,289              --        679,159              --             --
     Limited partnership investment                 --             --              --        (91,562)             --             --
     Conversion of debt for common stock            --        289,152              --        299,812              --             --
     Acquisition of limited partnership             --             --              --         91,419              --             --
     Minority interest shareholder
      exchange of shares                            --            747              --        121,989              --             --
                                          ------------   ------------    ------------   ------------    ------------   ------------
  Balance, end of year                              --     10,309,361              --      9,775,173              --      8,674,356
                                          ------------   ------------    ------------   ------------    ------------   ------------
DEFICIT:
  Balance, beginning of year                        --     (9,987,355)             --     (9,117,265)             --     (8,013,634)
  Net loss                                          --       (526,290)             --       (870,090)             --     (1,103,631)
                                          ------------   ------------    ------------   ------------    ------------   ------------
  Balance, end of year                              --    (10,513,645)             --     (9,987,355)             --     (9,117,265)
                                          ------------   ------------    ------------   ------------    ------------   ------------
TOTAL SHAREHOLDERS' DEFICIT                  6,410,833   $   (197,874)      5,344,617   $   (206,837)      3,762,505   $   (439,146)
                                          ============   ============    ============   ============    ============   ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.



                                    Page 21
<PAGE>   22

POLYMER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
(U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                        YEARS ENDED MARCH 31,
                                                               1999             1998             1997
<S>                                                        <C>              <C>              <C>
Cash flows used in operating activities:
  Net loss                                                 $  (526,290)     $  (870,090)     $(1,103,631)
  Adjustments to reconcile net loss to net cash used
   in operating activities:
    Depreciation and amortization                              243,777          111,157           83,581
    Writedown of other assets                                       --               --           21,229
    (Gain) loss on disposals of fixed assets                   (74,594)           2,816           19,890
    Changes in operating assets and liabilities:
      Accounts receivable                                     (167,718)        (281,269)          63,342
      Inventories                                              257,997         (174,558)        (356,543)
      Prepaid expenses and other assets                        (62,744)         (13,263)          50,297
      Accounts payable                                        (313,096)         369,661          441,828
      Salaries and commissions payable                         (17,703)           5,285           75,782
                                                           -----------      -----------      -----------

Net cash used in operating activities                         (660,371)        (850,261)        (704,225)
                                                           -----------      -----------      -----------

Cash flows provided by (used in) investing activities:
  Purchase of fixed assets                                    (201,332)         (72,610)        (159,137)
  Proceeds from disposals of fixed assets                      346,517           12,519               --
                                                           -----------      -----------      -----------

Net cash provided by (used in) investing activities            145,185          (60,091)        (159,137)
                                                           -----------      -----------      -----------

Cash flows provided by financing activities:
  Proceeds from issuance of stock                              244,722          680,120           13,410
  Proceeds from issuance of convertible debt                     8,403           72,000               --
  Proceeds from due to related parties, net                     45,621           98,729          267,980
  Payments on mortgage payable                                 (52,250)         (19,256)         (17,605)
  Borrowings on operating line of credit, net                  406,506           96,196          469,957
  Payment of capital lease obligations                         (99,690)         (18,798)              --
                                                           -----------      -----------      -----------

Net cash provided by financing activities                      553,312          908,991          733,742
                                                           -----------      -----------      -----------
Increase (decrease) in cash                                     38,126           (1,361)        (129,620)
Cash, beginning of year                                          1,177            2,538          132,158
                                                           -----------      -----------      -----------
Cash, end of year                                          $    39,303      $     1,177      $     2,538
                                                           ===========      ===========      ===========

Supplemental schedule of non-cash investing
 and financing activities:
Conversion of debt for common stock                        $   289,785      $   300,236      $        --
                                                           ===========      ===========      ===========

Minority interest shareholder exchange of shares           $       747      $   122,043      $        --
                                                           ===========      ===========      ===========

Acquisition of equipment under capital leases              $   239,127      $   488,992      $        --
                                                           ===========      ===========      ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                     Page 22

<PAGE>   23

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.   NATURE OF OPERATIONS
     Polymer Solutions, Inc. ("PSI" or "Company") is a Nevada corporation
     incorporated in 1996. Through its wholly-owned subsidiary, Alternative
     Materials Technology, Inc. ("AMT USA"), PSI is engaged in the development
     and sale of advanced polymer-based coatings, sealants and adhesives to
     industrial users in primarily California and neighboring states, including
     manufacturers of furniture, cabinets, doors and moldings.

