SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549

                                     Form 10-KSB

                     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                       FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                          RECYCLING CENTERS OF AMERICA, INC.
              (Name of Small Business Issuer as specified in its Charter)

                     Colorado                             84-0703717
             (State of Incorporation)                (IRS Employer ID No.)

                         23832 Rockfield Boulevard, Suite 275
                            Lake Forest, California 92630
                       (Address of Principal Executive Offices)


                                    (949) 609-0590
                            (Registrant's Telephone Number)

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

Securities to be registered pursuant to Section 12(g) of the Act:
10,222,815 Common shares $0.01 Par Value

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

        Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [   ].

        State issuers's revenues for its most recent fiscal year: $367,219

        State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which stock was sold, or the
average bid and asked prices of such stock, as of a specified date within the
past 60 days:  As of June 30, 2001, $4,341,179 (based on 7,316,713 shares held
by non-affiliates and computed by reference to the average closing bid and
asked prices of the Common Stock).

        The registrant had 10,222,815 shares of its $.01 par value common
stock issued and outstanding  as of June 30, 2001.

        The number of sequentially numbered pages in this document:_____

        Documents Incorporated by Reference:    See Part III Item 13.


TABLE OF CONTENTS

                                                                      Page

PART I  .............................................................. 2

ITEM 1  DESCRIPTION OF BUSINESS ...................................... 2

ITEM 2  DESCRIPTION OF PROPERTY ...................................... 8

ITEM 3  LEGAL PROCEEDINGS ............................................ 9

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                HOLDERS .............................................. 9

PART II .............................................................. 9

ITEM 5  MARKET OF COMMON EQUITY AND RELATED STOCK-
                HOLDER MATTERS ....................................... 9

ITEM 6  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTSN OF OPERATIONS .................11

ITEM 7  FINANCIAL STATEMENTS .................................F-2 - F-11

ITEM 8  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
                ACCOUNTING AND FINANCIAL DISCLOSURE ..................13

PART III .............................................................14

ITEM 9  MANAGEMENT OF THE COMPANY; COMPLIANCE WITH
                SECTION 16(a) ........................................14

ITEM 10 EXECUTIVE COMPENSATION .......................................15

ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND
                MANAGEMENT ...........................................17

ITEM 12 CERTAIN RELATIO SHIPS AND RELATED TRANSACTIONS ...............18

ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K .............................21

SIGNATURES ...........................................................22


<PAGE>2
                                        PART I

ITEM 1:  DESCRIPTION OF BUSINESS

I.      INTRODUCTION

        Recycling Centers of America, Inc., a Colorado corporation (referred
to herein as "We" or the "Company" or  the "Registrant") , is a development
stage company with no significant operating results to date, which is engaged
in the business of the engineering, design, marketing, sales, construction and
servicing of waste stream processing and recycling equipment.

        Recycling Centers of America, Inc., is a Colorado corporation,
originally formed in 1976 under the name Vac-Tec Systems, Inc., and
reorganized as a public shell corporation without significant assets in early
1997, after We ceased operations in the glass vacuum coating business.

        In November of 1997, a merger transaction with Aquadynamic
Technologies, Inc. ("ATI"), was completed, and ATI, a Minnesota corporation,
became a wholly-owned subsidiary of ours.  ATI had no operations of its own
prior to this merger, but conducted business through two wholly-owned
subsidiaries, Aquatek, Inc. ("AQT") and Wil-Flow, Inc. ("WFI").  WFI on March
8, 1999, was dissolved as a result of the settlement of a lawsuit between
Registrant and Jack Williams, the former owner and President of WFI.  Under
the terms of the lawsuit settlement, WFI assigned certain technology and
patents originally developed for it by Williams back to Williams and paid
Williams a fee of $37,500, in exchange for Williams' release of all claims
alleged against the Registrant by Williams.  In July of 2000, Aquatek, Inc.,
which provided engineering  services to wastewater treatment and potable water
treatment facilities, was sold back to its management for a cash purchase
price of $57,500.

                As a result of negotiations with Brody Special Projects, Inc.,
in December of 1999, We acquired all of the assets and business of Brody
Special Projects, Inc.  We were introduced to Brody Special Projects by New
Logic International, the manufacturer of the VSEP(tm) filtration technology
previously marketed by us.  Brody operated a VSEP(tm) test facility based in
Salt Lake City, Utah where many of the testing samples were analyzed.  New
Logic International, at that time, worked with Brody Special Projects under a
marketing and sales agreement.  This Agreement was non-transferable from Brody
to RCAI.  Brody also held an agreement with Pall Filter Corp. for their
patented PALLSEP(tm) filtration technology that we currently market and sell.

<PAGE>3

        In June of 1999, we acquired all the assets of a business conducted by
Bruce Selk.  Mr. Selk was originally approached by us as an individual
operating his own company under the fictitious name, "Sierra Technologies".
Mr. Selk's company had a potential customer base for the sale of the VSEP(tm)
filtration technology to the chemical and petroleum industries.  He was
introduced to us through Energy & Material Recovery, Inc., at that time a
company owned 50% by us.  As our interest in the VSEP(tm) technology grew
stronger and management could see a viable marketing opportunity, we hired Mr.
Selk to introduce us to his potential customer base, and we agreed to acquire
Mr. Selk's business.  There was no pre-existing affiliation, and the parties
dealt at arms' length with their negotiation of the terms for acquisition of
Mr. Selk's business.

        Under the informal agreement with Mr. Selk, the Registrant assumed all
of the liabilities of Sierra Technologies $(82,805), and was assigned all of
its business assets, $64,588, including its accounts receivable and its base
of customer accounts for brokered chemicals.  The business customers acquired
included Newalta Corp., Great Western Chemical, Hci Holchem, Molex Company,
MIH International Pacific Epoxy Polymer, Destara Chemical, Tosco, Recycle
Reuse and Mid America Distillations.

        There was no pre-existing relationship other than arms' length
business transactions between us and Mr. Selk or Brody Special Projects, Inc.
prior to our acquisitions. In September 2000 Mr. Selk resigned as Chief
Operating Officer of Recycling Centers of America, Inc. He took with him his
relationship based brokered chemical business. The Company, however still has
an active chemical business.

II.  BUSINESS

        Our primary business at this date is the engineering, design,
marketing, sales, construction and servicing of waste stream processing and
recycling equipment.

        We have obtained a License from Pall Filter Corp. to market and sell,
and currently markets and sells Pallsep(tm) Vibrating Membrane Treatment
Filters to the dairy industry, the food industry, the beverage industry, and
the pharmaceutical industry.

