U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                  FORM 10-KSB/A

[X]      ANNUAL  REPORT UNDER  SECTION 13 or 15(d) OF THE SECURTIES AND EXCHANGE
         ACT OF 1934.

         For the fiscal year ended December 31, 2001
                                   -----------------

[ ]      TRANSITION  REPORT  UNDER  SECTION  13 or 15(d) OF THE  SECURITIES  AND
         EXCHANGE ACT OF 1934.

         For the transition period from                     to
                                       -------------------  --------------------

                               Commission File No.

                             National Sorbents, Inc.


        Nevada                                                 31-1291923

 National Sorbents, Inc.
10139 Commerce Park Drive
 Cincinnati, Ohio  45246


                    Issuer's telephone number (513) 860-4144
                                              --------------

Securities registered under Section 12(b) of the Exchange Act:

   Title of each class                 Name of each exchange on which registered

Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.001 per share
                     ---------------------------------------
                                (Title of Class)

Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter  period
that the registrant  was required to file such reports),  and 2 has been subject
to such filing requirements for the past 90 days. Yes [ ] No [X]

Check  if  disclosure  of  delinquent  filers  in  response  to Item  405 of the
Regulation  S-B is not  contained  in  this  form,  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. [X]

State issuer's revenue for its most recent fiscal year. $2,285,050

Aggregate market value of voting stock held by  non-affiliates  of registrant as
of December 31: $131,315


Shares of Common Stock outstanding as of December 31: 13,131,472

                       DOCUMENTS INCORPORATED BY REFERENCE


Transitional Small Business Disclosure Format (check one): Yes[ ] No  [X]

<PAGE>


                                 SIGNATURE PAGE


In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

NATIONAL SORBENTS, INC.


     Signature                      Title                            Date
     ---------                      -----                            ----

\s\ Daniel B. Jones         President and Director             November 20, 2002
-------------------


In accordance  with the Exchange Act of 1934,  this report has been signed below
by the following  persons on behalf of the  registrant in the  capacities and on
the dates indicated.

     Signature                      Title                            Date
     ---------                      -----                            ----

\s\ Daniel B. Jones         President and Director             November 20, 2002
                            (Principal Executive Officer)

\s\ Leslie E. Jones         Exec. Vice President and Director  November 20, 2002












<PAGE>









                             National Sorbents, Inc.

                              Financial Statements

                           December 31, 2001 and 2000

                                      With

                          Independent Auditors' Report




<PAGE>

                             National Sorbents, Inc.

                                Table Of Contents


                                                                            Page
                                                                            ----


Independent Auditors' Report                                                   1

Financial Statements:

   Balance Sheets                                                            2-3

   Statements of Operations                                                    4

   Statements of Cash Flows                                                    5

   Statements of Changes in Stockholders' Deficit                              6

   Notes to the Financial Statements                                        7-14



<PAGE>

                          Independent Auditors' Report
                          ----------------------------



To the Board of Directors
National Sorbents, Inc.:


We have audited the accompanying balance sheets of National Sorbents, Inc. as of
December  31, 2001 and 2000,  and the related  statements  of  operations,  cash
flows,  and changes in  stockholders'  deficit  for the years then ended.  These
financial  statements are the  responsibility of the company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of National  Sorbents,  Inc. at
December 31, 2001 and 2000 and the results of its  operations and its cash flows
for the years then ended in conformity with U. S. generally accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial statements, the Company has incurred significant operating losses, and
has significant working capital and stockholders'  deficit.  These factors raise
substantial doubt about its ability to continue as a going concern. Management's
plans are also  described in the note.  The financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.



Clark, Shaefer, Hackett & Co.


