<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A

                                 Amendment No. 2

                                   (Mark One)
   [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE ACT OF 1934

           FOR THE FISCAL YEAR ENDED April 30, 2001

   [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE ACT OF 1934

           FOR THE TRANSITION PERIOD ______________ to _______________


                        COMMISSION FILE NUMBER 000-28307
                                               ---------

                              NESCO INDUSTRIES INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           NEVADA                                   13-3709558
-------------------------------                 -------------------
(State or other jurisdiction of                   (IRS Employer
 incorporation or organization)                 Identification No.)

     22-09 Queens Plaza North, Long Island City, New York         11101
    ----------------------------------------------------------------------
     (Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code 718/752-2400
                                                            ------------

           Securities registered pursuant to Section 12(b) of the Act:

  Title of each class             Name of each exchange on which registered
         None                                       None
  -------------------             -----------------------------------------

           Securities registered pursuant to section 12(g) of the Act:
                          Common Stock, par value $.001
           -----------------------------------------------------------
                                (Title of Class)

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
report(s), and (2) has been subject to such filing requirements for the past 90
days. Yes X   No
         ---    ----

Check if there is disclosure of delinquent fliers pursuant to Item 405 of
Regulation S-K contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

The issuer's revenues for its most recent fiscal year were:   $9,096,477
                                                              ----------

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, at August 8,
2001, was $969,858.

At August 8, 2001, the registrant had 6,694,963 shares of Common Stock
outstanding. Transitional Small Business Disclosure Format:  Yes       No    X
                                                                 ----       ----
Documents incorporated by reference:  None.
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                    PART I
<S>                                                                                                       <C>
Item 1.    Description of Business...............................................................          2

Item 2.    Description of Property...............................................................          9

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

Item 4.    Submission of Matters to a Vote of Security Holders...................................          11
<CAPTION>
                                                   PART II
<S>                                                                                                        <C>
Item 5.    Market Price of and Dividends on Common Equity and Other Shareholder Matters..........          12

Item 6.    Management's Discussion and Analysis of Financial Condition and Results of
           Operations............................................................................          14

Item 7.    Financial Statements..................................................................          18 (F1-F26)

Item 8.    Changes in and Disagreements With Accountants.........................................          19
<CAPTION>
                                                   PART III
<S>                                                                                                        <C>
Item 9.    Directors, Executive, Officers, Promoters and Control Persons; Compliance With
           Section 16(a) of the Exchange Act.....................................................          20

Item 10.   Executive Compensation................................................................          21

Item 11.   Security Ownership of Certain Beneficial Owners and Management........................          23

Item 12.   Certain Relationships and Other Transactions..........................................          25

Item 13.   Exhibits and Reports on Form 8-K......................................................          25

SIGNATURES ......................................................................................          26
</TABLE>







                                        i
<PAGE>

                           FORWARD-LOOKING STATEMENTS

         We have made statements under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations", "Business" and
elsewhere in this Report that are forward-looking statements within the meaning
of Section 21E of the Securities and Exchange Act of 1934. Forward-looking
statements do not describe historical events or other facts but, rather, convey
our management's current expectations. Such statements usually are prefaced with
forward-looking words such as "may", "will", "expect", "anticipate", "believe,"
"estimate" and similar terminology.

         Management's current expectations are subject to a number of factors
and uncertainties that could cause actual results or future conditions to differ
materially from those expressed in or implied by our forward-looking statements.
Thus, we caution investors that the forward-looking statements contained in this
Report must be interpreted and understood in light of conditions and
circumstances that exist as of the date of this Report. We expressly disclaim
any obligation or undertaking to update or revise forward-looking statements
made in this Report to reflect any changes in management's expectations
resulting from future events or changes in the conditions or circumstances upon
which such expectations are based.

























                                        1
<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

         A.       Business Development.

NESCO Industries, Inc. (hereinafter sometimes referred to as "we" or the
"Company") is principally engaged in providing asbestos abatement services,
indoor air quality monitoring, testing and remediation, and other environmental
services through its wholly-owned subsidiaries, National Abatement Corp., NAC
Environmental Services, Inc. and NAC/Indoor Air Professionals, Inc.

The Company was incorporated in Nevada in March 1993, and was inactive for a
number of years until it acquired National Abatement Corp. and NAC Environmental
Services Corp. in March 1998. National Abatement Corp. ("NAC") was incorporated
in May 1988 to provide asbestos abatement services primarily in the greater
metropolitan New York City area, and today is a full service asbestos abatement
contractor. NAC Environmental Services, Inc., ("NACE") was incorporated in May
1993. It is a provider of environmental services such as subsurface
soils/groundwater remediation, Phase I and Phase II environmental site
assessments and underground storage tank management and remediation.

In June 1999, we formed NAC/Indoor Air Professionals, Inc. ("NAC/IAP") through
which we provide indoor air quality monitoring, testing and remediation
services, primarily in New York, New Jersey and Connecticut. Prior to the
organization of NAC/IAP, we provided limited air quality services through NACE.

         B.       Business of the Issuer.

                  1.      Principal products and services and their markets.

                          a.        National Abatement Corp.

NAC has expertise in all types of asbestos abatement including removal and
disposal, enclosure (constructing structures around asbestos-containing area)
and encapsulation (spraying asbestos-containing materials with an approved
sealant). Asbestos abatement is principally performed in commercial buildings,
hospitals, government and institutional buildings, universities and industrial
facilities. NAC's revenues in the past two fiscal years ended April 30 were as
follows: 2001 - $6,883,778 (75.7% of the total Company revenues); 2000 -
$10,114,108 (80.5% of total Company revenues).

Asbestos is a fibrous mineral found in rock formations around the world that was
used extensively as a construction material and in construction-related products
as a fire retardant and insulating material prior to the early 1970s. Asbestos
also was used as a component in a variety of building materials (such as
plaster, drywall, mortar and building block) and in caulking, tile adhesives,
paint, roofing felts, floor tile and other surfacing materials.


                                        2
<PAGE>

In the early 1970s, it became widely recognized that inhalation or ingestion of
asbestos fibers caused a number of diseases, including asbestosis (a
debilitating pulmonary disease), lung cancer and mesothelioma (a cancer of the
abdominal and lung lining). The Environmental Protection Agency ("EPA") banned
the use of asbestos as a construction material in 1973, and the federal
government subsequently banned the use of asbestos in other building materials
as well. Most structures built before 1973, however, contained asbestos in some
form. The asbestos abatement industry grew rapidly in the 1980s due to
increasing awareness and concern over health hazards associated with asbestos,
legislative action mandating safety standards and requiring abatement in certain
circumstances, and economic pressures on building owners seeking to satisfy the
requirements of financial institutions, insurers and tenants. The market first
leveled off and then declined in the 1990s as building owners and facilities
managers developed containment and management programs and procedures that were
less costly than removal.

NAC provides its services on a project contract basis. Individual projects are
competitively bid, although many requests for bids from private owners are
subject to changes in specifications, additions and other factors with the
result that the final terms are negotiated. The majority of contracts undertaken
are on a fixed price basis with monthly billings based upon percentage of
completion or a schedule of values, less retainage. The lengths of the contracts
are typically less than one year; however, larger projects may require two or
three years to complete. Responsibility for each contract is assigned to a
project manager who coordinates the project until its completion. NAC provides
its asbestos abatement services using a qualified labor force in accordance with
regulatory requirements, contract specifications and operating procedures
manual, which describes worker safety and protection procedures, air monitoring
protocols and abatement methods.

NAC's asbestos abatement operations generally have been concentrated in the
tri-state New York, New Jersey and Connecticut regions. NAC faces formidable
competition in this market, and its margins have declined in recent years. Prior
to 1999, NAC had been involved in a joint venture project in Pennsylvania. NAC
is licensed and/or certified in all jurisdictions where required by its current
work in order to conduct its operations. In addition, certain management and
staff members are licensed and/or certified by various governmental agencies as
asbestos abatement supervisors and workers. Disposal of hazardous material is
subcontracted to licensed haulers who transport the material to a licensed
landfill or other disposal facility. A "chain of custody" for the material is
set forth in a waste manifest on which each step in the disposal process is
accounted for.

Since NAC is able to perform asbestos abatement work throughout the year, the
business is not considered seasonal in nature. However, it is affected by the
timing of large contracts.

                          b.        NAC Environmental Services, Inc.

NAC Environmental Services Corp. is a full service environmental firm with a
focus on remediation, closure and cost effectiveness. NACE's staff consists of
project managers and field technicians. NACE has established long term
relationships with many fortune 500 companies and institutional and military
organizations. Services offered by NACE include Phase I, II, and III
environmental assessments, including underground storage tank removals,
injection well closures, soil and groundwater treatment systems, contaminated
soil removal and emergency response.

                                        3
<PAGE>

The following is a brief summary of our environmental assessment services:

Phase I: A Phase I site assessment is undertaken to identify potential
environmental concerns at a subject property. The process is non-invasive,
utilizing site visits, historical review, regulatory review, etc. to develop a
competent environmental survey of the subject property.

Phase II: Once an environmental concern has been identified (i.e., an
underground storage tank, evidence of hazardous waste, etc.), a Phase II
assessment or investigation will take place. This investigation could include
drilling, ground penetrating radar, leaching pools sampling, etc. As part of the
investigation, samples are collected and analyzed to determine the presence
and/or absence of contamination.

Phase III: Once contamination is confirmed, an appropriate remedial action plan
is designed and implemented, based upon the nature and severity of the
contamination and the current conditions of the subject property. Remediation
could take place in the form of soil vapor extraction, ground water pump and
treatment systems, and many other options.

In satisfying our customers' needs, NACE generally provides inspection, various
testing services and project planning and management services directly, and
subcontracts with other environmental service providers for such specialized
services as hazardous waste removal, transportation and disposal.

                          c.        NAC/Indoor Air Professionals, Inc.

NAC/IAP provides indoor air quality testing, monitoring and remediation
services. Upon its organization, NAC/IAP took over the indoor air quality
testing and remediation activities previously conducted by NACE. In July 1999,
operations were expanded by acquiring the name and certain other assets from,
and hiring personnel formerly employed by, a Long Island, New York based air
quality contractor. The acquisition price of $637,860 was paid through the
issuance of common stock valued at $500,000 and cash. The purchase price was
allocated $500,000 to "goodwill", $50,000 to covenants not to compete, and the
balance to other assets.

On December 5, 2000, NAC/IAP acquired certain equipment and intangible assets in
connection with an asset purchase agreement entered into with two individuals.
The purchase price of $100,000 was paid through the issuance of 80,000 shares of
common stock valued at $100,000. The purchase price was allocated $88,450 to
equipment and $11,550 to intangible assets.

NAC/IAP offers an integrated approach to indoor air quality (IAQ) issues by
offering investigative services, mechanical hygiene through HVAC system cleaning
and engineering redesign, and microbiological decontamination. IAQ is an
important concern in a wide variety of industries and facilities, including
hospitals and other health care facilities, pharmaceutical and medical device
companies, food manufacturing facilities, cruise ships, commercial and
government office buildings, laboratories, universities, schools and retail
outlets. This concern results from increased awareness of health, mechanical and
fire hazards, related litigation exposure, and compliance with federal and state
IAQ mandates. As a result of increased awareness of IAQ as a health issue, terms
such as "Sick Building Syndrome", "Legionnaire's Disease" and "Building Related
Illness" have come into common use.