<PAGE>4

        (a)     Products and Services

        (i)  Pallsep(tm) We market, sell and act as a general contractor to
install membrane systems  manufactured by Pall Filter Corp. and patented
membrane type filtration systems, under the trade name Pallsep(tm).  These
systems filter out solids suspended in various liquid streams generated by
various manufacturing processes.  Applications for the V*SEP( system and
Pallsep(tm) system range through industries where efficient and rapid
processing of wastewater and product streams is required.  Pallsep(tm) Systems
compete with evaporators, biological systems, crossflow filters and
centrifuges.  Management believes the advantages of Pall-SEP(tm) over its
competitors are as follows:

        Filtration rates 10 x that of its competitors
        Incorporated Self-cleaning and anti-fouling characteristics
        Achieves high solids removal
        High efficiency (99% energy conversion)
        Dependability (self-repairing with only two moving parts)
        Compact design
        Low capital and operating costs

        (ii)    Pall-SEP(tm) Filtration.  The Pall-SEP(tm) filtration system
is designed for use in the food processing and pharmaceutical industries.  It
is manufactured by Pall Filter Corporation.

        We have a non-exclusive license to sell Pall-SEP(tm) Filtration
Systems in the Western Hemisphere to the following specified markets as part
of integrated systems: Food, Dairy, Beverage, Pharmaceutical, Biotech and
Cosmetic Markets.

        For the fiscal year ended June 30, 2001, this business accounted for
approximately 72% of our revenues.

(b)     Marketing and Sales

        Our marketing program includes the development of compliance data,
sales materials, plant tours and daily phone leads.  Compliance Data is data
performance We generated from on-site pilot testing.  This data specifically
shows influent characteristics prior to the filtration process and effluent
data after the filtration process.  We also utilize three sales
representatives nationwide, who operate under contract to assist us in
locating prospective customers.

<PAGE>5

        This is a two-step project.  Step one - sale of unit, ancillary
equipment and engineering services.  Step two - installation of unit along
with ancillary equipment.  We began marketing the VSEP(tm)/PALLSEP(tm)
technologies in June of 1999. We  have completed the sale of one Pallsep(tm)
Membrane Filtration unit to Dairy Farmers of America (DFA).  The application
of this unit is in treatment of wastewater to a milk condensing plant.  This
wastewater stream was a high BOD (biochemical oxygen demand) stream.  The high
BOD is the result of some milk being generated as a waste in the process and
being released as discharge to the city wastewater plant.  The use of this
technology allows the capture of those milk byproducts from the water, thereby
reducing the BOD.  The treated water is then released to the city wastewater
facility.

        The marketing of this technology is a sophisticated sale.  The
equipment is typically a capital cost item, and at many companies may need to
go through a yearly capital costing budget process.  Making a sale typically
requires on-site testing at the customer's operating facility and specific
testing of a number of different membranes tested under an assortment of
operating parameters.

        We have been conducting on-site tests at Leprino Foods in Colorado
which has led to the sale of one PallSep(tm) unit.  This customer is a
manufacturer of mozzarella cheese in the U.S.

        We also have ongoing testing at facilities operated by Safeway (ice
cream plant); Daisy Brand (yogurt); West Farm Foods (milk processing); Dean
foods (caustic wash recovery); Agrawaste (animal waste treatment); Slim Fast
(beverage) Membrane Systems Specialists (dairy).

        We have signed an Agreement with Membrane System Specialists, Inc.
("MSS"), designated as a Strategic Alliance Agreement, whereby MSS will be
selling PallSep(tm) Filter Systems, through us, at a markup over our costs
expected to be 15%.

(c)     Competition

        Our primary competitors is the manufacturer Pall Filter Corp., who
markets their system directly to users, as well as through OEMs such as us.

<PAGE>6

        More generally, we compete with numerous other companies who have
competing technologies, many of whom are larger, with greater financial
resources and larger organizations.

        Competition in this industry focuses on price, quality, features,
performance, specialization, expertise, reliability, technology, customer
relationships, marketing, advertising, sales, publicity, distribution, serving
particular market niches, and appealing to particular consumers.

(d)     Raw Materials

        Our filters are manufactured with off  the shelf components available
from many sources, with the exception of the membranes themselves and the
patented vibrating mechanisms, which are proprietary to Pall.

        Pall Filter Corp. manufactures its own filters, and we are dependent
on them for purchase of the technology and for production of the membranes.

(e)     Dependence on a Few Major Customers

        We have in process over five jobs, two of which are for installation,
and three of which are for testing, and is in the process of bidding on
thirteen additional jobs, for installation of filtration systems products.

        There is no single customer that currently or in the future is
expected to dominate our business.

(f)     Patents, Trademarks, Licenses, Etc.

        (i)     Patents and Trademarks

        We have no patents and no trademarks.

                (ii)    License of Technology

        In June of 1999, our predecessor, Brody Special Projects Company, a
Utah corporation ("Brody"), entered into an OEM Agreement with Pall Filtron,
Inc. ('Pall"), having a three year terms, and covering various proprietary
filtration products manufactured by Pall.  Pursuant to this Agreement, Pall
granted Brody a nontransferable license to integrate, market, sell, install
and support Pall's proprietary filtration products, as an integrated system
only, on a nonexclusive basis, limited to certain specified markets and
certain specified territories.

<PAGE>7

        The markets are fixed as the food, beverage, dairies, pharmaceutical,
biotech and cosmetics applications, including intermediates and wastewaters
resulting from their processing.  Drinking water is  excluded from the defined
market.  The specified territory is the Western Hemisphere, consisting of
North, Central and South America.

        The system must be sold in a configuration which includes a feed pump,
piping and valves and an integrated control system.  Brody is specifically
precluded from selling the Pall filtration products without integrating the
products  into a system.

        Pall is permitted under the contract to compete with Brody, and market
its products direct in the designated markets and territory.  Brody is
assigned the responsibilities under the contract to run samples and field
trials, purchase membranes at discount for certain systems, and design and
specify and quote prices for purchase and installation of an integrated system
using the filtration products.

        The assets of Brody were acquired by us in December of 1999, including
an assignment of Brody's rights under this Pall OEM Agreement.  Subsequently,
in December of 1999, Pall approved the assignment of Brody's rights under the
Pall OEM Agreement to us. Brody also had a License Agreement to sell VSEP(tm)
filtration systems manufactured by New Logic.  However, New Logic declined to
grant the required consent in order for Brody to transfer this License to us.
As a result, we no longer market and sell the VSEP(tm) products.

(g)     Government Regulation

        There are certain FDA (Food and Drug Administration) regulations which
regulate the installation and operation of our Filtration Systems, primarily
in the food industry.  Our filtration manufacturer, Pall Corp. is responsible
for compliance with these regulations, and we have not assumed any
responsibility or liability for compliance.  However, we  remain subject to
the risk that claims could be asserted against it based upon liability
associated with filtrating systems which it has sold.

(h)     After Market Sales Responsibility

        Pall provides the customer with a one-year equipment warranty that the
equipment will be free from defects in material and workmanship and
substantially conform to the specifications and user documentation provided by
Pall.  We have no responsibility with respect to these warranties, which are
provided in full by the manufacturer.