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 14.

     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 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, which is 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 $5,000 and
     $41,530 at March 31, 1999 and 1998, respectively.

     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 thirty-nine years. In fiscal year 1999,
     land and building facilities related to the Company's former manufacturing
     location were sold.

     Repair and maintenance costs are charged against income while improvements
     are capitalized as additions to the related assets. Retirements, sales and
     disposals of assets are recorded by removing



                                    Page 23
<PAGE>   24

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

     the costs and accumulated depreciation from the asset and accumulated
     depreciation accounts with any resulting gain or loss reflected in other
     income.

     OTHER ASSETS
     Other assets consist of patent and trademark costs, representing the costs
     incurred for the related 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.

     NET LOSS PER SHARE
     The Company computes basic net loss per share 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 and
     warrants because they are anti-dilutive.

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



                                    Page 24
<PAGE>   25

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

     INCOME TAXES
     The Company uses the 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 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 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 1999
     presentation.

3.   INVENTORIES

<TABLE>
<CAPTION>
                                                            MARCH 31,
                                                     1999             1998
<S>                                               <C>              <C>
     Raw materials and supplies                   $   605,288      $   830,174
     Finished goods                                   603,250          684,502
     Less allowance for slow-moving inventory        (198,784)        (246,925)
                                                  -----------      -----------
                                                  $ 1,009,754      $ 1,267,751
                                                  ===========      ===========
</TABLE>



                                    Page 25
<PAGE>   26

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

4.   FIXED ASSETS

<TABLE>
<CAPTION>
                                                 1999
                                              ACCUMULATED
                                   COST       DEPRECIATION        NET
<S>                             <C>           <C>             <C>
     Laboratory equipment       $  104,440     $   72,539     $   31,901
     Office equipment              126,574         87,784         38,790
     Production equipment          439,009        283,954        155,055
     Leasehold improvements        135,829         12,327        123,502
     Capital leases                716,017        157,732        558,285
                                ----------     ----------     ----------
                                $1,521,869     $  614,336     $  907,533
                                ==========     ==========     ==========
</TABLE>

<TABLE>
<CAPTION>
                                                    1998
                                                 ACCUMULATED
                                      COST       DEPRECIATION        NET
<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             386,409        217,974        168,435
     Building and improvements        177,935         13,426        164,509
     Leasehold improvements            43,419            362         43,057
     Capital leases                   455,992         23,552        432,440
                                   ----------     ----------     ----------
                                   $1,372,152     $  389,378     $  982,774
                                   ==========     ==========     ==========
</TABLE>

5.   OPERATING LINE OF CREDIT
     On October 30, 1998, the Company replaced its short-term $1,000,000 line of
     credit with a revolving line of credit that provides funds up to
     $1,800,000. Funds available to be advanced are limited to 85% of eligible
     accounts receivable and 50% of eligible inventories. At March 31, 1999, the
     maximum available borrowing under the line was $1,469,656 of which
     $1,286,473 was outstanding. Interest is payable on funds advanced at the
     rate of prime plus 2.75% (10.5% at March 31, 1999). The line of credit is
     collateralized by accounts receivable, inventories, equipment and other
     assets. The line of credit expires on October 30, 2000. Terms of the line
     of credit require repayment from collections of accounts receivable. The
     line of credit provides for various financial and non-financial covenants
     including minimum working capital, net worth, capital expenditures and
     compensation limitations and is subject to certain other provisions.