As a member of the National Air Duct Cleaners Association, NAC/IAP practices
source removal techniques to provide a level of cleaning in compliance with the
Association's 1992-01 industry standard.

                                        4
<PAGE>

NAC/IAP owns and operates the latest in source removal cleaning equipment. Its
present service area includes primarily the New York/New Jersey/Connecticut
Tri-State area. The Company is aggressively seeking to expand NAC/IAP's service
area to include the entire Atlantic seaboard and Puerto Rico.

                          d.        Backlog.

At April 30, 2001, we had contracts, including contract work in progress,
representing future revenues of approximately $1,672,709. At April 30, 2000, we
had contracts representing future revenues of approximately $3,862,000.

                  2.       Distribution Methods.

We undertake work primarily pursuant to written "fixed price" contracts which
are obtained through competitive bidding, or on a negotiated, non-bid basis.
Work performed in excess of the original contract amount is usually done
pursuant to change order. The incidence of time and material contracts, and unit
price contracts are not significant.

In marketing our services, we rely principally on a Company-employed sales staff
and upon the efforts of our operating and executive management team who
regularly call upon existing and prospective customers. We also utilize a number
of independent sales representatives. As the breadth of the services that we
offer has expanded beyond asbestos abatement to include indoor air quality and
general environmental services, cross selling and cross referrals among our
operating subsidiaries has increased and it is emphasized by management to take
advantage of the working relationships which we have developed over the years
with industrial, commercial, engineering and other professional concerns in our
service area.

We supplement our direct sales effort through regular advertising in trade
publications, direct mailings to selected industrial and engineering firms
(e.g., in the IAQ area, to industries that are most affected by IAQ issues),
strategic telemarketing and regular participation in industry conferences and
trade shows.

                  3.       New Products or Services.

Prior to the organization of NAC/IAP in June 1999, the indoor air quality
segment of our business was not significant. We are now actively promoting that
service segment, and presently expect NAC/IAP to generate approximately 35% of
total Company revenues in the current fiscal year.

                  4.       Competition.

The environmental services industry is highly competitive and fragmented. We
face competition from local owner-operated service contractors and from national
and regionally based companies that perform a variety of industrial and
environmental services. Competition in this market is based primarily on hourly
rates, productivity, safety, innovative approaches and quality of service. A
substantial portion of work in our service areas is performed pursuant to
contracts obtained through competitive bidding. Among qualified bidders, price
usually is the determining factor.

                  5.       Sources of Supply.

We purchase job related materials and equipment from several vendors. We are not
dependent on purchasing from any one vendor, as there are a number of sources of
supply.


                                        5
<PAGE>

                  6.       Major Customers.

Our customers include owners of commercial real estate, managing agents and
general contractors, industrial facilities and hospitals and educational
institutions. During the fiscal year ended April 30, 2001, approximately 85% of
our operating revenues were derived from commercial and industrial clients, and
approximately 15% was derived from institutional customers such as educational
institutions and hospitals. The mix for the prior fiscal year was approximately
89% commercial and industrial, and 11% institutional.

Due to the nature of our business, which involves contracts that are often
completed within one year, customers that account for a significant portion of
revenues in one year may not represent a significant portion of revenues in
subsequent years. We do not believe that the loss of future business from any
single customer would have a material adverse effect on our results of
operations or financial position taken as a whole.

Three customers accounted for 19.9%, 13.5%, and 10.7% of revenues in the current
fiscal year. In the prior fiscal year, no single customer accounted for more
than 10% of our revenues.

                  7.       Patents, Trademarks, Licenses, etc.

We do not consider intellectual property (apart from trade secrets concerning
customer and bidding information) to be significant to our operations.

                  8-9.     Governmental Approvals and Regulations.

A core component of our business is advising and assisting customers in
complying with local, state and federal laws and regulations concerning the
environment. With respect to asbestos abatement services, numerous regulations
at the federal, state and local levels impact the industry, including the EPA's
Clean Air Act and Occupational Safety and Health Administration ("OSHA")
requirements.

EPA regulations provide national emissions standards for asbestos abatement.
These standards mandate detailed procedures for collection, waste disposal,
handling and shipment of asbestos. The EPA regulations require precise methods
for accomplishing various aspects of asbestos abatement and include
specifications on:

         o    temporary storage of asbestos;

         o    air test protocols;

         o    air cleaning devices;

         o    record maintenance;

         o    placement, content and size of signs and labels warning of the
              presence of asbestos and associated health risks; and

         o    reporting requirements to the EPA.

                                        6
<PAGE>

In addition, the EPA requires schools to inspect for asbestos and implement
response actions and submit asbestos management plans to states. These
regulations specify the use of accredited inspectors, air sampling methods and
waste disposal procedures. The EPA also has notification requirements before
removal operations can begin.

The health and safety of personnel involved in the removal of asbestos is
protected by OSHA regulations. These regulations provide worker protection
measures and standards for asbestos exposure in all work and include
specifications on:

         o    worker training;

         o    engineering controls;

         o    labeling respiratory protection;

         o    bagging of waste;

         o    permissible exposures limits;

         o    exposure assessment and monitoring;

         o    methods of compliance;

         o    hygiene facilities and practices;

         o    communication of hazards;

         o    record maintenance; and

         o    designation, duties and training of a "competent person" to ensure
              worker safety.

Many state authorities and local jurisdictions have implemented similar programs
governing removal, handling and disposal of asbestos.

The transportation of asbestos, which has been designated a hazardous material,
is governed by the Department of Transportation under the Hazardous Materials
Act of 1975. The Department of Transportation's current regulations direct the
transportation of asbestos-containing waste materials and require the
maintenance of detailed waste contamination and shipping papers.

NAC's business depends, in part, on the issuance of permits from state and
federal agencies to allow NAC to transport hazardous materials, to operate
certain of NAC's equipment and to operate NAC's container cleaning and
wastewater pretreatment facilities. NAC believes that it has and will be able to
obtain and retain the applicable and necessary permits from governmental
authorities. The majority of these permits require renewal annually and,
accordingly, such permits may be subject to revocation, modification or denial.
NAC believes it is in compliance with all of the federal, state and local
statutes and regulations which affect its asbestos abatement business.

                                        7
<PAGE>

Certain services offered by NACE and NAC/IAP are required to be performed by
licensed individuals. In addition, as indicated above, NACE frequently
subcontracts with third parties for services which require licensing or permits
(e.g., transportation of hazardous waste).

                  10.      Research and Development.

We continuously pursue innovative and creative approaches and methods for
providing services to our customers. We do not, however, engage in any
significant research and development activities.

                  11.      Environmental Compliance.

Except in the ordinary course of our business operations, we do not anticipate
any significant costs to comply with environmental laws and requirements.

                  12.      Employees.

As of July 18, 2001, we had 19 full time employees, of which one is executive,
four are engaged in sales and marketing, and the remaining fourteen employees
are technical, production and administrative personnel. In addition, three of
our executive officers (Santo Petrocelli, Sr., Marshall Geller and Lawrence
Polan) devote less than full time to their duties as described in the
information set forth in Item 9 hereof.

In addition to our "permanent" work force, we typically hire temporary laborers
to staff NAC and NACE projects. Temporary laborers generally are represented by
a labor union and, in New York and New Jersey, are covered by a collective
bargaining agreement between the Company and the Mason Tenders Union. We also
employ union laborers with other affiliations depending on project jurisdiction,
on a project by project basis. Our permanent work force is not unionized.

We believe we have good relations with our employees, and have never incurred a
significant work stoppage due to any strike or protest by our employees.


                                        8
<PAGE>

ITEM 2.           DESCRIPTION OF PROPERTY.

We sublease our executive and administrative offices and warehouse space
(approximately 5,850 square feet) from Petrocelli Electric Co., Inc. Petrocelli
Electric Co., Inc. is owned and controlled by Santo Petrocelli, Sr., our
President and CEO, and members of Mr. Petrocelli's family, including his son,
Santo Petrocelli, Jr., who is a director of the Company. There is no written
sublease or term specified for this sublease. We pay a gross rent (i.e., our
rental includes utilities, taxes, common area maintenance and other typical
tenant charges) of $14.00 per square foot ($81,900 per year) which approximates
Petrocelli Electric Co., Inc.'s prime tenancy costs. We believe that our
occupancy costs under this sublease arrangement are no higher than market, and
that the terms are no less favorable to us than we could have obtained through
arms-length negotiation with non-affiliated parties.

We also rent a small amount of storage area in midtown Manhattan (approximately
170 square feet) at an annual rent of approximately $5,800.

We believe our offices and other facilities are adequate for our present needs.





                                        9


<PAGE>

ITEM 3.           LEGAL PROCEEDINGS.

We are a defendant in the following civil actions, all of which are pending in
the Supreme Court of the State of New York, County of New York, and relate to
property damage and/or bodily injury claims which arose in the ordinary course
of our business operations:

<TABLE>
<CAPTION>
          Date
       Proceeding                                             Claimant(s)                          Amount
          Began            Plaintiff                          Against Us                           Of Claim
          -----            ---------                          ----------                           --------
<S>                        <C>                                <C>                                  <C>
        12/12/95           Ralph LoRusso and                  Ralph LoRusso and Phillis            $  4,250,000
                           Phillis LoRusso                    LoRusso

         4/18/97           Manuel Zumba                       Manuel Zumba                         $ 10,000,000

         4/24/97           Abilio Sousa and                   Chase Manhattan Bank, N.A. and       $ 20,000,000
                           Maria Sousa                        Morse Diesel International

         7/13/98           Wilson Lopez                       Sablons Investors, Inc.              $  5,000,000

         9/22/98           Jan Niziol                         Sres Fifth Avenue, a/k/a             $  2,000,000
                                                              Sumitomo Real Estate Sales
                                                                      (NY), Inc.

         7/19/99           Bolivar Ochoa                      Bolivar Ochoa                        $ 10,000,000

         7/20/99           Andrzes Jakubowski and Pyonka      New York University                  $  4,250,000
                           Jakubowski

         7/26/99           Andrez Andruszkiewicz              Fast Track Construction              $  5,000,000

        12/15/99           Gerald J. Gliber, Becky            Norman Buchbinder, Zohar Ben         $  5,000,000
                           Gliber, Individually and           Dov, Culinary Associates No. 2,
                           As parents of Andrew               A J Clarke Mgmt. Corp., Angel
                           Gliber                             Rivera

        11/30/00           Samuel Burrison                    Samuel Burrison                      $  1,000,000

         1/8/01            Josef Petru                        Cushman & Wakefield Inc. and         $  4,000,000
                                                              Solovieff Realty Co., LLC

         1/18/01           20 Place Associates                20 Place Associates                  $  2,000,000

         7/25/01           Boston Properties, Inc. and        Boston Properties, Inc. and          $  1,879,472
                           Boston Properties Limited          Boston Properties Limited
                           Partnership                        Partnership
</TABLE>
                                       10
<PAGE>

In most or all cases, there are additional defendants against whom claims are
asserted by the plaintiffs and/or other parties, and we have filed crossclaims
and third party claims against other parties.

We are being defended by counsel engaged by our insurers in the above cases, and
we believe that all claims pending in these cases are covered by insurance.
Based on our experience, we believe that all of these cases will be settled or
otherwise disposed of within the limits of coverage on our insurance policies,
notwithstanding the amounts claimed. Two cases were settled in the fiscal year
ended April 30, 2001 for amounts within the limits of coverage on our insurance
policies.

Except for the project-related claims proceedings set forth above, we are not
involved in any other material legal proceedings.