<PAGE>8

(i)     Research and Development

        The technology sold by us is in the early stages of market acceptance.
As a result, in order to accomplish a sale, a customer will typically require
a significant research and development effort, in the form of testing and
trials of different types of membranes and differing operating parameters.
These costs are funded in part by us, and expensed as sales expense.  To date
we have expended $30,000 in research and development costs in an effort to
develop sales of the filtration systems.

        In addition, there are many undiscovered applications for the
PallSep(tm) system that are currently being explored by us through onsite
pilot testing.  These specific tests determine the feasibility of the
prospective project and allow our engineers to select specific operating
parameters and a selection of usable membranes.  This information is used in
preparing sales proposals for the customer's consideration.  Typically, we
charge $4,750 per week for onsite testing.  Each proposal for onsite testing
is negotiated with the customer on a case by case basis.

(j)     Compliance with Environmental Laws

        We, including our wholly-owned subsidiary are  not responsible for
systems (PALLSEP(tm)) that do not meet specific environmental discharge
standards.

(k)     Employees

        We have four full time employees, including two located in California,
one located in Utah, and one located in Colorado.

ITEM 2.  DESCRIPTION OF PROPERTY

Facilities

        The Company maintains corporate offices in Lake Forest, California, in
a 900 square foot facility, under a 36 month lease, expiring in April, 2004,
at a rent of $1,533 per month.

        The Company maintains a shop and office facility in Linden, Utah, in a
1000 square foot facility, under a 36 month lease, expiring in January, 2002,
at a rent of $500 per month.

<PAGE>9

ITEM 3.     LEGAL PROCEEDINGS

        There is no litigation outstanding, and management is not aware of any
potential claims which might be asserted.

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

Nothing to Report.

PART II

ITEM 5.  MARKET OF COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company's Common Stock trades over-the-counter in the Pink Sheets
under the symbol "RCAI".  The closing sales price as of June 30, 2001, was
$0.56.

        Set forth below is the high and low bid information for the Company's
Common Stock for each full quarterly period within the two most recent fiscal
years.

                              High       Low        High       Low
        Period                Bid        Bid        Ask        Ask
---------------------         -----      -----      -----      -----
1st Quarter 2001/2002         0.54       0.37       0.68       0.45

4th Quarter 2000/2001         0.56       0.41       0.72       0.53
3rd Quarter 2000/2001         0.77       0.27       0.86       0.32
2nd Quarter 2000/2001         0.58       0.27       0.79       0.35
1st Quarter 2000/2001         0.80       0.51       1.00       0.75

4th Quarter 1999/2000         1.2500     0.3125     1.3750     0.5313
3rd Quarter 1999/2000         0.7500     0.2500     1.0000     0.3125
2nd Quarter 1999/2000         0.9375     0.8125     1.4375     1.4375
1st Quarter 1999/2000         1.9375     0.5313     2.1875     0.9375


                At March 1, 2001, the Company had approximately 610
Shareholders of record.

<PAGE>10

        The Company has not paid a dividend since its incorporation, and
management does not anticipate the Company will pay dividends in the near
future.

        The authorized capital stock of Recycling Centers of America, Inc.,
consists of 75,000,000 shares of common stock, $0.01 par value, and 100,000
shares of preferred stock, par value $1.00 per share.  The Articles of
Incorporation authorize the Company's Board of Directors to establish by
resolution different classes or series of the undesignated shares and to fix
the relative rights and preferences of such shares in any class or series.
Under Colorado law, no further action by the Company's shareholders is
necessary and only the action of the Board of Directors is required to
authorize the issuance of any undesignated shares.  There is currently no
Preferred Stock outstanding.


Common Stock

        As of  June 30, 2001, there were 10,222,815 shares of Common Stock
outstanding and held of record by 602 stockholders.  The holders of Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the holders of Capital Stock.  Holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor.  In the event of a
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any preferred stock that might
be issued in the future.  Holders of Common Stock have no preemptive or
subscription rights, and there are no redemption or conversion rights with
respect to such shares.  All outstanding shares of Common Stock are fully paid
and nonassessable.

        This summary of certain provisions of the Common Stock of the Company
is subject to, and qualified in its entirety by the Company's Articles of
Incorporation, as amended, and its Bylaws (which documents are available and
will be supplied upon request).

        The Company has outstanding $248,483 in Convertible Debentures,
bearing interest at 10% per annum, all due and payable December 2005, and
convertible at any time prior to maturity at a conversion price of $0.40-$0.65
cents per share.

<PAGE>11

ITEM 6.

                         MANAGEMENT DISCUSSION AND ANALYSIS
                               JUNE 30, 2001 AND 2000


Overview

        During the last two fiscal years ending June 30, 2001 and 2000, the
Company has unsuccessfully attempted to form a group of operating companies
that were to offer the marketing and advanced technologies to become the
leader in the recycling of liquid wastes. The results of operations reflect
the significant costs associated with the unsuccessful ventures including Wil-
Flow, Inc. and Energy & Material Recovery, Inc. (EMRI) In addition, in July
2000 the Company sold Aquatek, a wholly owned subsidiary providing engineering
consulting to its management. Also in September 2000 the Company's Chief
Executive Officer resigned and took with him his relationship based brokered
chemical business.

        Even with these set backs the Company has begun to capitalize on the
development of market opportunities for the VSEP( and PALLSEP( technologies.
In December 1999 Brody Special Projects Company (Brody) was purchased. Brody
holds the marketing rights from Pall Filtration Corporation to supply advanced
filtration technology to be used to decontaminate liquid wastes. Two key
marketing and technical personnel of Brody were hired by the Company to
forward key projects in the Dairy Industry.  The Company has begun to place
various systems in the Dairy Industry and anticipates that with successful
results of these units that additional units will be ordered by Leprino Foods
and Dairy Farmers of America. Also Slim Fast has expressed an interest to
order recycling units to assist them in waste water discharge problems.

The Company has begun to receive purchase orders from these companies for
projects that will begin during the next fiscal year.

        The Company management has taken steps to reduce its operating
expenses. Management has taken wage reductions, lease commitments have been
consolidated and decreased and the overall posture of management has been to
focus on key revenue producing projects. The report of our outside accountants
accompany our Financial Statements included in this Registration Statement,
contains the following qualification:

"The Company has no equity and has no significant operating results to date
and together raise substantial doubt about the Company's ability to continue
as a going concern".

<PAGE>12

Statement of Operations

        The Company has incurred net losses of $1,003,254 for the fiscal year
ended June 30, 2001 as compared to a net loss of $1,233,387 for the fiscal
year ended June 30, 2000. The losses for the fiscal year ended June 2000 are a
direct result of the fact that the revenues from the sale of recycling
equipment have not been sufficient to cover the Company's operating expenses.
In addition, the Company incurred significant costs of raising investor
capital of $228,958 and the purchase price of Brody of $238,028 was written
off during the fiscal year. Although recurring operational costs have been
reduced, the losses in 2001 can be attributed to significant cost of raising
investor capital of $313,654, non-recurring cost of $33,918 to break an
existing lease commitment and the final pay-off arrangement with Bruce Selk,
the former Chief Executive Officer of the Company.