March  8, 2002
Cincinnati, Ohio


                                       1
<PAGE>

                             NATIONAL SORBENTS, INC.
                                 Balance Sheets
                           December 31, 2001 and 2000



                                     Assets
                                     ------

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

Current assets:
       Cash                                            $   12,317         12,716
       Trade receivables, net                             226,230        296,674
       Inventory:
           Raw materials                                  103,224        101,862
           Finished goods                                  42,084        108,037
                                                       ----------     ----------
                                                          145,308        209,899
                                                       ----------     ----------

       Prepaid expenses                                      --            1,460
       Employee advances                                   35,224         14,867
                                                       ----------     ----------
              Total current assets                        419,079        535,616
                                                       ----------     ----------


Property and equipment:
       Land and building                                     --          850,000
       Factory equipment                                  146,478        146,478
       Computers and office equipment                      92,669         73,940
       Furniture and improvements                          24,549         29,799
       Construction in process                             48,482         58,483
                                                       ----------     ----------
                                                          312,178      1,158,700
       Less accumulated depreciation                      220,018        275,321
                                                       ----------     ----------
              Net property and equipment                   92,160        883,379


Other assets                                               57,138          5,930
                                                       ----------     ----------

              Total assets                             $  568,377      1,424,925
                                                       ==========     ==========




See accompanying notes to financial statements.


                                       2
<PAGE>
<TABLE>
<CAPTION>

                      Liabilities and Stockholders' Deficit
                      -------------------------------------

                                                                      2001         2000
                                                                   ----------   ----------
<S>                                                                <C>           <C>

 Current liabilities:
        Trade payables                                             $  757,661    1,096,014
        Accrued expenses:
           Payroll taxes                                               33,743       53,076
           Interest                                                    14,829       38,805
           Other                                                       35,560       51,922
        Notes payable                                                 425,200      325,379
        Notes payable - stockholder                                   490,067      415,067
        Current portion of long-term debt and capital leases           10,315       15,895
                                                                   ----------   ----------
           Total current liabilities                                1,767,375    1,996,158
                                                                   ----------   ----------



 Deferred gain on building sale                                       590,372         --
 Mortgage payable, net of current portion                                --        600,084
 Capital lease, net of current portion                                 17,005       12,650
                                                                   ----------   ----------
        Total long-term liabilities                                   607,377      612,734
                                                                   ----------   ----------
           Total liabilities                                        2,374,752    2,608,892
                                                                   ----------   ----------


 Stockholders' deficit:
        Common stock; $0.001 par value, 50,000,000
           shares authorized, 13,131,472 and
           12,893,472 outstanding in 2001 and 2000, respectively       13,131       12,893
        Paid-in capital                                             5,534,368    5,496,880

        Accumulated deficit                                        (7,353,874)  (6,693,740)
                                                                   ----------   ----------
           Total stockholders' deficit                             (1,806,375)  (1,183,967)
                                                                   ----------   ----------

               Total liabilities and stockholders' deficit         $  568,377    1,424,925
                                                                   ==========   ==========
</TABLE>


                                       3
<PAGE>
<TABLE>
<CAPTION>

                             NATIONAL SORBENTS, INC.
                            Statements of Operations
                     Years Ended December 31, 2001 and 2000


                                                            2001            2000
                                                       ------------    ------------
<S>                                                    <C>                <C>

Revenues:
       Environmental                                   $    124,644       1,493,771
       Sorbents                                           2,013,965       1,976,070
       Freight revenues                                     161,954         152,371
       Sales returns and allowances                         (15,513)         (9,930)
                                                       ------------    ------------
           Net revenue                                    2,285,050       3,612,282
                                                       ------------    ------------
Cost of Sales:
       Environmental                                        117,473       1,182,723
       Sorbents                                           1,808,320       1,773,132
       Depreciation (Sorbents)                               25,187          22,234
                                                       ------------    ------------
                                                          1,950,980       2,978,089
                                                       ------------    ------------
           Gross Profit                                     334,070         634,193
                                                       ------------    ------------
Operating Costs and Expenses:
       Salaries, wages and taxes                            385,395         497,786
       Advertising and promotion                            212,994         408,948
       Commissions                                           28,421         106,554
       Professional fees                                    114,385         138,447
       Communications                                        26,648          24,499
       Insurance                                             35,307          32,974
       Other administration                                 180,612         179,926
                                                       ------------    ------------
                                                            983,762       1,389,134
                                                       ------------    ------------
           Loss from operations                            (649,692)       (754,941)

Interest expense                                            (46,781)        (72,019)
Other income                                                 36,339         194,957
                                                       ------------    ------------
           Loss before taxes                               (660,134)       (632,003)

Income tax provision                                           --              --
                                                       ------------    ------------
           Net loss                                    $   (660,134)       (632,003)
                                                       ============    ============

Net loss per common share:
       Net loss                                        $      (0.05)          (0.06)
                                                       ============    ============

Weighted average number of common shares outstanding     13,113,164      10,797,708
                                                       ============    ============
</TABLE>

See accompanying notes to financial statements.