We maintain commercial general liability insurance for claims arising from our
business operations with coverage of $5 million limit per claim and in the
aggregate against loss arising from property damage and bodily injury. The
policy is written on an "occurrence" basis which provides coverage for insured
risks that occur during the policy period, irrespective of when a claim is made.
Higher policy limits are available for individual projects. We also carry
pollution errors and omissions liability insurance ($1 million limit per claim
and in the aggregate), a $15 million commercial umbrella policy, and worker's
compensation insurance within statutory coverage limits. In addition, a
substantial number of NAC's customers require performance and payment bonds and
we maintain a bonding program to satisfy these requirements.


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

There were no matters submitted to a vote of our securities holders during the
fourth quarter of our fiscal year ended April 30, 2001.



                                       11
<PAGE>

                                     PART II


ITEM 5.           MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
                  EQUITY AND OTHER SHAREHOLDER MATTERS.

         A.       Market Information.

Since March 2000, our Common Stock has been quoted on an inter-dealer quotation
system published by the Pink Sheets LLC. Prior to that time, our Common Stock
was quoted on the Electronic Bulletin Board operated by the National Association
of Securities Dealers.

The following table sets forth the high and low closing bid prices quoted for
our Common Stock in the last two fiscal years:

         Year ended 4/30/2001               High                  Low
         --------------------               ----                  ---

         Quarter ended 7/31/00              $0.50                $0.50
         Quarter ended 10/31/00             $0.50                $0.30
         Quarter ended 1/31/01              $0.30                $0.30
         Quarter ended 4/30/01              $0.30                $0.30


         Year ended 4/30/2000               High                  Low
         --------------------               ----                  ---

         Quarter ended 7/31/99              $1.50                $1.125
         Quarter ended 10/31/99             $1.25                $0.5625
         Quarter ended 1/31/00              $2.625               $1.0625
         Quarter ended 4/30/00              $2.00                $0.50


The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions. Actual
trading in our shares has been very sporadic.

         B.       Holders

As of August 8, 2001, there were 31 record holders of our Common Stock.

         C.       Dividends

The Company has never declared or paid any cash dividends on its Common Stock.
We currently anticipate that future earnings will be retained to support our
business. Accordingly, we do not anticipate paying cash dividends on our Common
Stock in the foreseeable future.


                                       12
<PAGE>

         D.       Recent Sales of Unregistered Securities.

In the past three fiscal years, we have issued the following securities in
transactions not registered under the Securities Act of 1933:

(a) In July 1999, we issued 364,963 shares of Common Stock in partial payment
for certain business assets acquired from IAP, Inc. The transaction was a
negotiated business combination in which both buyer and seller were represented
by counsel. We relied on Section 4(2) of the Securities Act in issuing the
shares without registration under the Act.

(b) In December 2000, we issued 80,000 shares of Common Stock as payment for
equipment and intangible assets. The transaction was a negotiated asset purchase
in which both the buyer and seller were represented by counsel. We relied on
Section 4(2) of the Securities Act in issuing the shares without registration
under the Act.






                                       13
<PAGE>

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

         A.       General.

NESCO Industries, Inc. was incorporated in March 1993 as Coronado Communications
Corp. In March 1998, NESCO, which was then inactive, acquired all of the
outstanding capital stock of National Abatement Corp. ("NAC"), a corporation
engaged primarily in asbestos abatement services, and NAC Environmental Services
Corp. ("NACE"), a provider of a variety of other environmental remediation
services. As a result of this acquisition, which was the result of arms length
negotiation between previously non-affiliated parties, the former shareholders
of NAC and NACE acquired an aggregate of 5,000,000 shares of our Common Stock,
or 80% of the total outstanding immediately following the acquisition. The
former shareholders of NAC were the same as the former shareholders of NACE. For
accounting purposes, NAC was treated as the acquiring corporation. Thus, the
historical financial statements of NAC prior to this acquisition date are deemed
to be the historical financial statements of the Company.

         B.       Results of Operations.

Revenues are reported on the percentage of completion method of accounting using
job costs incurred to date to determine percentages of construction completion.
As the level of work installed fluctuates, job costs and earned revenues
fluctuate accordingly.

                  1. Fiscal years ended April 30, 2001 and 2000.

The following table sets forth our revenues by operating area in the periods
indicated:

                                                Fiscal year ended April 30,
                                                ---------------------------
                                                2001                  2000
                                                ----                  ----
         Asbestos abatement                  $6,883,778            $10,114,108
         Indoor air quality services          1,747,534              1,197,355
         Other environmental services           465,165              1,248,462
                                             -----------           -----------
                     Total:                  $9,096,477            $12,559,925

In the fiscal year ended April 30, 2001, our revenues decreased 28%, cost of
earned revenues decreased 30%, and gross profit margin increased 3%, as compared
to the fiscal year ended April 30, 2000. Our decline in revenues and costs were
due primarily to lower levels of both asbestos abatement and other environmental
services rendered by the Company. Revenues from asbestos abatement declined
$3,230,330, or 32%, and revenues from other environmental services declined
$783,297, or 37%, in part due to downward price adjustments as competitive
pressures continue to increase in these finite markets, which lack reoccurring
services components. More informed consumers as a result of the competitive
pressures also contributed to lower revenues. Competitive pressure in the
asbestos abatement market has forced some competitors to exit the market, and
the Company is making adjustments to compete more effectively. As a result of
the decline in revenues from asbestos abatement, three significant customers
(BTE Equipment/Level 3, PPC Construction LLC and Waldorf Carting Corp.)
accounted for 44% of total revenues. Each customer, other than PPC Construction
LLC, represented one substantial job. The Company does not anticipate continuing
this level of concentration other than with PPC Construction LLC. Our overall
gross margin was 19.7% as a percentage of revenues, which approximates our
historical average margin.

Our indoor air quality services segment is more profitable than our other
segments because of increased demand due to greater public awareness, compliance
pressure from the insurance industry, and a reoccurring maintenance service
component. We have not experienced significant losses on jobs from our asbestos
abatement segment, and are taking efforts to select projects with higher
revenues and margins. Revenues and margins from environmental services are lower
than from indoor air quality services. The competitive nature of the
environmental services market, and the immaterial market share held by us, does
not afford us the opportunity to increase revenues and margins. As a result, we
are reallocating resources to increase market share in the indoor air quality
services segment. Due to declining overall revenues, we reduced our salaries and
related expenses ($387,339), rents ($145,516) and travel and entertainment
($93,965), and overall we reduced general and administrative expenses by
$849,161 or 27% from the fiscal year ended April 30, 2000. Our net loss for the
fiscal year ended April 30, 2001 decreased to $666,482, as compared to $946,349
in the fiscal year ended April 30, 2000.

                                       14
<PAGE>

Effective April 30, 2001, we renegotiated our lease for office facilities with
Petrocelli Electric Co., Inc. and moved our offices. As a result, previously
unamortized leasehold improvements were abandoned and accordingly were written
off at April 30, 2001, resulting in a charge to other expenses of $118,863.
Interest expense declined principally due to a decreased level of borrowing from
shareholders. Sublease income from former office facilities is recognized over
the sublease terms. Income tax expense of $53,695 is due to a charge off for
previously recorded estimates of income tax recoveries.

                  2.     Fourth Quarter of the fiscal year ended April 30, 2001

During the fourth quarter of the fiscal year ended April 30, 2001, the Company
recorded significant adjustments to its accounts, which resulted in increasing
net loss by approximately $411,000. The adjustments for the fiscal year ended
April 30, 2001 were principally attributable to the write-off of uncollectible
accounts receivable of approximately $27,000, the write-off of leasehold
improvements of approximately $118,000, an over accrual of estimated tax refunds
which were received in the fourth quarter of approximately $54,000, depreciation
expense on acquired assets of approximately $30,000 and accruals for
commissions, management fees and accounting fees totaling approximately
$144,000.

During the fourth quarter of the fiscal year ended April 30, 2000, the Company
recorded significant adjustments to its accounts, which resulted in increasing
net loss by approximately $638,000. The adjustments for the fiscal year ended
April 30, 2000 were principally attributable to increasing the allowance for
possible losses on accounts receivable and writing off uncollectible accounts
receivable which totaled approximately $125,000, an unanticipated loss on a job
which totaled approximately $230,000, and accruals for insurance claims,
depreciation expense, consulting and professional fees and commissions which
totaled approximately $190,000.

         C.  Liquidity and Capital Resources.

The following table sets forth our working capital position at the end of the
fiscal years indicated:

                                                   Year ended April 30,
                                                   --------------------
                                                2001                   2000
                                                ----                   ----
         Current assets                      $3,032,076             $4,047,300
         Current liabilities                  3,700,318              4,548,297
                                             ----------             ----------
         Working capital (negative)          $ (668,242)            $ (500,997)


Our cash and cash equivalents increased to $68,169 at April 30, 2001, compared
to $32,515 at April 30, 2000.

During the fiscal year ended April 30, 2001, net cash provided by operations was
$39,005. Cash provided by investing activities was $335,860 and was a result of
the collection of $397,800 from the sublease of our New York offices offset by
the purchase of equipment and leasehold improvements totaling $61,940. Cash used
in financing activities was $339,211 and reflected the net repayment on
equipment and shareholder loans. Our overall cash flow was adversely affected by
slower collections of accounts receivable, noted by accounts receivable turnover
decline from 3.9 times to 2.9 times as compared to the fiscal year ended April
30, 2000. Ongoing evaluation of accounts receivable concluded with a net
increase in our allowance for bad debts from $238,890 to $333,954.

                                       15
<PAGE>

During the fiscal year ended April 30, 2000, our cash position was adversely
affected by cash used in operations of $862,752 and cash used to acquire Indoor
Air Professionals ($137,050) and the purchase of fixed assets ($174,152) and
equipment note payments ($15,855). Cash was provided principally from short-term
shareholder loans, net of repayments of $790,559 and from the cash proceeds from
the sale of our New York office leasehold improvements of $334,000.

The Company's ability to finance its operating cash needs with cash generated by
operations is a function of returning to profitability. We have taken measures
to conserve cash by cutting back on personnel and related expenses and have
subleased our New York City office and relocated to less expensive offices. The
Company is exploring credit markets to secure financing of its working capital
needs, but there is no assurance that the Company will be able to obtain any
other financing.

We are directing our efforts toward improved profitability and revenue share,
reduction of overhead expense and therefore conserving and improving cash flow
from operations. Because of our net losses and negative working capital, our
auditors expressed a doubt about our ability to continue as a going concern in
their report on our financial statements for the fiscal year ended April 30,
2001. We may continue to be dependent upon loans from our shareholder until we
become profitable.

The Company is a defendant in lawsuits involving personal injury claims arising
from job-site accidents. These plaintiffs' claims exceed the Company's
applicable insurance coverages, therefore, any judgment or settlement in excess
of insurance will require payment by the Company and may have a negative impact
on profitability. Claims in excess of insurance coverage total approximately
$44,000,000 as of April 30, 2001. In the opinion of management, the amount of
the ultimate liability with respect to these actions will not materially affect
the financial position, results of operations or net cash flows of the Company.

         D.       Basis of Presentation - Going Concern.

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplate continuation of the Company as a going concern. However, as of April
30, 2001, the Company has an accumulated deficit in shareholders' equity of
$1,228,250, negative working capital of $668,242 and has incurred net losses of
$666,482 and $946,349 for the fiscal years ended April 30, 2001 and 2000,
respectively.