        The revenues for the fiscal year ending June 30, 2000  have been
primarily from the sale of recycling equipment to Dairy Farmers of America of
$198,000 and Chemical sales of $253,031. The majority of the revenue for the
fiscal year ending June 30, 2001 can be attributed to sale of recycling
equipment and services to Leprino Foods of $144,276 and the sales of
chemicals.

        The Cost of Goods Sold represents thirty percent (53 %) of sales for
fiscal year ending June 30, 2001 as compared to forty two percent (30 %) as of
June 30, 2000. The Costs of Goods are not consistent between years as a result
of the fact that during this development stage where market penetration has
been key the margins generated on equipment sales will varying in any given
year. In addition, the Company negotiated with Pall Filter and reduced the
cost of equipment and or sent back certain equipment to this manufacturer.

        Operating expenses consist primarily of general and administrative
expenses. For the fiscal year ended June 30, 2001 operating expenses totaled
$1,275,597 as compared to $1,127,850 for the fiscal year ended June 30, 2000.
The Company has made a concerted effort to reduce its operating costs. The
major increase between years has been the increase of approximately $85,000 in
the cost of raising capital and the write-off of certain receivables from
Leprino Foods and Dairy Farmers of America which gave rise to the
aforementioned settlement with Pall Filter which reduced the Company's Cost of
Goods Sold.

        Interest expense and other finance charges increased from $7,454 for
the fiscal year ended June 30, 2000 to $20,637 for the fiscal year ended June
30, 2001. The increase between years can be attributed to the interest related
to the increase in Notes payable and loans from officers and shareholders of
approximately $100,000.

<PAGE>13

Liquidity and Capital Resources

As of June 30, 2001 the Company had cash and cash equivalents of $12,604 as
compared to cash and cash equivalents of $5,571 as of June 30, 2000. At June
30, 2001, the Company had a working capital deficiency (total current
liabilities in excess of total current assets) of $479,686 as compared to a
working capital deficit (total current liabilities in excess of  total current
assets) of $488,325 as of June 30, 2000. The working capital remained the same
between years.

The principal use of cash for the fiscal year ended June 30, 2001 and 2000 was
to fund the net loss from operations. The Company through a 506 D Offering has
solicited investment funds from the issuance of Convertible Debentures and
also converted these Convertible Debentures into common shares of the Company.
In addition, during this period the Company obtained $1.042,481 from the
issuance of common stock and $83,400 from shareholder loans to fund the loss
from operations. During the fiscal year ended June 30, 2000 the Company
obtained $906,131 from the issuance of common stock and solicited investment
funds of $315,858 from the issuance of Convertible Debentures to fund the loss
from operations.

The management of the Company has committed to covering the operating expenses
of the Company until adequate sales are generated. It is anticipated that the
Company will become profitable and begin to generate sufficient cash flow to
meet its monthly operating expenses by December 2001. In October 1999, the
Company through a Private Placement Memorandum in accordance with SEC
Regulation 504 D, began to raise one million dollars in equity capital. In
June 2000 the Company began soliciting $10.0 million in accordance with SEC
Regulation 506 D in the form of a convertible debentures. There is no
assurance that this effort will be successful or that enough capital will be
brought into the business. The Company's monthly operating expenses currently
average approximately $45,000 per month.

ITEM 7. FINANCIAL STATEMENTS

        The Company's audited financial statements for the fiscal year ending
June 30, 2001 and 1999 follow on pages F-2 through F-11.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

        Nothing to Report.


<PAGE>14

                                PART III

ITEM 9. MANAGEMENT OF THE COMPANY COMPLIANCE WITH SECTION 16(a)


        The names, ages and positions of the directors and executive officers
of the Company as of  June 30, 2001, are as follows:

Name                   Age     Position                           Since
-----------------      ---     -----------------------------      ---------
Michael C. Davies      31      Chief Financial Officer,           Dec. 1997
                               Vice President and a Director

Gordon W. Davies       32      President and a Director           Dec. 1997

        The Directors serve until the next annual meeting of shareholders, or
until their successors are elected.

Mr. Michael C. Davies

        From 1988 to 1991 Mr. Davies was the Owner/Manager of Fuel Oil
Polishing Company located in Vancouver, British Columbia, Canada.  Mr. Davies'
company was in the sales, marketing and project management of fuel oils
polishing within the Province of British Columbia.

        From 1991 to 1993 he was an Accounts Executive with Innovative
Environmental Services, Ltd. in Vancouver, a company in the business of sales
and marketing of wastewater treatment equipment.

        From 1993 to 1994 he was the Marketing Manager for Transenviro, Inc.,
located in Irvine, California.  Transenviro is an international supplier of
wastewater treatment equipment and process design engineering.

        From 1994 to 1996 Mr. Davies was the Marketing Manager for Babcock
King-Wilkinson, LP, Irvine, California, a wastewater treatment business.

        From 1996 to the present Mr. Davies has held the positions of Vice
President and a Director for Aquadynamic Technologies, Inc. and Aquatek, Inc.,
which is a wholly-owned subsidiary of Aquadynamic Technologies.  Aquadynamic
Technologies, Inc. was acquired by Registrant and became Registrant's wholly-
owned subsidiary in November of 1997.

        From 1996 to 1998 Mr. Davies held the position of Vice President,
Sales/Director for Wil-Flow, Inc., the sole supplier of its patented RGD
(Rapid Gravity Dewatering) wastewater sludge dewatering system.

        From 1997 to the present, Mr. Davies has been the Vice President,
Chief Financial Officer and a Director.  Mr. Davies is the brother of Gordon
Davies.

<PAGE>15

Mr. Gordon W. Davies

        From 1991 to 1994 Mr. Davies was an Accounts Executive for Innovative
Environmental Services, Ltd., located in Vancouver, British Columbia, which is
a company in the business of wastewater treatment equipment.

        From 1993 to 1993 he held a Sales Manager position at Transenviro,
Inc. in Irvine, California.  From 1994 to 1996, Mr. Davies was the
Sales/Marketing & Proposals Manager for Babcock King-Wilkinson, LP in Irvine,
California, and in 1996 he was the acting CEO for this company.  Babcock King-
Wilkinson, LP is in the business of process design/engineering and equipment
supply operations on a worldwide basis.

        From 1996 to the present Mr. Davies has been the President and a
Director of Aquadynamic Technologies, Inc.  He is also a Director of Aquatek,
Inc., the wholly-owned subsidiary of Aquadynamic Technologies, Inc.  Aquatek,
Inc. is an engineering design house and supplier of computer-automated process
and motor control systems for water and wastewater treatment systems.

        From 1996 to 1998 Mr. Davies was the General Manager of Wil-Flow, Inc.

        From 1997 to the present, Mr. Davies has held the position of Vice
President and a Director  for us.  Gordon Davies is the brother of Michael
Davies.

