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


                                    FORM 10-Q

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


                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998

                                       OR

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


                         COMMISSION FILE NUMBER 0-18583


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

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


                                1569 Dempsey Road
                           Vancouver, British Columbia
                                 Canada V7K 1S8
                    (Address of principal executive offices)

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


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

                                                               Yes [ ]    No [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of Dec. 31, 1998.

<TABLE>
<S>                                                          <C>
       TITLE OF CLASS                                        NO. OF SHARES
Common Shares, par value $0.001                                6,410,833
</TABLE>



                                                                               1
<PAGE>   2

                             POLYMER SOLUTIONS, INC.
                          Quarterly Report on Form 10-Q
              For the Three and Nine Months Ended December 31, 1998

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

1.   Financial Statements

          Consolidated Statements of Operations for the periods ended 
               December 31, 1998 and 1997 ...................................................... 3

          Consolidated Balance Sheets at December 31, 1998 and 
               March 31, 1998................................................................... 4

          Consolidated Statements of Cash Flows for the periods ended 
               December 31, 1998 and 1997 ...................................................... 5

          Consolidated Statements of Shareholders' Equity (Deficiency) 
               for the periods ended December 31, 1998 and 1997 ................................ 6

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

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


                          PART II -- OTHER INFORMATION

4.   Submission of matters to a vote of securities holders .................................... 16

5.   Other Information ........................................................................ 16

6.   Exhibits and Reports on Form 8-K ......................................................... 16

SIGNATURES .................................................................................... 16
</TABLE>


The accompanying interim consolidated financial statements and notes are
unaudited; However, in the opinion of management, they reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the results for the interim periods presented. Results of operations for the
periods ended December 31, 1998 are not necessarily indicative of results
expected for an entire year.

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



                                                                               2
<PAGE>   3

POLYMER SOLUTIONS, INC.

               CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED                NINE MONTHS ENDED
                                                        DECEMBER 31                      DECEMBER 31
                                                    1998           1997              1998           1997
<S>                                              <C>           <C>                <C>            <C>
Sales revenue                                    $ 1,966,646   $ 1,822,961         $ 5,658,954   $ 5,387,614

Costs of goods sold (Note 14)                     (1,419,281)   (1,459,307)         (4,190,070)   (4,357,417)
                                                 -----------   -----------         -----------   -----------
                                                     547,365       363,654           1,468,884     1,030,197
                                                 -----------   -----------         -----------   -----------
Corporate and administrative expenses:
 Marketing and sales                                 236,246       205,408             682,001       667,868
 General and administrative                          210,516       269,419             623,564       624,508
 Research and development                            134,691        85,015             374,144       239,715
                                                 -----------   -----------         -----------   -----------
                                                     581,453       559,842           1,679,709     1,532,091
                                                 -----------   -----------         -----------   -----------
Loss from operations                                 (34,088)     (196,188)           (210,825)     (501,894)

Interest expense                                    (117,312)      (53,643)           (243,072)     (137,790)
                                                 -----------   -----------         -----------   -----------
Loss before provision for income taxes              (151,400)     (249,831)           (453,897)     (639,684)
Provision for income taxes                                --            --                  --            --
                                                 -----------   -----------         -----------   -----------
Net loss                                         $  (151,400)  $  (249,831)        $  (453,897)  $  (639,684)
                                                 -----------   -----------         -----------   -----------
Basic and diluted net loss per share             $      (.02)  $      (.06)        $      (.08)  $      (.17)
                                                 -----------   -----------         -----------   -----------
Weighted average basic and diluted number
 of shares outstanding                             6,410,833     4,294,150           5,622,290     3,768,219
                                                 -----------   -----------         -----------   -----------
</TABLE>



                                                                               3
<PAGE>   4


POLYMER SOLUTIONS, INC.

                    CONSOLIDATED BALANCE SHEETS -- UNAUDITED

<TABLE>
<CAPTION>
                                                            DEC. 31                   MARCH 31
                                                             1998                       1998
                          ASSETS
<S>                                                      <C>                         <C>
Current assets:
  Cash                                                   $      3,818                $     1,177
  Accounts receivable, net                                    888,096                    976,201
  Inventories                                               1,069,021                  1,267,751
  Prepaid expenses                                            129,590                     33,841
                                                         ------------                -----------
                                                            2,090,525                  2,278,970

Fixed assets, net                                             951,701                    982,774
Other assets                                                    8,589                      9,386
                                                         ------------                -----------
                                                         $  3,050,815                $ 3,271,130
                                                         ============                ===========

         LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
  Accounts payable                                       $    851,858                $ 1,356,162
  Salaries payable                                            242,166                    262,035
  Professional fees payable                                    27,689                     70,681
  Operating line of credit                                  1,166,733                    879,967
  Current portion of capital lease obligations                 97,412                     67,738
  Current portion of mortgage payable                              --                     21,062
                                                         ------------                -----------
                                                             2,385,858                 2,657,645
Long-term liabilities:
  Capital lease obligations                                   530,421                    402,456
  Due to related parties                                       34,981                     88,895
  Mortgage payable                                                 --                     31,188
  Convertible note payable                                         --                     72,000
                                                         ------------                -----------
                                                            2,951,260                  3,252,184
                                                         ------------                -----------
  Minority interest                                           225,037                    225,783
                                                         ------------                -----------
Commitments and contingencies (Note 9)

Shareholders' equity (deficiency):
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, 12/31/98 -- 
  6,410,833 shares, and 3/31/98 -- 5,344,617                    6,411                      5,345

Additional paid-in capital                                 10,309,359                  9,775,173

Accumulated deficit                                       (10,441,252)                (9,987,355)
                                                         ------------                -----------
                                                             (125,482)                  (206,837)
                                                         ------------                -----------
                                                         $  3,050,815                $ 3,271,130
                                                         ============                ===========
</TABLE>



                                                                               4
<PAGE>   5


POLYMER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

<TABLE>
<CAPTION>
                                                         NINE MONTHS ENDED DECEMBER 31,
                                                               1998         1997
<S>                                                         <C>           <C>       
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
  Net loss (Note 14)                                        $(453,897)    $(639,684)
   Adjustments to reconcile net loss to net cash used
   in operating activities
   Depreciation and amortization                              179,712        73,479
   Loss (gain) on disposal of assets                          (74,594)          299
   Accounts receivable                                         88,105      (311,283)
   Inventories (Note 14)                                      198,730      (265,161)
   Prepaid expenses and other assets                          (95,749)       (7,024)
   Accounts payable                                          (567,165)      415,149
                                                            ---------     --------- 

Net cash used in operating activities                        (724,858)     (734,225)

CASH FLOWS USED IN INVESTING ACTIVITIES:
  Capital additions                                          (420,264)     (161,974)
  Proceeds from disposal of assets                            347,017
                                                            ---------     --------- 
Net cash used in investing activities                         (73,247)     (161,974)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
  Cost of financing                                           (49,156)           --
  Proceeds from private placement                             293,876       596,438
  Proceeds from conversion of debt to equity                  289,785       300,236
  Proceeds from (payments on) convertible note                (72,000)       72,000
  Proceeds from (payments on) due to related
   parties, net                                               (53,914)     (220,488)
  Proceeds from (payments on) mortgage payable                (52,250)      (14,279)
  Borrowings on operating line of credit, net                 286,766       212,972
  (Payment) of capital lease obligations                      157,639            --
                                                            ---------     --------- 
Net cash provided by financing activities                     800,746       946,879
                                                            ---------     --------- 
Increase (decrease) in cash                                     2,641        50,680
Cash, beginning of period                                       1,177         2,538
                                                            ---------     --------- 
Cash, end of period                                         $   3,818     $  53,218
                                                            =========     =========
</TABLE>



                                                                               5
<PAGE>   6

POLYMER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                  NINE MONTHS ENDED DECEMBER 31,
                                                  1998                      1997
                                         -------------------------------------------------
                                          COMMON                     COMMON
                                          SHARES        AMOUNT       SHARES        AMOUNT
                                         -----------------------   ------------------------
<S>                                      <C>         <C>           <C>         <C>        
COMMON STOCK:
  Balance, beginning of period           5,344,617        $5,345   3,762,505       $3,763

  Shares issued, pursuant to --
   Private placement and other             432,333           432     885,339          885
   Debt to equity conversion               633,883           634     424,324          424
     (Shares to be issued subject
       to regulatory approval)

  Balance, end of period                 6,410,833         6,411   5,072,168         5,072
                                         ---------   -----------   ---------   -----------
ADDITIONAL PAID-IN CAPITAL:
  Balance, beginning of period                  --     9,775,173          --     8,674,356
  Shares issued, pursuant to -
   Private placement, conversion of
     preferred shares and other                 --       294,190          --       696,089
   Debt to equity conversion                    --       289,151          --       299,812
   Cost of financing                            --       (49,155)         --            --