In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon the Company's ability to meet its financing requirements
on a continuing basis, to maintain its present financing, and to succeed in its
future operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.

Management has relocated its office to reduce rent expense and hopes to increase
its profitability and cash flows from operations in the future year by
increasing its revenue from its Indoor Air Quality division, which generates the
highest margins, which it believes is sufficient to provide the Company with the
ability to continue in existence. The Company is exploring credit markets to
secure alternative financing but there is no assurance that the Company will be
able to obtain any financing. The Company may continue to be dependent on
shareholder loans for additional financing unless it becomes profitable.

         E.       New Accounting Pronouncements.

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations." SFAS No. 141 requires the purchase method of accounting for
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company does not believe that the adoption of
SFAS No. 141 will have a significant impact on its financial statements.



                                       16
<PAGE>

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets," which is effective
for all fiscal years beginning after December 31, 2001; however, early adoption
is permitted. SFAS No. 142 requires, among other things, the discontinuance of
goodwill amortization. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairment of goodwill. SFAS No. 142 also requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption. The
Company is required to adopt SFAS No. 142 in fiscal 2003. The Company is
currently assessing but has not yet determined the impact of SFAS No. 142 on its
financial position and results of operations.

         F.       Quantitative and Qualitative Disclosures About Financial
                  Derivative  and Other Market Risks.

The Company employs no "hedging" strategies at the present time, and all of our
cash deposits are denominated in US dollars.









                                       17
<PAGE>

ITEM 7.           FINANCIAL STATEMENTS


                        CONSOLIDATED FINANCIAL STATEMENTS
                                  AND REPORT OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                             NESCO INDUSTRIES, INC.

                                 April 30, 2001


                                 C O N T E N T S



                                                                         Page
                                                                         ----

Report of Independent Certified Public Accountants                        F2


Financial Statements

      Consolidated Balance Sheet                                          F3

      Consolidated Statements of Operations                               F4

      Consolidated Statement of Stockholders' Equity (Deficit)            F5

      Consolidated Statements of Cash Flows                               F6

      Notes to Consolidated Financial Statements                       F7 - F26





                                       F1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




Board of Directors
    NESCO Industries, Inc.


We have audited the accompanying consolidated balance sheet of NESCO Industries,
Inc. as of April 30, 2001, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the two
years in the period ended April 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of NESCO Industries,
Inc. as of April 30, 2001, and the consolidated results of their operations and
their consolidated cash flows for each of the two years in the period ended
April 30, 2001 in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
as of April 30, 2001, the Company has an accumulated deficit in stockholders'
equity of $1,228,250, negative working capital of $668,242, and has incurred net
losses of $666,482 and $946,349 for the years ended April 30, 2001 and 2000,
respectively. These factors, among others, as discussed in Note A to the
financial statements, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note A. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.




/s/ Grant Thornton LLP
----------------------
Grant Thornton LLP

New York, New York
July 6, 2001

                                       F2
<PAGE>

                             NESCO Industries, Inc.

                           CONSOLIDATED BALANCE SHEET

                                 April 30, 2001


<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                          <C>
CURRENT ASSETS
    Cash and cash equivalents                                                $    68,169
    Accounts receivable, net of allowance                                      2,497,904
    Unbilled costs and estimated earnings in excess of
       billings on uncompleted contracts                                         318,247
    Prepaid expenses                                                              21,427
    Inventory                                                                    126,329
                                                                             -----------
           Total current assets                                                3,032,076
FIXED ASSETS, NET                                                                187,504
OTHER ASSETS                                                                      91,264
INTANGIBLE ASSETS, NET                                                           455,224
                                                                             -----------
                                                                             $ 3,766,068
                                                                             ===========
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S>                                                                          <C>
CURRENT LIABILITIES
    Accounts payable and accrued expenses                                    $ 2,437,905
    Notes payable - equipment - current portion                                    1,577
    Loans payable - shareholders                                                 648,490
    Interest payable to shareholders                                             190,052
    Billings in excess of costs and estimated earnings on
       uncompleted contracts                                                     422,294
                                                                             -----------
          Total current liabilities                                            3,700,318
DEFERRED SUBLEASE INCOME                                                         304,200
                                                                             -----------
                                                                               4,004,518
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
    Common stock, $.001 par value; authorized, 25,000,000
       shares; issued and outstanding, 6,694,963 shares                            6,695
    Capital in excess of par value                                               983,105
    Accumulated deficit                                                       (1,228,250)
                                                                             -----------
                                                                                (238,450)
                                                                             -----------
                                                                             $ 3,766,068
                                                                             ===========
</TABLE>
The accompanying notes are an integral part of this statement.

                                       F3
<PAGE>

                             NESCO Industries, Inc.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                              Year ended April 30,


<TABLE>
<CAPTION>
                                                                      2001                 2000
                                                                   ----------          -----------
<S>                                                                <C>                 <C>
Earned revenues                                                    $9,096,477          $12,559,925
Cost of earned revenues                                             7,307,533           10,512,471
                                                                    ---------          -----------

         Gross profit                                               1,788,944            2,047,454

General and administrative expenses                                 2,278,101            3,127,262
                                                                    ---------          -----------

         Operating loss                                              (489,157)          (1,079,808)
                                                                   ----------          -----------

Other income (expense)
    Sublease income                                                    46,800
    Interest expense, net                                             (52,543)             (83,027)
    Miscellaneous (expense) income                                   (117,887)              66,423
                                                                   ----------          -----------

         Loss before income taxes                                    (612,787)          (1,096,412)

Income tax expense (benefit)                                           53,695             (150,063)
                                                                   ----------          -----------

         NET LOSS                                                  $ (666,482)         $  (946,349)
                                                                   ==========          ===========


Basic and diluted loss per share                                        $(.10)               $(.14)
                                                                   ==========          ===========

Weighted average common shares outstanding                          6,646,963            6,543,970
                                                                   ==========          ===========
</TABLE>


The accompanying notes are an integral part of these statements.

                                       F4
<PAGE>

                             NESCO Industries, Inc.

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

                       Years ended April 30, 2001 and 2000


<TABLE>
<CAPTION>
                                                                                                       Retained
                                                             Common stock           Capital in         earnings/
                                                      -----------------------        excess of       (accumulated
                                                        Shares         Amount        par value         Deficit)          Total
                                                      ---------        ------       ----------       ------------      ---------
<S>                                                   <C>              <C>          <C>              <C>               <C>
Balance at April 30, 1999                             6,250,000        $6,250       $ 383,550        $    384,581      $ 774,381

Stock issued in connection with acquisition             364,963           365         499,635                            500,000

Net loss for the year ended April 30, 2000                                                              (946,349)       (946,349)
                                                      ---------        ------       ---------        -----------       ---------

Balance at April 30, 2000                             6,614,963         6,615         883,185           (561,768)        328,032

Stock issued in connection with asset purchase           80,000            80          99,920                            100,000

Net loss for the year ended April 30, 2001                                                              (666,482)       (666,482)
                                                      ---------        ------       ---------        -----------       ---------

Balance at April 30, 2001                             6,694,963        $6,695       $ 983,105        $(1,228,250)      $(238,450)
                                                      =========        ======       =========        ===========       =========

</TABLE>





The accompanying notes are an integral part of this statement.


                                       F5
<PAGE>

                             NESCO Industries, Inc.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                              Year ended April 30,

<TABLE>
<CAPTION>
                                                                                      2001                 2000
                                                                                    ---------           ----------
<S>                                                                                 <C>                 <C>
Cash flows from operating activities
   Net loss                                                                         $(666,482)          $(946,349)
   Adjustments to reconcile net loss to net cash provided by (used in)
     operating activities
       Depreciation and amortization                                                  136,624             128,671
       Bad debt expense                                                               144,663              86,090
       Amortization of deferred sublease income                                       (46,800)
       Loss (gain) on disposal of fixed asset                                         118,863             (70,265)
       Deferred income taxes                                                                               94,600
       Changes in operating assets and liabilities
         Accounts receivable                                                          471,653            (377,486)
         Inventory                                                                     43,277             (54,947)
         Unbilled costs and estimated earnings in excess of
           billings on uncompleted contracts                                          207,359            (378,304)
         Prepaid expenses                                                             183,926            (161,137)
         Other assets                                                                   3,067              15,383
         Accounts payable and accrued expenses and interest payable                  (384,614)            847,250
         Billings in excess of costs and estimated earnings on
           uncompleted contracts                                                     (172,531)            120,615
         Income taxes payable                                                                            (166,873)
                                                                                    ---------           ---------
         Net cash provided by (used in) operating activities                           39,005            (862,752)
                                                                                    ---------           ---------
Cash flows from investing activities
   Proceeds from sublease                                                             397,800
   Purchase of fixed assets                                                           (61,940)           (174,152)
   Proceeds from disposition of fixed assets                                                              334,000
   Acquisition of Indoor Air Professionals                                                               (137,050)
                                                                                    ---------           ---------

         Net cash provided by investing activities                                    335,860              22,798
                                                                                    ---------           ---------
Cash flows from financing activities
   Payment of equipment notes                                                          (8,701)            (15,855)
   Net (payments) proceeds from shareholder loans                                    (330,510)            790,559
                                                                                    ---------           ---------
         Net cash (used in) provided by financing activities                         (339,211)            774,704
                                                                                    ---------           ---------
         NET INCREASE (DECREASE) IN CASH AND CASH
             EQUIVALENTS                                                               35,654             (65,250)

Cash and cash equivalents at beginning of year                                         32,515              97,765
                                                                                    ---------           ---------
Cash and cash equivalents at end of year                                            $  68,169           $  32,515
                                                                                    =========           =========
</TABLE>



The accompanying notes are an integral part of these statements.

                                       F6
<PAGE>

                             NESCO Industries, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             April 30, 2001 and 2000


NOTE A - ORGANIZATION, BASIS OF PRESENTATION, OPERATIONS AND
                  SIGNIFICANT ACCOUNTING POLICIES

     Organization

     NESCO Industries, Inc. (the "Company") was incorporated in Nevada on March
     29, 1993, under the name Coronado Capital Corp. (formerly Coronado
     Communications Corp.).

     On March 11, 1998, the Company acquired National Abatement Corp. ("NAC")
     and NAC Environmental Services Corp. ("NESC") pursuant to an Agreement and
     Plan of Reorganization. To effect the reorganization, NESCO issued
     5,000,000 shares of its common stock in exchange for the outstanding common
     shares of NAC and NESC. Upon consummation of the reorganization, NAC and
     NESC became wholly-owned subsidiaries of NESCO. As part of the
     reorganization, the Company amended its articles of incorporation to change
     its name to NESCO Industries, Inc. and authorized 1,000,000 shares of
     preferred stock. For accounting purposes, the acquisition has been treated
     as a recapitalization of NAC with NAC as the acquirer (reverse
     acquisition).

     The Company is a holding company and all of its business is conducted
     through its wholly-owned subsidiaries.

     NAC was organized under the laws of the state of Delaware on May 15, 1988.
     NAC is engaged in the abatement and removal of asbestos materials found in
     commercial and industrial structures located in New York, New Jersey, and
     Pennsylvania. The work is performed principally in office buildings for
     owners of various commercial businesses and other contractors principally
     under lump-sum contracts.

     NESC was organized under the laws of the state of Delaware on May 12, 1993.
     NESC is engaged in providing various environmental services including air
     quality management, lead abatement services, and management of storage
     tanks found in commercial and industrial structures located in New York and
     New Jersey.