ITEM 10.     EXECUTIVE COMPENSATION

        (a)  The following table sets forth the annual compensation paid and
accrued by the Company during its last three fiscal years to its Chief
Executive Officer.  No other executive officer received annual salary and
bonus in excess of $100,000.


                                        Summary Compensation
                      -------------------------------------------------------
                      Annual Compensation             Awards          Payouts
                      -------------------------------------------------------
<table>
<caption>

            <c>       <c>        <c>        <c>         <c>           <c>           <c>       <c>         <c>

Name                                            Annual     Restricted                            All Other
and            Year                             Compen-      Stock       Underlying     LTIP      Compen-
Principal      Ending    Salary      Bonus      sation       Award(s)     Options/     Payouts    sation      Other
Position       6/30       ($)         ($)         $            ($)        SARs (#)       ($)        ($)     Securities
--------       -----     -------    -------     ------     ----------    ----------    -------   ---------  ----------
Gordon         2001      $96,000
Davies,        2000      $81,000          0       0          200,000         0            0          0          0
Pres.          1999      $60,000    $60,000       0          750,000         0            0          0          0

Michael        2001      $96,000
Davies,        2000      $81,000          0       0          200,000         0            0          0          0
CFO            1999      $60,000    $60,000       0          750,000         0            0          0          0

</table>

<PAGE>16

        The Company has no stock option program, long term incentive plans,
and no Awards were made in its last fiscal year.  The only options, warrants
or rights outstanding and in the hands of the Company's officers or directors
are options granted to them pursuant to the terms of their Employment
Contracts..

        The Company has no Long-Term Incentive Plans and no Awards were made
in its Last Fiscal Year.

        (b)  The Company has entered into the following 4 Employment Contracts
with Senior Management.

        Michael Davies

        The Company entered into a 5 year Employment Agreement with Michael
Davies in June of 1999, which provides for a salary of $96,000 per year, and a
car allowance of $550 per month.

        In addition, the contract grants Mr. Michael Davies options to
purchase 750,000 shares of the Company's Common Stock, which vest, become
exercisable, and have an option exercise price  as follows:

       No. Of Options     Date of Vesting     Option Exercise Price

          200,000          June 1, 1999              $0.30
          275,000          June 1, 2002              $0.40
          275,000          June 1, 2002              $0.40

        At June 30, 2001, 200,000 of these options remained vested and
outstanding, and 200,000 options had been exercised.  The options expire, if
not exercised, by one year beginning from the vesting date.

        Gordon Davies

        The Company entered into a 5 year Employment Agreement with Gordon
Davies in June of 1999, which provides for a salary of $96,000 per year, and a
car allowance of $550 per month.

        In addition, the contract grants Mr. Gordon Davies options to purchase
750,000 shares of the Company's Common Stock, which vest, become exercisable,
and have an option exercise price  as follows:

       No. Of Options     Date of Vesting     Option Exercise Price

          200,000          June 1, 1999              $0.30
          275,000          June 1, 2002              $0.40
          275,000          June 1, 2002              $0.40

        At June 30, 2001, 200,000 of these options remained vested and
outstanding, and 200,000 options had been exercised.  The options expire, if
not exercised, by one year beginning from the vesting date.

<PAGE>17

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth the holdings of common stock by each
person who, as of June 30 , 2000, held of record, or was known by the Company
to own beneficially, more than 5% of the outstanding common stock of the
company, by all directors individually, and by all officers and directors as a
group.

                                                  Amount and
                                                  Nature of
         Title of         Name & Address of       Beneficial      Percent of
         Class            Beneficial Owner        Ownership      Common Stocks

         Common Stock     Michael C. Davies1        925,867          10.0
         Common Stock     Gordon W. Davies2         930,400          10.0
         Common Stock     Canvasback Company,       450,000           5.0
                          Ltd.(3)
         Common Stock     Kurt Baum                 599,835           6.0



All Officers and
Directors as a Group                              2,906,102          31.0%


Footnote Warrants and Options

1 Includes 200,000 Exercised Options and 550,000 Unvested Options held by
Michael C. Davies, pursuant to his Employment Contract.

2 Includes 200,000 Exercised Options and 550,000 Unvested Options held by
Gordon W. Davies, pursuant his Employment Contract.

3 Canvasback Company, Ltd. is an Anguilla corporation whose Chief Executive
Officer is Bernadine Romney, a resident of Anguilla.

<PAGE>18

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1.      Acquisition of Business Customers of Bruce Selk, dba Sierra
Technologies

        Sierra Technologies was established by Bruce Selk in June 1997 and was
in the business of buying and selling industrial chemicals.  In June of 1999,
We offered Mr. Selk a position of CEO.  As part of these negotiations, Mr.
Selk transferred all of his business done under the name, Sierra Technologies,
into us.  Under the informal agreement with Mr. Selk, the Registrant assumed
all of the liabilities ($82,805) of Sierra Technologies, and was assigned all
of its business assets, $64,588, including its accounts receivable, and its
base of customer accounts for brokered chemicals. In September 2000 Mr. Selk
resigned as Chief  Operating Officer of Recycling Centers of America, Inc. He
took with him his relationship based brokered chemical business. The Company,
however still has an active chemical business.

3.      Acquisition of Brody Special Projects, Inc.

        In June 30 of 1999, the Company acquired from Steve Madsen and John
Ewing certain of the assets formerly belonging to Brody Special Projects
Company, a Utah corporation, which were utilized by Brody in the business of
marketing, selling and leasing VSEP( and Pall Sep(tm) Systems.  Also
transferred and assigned to the Registrant were the rights to sell and lease
VSEP( and Pall Sep(tm) Units under OEM Agreements originally held by Brody
with New Logic International and Pall Filtron, Inc., respectively.  Under the
purchase agreement with Messrs. Madsen and Ewing, the Company paid $300,000 in
staged cash payments to Brody on behalf of Messrs. Madsen and Ewing, and
agreed to assume and pay to Brody, $300,000 out of future sales.  The cash
payments based on future sales are payable as follows:

                June 13, 1999    100,000    Paid
                June 30, 1999    50,000     Paid at the Closing

The balance of the cash payment is payable in three instalments of $50,000
each, payable on March 30, 2000, June 30, 2000 and September 30, 2000.   All
of these payments have been made.

        The $300,000 to be paid out of future sales is to be paid (i) at the
rate of 25% of net sales proceeds, or (ii) the sum of $6,250, whichever is
greater, on each Pall Sep(tm) and VSEP(tm) Unit sold to certain specified
customers.  The Registrant also assumed approximately $212,000 in liabilities
of Brody that had been assumed by Messrs. Madsen and Ewing.

<PAGE>19

        New Logic subsequently declined to approve a transfer of the New Logic
OEM Agreement to the Company, because they were in the process of changing
their marketing strategy for the use of OEMs to the use of marketing
representatives, and did not wish to permit transfer of an OEM Agreement.