                                    Page 26
<PAGE>   27

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

6.   LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

     Long-term debt at March 31, consisted of the following:

<TABLE>
<CAPTION>
                                                                          1999         1998
<S>                                                                     <C>          <C>
     Capital lease obligations bearing interest ranging from 11.97%
      to 24.58%, payable in monthly principal and interest payments
      and secured by the related equipment                              $609,631     $470,194

     Mortgage payable, paid in June 1999                                      --       52,250

     Convertible note, paid in December 1999                                  --       72,000
                                                                        --------     --------
                                                                         609,631      594,444

     Less current portion                                                126,912       88,800
                                                                        --------     --------

                                                                        $482,719     $505,644
                                                                        ========     ========
</TABLE>

     Future minimum principal payments under long-term debt obligations are as
     follows:

<TABLE>
<S>                                   <C>
     2000                             $126,912
     2001                              145,318
     2002                              149,771
     2003                              142,552
     2004                               45,078
                                      --------
                                      $609,631
                                      ========
</TABLE>

7.   RELATED PARTY TRANSACTIONS
     During fiscal year 1999, the Company converted $153,064 of debt to officers
     and directors to 334,815 shares of common stock. During fiscal 1999 and
     1998, directors and officers received 250,000 and 580,250 warrants and 0
     and 548,000 stock options for services rendered.

     Operating expense of $54,712, $79,305, $68,665 in fiscal 1999, 1998 and
     1997 were incurred on a cost plus approximately 10% markup basis from a
     corporation owned by an officer and director of the Company.

8.   INCOME TAXES
     The Company and its subsidiaries have operating loss carry-forwards in
     excess of $6,000,000 expiring at various dates through 2014, as well as
     federal and state tax credits of $221,000 and $104,000, which are
     indefinite. These operating loss carry-forwards and tax credits are
     available for offset against future taxable income 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.



                                    Page 27
<PAGE>   28

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

9.   COMMITMENTS AND SUBSEQUENT EVENTS

     ACQUISITION OF U.S. CELLULOSE COMPANY, INC.
     In February 1999, the Company entered into a non-binding letter of intent
     to acquire all of the outstanding common stock of another company in the
     coatings industry for $1,000,000. The Agreement includes a provision for
     the Company to pay up to $400,000 in involuntary termination compensation
     to U.S. Cellulose employees. The Company anticipates closing the
     transaction in June 1999.

     To finance the transaction, the Company repriced certain warrants to
     encourage exercise as disclosed in Note 12. In addition, on June 16, 1999,
     the Company signed an offering agreement to issue up to 800,000 shares at
     Cdn$.80 with transferable warrants. The Company is concurrently working on
     a private placement of up to 1,250,000 shares at Cdn$.80 with
     nontransferable warrants.

     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. Rental expense was $237,024, $54,400, and $41,400 for each of the
     three years in the period ended March 31, 1999, respectively.

     Future minimum rental commitments as of March 31, 1999, under noncancelable
     operating lease are as follows:

<TABLE>
<S>                                                  <C>
     2000                                            $  249,342
     2001                                               255,948
     2002                                               234,108
     2003                                               223,788
     2004                                               226,212
     Thereafter                                         895,965
                                                     ----------
                                                     $2,085,363
                                                     ==========
</TABLE>


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.



                                    Page 28
<PAGE>   29

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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 business or operations of
     their own prior thereto. The reorganization was accounted for in a manner
     similar to a pooling of interests.

     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 1999 and 1998, 333 and 54,431 preferred shares were
     exchanged or redeemed for 333 and 54,431 shares of the Company's common
     stock.

     FOUNDERS' SHARES
     An aggregate of 197,774 of "Founders' shares" are held in escrow by the
     Company's transfer agent at March 31, 1999. These shares are releasable
     from escrow at various times based on requirements of the Vancouver Stock
     Exchange. The founders have all rights related to these shares except the
     right to transfer the shares without the permission of the Vancouver Stock
     Exchange.

12.  STOCK OPTION PLANS AND WARRANTS AND SUBSEQUENT EVENT
     No options were granted in fiscal year 1999. The current options are all
     vested and expire in fiscal year 2001.