  Balance, end of period                        --    10,309,359          --     9,670,257
                                         ---------   -----------   ---------   -----------
DEFICIT:
  Balance, beginning of period                  --    (9,987,355)         --    (9,117,265)
  Net loss (Note 14)                            --      (453,897)         --      (639,684)
                                         ---------   -----------   ---------   -----------
  Balance, end of period                        --   (10,441,252)         --    (9,756,949)
                                         ---------   -----------   ---------   -----------
TOTAL SHAREHOLDERS' EQUITY
 (DEFICIENCY)                            6,410,833   $  (125,482)  5,072,168   $   (81,620)
                                         =========   ===========   =========   ===========
</TABLE>



                                                                               6
<PAGE>   7

POLYMER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------

1.   NATURE OF OPERATIONS 

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

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

     As of December 31, 1998, the Company's financial statements reflect a
     reduction in losses from operations compared to prior periods, as restated
     per Note 14. In addition, on October 30, 1998, the Company's operating
     subsidiary obtained a new $1,800,000 asset-based line of credit, which is
     expected to save approximately 10 percentage points per annum in interest
     and fees, and which is expected to finance the continued growth of the
     Company. See Note 5.

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 15.

     BASIS OF CONSOLIDATION

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

     FINANCIAL STATEMENT PRESENTATION

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

     CONCENTRATION OF CREDIT RISK

     Financial instruments that potentially subject the Company to significant
     concentrations of credit risk consist primarily of trade accounts
     receivable from wood coatings customers. Concentrations of credit risk with
     respect to trade accounts receivable are limited due to the large number of
     customers. The Company performs credit evaluations of its customers'
     financial condition and generally does 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 $34,628 and $41,530 at December 31, 1998 and March 31, 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.



                                                                               7
<PAGE>   8

     FIXED ASSETS

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

     OTHER ASSETS

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

     LONG-LIVED ASSETS

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

     STOCK OPTIONS

     The Company accounts for its stock option plan in accordance with the
     intrinsic value method, under which no compensation expense is recognized
     in the financial statements except where the fair market value of the stock
     exceeds the exercise price of the options granted on the date of the grant.

     ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

     The Financial Accounting Standards Board issued Statement of Financial
     Accounting Standard No. 128, "Earnings per Share", which changes the basis
     upon which earnings (or loss) per share is calculated. As required by this
     statement, the Company adopted its provisions for the quarter ended
     December 31, 1998, and retroactively for each quarter presented in the
     financial statements.

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

     RESEARCH AND DEVELOPMENT COSTS

     Research and development costs are expensed as they are incurred.

     REVENUE RECOGNITION

     Revenue from the sale of products is recognized upon shipment.

     FOREIGN CURRENCY TRANSLATION

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

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

     INCOME TAXES

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



                                                                               8
<PAGE>   9

     FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The fair value of the Company's financial instruments for cash, accounts
     receivable, accounts payable, salaries payable and professional fees
     payable approximate carrying value due to their short-term nature. The fair
     value of the operating line of credit approximates carrying value due to
     the floating rate interest terms. The fair value of the mortgage payable
     approximates carrying value as its interest rate approximates market for
     borrowings with similar terms. The fair value of Due to related parties
     cannot be estimated because of the nature of the relationships involved.

     RECLASSIFICATIONS

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

3.   INVENTORIES

<TABLE>
<CAPTION>
                                                 DEC. 31,      MARCH 31,
                                                  1998          1998
<S>                                            <C>           <C>       
Raw materials and supplies                     $  643,242    $  830,174
Finished goods                                    665,620       684,502
Less allowance for a slow-moving inventory       (239,841)     (246,925)
                                               ----------    ----------
                                               $1,069,021    $1,267,751
</TABLE>

4.   FIXED ASSETS

<TABLE>
<CAPTION>
                                                            DECEMBER 31, 1998
                                                               ACCUMULATED
                                                    COST       DEPRECIATION       NET

<S>                                              <C>           <C>             <C>     
Land                                             $       --      $      --     $     --
Laboratory equipment                                138,579         73,661       64,918
Office equipment                                    181,206         90,600       90,606
Production Equipment -- owned and leased          1,026,611        377,976      648,635
Building                                                 --             --           --
Leasehold improvements                              147,329          9,562      137,767
Assets in hands of customers                         10,478            703        9,775
                                                 ----------      ---------     --------
                                                 $1,504,203      $ 552,502     $951,701
                                                 ==========      =========     ========

                                                              MARCH 31, 1998

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


On July 22, 1998, the Company sold the land and building of its previous
operations facility.