     NAC/Indoor Air Professionals was organized under the laws of the State of
     New York on June 28, 1999. The Company provides indoor air quality
     monitoring, testing and remediation services.


                                       F7
<PAGE>


                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE A (continued)

     Basis of Presentation - Going Concern

     The accompanying financial statements have been prepared in conformity with
     accounting principles generally accepted in the United States of America,
     which contemplate continuation of the Company as a going concern. However,
     as of April 30, 2001, the Company has an accumulated deficit in
     stockholders' equity of $1,228,250 and negative working capital of
     $668,242, and has incurred net losses of $666,482 and $946,349 for the
     years ended April 30, 2001 and 2000, respectively. These matters raise
     substantial doubt about the Company's ability to continue as a going
     concern.

     In view of the matters described in the preceding paragraph, recoverability
     of a major portion of the recorded asset amounts shown in the accompanying
     balance sheet is dependent upon the Company's ability to meet its financing
     requirements on a continuing basis, to maintain its present financing, and
     to succeed in its future operations. The financial statements do not
     include any adjustments relating to the recoverability and classification
     of recorded asset amounts or amounts and classification of liabilities that
     might be necessary should the Company be unable to continue in existence.

     Management has relocated its office to reduce rent expense and hopes to
     increase its profitability and cash flows from operations in the future
     year by increasing its sales from its Indoor Air division, which generates
     the highest margins, which it believes is sufficient to provide the Company
     with the ability to continue in existence. The Company is exploring credit
     markets to secure alternative financing but there is no assurance that the
     Company will be able to obtain any financing. The Company may continue to
     be dependent on shareholder loans for additional financing unless it
     becomes profitable.

     Principles of Consolidation

     The accompanying financial statements include the accounts of the Company
     and its wholly-owned subsidiaries on a consolidated basis. All significant
     intercompany accounts and transactions have been eliminated.


                                       F8
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE A (continued)

     Use of Estimates

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America requires
     management to make estimates and assumptions that affect reported amounts
     of assets and liabilities, disclosure of contingent assets and liabilities
     at the date of the financial statements, and revenues and expenses during
     the reporting period. In these financial statements, assets, liabilities,
     and earnings from contracts involve extensive reliance on management's
     estimates. Actual results could differ from those estimates.

     Revenue and Cost Recognition

     Earned revenues are recorded using the percentage-of-completion method.
     Under this method, earned revenues are determined by reference to Company's
     engineering estimates, contract expenditures incurred, and work performed.
     The calculation of earned revenue and the effect on several asset and
     liability amounts is based on the common industry standard revenue
     determination formula of actual costs-to-date compared to total estimated
     job costs. Due to uncertainties inherent in the estimation process, and
     uncertainties relating to future performance as the contracts are
     completed, it is at least reasonably possible that estimated job costs, in
     total or on individual contracts, will be revised. When a loss is
     anticipated, the entire amount of the estimated loss is provided for in the
     period.

     The asset "unbilled costs and estimated earnings in excess of billings on
     uncompleted contracts" represents revenues recognized in excess of amounts
     billed. The liability "billings in excess of costs and estimated earnings
     on uncompleted contracts" represents billings in excess of revenues
     recognized.

     Cash and Cash Equivalents

     The Company classifies highly liquid debt instruments, purchased with a
     maturity of three months or less, as cash equivalents.

     Fixed Assets and Depreciation

     Depreciation is computed principally using accelerated methods over the
     estimated useful lives of the assets. Expenditures for maintenance,
     repairs, and minor renewals are charged to operations. Major renewals and
     betterments are capitalized.


                                       F9
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE A (continued)

     Income Taxes

     Provisions for income taxes are based on taxes payable or refundable for
     the current year and deferred taxes on temporary differences between the
     tax bases of assets and liabilities and their reported amounts in the
     financial statements. Deferred tax assets and liabilities are included in
     the financial statements at enacted income tax rates expected to apply to
     taxable income in the years when such temporary differences and net
     operating losses are expected to be recovered as prescribed in Statement of
     Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for
     Income Taxes." As changes in tax laws or rates are enacted, deferred tax
     assets and liabilities are adjusted through the provision for income taxes.

     An allowance for bad debts is provided for financial statement purposes and
     the direct write-off method is used for tax reporting. In accordance with
     income tax regulations, NAC, IAP and NESC are required to report income
     from construction contracts using the percentage-of-completion method.

     Segment Information

     Segment information is presented in accordance with SFAS No. 131,
     "Disclosures About Segments of an Enterprise and Related Information." This
     standard is based on a management approach, which requires segmentation
     based upon our internal organization that is used by us for making
     operating decisions and assessing performance as the source of the
     Company's reportable operating segments. SFAS No. 131 also requires
     disclosures about products and services, geographic areas and major
     customers.

     Reclassifications

     Certain prior period amounts have been reclassified to conform to the
     current period presentation.

     Loss Per Share

     Basic loss per share is computed by dividing the loss available to common
     stockholders by the weighted average number of common shares outstanding
     for the period. Diluted loss per share reflects the potential dilution that
     could occur if securities or other contracts to issue common stock were
     exercised or converted into common stock and resulted in the issuance of
     common stock. As a result of the Company's net loss, diluted net loss per
     share was the same as basic net loss per share for the years ended April
     30, 2001 and 2000, since the effect of any potentially dilutive securities
     would be antidilutive.


                                       F10
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE A (continued)

     Impairment of Long-Lived Assets

     Statement of Financial Accounting Statements No. 121 ("SFAS No. 121"),
     "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to be Disposed of," establishes accounting standards for the
     impairment of long-lived assets, certain identifiable intangibles, and
     goodwill related to those assets. Under provisions of SFAS No. 121,
     impairment losses are recognized when expected future cash flows are less
     than the assets' carrying value. Accordingly, when indicators of impairment
     are present, the Company will evaluate the carrying of equipment and
     intangibles in relation to the operating performance and future
     undiscounted cash flow of the underlying business. SFAS No. 121 requires
     analysis of each item on an individual assets-by-asset basis, where
     applicable. The amount of the impairment loss is the excess of the carrying
     amount of the impaired assets over the fair value of the asset. Generally,
     fair value represents the expected future cash flows from the use of the
     asset or group of assets, discounted at an interest rate commensurate with
     the risks involved.

     Accounting for Stock-Based Compensation

     The Company has adopted SFAS No. 123, "Accounting for Stock-Based
     Compensation." As permitted by SFAS No. 123, the Company has elected to
     follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
     Issued to Employees" ("APB No. 25"), and related interpretations, in
     accounting for employee stock options. As opposed to SFAS No. 123, which is
     a fair value based method, APB No. 25 provides that compensation expense
     related to the Company's employee stock options be measured based on the
     intrinsic value of the stock option. SFAS No. 123 requires companies that
     elect to follow APB 25 to provide pro forma disclosure of the impact of
     applying the fair value method of SFAS No. 123.

     New Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"),
     "Business Combinations." SFAS No. 141 requires the purchase method of
     accounting for business combinations initiated after June 30, 2001 and
     eliminates the pooling-of-interests method. The Company does not believe
     that the adoption of SFAS No. 141 will have a significant impact on its
     financial statements.


                                       F11
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE A (continued)

     In July 2001, the FASB issued Statement of Financial Accounting Standards
     No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets," which is
     effective for all fiscal years beginning after December 31, 2001; however,
     early adoption is permitted. SFAS No. 142 requires, among other things, the
     discontinuance of goodwill amortization. In addition, the standard includes
     provisions for the reclassification of certain existing recognized
     intangibles as goodwill, reassessment of the useful lives of existing
     recognized intangibles, reclassification of certain intangibles out of
     previously reported goodwill and the identification of reporting units for
     purposes of assessing potential future impairment of goodwill. SFAS No. 142
     also requires the Company to complete a transitional goodwill impairment
     test six months from the date of adoption. The Company is required to adopt
     SFAS No. 142 in fiscal 2003. The Company is currently assessing but has not
     yet determined the impact of SFAS No. 142 on its financial position and
     results of operations.

NOTE B - ACCOUNTS RECEIVABLE

     The Company submits requisitions (invoices) to customers based on work
     performed. Pursuant to contract provisions, these requisitions include
     amounts, referred to as retainage, which are retained until completion and
     acceptance of the contract. Included in accounts receivable are amounts
     retained by customers at April 30, 2001 and 2000 of $163,516 and $239,547,
     respectively. The allowance for bad debts at April 30, 2001 and 2000 was
     $333,954 and $238,890, respectively.

     The Company's principal accounts receivable are due from owners of
     commercial real estate and other contractors.


NOTE C - UNBILLED COSTS AND ESTIMATED EARNINGS ON
         UNCOMPLETED CONTRACTS

     An analysis of job costs and billings, on a per job basis, reflects the
     following:

                                                                  2001
                                                               ----------
      Costs incurred on uncompleted contracts                  $7,249,478
      Estimated earnings                                        1,748,186
                                                               ----------

                                                                8,997,664
      Less billings to date                                     9,101,711
                                                               ----------

                                                               $ (104,047)
                                                               ==========


                                       F12
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE C (continued)

     The aforementioned balances are included in the accompanying balance sheet
     for the year ended April 30, 2001 under the following captions:

      Unbilled costs and estimated earnings in excess
          of billings on uncompleted contracts                       $ 318,247
      Less billings in excess of costs and estimated
          earnings on uncompleted contracts                            422,294
                                                                     ---------

                                                                     $(104,047)
                                                                     =========

NOTE D - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

                                                       Year ended April 30,
                                                       --------------------
                                                      2001               2000
                                                      ----               ----
      Cash paid during the periods for:
          Interest                                  $ 54,222           $ 41,010
          Taxes                                        1,760            174,324

      Noncash investing and financing items:
          Issuance of Company common shares in
             connection with asset purchase          100,000            500,000



                                       F13
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE E - FIXED ASSETS

     The major classes of fixed assets and the range of their useful lives are
     as follows:


                                                                      Estimated
                                                       April 30,     useful life
                                                          2001         (years)
                                                       ----------    -----------


      Vehicles                                           $167,536           5
      Office equipment                                     29,225           5
      Furniture and fixtures                               67,869           7
      Equipment and tools                                 117,684        3 - 5
      Leasehold improvements                               13,834          10
                                                         --------

                                                          396,148
      Less accumulated depreciation and amortization      208,644
                                                          -------

                                                         $187,504
                                                         ========


NOTE F - INTANGIBLE ASSETS

     Intangible assets consist of:


                                                        April 30,   Amortization
                                                          2001         period
                                                       ----------   ------------

      Goodwill                                          $500,000     15 years
      Customer lists and trade name                       61,550      2 years
                                                        --------

                                                         561,550
      Less accumulated amortization                      106,326
                                                         -------

                                                        $455,224
                                                        ========




                                       F14
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE G - INCOME TAXES

     The provision for income taxes consists of the following:


                                          2001                  2000
                                        ---------           ------------


      Current
          Federal                         $49,323              $(245,098)
          State and local                   4,372                    435
                                          -------              ---------

                                           53,695               (244,663)
                                          -------              ---------

      Deferred
          Federal                               -                 67,600
          State and local                       -                 27,000
                                          -------              ---------

                                                -                 94,600
                                          -------              ---------

                                          $53,695              $(150,063)
                                          =======              =========



     The tax effects of temporary differences and tax credits that give rise to
     deferred tax assets at April 30, 2001 are as follows:



      Deferred tax assets
          Net operating loss                                  $   45,222
          Accounts receivable allowance                          140,261
          Minimum tax credits                                     76,816
          Deferred sublease income                               147,420
          Other                                                   10,967
                                                               ---------

                                                                 420,686

      Valuation allowance                                       (420,686)
                                                                --------

      Net deferred tax asset (liability)                        $      -
                                                                ========



                                       F15
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE G (continued)

     A reconciliation of the income tax expense shown in the statements of
     operations to the effective Federal tax rate is as follows:


                                                           2001          2000
                                                          ------        ------


      Federal statutory rate (recovery)                   (34.0)%        (34.0)%
      State and local income taxes, net of Federal
          tax benefit                                        .7            1.7
      Nondeductible items                                   3.1            3.0
      Provision variance                                    8.0           (2.2)
      Other                                                (3.1)           1.8
                                                          -----          -----

      Rate before valuation allowance                     (25.3)         (29.7)

      Valuation allowance adjustment                       34.0           16.0
                                                          -----          -----

                                                            8.7%         (13.7)%
                                                          =====          =====


     The valuation allowance increased by approximately $224,000 for the year
     ended April 30, 2001.