     The following table summarizes the activity for the stock options:

<TABLE>
<CAPTION>
                                                                    WEIGHTED-AVERAGE
                                                   UNDERLYING        EXERCISE PRICE
                                                     SHARES         CDN          U.S.
<S>                                                <C>            <C>          <C>
Stock options outstanding, March 31, 1997                 --      $     --     $     --
  Granted                                            750,000          1.00          .72
                                                    --------      --------     --------
Stock options outstanding, March 31, 1998            750,000          1.00          .72
  Forfeited                                          (11,200)         1.00           --
                                                    --------      --------     --------
Stock options outstanding, March 31, 1999            738,800      $   1.00     $    .72
                                                    ========      ========     ========
</TABLE>



                                    Page 29
<PAGE>   30

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

     In 1999 and 1998, the Company granted warrants to purchase 296,000 and
     1,080,250 common shares at an exercise price of Cdn$1.00 per share for the
     first year and Cdn$1.25 the second year. In addition, during 1999, the
     Company issued warrants for 350,000 shares at US$.65. During 1999, the
     296,000 warrants issued in connection with the fiscal 1999 private
     placement were repriced to Cdn$.76 through July 15, 1999. The warrants
     outstanding at March 31, 1999, are as follows:

<TABLE>
<CAPTION>
                                                                     WEIGHTED-AVERAGE
                                                UNDERLYING            EXERCISE PRICE                 EXPIRATION
                                                  SHARES            CDN             U.S.                DATES
<S>                                             <C>              <C>              <C>              <C>
     Warrants outstanding March 31, 1997               --               --               --
       Issued                                   1,080,250        $    1.41        $    1.02        October 1999 to
                                                                                                    December 2003
                                                ---------        ---------        ---------

     Warrants outstanding March 31, 1998        1,080,250        $    1.41        $    1.02
       Issued                                     646,000              .84              .60         July 2000 to
                                                                                                   December 2003
                                                ---------        ---------        ---------

     Warrants outstanding March 31, 1999        1,726,250        $    1.27        $     .91
                                                =========        =========        =========
</TABLE>

     On May 27, 1999, the Vancouver Stock Exchange approved the Board of
     Director's request to reduce the exercise price of 214,750 warrants issued
     in fiscal 1998 from Cdn$1.25 to Cdn$.76. The repriced warrants will be
     subject to a mandatory exercise or forfeiture provision if the Company's
     stock trading price exceeds Cdn$.91 for ten consecutive trading days.

     For purposes of the pro forma disclosures required by SFAS 123, the
     estimated fair value of options and warrants is recognized as expense upon
     issuance as the options are immediately vested. The fair value of each
     option and warrant grant is estimated at the date of grant using the
     Black-Scholes option pricing model. The Black-Scholes model was developed
     for use in estimating the fair value of traded options that have no vesting
     restrictions and are fully transferable. In addition, option valuation
     models require the input of highly sensitive assumptions, including the
     expected stock price volatility, which are subject to change from time to
     time. For this reason, the resulting pro forma compensation costs are not
     necessarily indicative of costs to be expected in future years.

     Pro forma unaudited net loss and pro forma basic and diluted unaudited net
     loss per share in fiscal year 1999 would not have been significantly
     different than reported if the Company had accounted for its stock options
     and warrants using the fair value based method of accounting established by
     SFAS 123. The following weighted average assumptions were used in the
     option pricing model to determine the fair value of the options: dividend
     yield of 0%, expected volatility of 103%, risk-free interest rate of 5.11%
     and expected lives of 3 years.



                                    Page 30
<PAGE>   31

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

13.  AMT I MARKETING LIMITED PARTNERSHIP
     Pursuant to an Asset Purchase Agreement dated March 1, 1998 between the
     Company and a Joint Venture formed in 1995 between AMT I Marketing Limited
     Partnership (the "Partnership") and the Company, the Company agreed to
     purchase the Assets of the Partnership. An evaluation was obtained and the
     assets were determined to have a fair market value of Cdn$130,000. The
     Partnership accepted this appraisal and agreed, with regulatory approval,
     to receive 142,857 common shares of PSI at US$.64 (Cdn$0.91) in exchange
     for the partnership assets.