5.   OPERATING LINE OF CREDIT

     The Company, on October 30, 1998, through its operating subsidiary,
     replaced its prior loan arrangements with a new $1,800,000 asset-based
     revolving line of credit. Funds available to be advanced are limited to 85%
     of eligible accounts receivable up to the maximum loan amount, and to 50%
     of eligible inventories to a maximum of $600,000. Interest is payable on
     funds advanced at prime rate as published by Citibank, N.A. plus 2.75% per
     annum.



                                                                               9
<PAGE>   10

6.   LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

     Long-term debt at December 31, 1998 and March 31, 1998 consisted of the
     following:

<TABLE>
<CAPTION>
                                                                            12/31/98      3/31/98
<S>                                                                         <C>           <C>     
Capital lease obligations bearing interest ranging from 12 1/2%             $627,833      $470,194
 to 18 2/3%, payable in monthly principal and interest payments
 and secured by the related equipment

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

Convertible note bearing simple interest of 10%, payable in a balloon
 payment of principal and interest in June, 1999; note is
 convertible at US$.72 per common share                                           --        72,000
                                                                            --------      --------
                                                                             627,833       594,444

Less current portion                                                          97,412        88,800
                                                                            --------      --------
                                                                            $530,421      $505,644
                                                                            ========      ========
</TABLE>

7.   RELATED PARTY TRANSACTIONS

     At December 31, 1998, $34,981 was due to related parties of the Company.

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

9.   COMMITMENTS AND CONTINGENCIES

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

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

 10. PREFERRED STOCK

     AUTHORIZED

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



                                                                              10
<PAGE>   11

11.  COMMON STOCK

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

     MINORITY INTEREST

     In completing the Reorganization, the Company consolidated its shares on
     the basis of one common share of PSI, in exchange for three previously
     existing common shares of AMT. Canadian shareholders holding 465,388 common
     shares of AMT elected to receive 155,130 non-transferable preferred shares
     of PAC in order to defer the tax consequences of receiving a U.S. security.
     The preferred shares of PAC are convertible or redeemable into common
     shares of PSI on a 1:1 basis at any time and have certain rights and
     benefits of PSI common shares, particularly relating to the declaration of
     dividends and proceeds from liquidation, dissolution or wind-up of the
     Company. PAC preferred shares are non-voting and the Company may redeem the
     PAC preferred shares for common shares of PSI at any time after September
     1, 2001. To date a total of 54,764 preferred shares have been exchanged or
     redeemed for 54,764 shares of the Company's common stock.

     FOUNDERS' SHARES

     An aggregate of 197,774 shares were held in escrow by the Company's
     transfer agent at March 31, 1998. These were issued at a price of US$0.13
     (Cdn$0.18) per share in March 1987, pursuant to AMT's incorporation and
     initial public offering. These shares will be released on the basis of one
     share for each US$10.27 (Cdn$14.22) of accumulated "cash flow" of the
     Company, as defined in the Escrow Agreement. Any of the 197,774 shares that
     are not released from escrow on or before December 15, 1997 may be
     canceled. The Company is currently awaiting a response from the Vancouver
     Stock Exchange to review and further extend the expiration date.

     SHARES FOR DEBT

     At September 30, 1998, the number of common shares of common stock
     outstanding and the equity portion of the balance sheet reflected the
     conversion of $289,785 of debt to 633,883 shares, which were to be issued
     subject to regulatory approval. Such regulatory approval was obtained
     during the quarter ended December 31, 1998.

12.  STOCK OPTION PLANS AND WARRANTS

     Management of the Company, in the Proxy relating to the August 6, 1998
     Annual General Meeting of the Company, received shareholder approval to
     adopt a 1998 Economic Value Added Incentive Compensation Plan (EVA Plan).
     This Plan authorizes the grant of options for the purchase of 1,000,000
     Common shares of the Company and reservation of the 1,000,000 Common
     shares.



                                                                              11
<PAGE>   12

13.  FINANCING

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

     During the quarter ended September 30, 1998, the Company issued 400,000
     shares of its common stock related to the aforementioned transaction, along
     with warrants to purchase a further 200,000 common shares. Net proceeds
     totaled $272,108. Additionally, a commission, paid in special warrants,
     consisted of 32,000 common shares and warrants to purchase 16,000 common
     shares, and agents who arranged the placement of the above financing
     warrants received 80,000 additional warrants exercisable into 80,000 common
     shares. The agents' warrants have the same components, terms and conditions
     as the share purchase warrants.