     During the year ended April 30, 2001, the Company utilized approximately
     $240,000 in federal, state and city net operating loss carryback claims.
     The current provision for income taxes in 2001 includes an adjustment of
     the over accrual of prior year's refunds.

     As of April 30, 2001, the Company has a net operating loss carryforward of
     approximately $108,000 which expires in 2021, and an alternative minimum
     tax carryforward credit of approximately $77,000.


                                       F16
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE H - LOANS PAYABLE - SHAREHOLDERS

     The loans payable to shareholders are due on demand, bear interest at
     varying or variable rates, and are unsecured. Interest on borrowings
     outstanding at April 30, 2001 is calculated at a rate of 10% and at April
     30, 2001 accrued interest amounted to $190,052.

     Interest expense on these notes totaled $53,063 and $61,010 for the years
     ended April 30, 2001 and 2000, respectively.


NOTE I - STOCK OPTIONS

     The Company's 1999 Stock Option Plan provides that key employees are
     eligible to receive incentive stock options or nonqualified stock options
     and that directors and advisors shall be eligible to receive nonqualified
     options. Under the plan, the Company may grant options to purchase up to
     1,000,000 shares of common stock. As of April 30, 2001, there are 555,000
     options available for future grants. In the case of an optionee who
     beneficially owns more than ten percent of the Company's outstanding shares
     as of the time the option is granted, the purchase price of the optioned
     stock must be fixed at not less than one hundred and ten percent of the
     fair market value. The maximum term of these options may not exceed five
     years from the date of grant.

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option pricing model with the following weighted-average
     assumptions: no dividend yield, expected volatility of 125 percent,
     risk-free interest rate of 6.06 percent, and five-year expected lives.

     Options were granted on June 14, 1999 at 110% of fair market value, $1.50
     per share, and these options were fully vested on granting.


                                       F17
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE I (continued)

     The following table summarizes the options granted under the various plans
     for the period from April 30, 1999 through April 30, 2001:

<TABLE>
<CAPTION>
                                                        Total                    Number of shares                Exercise
                                                        number         ----------------------------------        price per
                                                       of shares          Qualified        Nonqualified            share
                                                       ---------          ---------        ------------          ---------
<S>                                                    <C>                <C>              <C>                   <C>
      Options outstanding at April 30, 1999                  -                  -                  -                   -

      Granted                                          445,000            277,000            168,000               $1.50
                                                       -------            -------            -------               -----

      Options outstanding at April 30, 2000            445,000            277,000            168,000                1.50

      Granted                                                -                  -                  -
                                                       -------            -------            -------               -----

      Options outstanding at April 30, 2001            445,000            277,000            168,000               $1.50
                                                       =======            =======            =======               =====
</TABLE>


     The Company has adopted the disclosure-only provisions of Statement of
     Financial Accounting Standards No. 123, "Accounting for Stock-Based
     Compensation." The Company accounts for its option plan under APB Opinion
     No. 25, "Accounting for Stock Issued to Employees," and related
     interpretations and, accordingly, no compensation cost has been recognized
     for the employee stock option plan. Had compensation cost for the Company's
     employee stock option plan been determined based on the fair value at grant
     date for awards, net loss and loss per share would have increased as
     follows:

                                                                  Year ended
                                                                   April 30,
                                                                     2000
                                                                -------------
      Net loss
          As reported                                           $   (946,349)
          Pro forma                                               (1,489,249)

      Basic and diluted loss per share
          As reported
             Basic and diluted                                         $(.14)
          Pro forma
             Basic and diluted                                          (.23)


                                       F18
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE I (continued)

     The following table summarizes information about the stock options at April
     30, 2001:

<TABLE>
<CAPTION>
                                                    Options outstanding                           Options exercisable
                                      -----------------------------------------------       -----------------------------
                                        Number             Weighted-                           Number
                                      outstanding           average        Weighted          exercisable        Weighted-
                                          at               remaining        average              at              average
              Range of                 April 30,          contractual      exercise           April 30,         exercise
           exercise prices               2001                life            price              2001              price
           ---------------           -------------        -----------     -----------       -------------      --------
<S>                                    <C>                <C>                 <C>              <C>               <C>
             $1.50                     445,000            3.13 years          $1.50            445,000           $1.50
</TABLE>


NOTE J - PREFERRED SHARES

     On March 11, 1998, the Company's Articles of Incorporation were amended to
     authorize 1,000,000 shares of preferred stock, par value $.001 per share to
     be issued with rights, preferences and designations as determined by the
     Board of Directors. To date, no preferred shares have been subscribed to or
     issued.


NOTE K - RELATED PARTY TRANSACTIONS

     During the year ended April 30, 2001, certain stockholders and officers of
     the Company rendered consulting and management services totaling $104,000.
     Included in accounts payable and accrued expenses are amounts due to
     stockholders and officers, which services totaled $251,000.

     As of April 30, 2001, $27,000 is due from an affiliated company for
     services rendered and $86,675 is due to the same affiliated company for
     services rendered by the affiliate.

     During the year ended April 30, 2000, certain stockholders and officers of
     the Company rendered consulting and management services totaling $165,450
     and subcontractor services totaling $59,000. Subcontractor services
     rendered to affiliates totaled $1,989. In addition, rental payments
     totaling $10,734 were paid to an affiliated company.


NOTE L - EMPLOYEE BENEFIT PLANS

     The Company has established a profit sharing and a 401(k) plan covering
     substantially all full-time, non-union employees who have completed one
     year of continuous service and who meet certain other eligibility
     requirements. Contributions to the plan are discretionary and are allocated
     in proportion to compensation. For the years ended April 30, 2001 and 2000,
     the Company contributed $19,415 and $23,105, respectively, to the profit
     sharing plan.

                                       F19
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE M - COMMITMENTS AND CONTINGENCIES

     Litigation

     The Company is a defendant in lawsuits involving personal injury claims
     arising from job-site accidents. These plaintiffs' claims exceed the
     Company's applicable insurance coverages; therefore, any judgment or
     settlement in excess of insurance will require payment by the Company.
     Claims in excess of insurance coverage total approximately $44,000,000 as
     of April 30, 2001. In the opinion of management, the amount of ultimate
     liability with respect to these actions will not materially affect the
     financial position of the Company.

     Taxes

     The Company is currently being examined by the Internal Revenue Service for
     fiscal year 1999 and by sales tax authorities for fiscal year 2000. The
     results of the examinations are not expected to have a materially adverse
     effect on the financial position or results of operations of the Company

     Leases

     On October 1, 1998, the Company entered into a ten-year lease through
     September 30, 2008 for rental of office facilities. The lease provides for
     escalations for scheduled rent increases and for the Company's
     proportionate share of increases in real estate taxes and maintenance
     costs.

     On March 4, 2000, the Company entered into a sublease agreement for the
     October 1998 lease with a company in which a major shareholder of the
     Company is a stockholder. The sublease expires on September 30, 2008.

     Aggregate future minimum rental payments and sublease payments under the
     operating leases as of April 30, 2001 are as follows:

<TABLE>
<CAPTION>
                                                       Rent               Sublease
                                                      expense              income                Net
                                                    ----------           ----------              ----
<S>                                                <C>                  <C>                     <C>
             Year ending April 30,
                 2002                               $  158,286           $  158,286              $  -
                 2003                                  168,498              168,498                 -
                 2004                                  178,710              178,710                 -
                 2005                                  178,710              178,710                 -
                 2006                                  178,710              178,710                 -
                 Thereafter                            446,775              446,775                 -
                                                    ----------           ----------              ----

                                                    $1,309,689           $1,309,689              $  -
                                                    ==========           ==========              ====
</TABLE>



                                       F20
<PAGE>


                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE M (continued)

     In connection with this agreement, the Company sold certain fixed assets to
     the tenant for $334,000. The gain on the sale of the fixed assets of
     $70,265 is included in "Miscellaneous (expense) income" for the year ended
     April 30, 2000.

     In June 2000, the Company received a payment of $397,800 in connection with
     the sublease from the tenant for future rent. This payment was recorded as
     deferred sublease income and will be recognized as revenue on a
     straight-line basis over the lease term.

     Starting in April 2000 and continuing through the present, the Company
     subleases their executive and administrative offices and warehouse from an
     affiliated company. There is no specified term or written agreement for
     this lease. The Company pays rent of $6,825 per month.

     Rent expense for the years ended April 30, 2001 and April 30, 2000 was
     $117,317 and $243,240, respectively.

     The Company wrote off leasehold improvements totaling $118,863 due to the
     relocation of the Company in April 2001. The loss on the disposal of these
     leasehold improvements is included in "Miscellaneous (expense) income" for
     the year ended April 30, 2001.


NOTE N - RISK AND UNCERTAINTIES

     The Company is subject to laws and regulations relating to the protection
     of the environment. While it is not possible to quantify with certainty the
     potential impact of actions regarding environmental matters, particularly
     any future remediation and other compliance efforts, in the opinion of
     management, compliance with the present environmental protection laws will
     not have a material adverse effect on the financial condition, competitive
     position or capital expenditures of the Company. However, the Company's
     efforts to comply with increasingly stringent environmental regulations may
     have an adverse effect on the Company's future earnings.


                                       F21
<PAGE>


                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE O - CONCENTRATION OF CREDIT RISK

     The Company grants unsecured trade credit to customers, substantially all
     of whom are located in the New York tri-state area.

     Sales to three customers accounted for 19.9%, 13.5% and 10.7%,
     respectively, of revenues for the year ended April 30, 2001. Accounts
     receivable for two customers accounted for 20% and 13%, respectively of
     accounts receivable as of April 30, 2001.


NOTE P - FAIR VALUES OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate the fair value
     of financial instruments:

     Cash and Cash Equivalents

     The carrying amounts reported in the balance sheet for cash and cash
     equivalents approximate their fair values, principally because of the
     short-term maturity of these items.

     Accounts Receivable and Accounts Payable

     The carrying amounts of accounts receivable and accounts payable in the
     balance sheet approximate fair values, principally because of the
     short-term maturity of these items.

     Short-Term and Long-Term Debt

     The carrying amounts of the notes payable approximate fair value based upon
     their effective interest rates compared to current market rates.