                                       4
<PAGE>
<TABLE>
<CAPTION>

                             NATIONAL SORBENTS, INC.
                            Statements of Cash Flows
                     Years Ended December 31, 2001 and 2000


                                                             2001           2000
                                                         -----------    -----------
<S>                                                      <C>               <C>

Cash flows from operating activities:
      Net loss                                           $  (660,134)      (632,003)
      Adjustments to reconcile net loss to net
         cash used by operating activities:
          Depreciation                                        26,891         36,295
          Stock issued for services                             --           51,000
          Amortization of deferred gain on sale              (36,572)          --
          Changes in operating assets and liabilities:
             Decrease in accounts receivable                  70,444        115,977
             (Increase) decrease in inventory                 64,591         (4,828)
             Decrease  in prepaid expenses                     1,460         16,685
             (Increase) in employee advances                 (20,357)        (4,439)
             (Increase) in other assets                      (51,208)        (1,090)
             Increase (decrease) in trade payables          (338,353)        17,941
             (Decrease) in accrued expenses                  (21,945)       (11,194)
                                                         -----------    -----------
Net cash used by operating activities                       (965,183)      (415,656)
                                                         -----------    -----------

Cash flows from investing activities:
      Proceeds from sale of building                       1,400,000           --
      Purchase of equipment                                   (8,728)       (86,759)
                                                         -----------    -----------
Net cash used by investing activities                      1,391,272        (86,759)
                                                         -----------    -----------

Cash flows from financing activities:
      Proceeds from new loans                                570,000           --
      Proceeds from capital lease                             15,853         20,759
      Payments on notes payable                             (395,179)        (3,061)
      Payments on mortgage debt                             (607,799)        (6,355)
      Payments on capital lease                               (9,363)        (6,828)
      Proceeds from sale of common stock                        --          498,329
                                                         -----------    -----------
Net cash provided by financing activities                   (426,488)       502,844
                                                         -----------    -----------

      Net increase (decrease) in cash                           (399)           429

      Cash at beginning of year                               12,716         12,287
                                                         -----------    -----------

      Cash at end of year                                $    12,317         12,716
                                                         ===========    ===========

Schedule of noncash activities:
      Stock issued for accrued interest                  $    37,726           --
                                                         ===========    ===========
</TABLE>

See accompanying notes to financial statements.


                                       5
<PAGE>
<TABLE>
<CAPTION>

                             NATIONAL SORBENTS, INC.
                 Statements of Changes in Stockholders' Deficit
                     Years Ended December 31, 2001 and 2000



                                                   Common Stock                                                   Total
                                          ------------------------------       Paid-In        Accumulated     Stockholders'
                                              Shares           Amount          Capital          Deficit          Deficit
                                          -------------    -------------    -------------    -------------    -------------
<S>                                       <C>              <C>              <C>              <C>              <C>

Balance, December 31, 1999                    9,763,938    $       9,764        4,898,180       (6,061,737)      (1,153,793)

 Sales of common stock                        2,884,534            2,884          547,945             --            550,829

 Stock issued for services, net                 300,000              300           50,700             --             51,000

 Cancellation of stock for compensation         (55,000)             (55)         (27,445)            --            (27,500)

 Underwriting costs reversed                       --             27,500             --             27,500

 Net loss for year                                 --               --               --           (632,003)        (632,003)
                                          -------------    -------------    -------------    -------------    -------------

 Balance, December 31, 2000                  12,893,472           12,893        5,496,880       (6,693,740)      (1,183,967)

 Stock issued for interest                      238,000              238           37,488             --             37,726

 Net loss for year                                 --               --               --           (660,134)        (660,134)
                                          -------------    -------------    -------------    -------------    -------------

 Balance, December 31, 2001                  13,131,472    $      13,131        5,534,368       (7,353,874)      (1,806,375)
                                          =============    =============    =============    =============    =============
</TABLE>

See accompanying notes to financial statements.