14.  FOURTH QUARTER ADJUSTMENT TO FISCAL YEAR 1998 (UNAUDITED) 

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

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

     For comparison with quarterly data for the fiscal year ending 3/31/99, the
     cost of goods sold and inventories for each of the first three quarters of
     the fiscal year ending 3/31/98 have been adjusted as depicted above in
     order to reflect the impact of the $590,000 adjustment on a quarterly
     basis.

15.  DIFFERENCES BETWEEN UNITED STATES AND CANADIAN ACCOUNTING PRINCIPLES AND
     PRACTICES 

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



                                                                              12
<PAGE>   13

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

<TABLE>
<CAPTION>
                                              DECEMBER 31,                      MARCH 31,
                                                 1998                            1998
                                          U.S.        CANADIAN            U.S.        CANADIAN
                                         BASIS         BASIS             BASIS         BASIS
<S>                                  <C>            <C>              <C>            <C>        
ASSETS
Current assets                       $  2,090,525   $ 2,090,525      $  2,278,970   $ 2,278,970
Fixed assets (a)                          951,701       936,477           982,774       967,550
Other assets                                8,589         8,589             9,386         9,386
                                     ------------   -----------      ------------   -----------
                                     $  3,050,815   $ 3,035,591      $  3,271,130   $ 3,255,906
                                     ------------   -----------      ------------   -----------

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities                  $  2,385,858   $ 2,385,858      $  2,657,645   $ 2,657,645
Long term liabilities                     565,402       565,402           594,539       594,539
Minority interest                         225,037       225,037           225,783       225,783
Common shares                               6,411         6,411             5,345         5,345
Additional paid-in capital (a)(c)      10,309,359     9,509,317         9,624,750     8,822,110
Deficit (a)(c)                        (10,441,252)   (9,656,434)       (9,836,932)   (9,049,516)
                                     ------------   -----------      ------------   -----------
                                     $  3,050,815   $ 3,035,591      $  3,271,130   $ 3,255,906
                                     ------------   -----------      ------------   -----------
</TABLE>


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

<TABLE>
<CAPTION>
                                                  NINE MONTHS ENDED DECEMBER 31,
                                                     1998               1997
<S>                                               <C>                 <C>       
Net loss under U.S. basis                         $(453,897)          $(639,684)
Effect of change in reporting currency (a)               --                  --
Effect of Arrangement costs (c)                          --                  --
                                                  ---------           ---------
Net loss under Canadian basis                     $(453,897)          $(639,684)
                                                  =========           ========= 

Basic and diluted net loss per share under
 U.S. basis                                       $    (.08)          $    (.17)
                                                  =========           ========= 
Basic and diluted net loss per share under
 Canadian basis (b)                               $    (.08)          $    (.16)
                                                  =========           =========
</TABLE>
----------

(a)  For Canadian purposes, the Company adopted the U.S. dollar as the
     functional currency for the consolidated financial statements effective
     January 1, 1995. The comparative amounts reported in Canadian dollars for
     share capital and non-monetary assets and liabilities were translated into
     U.S. dollars at the December 31, 1994 exchange rate of one U.S. dollar
     equal to Cdn $1.4018. 

(b)  On a U.S. basis, common shares returnable to the issuer if specified
     conditions are not met are excluded from the determination of weighted
     average number of common shares used for calculation of earnings per share
     if those conditions are not currently being attained. On a Canadian basis,
     the 197,774 common shares escrowed for release pursuant to cumulative cash
     flow earned from operations would have been included for reporting loss per
     share. 

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



                                                                              13
<PAGE>   14

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
              For the Three and Nine Months ended December 31, 1998

RESULTS FROM OPERATIONS

Sales revenue increased 8% to $1,966,646 and 5% to $5,658,954 for the three and
nine month periods ended December 31, 1998, respectively, over sales revenue for
the comparable periods one year ago, reflecting continued growth in demand for
the Company's coatings and other products.

Gross profit increased to 28% from 20% during the third quarter and to 26% from
19% for the first nine months from the comparable periods last year. This is
from lower raw material costs and bringing in-house the toll manufacturing
previously done by sub-contract manufacturers. Cost of goods sold for the
year-ago periods has been adjusted as described in Note 14 of the Notes to
Financial Statements in order to reflect the impact of a year-end $590,000
adjustment on each quarter of the fiscal year ended March 31, 1998.