     The Partnership was originally created as a special purpose entity to
     assist in a marketing campaign. The Partnership incurred the marketing and
     administrative costs of $241,985 in 1996 on behalf of the Company, which
     was recorded as additional paid-in capital.

14.  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, $198,694 of reorganization
     expenses, which were charged to income in fiscal years 1998 and 1997 under
     the U.S. basis, would have been treated as a capital transaction and
     charged to paid-in-capital for Canadian purposes.



                                    Page 31
<PAGE>   32

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

Not applicable


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning the Company's directors and executive officers and
regarding compliance with Section 16 of the Securities and Exchange Act of 1934,
required by this Item, is incorporated by reference to the Company's Proxy
Statement prepared for the Annual General Meeting of Shareholders to be held
August 17, 1999.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the
Company's Proxy Statement prepared for the Annual General Meeting of
Shareholders to be held August 17, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT

The information required by this Item is incorporated by reference to the
Company's Proxy Statement prepared for the Annual General Meeting of
Shareholders to be held on August 17, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference to the
Company's Proxy Statement prepared for the Annual General Meeting of
Shareholders to be held August 17, 1999.


                                     PART IV

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

(A) The following documents are filed as a part of this Report.

  (i)     FINANCIAL STATEMENTS
             See Index to Financial Statements on page 16 of this Annual Report
on Form 10-K.

  (ii)    FINANCIAL STATEMENT SCHEDULES

             Schedule II - Valuation and qualifying accounts is located on page
             34.

             Schedule III - Supplementary financial information required by Item
             302 of Regulations S-K is located on page 35

             Financial Statement Schedules may have been omitted because they
             are not applicable, are not required, or the information to be set
             forth therein is included in the Consolidated Financial Statements
             or Notes thereto.



                                    Page 32
<PAGE>   33

  (iii)   EXHIBITS

             The exhibits listed on the Exhibit Index at page 37 are filed as
             part of this Annual Report on Form 10-K.

(B)     REPORTS ON FORM 8-K  - FILED BY EDGAR

<TABLE>
<CAPTION>
              DATE OF REPORT       ITEM #          DESCRIPTION:
<S>           <C>                  <C>             <C>
        1)     September 23, 1998   5              The Company issued 432,000 common shares in
                                                   regards to a private placement of Special Warrants

        2)    December 8, 1998      5              The Company issued 633,883 commons
                                                   shares to purchasers for settlement of debt
                                                   totalling Cdn$443,718.
</TABLE>



                                    Page 33
<PAGE>   34

                                   SCHEDULE II
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                    For the Fiscal Year Ended March 31, 1999

<TABLE>
<CAPTION>
              COLUMN A                     COLUMN B          COLUMN C          COLUMN D          COLUMN E

              DESCRIPTION                 BALANCE AT        ADDITIONS        DEDUCTIONS-      BALANCE AT END
                                         BEGINNING OF       CHARGED TO        DESCRIBE          OF PERIOD
                                           PERIOD           COSTS AND
                                                            EXPENSES
<S>                                      <C>                <C>              <C>              <C>
              Allowance
              against
              available
              income
              from:

              net operating losses        $2,273,921        $  227,871           nil            $2,501,792

              federal and state
              tax credits                 $  275,000        $   50,000           nil            $  325,000
</TABLE>

              Note [1]: Considering the Company's cumulative losses, Management
              has taken a conservative approach and chosen to provide a 100%
              allowance. FAS 109 requires the Company to annually reassess this
              allowance, taking into consideration the results from operations.