        As a part of the consideration for this acquisition, the Company
agreed to pay Steve Madsen, an owner of Brody, the sum of $36,000 over a six
month period, in six equal payments of $6,133, beginning January 15, 2000, and
issued 50,000 stock options to Steve Madsen and 50,000 stock options to John
Ewing (also an owner of Brody), to acquire shares of the Company's Common
Stock at $0.40 per share.  The options are vested, and have a five year term,
and expire on November 15, 2004.  In addition, Messrs. Madsen and Ewing were
each issued 200,000 additional options, at an exercise price of $0.40 per
share, in 50,000 increments to each individual, for each $4,000,000 in gross
sales which are generated by the Company's Membrane Filtration business.
These options also expire, if not vested and exercised by November 15, 2004.

4.      Issuance of Common Stock and/or Options to Officers, Directors and
Others

        The only outstanding options issued to officers and directors are
those provided for as a part of their Employment Contracts (see "Compensation
of Executive Officers").

        The Company has issued the following options to acquire the Company's
Common Stock, at an option exercise price of $0.40 per share, to the following
non-officer employees:

                                                            Option
Name                     Title       No. Of Options     Expiration Date
-------------------      -----       --------------     ---------------
David Gramazio                           200,000           08/01/02
Stuart Newton                            133,333           08/01/02
Randy Ricker                             107,500           12/29/01
Del Stevens                              100,000           12/29/01
Scott Carpenter                          250,000           12/29/02
Mary Jane Von Bokel                       50,000           01/01/02
Robert Leiphart                           42,500           01/01/02
Vern Hinderer                             50,000           01/01/02
Stuart Rubin                             100,000           01/01/02
Dave Butler                              100,000           01/01/02

<PAGE>20

5.      Outstanding Loans Owed to Officers, Directors and Certain Shareholders

        Canvasback Company, Ltd. loaned the Company an aggregate of $265,000
between January 27, 2000 and September 28, 2000, none of which has been
repaid.  This loan is evidenced by a promissory note, providing for interest
at 10% per annum, is secured by a Security Agreement and UCC-1 filing which
pledges all of the Company's assets to secure repayment of the loan, and is
payable interest monthly, with all accrued interest and principal all due and
payable on or before July 12, 2002.

6.      Three Year Employment Contracts with Certain Managers

        Steve Madsen

        The Company entered into a 3 year Employment Contract with Steve
Madsen in June 30, of 1999, which provides for a salary of $120,000 per year,
plus a vehicle allowance of $550 per month.

        In addition, the contract grants 450,000 options to purchase shares of
the Company's Common Stock at an exercise price of $0.40 per share.  The
options vest in each year in lots of 150,000 options per year, starting
January 1, 2001, and expire if they are not exercised within two years after
the vesting date.

        John Ewing

        The Company entered into a 3 year Employment Contract with John Ewing
in November, of 1999, which provides for a salary of $120,000 per year, plus a
vehicle allowance of $550 per month.

        In addition, the contract grants 450,000 options to purchase shares of
the Company's Common Stock at an exercise price of $0.40 per share.  The
options vest in each year in lots of 150,000 options per year, starting
January 1, 2001, and expire if they are not exercised within two years after
the vesting date.

<PAGE>21

ITEM 13.  INDEX TO EXHIBITS

<table>
<caption>

        <c>
           F2-F11  Audited Financial Statements as of June 30, 2001 and 2000.
    3.     (i)     *Articles of Incorporation of Recycling Centers of America, Inc.
           (ii)    *Bylaws of Recycling Centers of America, Inc.

   10.     Material Contracts
           (b)     *Employment Contract with Michael Davies
           (c)     *Employment Contract with Gordon Davies
           (d)     *OEM (License) Contract with Pall Filtron, Inc.
           (e)     *Transfer Agreement covering assets of Brody Special Projects Company

   11.     *Statement Re: Computation of Per Share Earnings

   12.     *Subsidiaries of Registrant
            (a)     Aquadynamic Technologies, Inc., a Minnesota corporation


        *Incorporated by reference to Registrant's Form 10-SB/A-2 filed on April 14, 2000.
</table>

<PAGE>22

SIGNATURES

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

                                           RECYCLING CENTERS OF AMERICA, INC.



           Date: November 27, 2001             /s/ Michael C. Davies
                                                   -----------------
                                                   Michael C. Davies
                                                   Chief Financial Officer


           Date: November 27, 2001             /s/ Gordon Davies
                                                   -----------------
                                                   Gordon Davies
                                                   President and a Director




                                     CONTENTS
                                                                            PAGE

Independent Auditors' Report ............................................... F-2

Balance Sheets ............................................................. F-3

Statement of Operations .................................................... F-4

Statements of Stockholders' Equity (Deficit) ............................... F-5

Statements of Cash Flows ................................................... F-6

Notes to the Financial Statements ................................... F-7 - F-11


<PAGE>F-2

                          INDEPENDENT AUDITORS' REPORT

                            To the Board of Directors
                        Recycling Centers of America, Inc.

We have audited the accompanying balance sheets of Recycling Centers of
America, Inc. and Subsidiaries as of June 30, 2001 and 2000 and the related
statements of operations, stockholder's equity (deficit) and cash flows for
the years then ended  These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Recycling Centers of America,
Inc. and Subsidiaries as of June 30, 2001 and 2000 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note J to the
financial statements, the Company has no equity and has no significant
operating results to date that together raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note J. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                                     /s/ Stuart Rubin, CPA
                                                         ------------------
                                                         Stuart Rubin, CPA
                                                         November 27, 2001


<PAGE>F-3

                           RECYCLING CENTERS OF AMERICA, INC.
                                    Balance Sheets

<table>
<caption>

                                                            <c>              <c>
                                                                         June 30,
                                                               ---------------------------
                                                                    2001            2000
                                                               ----------       ----------
ASSETS

Cash and cash equivalents                                          12,604            5,571
Accounts receivable, net                                          181,779          146,405
Inventory                                                          71,128           47,734
                                                               ----------       ----------
     Total Current Assets                                         265,511          199,710

Equipment, net                                                     22,065          139,160

Other Assets                                                       12,320            9,893

     TOTAL ASSETS                                                 299,896          348,763
                                                               ----------       ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                                  344,199          125,826
Contract payable                                                        -           62,266
Note payable                                                            -          120,316
Taxes payable                                                     186,900           63,769
Convertible debentures                                            248,483          315,858
                                                               ----------       ----------
     Total current liabilities                                    779,582          688,035

Long-term notes payable                                                 -          124,626
Loans from officers and shareholders                              185,560          102,160
                                                               ----------       ----------
     TOTAL LIABILITES                                             965,142          914,821

Common stock; 75,000,000 authorized of $.01 par value,
10,222,815 and 8,665,920 shares issued and outstanding
as of June 30, 2001 and 2000 respectively                       4,193,790        3,151,309
Less: common stock in treasury of 1,500,000 shares                (15,000)         (15,000)
Preferred stock                                                       380              380
Retained earnings                                              (3,841,162)      (2,469,360)
Net income                                                     (1,003,254)      (1,233,387)
                                                               ----------       ----------
     Total stockholders' equity                                  (665,246)        (566,058)