Marketing and sales expense for the three months ended December 31, 1998 totaled
$236,246, an increase of 15% from $205,408 in the comparable period a year ago,
due primarily to a strengthening of the marketing and sales staff in order to
expand the customer base and distribution channels. For the nine months ended
December 31, 1998 and 1997, marketing and sales expense totaled $682,001 and
$667,868, respectively.

General and administrative expense totaled $210,516 for the quarter ended
December 31, 1998 compared to $269,419 for the year-ago period. For the nine
months ended December 31, 1998 and 1997, general and administrative expense
totaled $623,564 and $624,508, respectively.

Research and development expenses were $134,691 for the three months ended
December 31, 1998, up 58% from $85,015 in the year-ago comparable period,
reflecting an increase in the allocation of the Company's resources relating to
product development. Research and development expenses for the nine months
ending December 31, 1998 and 1997 were $374,144 and $239,715, respectively.

Interest expense totaled $117,312 for the quarter ended December 31, 1998,
compared with $53,643 for the same quarter a year ago. The increase was due to
the following: $45,752 of primarily one-time fees on the Company's new $1.8
million asset-based revolving line of credit; an increase in operating line of
credit borrowings from $996,743 at December 31, 1997 to $1,166,733 at December
31, 1998, offset by an effective interest rate reduction as a result of the new
credit facility of approximately 10 percentage points; and also to the addition
of capital lease obligations. Interest expense for the nine months ended
December 31, 1998 and 1997 was $243,072 and $137,790, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1998, the Company had $3,818 in cash compared to $1,177 at the
end of fiscal 1998. Cash flow used in operating activities totaled $724,858 in
the first nine months of 1998 versus $734,225 in the comparable period last
year. Additionally, capital additions were $420,264 in the nine months ended
December 31, 1998 compared to $161,974 for the same period a year ago. These
requirements were financed primarily from a private placement, sale of the
Company's former operating facility, conversion of debt to common equity, lease
financing and borrowings on the Company's line of credit.

The Company has a working capital deficiency of $295,333 at December 31, 1998
versus $378,675 at the end of fiscal 1998. The current ratio at December 31,
1998 was 0.9 versus 0.9 for the fiscal 1998 year-end ratio.

OUTLOOK

During the fourth quarter of fiscal 1998 and the first quarter of fiscal 1999,
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.



                                                                              14
<PAGE>   15

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 begun 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 plans to survey
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. With regard to information technology, the Company plans to
upgrade its plant operation system software and accounting system software to
year 2000 compliant versions by the end of the fourth quarter of fiscal 1999.
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 Company will utilize both internal and external resources to
implement the aforementioned upgrades.

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

With regard to the risks relating to the Company's year 2000 issue, there is
still uncertainty as to those risks, and the Company cannot at this time
quantify the total potential impact. The Company's year 2000 efforts are being
directed toward issues within the Company's control. These efforts are expected
to minimize, but not to eliminate, the issues of external parties.

The Company's contingency plans will be developed based upon the results of the
year 2000 readiness surveys described above.

Note to Readers

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



                                                                              15
<PAGE>   16

PART II -- OTHER INFORMATION


4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 

     The Company held its 1998 Annual General Meeting of Shareholders on 
     August 6, 1998. The shareholders approved:

     a)   the appointment of Price Waterhouse LLP (now PricewaterhouseCoopers),
          Sacramento, California as auditors for fiscal 1999; 

     b)   the election of directors; 

     c)   the adoption of the Polymer Solutions, Inc. 1998 Economic Value Added
          Incentive Compensation Plan.

5.   OTHER INFORMATION

     Directors as at December 31, 1998

<TABLE>
<S>                                           <C>
     Gordon L. Ellis                          Darryl F. Jones
     Stephen H. Silbernagel                   John J. Sutherland
     Gerald A. Habib                          William A. Maligie
     E. Laughlin Flanagan
</TABLE>

6.   EXHIBITS AND REPORTS ON FORM 8-K

     No exhibits.

     The Company filed a Current Report on Form 8-K, dated December 8, 1998,
which reported an issuance of shares pursuant to Shares for Debt agreements with
certain creditors.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                        POLYMER SOLUTIONS, INC.
                                        (Registrant)


Date: February 10, 1999                 /s/ Gordon L. Ellis
                                        ----------------------------------------
                                        Gordon L. Ellis
                                        Chairman


Date: February 10, 1999                 /s/ Stephen  Silbernagel
                                        ----------------------------------------
                                        Stephen Silbernagel
                                        Director