                                    Page 34
<PAGE>   35
                                  SCHEDULE III
                               SUPPLEMENTARY DATA

Supplementary financial information required by Item 302 of Regulations S-K

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


<TABLE>
<CAPTION>
                                             QTR ENDING     QTR ENDING     QTR ENDING     QTR ENDING
                                               JUNE 30        SEPT 30        DEC 31          MAR 31
<S>                                          <C>            <C>            <C>            <C>
1999
----
 Net revenue                                 $1,735,261     $1,957,047     $1,966,646     $2,148,337
 Gross Profit                                   353,831        567,688        547,365        588,280
 Income (loss) from operations(1)(2)(3)        (159,114)       (65,487)       (80,275)       (15,552)
 Income (loss) before income taxes             (236,700)       (65,797)      (151,400)       (72,393)
 Net income (loss)(1)(2)(3)                    (236,700)       (65,797)      (151,400)       (72,393)
 Net income (loss) per share - basic              (0.04)         (0.01)         (0.02)         (0.01)

1998
----
 Net revenue                                 $1,643,395     $1,921,258     $1,822,961     $1,941,333
 Gross Profit(1)                                298,819        367,724        363,654        393,953
 Income (loss) from operations(2)              (191,937)      (113,769)      (196,188)      (175,998)
 Income (loss) before income taxes             (232,928)      (156,925)      (249,831)      (230,406)
 Net income (loss)                             (232,928)      (156,925)      (249,831)      (230,406)
 Net income (loss) per share - basic              (0.07)         (0.04)         (0.06)         (0.06)
</TABLE>


1999 ADJUSTED QUARTERLY FINANCIAL DATA FOR THE FISCAL YEAR ENDED.

(1)  The first quarter ended June 30, 1999 reflects a change of $10,743 from
     general and administrative expenses to interest expense.

(2)  The second quarter ended September 30, 1999 shows a reclassification in the
     amount of $74,594 for the gain on the sale of the building to other
     interest expense from general and administrative expenses and reflects a
     change of $15,987 from general and administrative expenses to interest
     expense.

(3)  The third quarter reflects a change of $45,687 from interest expense to
     general and administrative expenses for loan fees and $500 for a gain on
     the sale of fixed assets to other income from general and administrative
     expenses.

1998 ADJUSTED QUARTERLY FINANCIAL DATA FOR THE FISCAL YEAR ENDED.

(1)  Cost of goods sold has been restated to reflect the adjustment of
     approximately $590,000 to reflect an adjustment in the fourth quarter of
     fiscal year ended March 31, 1998.

(2)  The last quarter has been adjusted to reflect the reclassification of loss
     on sale of equipment of $2,816.


                                    Page 35


<PAGE>   36

                                   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 behalf
by the undersigned, thereunto duly authorized.


                                            POLYMER SOLUTIONS, INC., a
                                            Nevada, U.S.A. corporation


                                                  /s/ Gordon L. Ellis
                                            ----------------------------------
                                            Chairman of the Board of Directors
Dated:  June 28, 1999



                                    Page 36
<PAGE>   37

                                  EXHIBIT INDEX


                               Supplementary Data


<TABLE>
<S>            <C>
EXHIBIT 2      PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
               SUCCESSION

      2.1      [1]    Plan of acquisition

EXHIBIT 13     ANNUAL REPORT TO SECURITY HOLDERS, FORM 10Q OR QUARTERLY REPORT
               TO SECURITY HOLDERS
     13.1      [1]    1999 Annual Report to Shareholders
     13.2      [2]    Form 10Q for the period ending June 30, 1998
     13.3      [2]    Form 10Q for the period ending September 30, 1998
     13.4      [2]    Form 10Q for the period ending December 31, 1998

EXHIBIT 21.    SUBSIDIARIES OF THE REGISTRANT

     21.1      [1]    List of Subsidiaries of the Company

EXHIBIT 24.    POWER OF ATTORNEY

     24.1      [1]    Power of Attorney

EXHIBIT 27.    FINANCIAL DATA SCHEDULE

     27.1      [1]    Financial Data Schedule for Commercial and Industrial
                      Companies
</TABLE>

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

[1]     Filed herewith.
[2]     Incorporated by reference to the Form 10-Q filed with the Company's
        Quarterly Report for the periods ended June 30, September 30, and
        December 31, 1999.