NOTE Q - ACQUISITIONS

     On July 10, 1999, NAC/Indoor Air Professionals, Inc. purchased certain
     tangible and intangible assets for a purchase price of $637,860. The
     purchase price was payable $137,860 in cash and 364,963 shares in Company
     common stock valued at $500,000. The acquisition was accounted for as a
     purchase. The allocation of purchase price follows:


                                       F22
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE Q (continued)

      Cost in excess of billings                                   $ 50,000
      Fixed assets                                                   37,860
      Covenant not to compete                                        50,000
      Goodwill                                                      500,000
                                                                   --------
                                                                   $637,860
                                                                   ========

     The following unaudited pro forma consolidated amounts give effect to the
     NAC/Indoor Air Professional's acquisition as if it had occurred on May 1,
     1998, by consolidating its results of operations with the results of NESCO
     Industries, Inc. for the year ended April 30, 2000. The unaudited pro forma
     consolidated results are not necessarily indicative of the operating
     results that would have been achieved had the transaction been in effect as
     of the beginning of the period presented and should not be construed as
     being representative of future operating results. The pro forma basic and
     diluted net loss per common share is computed by dividing the net loss
     attributable to common stockholders by the weighted-average number of
     common shares outstanding. The calculation of the weighted-average number
     of shares outstanding assumed that 364,963 shares of NESCO Industries, Inc.
     common stock issued in connection with its acquisition of NAC/Indoor Air
     Professionals were outstanding for the entire period.

                                                            Year ended
                                                             April 30,
                                                               2000
                                                            -----------
                                                            (unaudited)

      Revenue                                               $12,708,836
      Net loss                                               (1,001,456)

      Basic and diluted loss per share                      $      (.15)


     On December 5, 2000, the Company issued 80,000 shares of common stock
     valued at $100,000 in connection with an asset purchase agreement, which
     was allocated as follows:

      Fixed assets                                          $ 88,450
      Customer lists and trade name                           11,550
                                                            --------

                                                            $100,000
                                                            ========

     The Company believes the pro forma information for this transaction is not
     material to the financial statements. The results of operations of the
     acquired companies are included in the Company's statement of operations
     from the date of the acquisition.


                                       F23
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE R - BUSINESS SEGMENT INFORMATION

     The asbestos removal segment provides asbestos abatement including removal
     and disposal, enclosure and encapsulation. The environmental services
     segment provides environmental remediation, closure, and cost effectiveness
     services. Services include Phase I, II, and III environmental assessments,
     including underground storage tank removals, injection well closures, soil
     and ground water treatment systems, contaminated soil removal and emergency
     response. The indoor air quality services segment provides indoor air
     quality testing, monitoring and remediation services.

     Identifiable assets by segment are those assets that are used in the
     operations of each segment as well as the accounts receivable generated by
     each segment. Corporate assets consist primarily of cash and cash
     equivalents, prepaid expenses, and corporate furniture, fixtures and
     equipment. Capital expenditures are comprised primarily of additions to
     data processing equipment, furniture and fixtures, and leasehold
     improvements.

     The following table presents the Company's business segment financial
     information:

<TABLE>
<CAPTION>
                                                             Year ended April 30,
                                                      -----------------------------------
                                                          2001                   2000
                                                      ------------           ------------
<S>                                                   <C>                    <C>
      Revenues
          Asbestos removal                              $6,883,778            $10,114,108
          Environmental services                           465,165              1,248,462
          Indoor air quality services                    1,747,534              1,197,355
                                                        ----------            -----------

               Total revenues                           $9,096,477            $12,559,925
                                                        ==========            ===========

      Operating loss from segments
          Asbestos removal                              $   66,303            $  (600,415)
          Environmental services                          (201,824)               (18,781)
          Indoor air quality services                     (128,324)              (350,883)
                                                        ----------            -----------

                                                          (263,845)              (970,079)

          Corporate expenses, net                         (225,312)              (109,729)
          Interest expense, net                            (52,543)               (83,027)
          Other income, net                                (71,087)                66,423
          Income tax (expense) benefit                     (53,695)               150,063
                                                        ----------            -----------

               Net loss                                 $ (666,482)           $  (946,349)
                                                        ==========            ===========
</TABLE>


                                       F24
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000


NOTE R (continued)

<TABLE>
<CAPTION>
                                                                      Year ended April 30,
                                                               -----------------------------------
                                                                   2001                   2000
                                                               ------------           ------------
<S>                                                             <C>                    <C>
      Depreciation and amortization
          Asbestos removal                                      $    15,965            $    72,778
          Environmental services                                      1,217                  1,217
          Indoor air quality services                                99,416                 53,537
          Corporate                                                  20,026                  1,139
                                                                -----------            -----------

               Total depreciation and amortization              $   136,624            $   128,671
                                                                ===========            ===========

      Capital expenditures
          Asbestos removal                                      $     2,144            $    12,025
          Indoor air quality services                                 4,850                 25,404
          Corporate                                                  54,946                136,723
                                                                -----------            -----------

               Total capital expenditures                       $    61,940            $   174,152
                                                                ===========            ===========

      Identifiable assets
          Asbestos removal                                      $ 2,511,870            $ 3,447,037
          Environmental services                                     10,080                285,043
          Indoor air quality services                             1,186,597                974,416
                                                                -----------            -----------

               Total assets for reportable segments               3,708,547              4,706,496

      Corporate                                                      57,521                171,410
                                                                -----------            -----------

               Total assets                                     $ 3,766,068            $ 4,877,906
                                                                ===========            ===========
</TABLE>

NOTE S - FOURTH QUARTER ADJUSTMENTS

     During the fourth quarter of the year ended April 30, 2001, the Company
     recorded significant adjustments to its accounts, which resulted in
     increasing net loss by approximately $411,000. The adjustments for the year
     ended April 30, 2001 were principally attributable to the write-off of
     uncollectible accounts receivable of approximately $27,000, the write-off
     of leasehold improvements of approximately $118,000, an over accrual of
     estimated tax refunds which were received in the fourth quarter of
     approximately $54,000, depreciation expense on acquired assets of
     approximately $30,000 and accruals for commissions, management fees and
     accounting fees totaling approximately $144,000.

                                       F25
<PAGE>

                             NESCO Industries, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             April 30, 2001 and 2000



NOTE S (continued)

     During the fourth quarter of the year ended April 30, 2000, the Company
     recorded significant adjustments to its accounts, which resulted in
     increasing net loss by approximately $638,000. The adjustments for the year
     ended April 30, 2000 were principally attributable to increasing the
     allowance for possible losses on accounts receivable and writing off
     uncollectible accounts receivable which totaled approximately $125,000, an
     unanticipated loss on a job which totaled approximately $230,000, and
     accruals for insurance claims, depreciation expense, consulting and
     professional fees and commissions which totaled approximately $190,000.






                                       F26
<PAGE>

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

On June 15, 2000, we engaged Grant Thornton LLP as our auditors, as Mendelsohn
Kary Bell & Natoli LLP ("MKB&N") declined to stand for reappointment as
auditors. MKB&N's report on our financial statements for the year prior to its
election not to stand for reappointment did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles.

During our the fiscal year prior to, and the interim period preceding, MKB&N's
election not to stand for re-election, we had no disagreements with MKB&N of the
nature required to be reported under Item 304(a)(1)(iv) of Regulation S-K, and
there no events of the nature required to be reported under Item 304(a)(1)(v) of
Regulation S-K occurred.

During the fiscal year prior to engaging Grant Thronton, we have had no
consultations with it concerning: (a) the application of accounting principles
to a specific transaction or the type of opinion that might be rendered on our
financial statements as to which a written report was provided to us or as to
which we received oral advice that was an important factor in reaching a
decision on any accounting, auditing or financial reporting issue; or (b) any
disagreements, as defined in Item 304(a)(1)(iv) of Regulation S-K; or (c) a
reportable event, as described in Item 304(a)(1)(v) of Regulation S-K.

Our Board of Directors has approved the engagement of Grant Thornton LLP as our
auditors to replace MKB&N.





                                       19
<PAGE>

                                    PART III


ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL

The Company's executive officers and directors are as follows:


<TABLE>
<CAPTION>
Name                                             Age                     Positions With Company
<S>                                               <C>         <C>
Santo Petrocelli, Sr. ..............              68          President and Chief Executive Officer, Chairman
                                                              of the Board of Directors

Michael J. Caputo ..................              50          Chief Operating Officer and Director

Marshall H. Geller .................              64          Executive Vice President and Director

Lawrence S. Polan ..................              73          Chief Financial Officer, Secretary-Treasurer and
                                                              Director

Santo Petrocelli, Jr. ..............              36          Director
</TABLE>

         Santo Petrocelli, Sr., has served as Chairman and CEO of the Company
and its predecessors since 1988. Mr. Petrocelli is the Chairman and CEO and a
Director of Petrocelli Industries, Inc. and Petrocelli Electric Co., Inc., a
privately-owned company based in Long Island City, New York, which is engaged in
the business of electrical and telecommunications contracting. Mr. Petrocelli
devotes less than a majority of his working time (approximately 30%) to the
Company's business.

         Michael J. Caputo has served as Chief Operating Officer and a director
of the Company and its predecessors since 1988.

         Marshall H. Geller, Executive Vice President and a director of the
Company, has served as a director of the Company since March 1998, and in a
variety of executive and consulting capacities with the Company and its
predecessors since 1988. He has owned and operated an exterior maintenance and
restoration firm in New York City since 1962. Mr. Geller devotes less than a
majority of his time (approximately 30%) to the business of the Company.

         Lawrence S. Polan has served as Secretary, Treasurer, Chief Financial
Officer and a director of the Company and its predecessors since 1988. Mr. Polan
also is the Chief Financial Officer of Petrocelli Electric Co., Inc. Mr. Polan
devotes less than a majority of his time (approximately 30%) to the Company's
business.

         Santo Petrocelli, Jr., has served as a director of the Company since
March 1998. Mr. Petrocelli also is President of Petrocelli Communications
Company, a division of Petrocelli Electric Co., Inc., a position he has held
since May 1998. From May 1992 to May 1998, Mr. Petrocelli was Executive Vice
President of Petrocelli Communications Company.

                                       20
<PAGE>

         Santo Petrocelli, Sr., is the father of Santo Petrocelli, Jr. There are
no other family relationships among the Company's officers and directors.

ITEM 10.     EXECUTIVE COMPENSATION

         A.       Summary Compensation Table.

The following table sets forth information concerning compensation for services
rendered in all capacities awarded to, earned by or paid to Santo Petrocelli,
Sr., the Company's Chairman and Chief Executive Officer, Michael J. Caputo,
Chief Operating Officer, and Marshall Geller, Executive Vice President, in FY
2001 and 2000. No other executive officer of the Company received compensation
of $100,000 or more from the Company in either of those fiscal years.

Mr. Petrocelli is compensated by the Company through Petrocelli Industries,
Inc., and Mr. Geller is compensated through Gelco Development Corp. Payments to
these companies are classified as "Management Fees and Consulting Fees" in the
Company's Statements of Operations for the FY 2001 and 2000. Mr. Petrocelli and
Mr. Geller also received compensation directly from the Company in FY 2001.