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)         299,896          348,763
                                                               ----------       ----------

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

</table>

<PAGE>F-4

                           RECYCLING CENTERS OF AMERICA, INC.
                                Statements of Operations
<table>
<caption>

                                                            <c>              <c>
                                                              For the Years Ended June 30,
                                                               ---------------------------
                                                                    2001            2000
                                                               ----------       ----------
REVENUES

Contract income                                                   264,876          213,905
Chemical sales                                                    102,343          253,031
                                                               ----------       ----------
                                                                  367,219          466,936

Cost of sales                                                     171,303          326,991
                                                               ----------       ----------
     Gross Profit                                                 195,916          139,945

OPERATING EXPENSES

Wages and payroll taxes                                           556,310          569,695
Office expenses                                                   101,390           80,756
Bad debt expense                                                  141,993           96,064
Professional fees                                                 313,654          228,958
Stock transfer fees                                                 6,817            8,128
Travel expenses                                                    48,581           27,240
Marketing expenses                                                 19,695           24,737
Depreciation expense                                               30,000           15,250
Insurance                                                          23,573           25,443
Auto expense                                                       33,084           25,914
Engineering expenses                                                  470           24,875
Dues and subscriptions                                                 30              790
                                                               ----------       ----------
     Total operating expenses                                   1,275,597        1,127,850

OTHER EXPENSE

Income from sale of Aquatek                                       (97,064)               -
Interest expense                                                   20,637            7,454
Brody Investment                                                        -          238,028
                                                               ----------       ----------
     Total other expense                                          (76,427)         245,482

NET LOSS                                                       (1,003,254)      (1,233,387)
                                                               ----------       ----------
LOSS PER SHARE                                                      (0.10)           (0.14)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                  10,222,815        8,665,920

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

</table>

<PAGE>F-5

                          RECYCLING CENTERS OF AMERICA, INC.
                     Statements of Stockholders' Equity (Deficit)
<table>
<caption>

                                     <c>           <c>           <c>           <c>           <c>            <c>

                                                                                                                   Total
                                             Common Stock              Preferred Stock           Accumulated    Stockholders
                                          Shares       Amount         Shares     Amount            Deficit        Deficit

Balance   June 30, 1999                 5,066,677     2,230,178       52,902          380       (2,469,360)       (238,802)

Issuance of Common Stock                5,099,243       921,131            -                                       921,131

Common Stock Placed in Treasury        (1,500,000)      (15,000)                                                   (15,000)

Net loss for the year ended
June 30, 2000                                   -             -            -            -       (1,233,387)     (1,233,387)
                                       ----------     ---------      -------      -------       ----------      ----------
Balance   June 30, 2000                 8,665,920     3,136,309       52,902          380       (3,702,747)       (566,058)

Adjustment from sale of Aquatek                                                                   (138,415)       (138,415)

Issuance of Common Stock                1,556,895     1,042,481                                                  1,042,481

Net loss for the year ended
June 30, 2001                                   -             -            -            -       (1,003,254)     (1,003,254)
                                       ----------     ---------      -------      -------       ----------      ----------
Balance June 30, 2001                  10,222,815     4,178,790       52,902          380       (4,844,416)       (665,246)
                                       ----------     ---------      -------      -------       ----------      ----------

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

</table>

<PAGE>F-6

                           RECYCLING CENTERS OF AMERICA, INC.
                                Statements of Cash Flow

<table>
<caption>

                                                            <c>              <c>
                                                              For the Years Ended June 30,
                                                               ---------------------------
                                                                    2001            2000
                                                               ----------       ----------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss)                                              (1,003,254)      (1,233,387)
Adjustments to reconcile net
income (loss) to net cash:
Depreciation                                                       30,000           15,250
Loss on disposition of equipment                                        -          (22,576)
Changes in assets and liabilities:
(Increase) decrease in accounts receivables                       (35,374)          12,824
(Increase) decrease in inventory                                  (23,394)         (47,734)
(Increase) decrease in other assets                                (2,427)            (220)
Increase (decrease) in accounts payable and
other current liabilities                                             645           30,125
                                                               ----------       ----------
Net Cash Provided (Used) by
Operating Activities                                           (1,033,804)      (1,245,718)
                                                               ----------       ----------
CASH FLOWS FROM INVESTING
ACTIVITIES

(Purchase) / Conversion of test equipment                         117,095         (102,444)
                                                               ----------       ----------
Net Cash Provided (Used) by
Investing Activities                                              117,095         (102,444)
                                                               ----------       ----------
CASH FLOWS FROM FINANCING
ACTIVITIES

Aquatek sale to management                                       (138,415)               -
Pall financing of equipment sales                                 128,277          124,626
Proceeds from convertible debentures                              (67,375)         315,858
Proceeds from shareholder loans                                   (41,226)        (102,840)
Common stock issued for cash                                    1,042,481          906,131
                                                               ----------       ----------
Net Cash Provided (Used) by
Financing Activities                                              923,742        1,243,775

NET INCREASE (DECREASE) IN CASH                                     7,033         (104,387)

CASH AT THE BEGINNING OF PERIOD                                     5,571          109,958
                                                               ----------       ----------
CASH AT END OF PERIOD                                              12,604            5,571
                                                               ----------       ----------

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

</table>

<PAGE>F-7

                       Recycling Centers of America, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 2001 and 2000

NOTE A - COMPANY BACKGROUND

Recycling Centers of America, Inc. (RCAI), is a Colorado corporation,
originally formed in 1976. RCAI as of June 30, 1998 was comprised of three
companies Aquadynamic Technologies, Inc. (ATI), and its subsidiaries Aquatek,
Inc. and Wil-Flow, Inc. Wil-flow, Inc., on March 8, 1999, became non
operational and the patents on the technology were returned to its former
owner and president as a result of the resolution of a lawsuit between the
parties. On June 1, 1999 ATI  acquired Sierra Technologies.

ATI markets its products and services through its two distinct wholly owned
subsidiaries. Aquatek, Inc. was organized and incorporated in 1995 to engage
in providing comprehensive contract engineering services for automated process
control systems. It's primary emphasis has been focused toward offering its
broad engineering  expertise to the domestic and foreign wastewater treatment
industries. In July 2000, Aquatek, Inc. was sold back to its management. Wil-
Flow, Inc. became a subsidiary of ATI in January of 1996 and was a  technology
company specializing in the design and fabrication of sludge dewatering
equipment for the municipal and industrial markets.

Sierra's main business is the purchasing, treatment and brokerage of chemical
and petroleum products throughout North America.


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying consolidated financial
statements follows:

1.      Principles of Consolidation

The consolidated financial statements include the accounts of Aquadynamic
Technologies, Inc.,its wholly owed subsidiaries Aquatek, Inc. and Wil-Flow,
Inc. and Sierra Technologies The financial statements of Aquatek, Inc. as of
March 31, 2001 were not included as the Company was sold back to its
management in July 2000. All material intercompany balances and transactions
including investments in subsidiaries have been eliminated.