<TABLE>
<CAPTION>
=====================================================================================================================
                                             Summary Compensation Table
=============================================================== =====================================================
                                                                               Long Term Compensation
==================== ======= ================================== ========================== ==========================
                                    Annual Compensation                  Awards                     Payouts
==================== ======= ========== ======== ============== ============ ============= =========== ==============

                                                      Other      Restricted    Securities                  All
Name and                                             Annual         Stock      Underlying     LTIP        Other
Principal                      Salary     Bonus   Compensation    Award(s)      Options/    Payouts    Compensation
Position              Year      ($)       ($)         ($)           ($)        SARS(#)        ($)           ($)
--------              ----      ---       ---         ---           ---        -------        ---           ---
-------------------- ------- ---------- -------- -------------- ------------ ------------- ----------- --------------
<S>                   <C>      <C>         <C>         <C>           <C>          <C>          <C>           <C>
Santo Petrocelli,     2001     87,000     -0-         -0-           -0-          -0-          -0-           -0-
Sr., Chairman of
the Board,
President and CEO     2000     88,950     -0-          *            -0-          -0-          -0-           -0-

-------------------- ------- ---------- -------- -------------- ------------ ------------- ----------- --------------
Michael J. Caputo,    2001    132,500     -0-         -0-           -0-          -0-          -0-           -0-
COO
                      2000    132,500     -0-          *            -0-          -0-          -0-           -0-

-------------------- ------- ---------- -------- -------------- ------------ ------------- ----------- --------------
Marshall H. Geller,   2001     27,000     -0-         -0-           -0-          -0-          -0-           -0-
Executive Vice
President             2000     52,000     -0-          *            -0-          -0-          -0-           -0-
-------------------- ------- ---------- -------- -------------- ------------ ------------- ----------- --------------

==================== ======= ========== ======== ============== ============ ============= =========== ==============
</TABLE>

*Less than $50,000

                                       21
<PAGE>

         B.       Options/SAR Grants in Last Fiscal Year.

Not applicable.

         C.       Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
                  Value.

None of the executive officers identified in (a) above exercised any options or
SARs in the last fiscal year, and none of such officers held any SARs at year
end. Information relating to the number and value of options held at year end by
such officers is set forth in the following table:

<TABLE>
<CAPTION>
---------------------------------------- -------------------------------------- --------------------------------------
                                                Number of Securities(1)                 Value of Unexercised
                                                Underlying Unexercised                  In-the-Money Options
                                                   Options at FY end                        At FY end (2)
                 Name                          Exercisable/Unexercisable              Exercisable/Unexercisable
                 ----                          -------------------------              -------------------------
---------------------------------------- -------------------------------------- --------------------------------------
<S>                                                      <C>                                   <C>
Santo Petrocelli, Sr.                                    150,000/-0-                            None
---------------------------------------- -------------------------------------- --------------------------------------
Marshall Geller                                          150,000/-0-                            None
---------------------------------------- -------------------------------------- --------------------------------------
Michael J. Caputo                                         50,000/-0-                            None
---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>

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

(1)      Shares of common stock.

(2)      Based on the high "bid" price of shares quoted on April 30, 2001.

         D.       Long-Term Incentive Plans.

None.

         E.       Compensation of Directors.

During the fiscal year ended April 30, 2001, no director of the Company received
any compensation for any services provided in such capacity. Directors of the
Company are reimbursed for any expenses incurred by them in connection with
their activities on behalf of the Company.

         F.       Employment Contracts and Termination of Employment, and Change
                  in Control Arrangements.

None of the Company's executive officers have fixed term employment agreements
and there are no agreements relating to severance, change of control or other
similar terms between the Company and any of its executive officers.

         G.       Report on Repricing of Options/SARS.

Not Applicable.

         H.       Supplementary Information on Stock Options.

Not applicable.


                                       22
<PAGE>

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT

The following table sets forth information as of August 8, 2001, with respect to
the beneficial ownership of our securities by officers and directors,
individually and as a group, and all holders of more than 5% of our Common
Stock. Unless otherwise indicated, all shares are beneficially owned and sole
investment and voting power is held by the beneficial owners indicated. On
August 8, 2001, there were 6,694,963 shares of Common Stock outstanding. No
shares of any other class of capital stock were outstanding.

<TABLE>
<CAPTION>
        --------------------------------------------- ------------------------------- -----------------------
                                                                                          Percentage of
                                                                                        Outstanding Common
                    Names and Addresses                 Number of Shares of Common      Stock Beneficially
                    of Beneficial Owner                Stock Beneficially Owned(1)            Owned

       --------------------------------------------- ------------------------------- -----------------------
<S>                                                           <C>                            <C>
        Santo Petrocelli, Sr. (2)                                2,550,000                      37.7%
        c/o Petrocelli Industries, Inc.
        2209 Queens Plaza North
        Long Island City, NY  11101

        --------------------------------------------- ------------------------------- -----------------------
        Marshall H. Geller(3)                                    2,550,000                      37.7%
        20 Country Ridge Circle
        Ryebrook, NY  10573

        --------------------------------------------- ------------------------------- -----------------------
        Michael J. Caputo(4)                                       150,000                      2.25%
        c/o Nesco Industries, Inc.
        1212 43rd Avenue
        Long Island City, NY  11101

        --------------------------------------------- ------------------------------- -----------------------
        Lawrence S. Polan(5)                                       150,000                      2.25%
        c/o Petrocelli Industries, Inc.
        2209 Queens Plaza North
        Long Island City, NY  11101

        --------------------------------------------- ------------------------------- -----------------------
        Santo Petrocelli, Jr.(6)                                       -0-                        -0-
        c/o Petrocelli Industries, Inc.
        2209 Queens Plaza North
        Long Island City, NY  11101

        --------------------------------------------- ------------------------------- -----------------------
        All Officers and Directors as a                          5,400,000                      77.0%
        Group (5 persons)

        --------------------------------------------- ------------------------------- -----------------------
</TABLE>

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

(1)    As used herein, the term beneficial ownership with respect to a security
       is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as
       consisting of sole or shared voting power (including the power to vote or
       direct the vote) and/or sole or shared investment power (including the
       power to dispose or direct the disposition of) with respect to the
       security through any contract, arrangement, understanding, relationship
       or otherwise, including a right to acquire such power(s) during the next
       60 days. Unless otherwise noted, beneficial ownership consists of sole
       ownership, voting and investment rights.

                                       23
<PAGE>

(2)    Includes  150,000 shares  reserved for issuance upon the exercise of an
       option granted under our 1999 Incentive Stock Option Plan, and 2,400,000
       shares owned of record by Petrocelli Industries Inc. Mr. Petrocelli is
       the President and Chief Executive Officer of Petrocelli Industries, Inc.,
       and beneficially owns 25% of its outstanding capital stock. The other 75%
       is owned by members of Mr. Petrocelli's family.

(3)    Includes 150,000 shares reserved for issuance upon the exercise of an
       option granted under our 1999 Incentive Stock Option Plan, and 2,400,000
       shares owned of record by Gelco Development Corp., a company owned and
       controlled by Mr. Geller and members of his family.

(4)    Includes 50,000 shares reserved for issuance upon the exercise of an
       option granted under our 1999 Incentive Stock Option Plan ("Plan").

(5)    Includes 50,000 shares reserved for issuance upon the exercise of an
       option granted under our 1999 Incentive Stock Option Plan, and 100,000
       shares owned of record by LPS Consultants Inc., a company owned and
       controlled by Mr. Polan and his wife.

(6)    Does not include shares owned by Petrocelli  Industries, Inc., in which
       Mr. Petrocelli has an economic interest by reason of his equity ownership
       of Petrocelli Industries, Inc.


                                       24
<PAGE>

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During FY 2001, Santo Petrocelli, Sr., our President and Chief Executive
Officer, and Petrocelli Industries, Inc. ("Petrocelli Industries"), a company
controlled by Mr. Petrocelli, were repaid $355,082 with loans by the Company,
net of new loans during the year. In FY 2000, Petrocelli Industries loaned
$950,000 to us, net of repayments during the year.

The highest loan balance outstanding at any time during FY 2001 was $975,000,
compared to $950,000 in the prior fiscal year. These loans bear interest at the
rate of 10% per annum, payable monthly, and have no fixed term. Accordingly, we
consider them to be due on demand. No interest was paid on these loans during
the year. At April 30, 2001, we had accrued interest of $44,032 on FY 2001
loans, compared to $43,137 in the prior year on FY 2000 loans.

The indebtedness to Mr. Petrocelli and Petrocelli Industries described in the
preceding paragraph is in addition to amounts owed to Petrocelli Electric Co.
for rent on the office and warehouse space totaling $6,825 per month and demand
loans of $129,000 made to NAC by Petrocelli Industries and Gelco Development
Corp., a company controlled by Marshall Geller, our Executive Vice President and
a director of the Company, prior to our acquisition of NAC in March 1998.

We believe the loan terms obtained from Petrocelli Industries, Gelco Development
Corp. and Santo Petrocelli are at least as favorable as could have been obtained
by us from non-affiliated parties through arms length negotiation.

During FY 2001 and FY 2000, certain shareholders and officers of the Company
received consulting and management services fees totaling $104,000 and $165,450,
respectively. During FY 2000, Petrocelli Industries Inc. rendered subcontractor
services to the Company totaling $59,000.

Except as set forth above, there were no transactions between the Company and
any of its current executive officers or holders of 5% or more of its voting
securities during either of the last two fiscal years.


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

A list of the exhibits filed as part of this Report is set forth in the Exhibit
Index which immediately follows the Signature Page.

During the last quarter of the period covered by this Report we did not file any
Current Reports on Form 8-K.


                                       25
<PAGE>


                            SUPPLEMENTAL INFORMATION

We have not sent an annual report or proxy statement to security holders in
respect of the fiscal year ending April 30, 2001, or in the current fiscal year.
Such report and proxy statement will be furnished to security holders in
connection with the Company's Annual Meeting. Copies of such material will be
furnished to the Commission when it is sent to security holders.


                                   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.

                                        NESCO INDUSTRIES INC.


                                        By: /s/ Santo Petrocelli, Sr.
                                           -------------------------------------
                                           Santo Petrocelli, Sr.
                                           President and Chairman
                                           of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                Signature                                    Title                                 Date
                ---------                                    -----                                 ----
<S>                                        <C>                                               <C>
/s/ Santo Petrocelli, Sr.                  President, Chairman of the Board                  March 5, 2002
----------------------------               and Director
Santo Petrocelli, Sr.

/s/ Lawrence S. Polan                      Chief Financial and Accounting                    March 5, 2002
----------------------------               Officer and Director
Lawrence S. Polan

/s/ Michael J. Caputo                      Chief Operating Officer and Director              March 5, 2002
----------------------------
Michael J. Caputo


/s/ Santo Petrocelli, Jr.                  Director                                          March 5, 2002
----------------------------
Santo Petrocelli, Jr.
</TABLE>




                                       26
<PAGE>

                                INDEX TO EXHIBITS

---------------------------------------------------------------------------
Exhibit No.          Description
-----------          -----------
---------------------------------------------------------------------------

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

3.1*                 Articles of Incorporation as amended
---------------------------------------------------------------------------
3.2*                 Bylaws as amended
---------------------------------------------------------------------------
4.1*                 Common Stock Certificate
---------------------------------------------------------------------------
4.2*                 Incentive Stock Option Plan
---------------------------------------------------------------------------
16**                 Letter dated June 28, 2000, from Mendelsohn Kary
                     Bell & Natoli LLP rechange in certifying accountants
---------------------------------------------------------------------------
21*                  Subsidiaries
---------------------------------------------------------------------------

*  Filed as Exhibits with the Company's Registration Statement on Form 10-SB
   filed with the Commission on November 30, 1999, and incorporated by reference
   herein.

** Filed as an Exhibit with the Company's Current Report on Form 8-K filed on
   June 30, 2000, and incorporated by reference herein.



                                       27