2.      Revenue Recognition

The revenues in fiscal year 2000 were generated from the consulting services
of Aquatek. These revenues were recorded when the consulting services were
provided. The revenues in fiscal year 2001 were generated from the sale of
waste water recycling equipment and chemical sales by Aquadynamic
Technologies, Inc

<PAGE>F-8

3.      Using Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period.  Actual
results could differ from those estimates.

4.      Depreciation and Amortization

Depreciation and amortization are provided in amounts sufficient to relate the
cost of depreciable to operations over their estimated service lives as
defined below.

            Transportation Equipment               3-5 years
            Office Furniture and Fixtures          5-7 years
            Machinery and Equipment               3-10 years

The straight-line method of depreciation is used for substantially all assets
for financial reporting purposes.

5.      Income Taxes

The Company and its wholly owned subsidiaries are organized as C-corporations.

     The Company does not file consolidated tax returns and the subsidiary
Companies have not filed tax returns since 1999. The Company accounts for
income taxes under Statement of Financial Accounting Standards No. 109 (SFAS
109). SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's financial
statements of tax returns. In estimating future tax consequences SFAS 109
generally considers all expected future events other than enactments of
changes in tax law or rates.

        There has been no provision for income taxes as current and previous
operations of the Company have resulted in taxable losses. There is no
determinable benefit of these net operating losses which can be carried
forward for 15 years because of the significant losses incurred by the
Companies.

6.      Fair Value of Financial Instruments

        The carrying amount of cash, accounts and notes receivable, lines of
credit, and other liabilities due in less than one year approximated fair
value as of June 30, 2001 and 2000 due to the relatively short maturity of
these instruments.

        The carrying value of long-term liabilities approximated fair value as
of June 30, 2001 and 2000 based on the current rates offered to the Company
for similar debt of the same remaining maturities.

7. Segment Reporting

The Company's wholly owned domestic subsidiary, Aquatek, Inc., which provides
consulting services to Cass Industries, has generated all the revenue for the
year ended March 31, 2000. The revenues for the period ended March 31, 2001
were generated from sales of recycling equipment to the dairy industry. All
sales were within the United States.

8.   Recent Accounting Pronouncements

The Recent Accounting Pronouncements including SFAS 133 do not have any
applicability to the Company's current and future operations.

<PAGE>F-9

NOTE C - ACCOUNTS RECEIVABLE

All accounts Receivable are trade related. These receivables are current and
collection is fully expected. No reserve for uncollectable accounts is deemed
necessary.

NOTE D - PLANT PROPERTY AND EQUIPMENT

Plant, Property and Equipment consisted of the following at June 30, 2001 and
2000:

                                                  2001           2000
                                                -------        --------
Computers and Office Equipment                $  62,191       $  43,053
        Test Equipment                                0         117,096
        Transportation Equipment                      0               0
                                                -------        --------
                                                 62,191         160,149
        Less accumulated depreciation           (40,126)        (20,989)
                                                -------        --------
        Balance                               $  22,065       $ 139,160


Depreciation expense was $30,000 and  $15,250 for the year ended June 30, 2001
and 2000.

NOTE E - NOTES PAYABLE

Notes payable consisted of the following at June 30, 2001 and 2000:

                                                  2001           2000
                                                -------        --------
Loan Payable to Shareholders bearing
interest rate of 10 % payable in restricted
stock of the Company                           $      0       $  58,003

Note Payable to Pall Filter payable in
installments beginning March 2001               253,903         186,939
                                                -------        --------
                                        Total $ 253,903       $ 244,942

Less long-term portion                               (0)       (124,626)
Current Portion                               $ 253,903       $ 120,316

<PAGE>F-10

NOTE F - RELATED PARTY TRANSACTIONS

Certain of the Company's major shareholders have loaned money to the Company
at various times. The consolidated long-term loans as of June 30, 2001 and
2000 from related parties are $185,560 and $102,160 respectively. It is the
intent of the Company to convert these notes into common shares of stock.
These loans bear interest at ten percent (10%) per annum.

NOTE G - COMMITMENTS AND CONTINGENCIES

The Company conducts its operations utilizing leased facilities and equipment
under noncancellable operating lease agreements expiring at various dates
through the year 2003. Future minimum lease commitments, excluding property
taxes and insurance, are approximately as follows:

                         Year ending June 30,
                                2002                    $ 25,592
                                2003                      25,592
                                2004                      15,333

Rent expense for all leased facilities and equipment was approximately $24.590
and $41,748 for the year ended June 30, 2001 and 2000, respectively.

The Company has no pending lawsuits. Management is not aware of any potential
lawsuits that will have a material adverse effect on the financial position of
the Company.

NOTE H - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

The Company maintains its cash balances in more than one financial
institution.  At times, the Company's balances exceed the amounts insured by
the Federal Deposit Insurance Corporation.  The Company has not experienced
any losses in such accounts and believes it is not exposed  to any significant
credit risk on cash and cash equivalents.

The majority of the Sales in 2001  and 2000 are to a few  customers.  At June
30, 2001 and 2000, the largest one customer comprised approximately $144,276
and $198,983 of the Company's accounts receivable.  Management believes that
customer acceptance, billing, and collection policies are adequate to minimize
potential risk on trade receivables.

NOTE I - ACQUISITION OF SIERRA TECHNOLOGIES

On June 1, 1999 the Company purchased Sierra Technologies, Inc whose business
includes purchasing, treatment and brokerage of chemical and petroleum
products throughout North America. The net purchase price was $22,299 which
represents the difference between the amount owed to Sierra Technologies
vendors and the Accounts Receivable due from its  customers. In September 2000
the President of Sierra Technologies resigned as Chief Executive Officer of
Recycling Centers of America, Inc. to pursue other interests. He took with him
his relationship based brokered chemical business.

<PAGE>F-11

NOTE J - GOING CONCERN

The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred significant losses which have result in an
accumulated deficit of $ 4,844,416 at June 30, 2001 which raises substantial
doubt about the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments relation to
the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result from the outcome of this
uncertainty. It is the intent of management to create additional revenues
through its technologies and to rely upon additional equity financing if
required to sustain operations. The management of the Company has committed to
covering the operating expenses of the Company until adequate sales are
generated.

NOTE L - CONVERTILBE DEBENTURES

        The Company through a 506 D Securities Offering has solicited
investment funds. The Convertible Debentures bear interest at ten percent
(10%) per annum and are convertible into restricted common shares of the
Company at $.40 to $.65 cents per share. The Company has the right to change
the conversion price of the debentures.


NOTE M - ACQUISITION OF BRODY SPECIAL PROJECTS

In December 1999, the Company completed a merger with Brody Special Projects
Company at a cost of $300,000. The Company acquired the international
marketing agreements with New Logic and Pall Filtron for the marketing and
sale of their respective technologies.

The Company has expensed $239,000 relating to this purchase; the portion not
related to the purchase of  test equipment.