                                       6
<PAGE>

                             National Sorbents, Inc.

                          Notes To Financial Statements


1.       Nature Of Operations:
         --------------------

         National Sorbents, Inc. (Company) was incorporated in 1990 in the State
         of Ohio where its  administrative,  sales and manufacturing  facilities
         are  located.  In January  2000,  the  Company  redomiciled  in Nevada,
         authorizing 25,000,000 additional common shares at $0.001 par value per
         share.  Immediately  following the incorporation in Nevada, the Company
         affected a  share-for-share  exchange with the shareholders of the Ohio
         Company and then merged the Ohio  Company into the Nevada  Company,  so
         the surviving  company is the Nevada Company.  Immediately  after,  the
         Company purchased Polyspherics, Inc. (Poly), a Nevada shell corporation
         with no assets, liabilities, revenues or operations. Poly was a company
         required to file annual and periodic  reports with the  Securities  and
         Exchange Commission by virtue of its having a 12-g registration on Form
         10-SB.  Subsequent to the  acquisition  of Poly, the Company merged the
         subsidiary  into  itself  and is the  surviving  entity  for  reporting
         purposes.

         The Company engages in two segments of the environmental  industry, one
         dealing with  containment/cleanup  (sorbents)  and the other with waste
         disposal   (environmental   services).  As  discussed  later  in  these
         footnotes,  the environmental segment experienced a significant decline
         in revenue during 2001 and is not expected to recover. The breakdown of
         the segment information is shown elsewhere in these footnotes.

2.       Summary Of Significant Accounting Policies:
         ------------------------------------------

         Use of estimates
         ----------------

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

         Fair value of financial instruments
         -----------------------------------

         Substantially all of the Company's financial assets and liabilities are
         carried at fair value or contracted  amounts,  which  approximate  fair
         value.

         Net loss per common share
         -------------------------

         Net loss per common share has been computed by dividing the  respective
         numerator by the weighted  average number of common shares  outstanding
         during the periods.


                                       7
<PAGE>

         Trade receivables and revenue recognition
         -----------------------------------------

         The  Company,  in the  normal  course of  business,  extends  credit to
         customers on an  uncollateralized  basis.  Revenue is  recognized  upon
         shipment  of  product to  customers.  Management  periodically  reviews
         outstanding accounts receivable,  as well as the bad debt write offs in
         the  past,  to  establish  an  allowance   for  doubtful   account  for
         uncollectible amounts.

         Inventories
         -----------

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
         determined  using the  first-in-first-out  method (FIFO).  Shipping and
         handling costs are included in cost of sales.

         Property and equipment
         ----------------------

         Property and equipment are recorded at cost.  Depreciation  is provided
         principally on the straight-line method over the estimated useful lives
         of the assets.  Additions,  improvements,  and expenditures for repairs
         and maintenance  that are material in nature and  significantly  add to
         the productivity or extend the economic life of assets are capitalized.
         Any immaterial  amounts or amounts  incurred as recurring  expenditures
         for repairs are charged to expense.

         Income taxes
         ------------

         Income taxes are recorded in accordance  with SFAS No. 109,  Accounting
         for Income Taxes.  This statement  requires the recognition of deferred
         tax assets and  liabilities to reflect the future tax  consequences  of
         events that have been recognized in the Company's financial  statements
         or tax returns.  Measurement  of the deferred items is based on enacted
         tax laws. In the event the future  consequences of differences  between
         financial  reporting  basis and tax  basis of the  Company  assets  and
         liabilities  result in a deferred  tax asset,  SFAS No. 109 requires an
         evaluation  of the  probability  of being  able to  realize  the future
         benefits  indicated by such asset. A valuation  allowance  related to a
         deferred  tax asset is  recorded  when it is more  likely than not that
         some portion of the deferred tax asset will not be realized.

         Advertising costs
         -----------------

         The Company expenses  advertising costs as incurred.  Advertising costs
         totaled $21,949 in 2001 and $67,140 in 2000.

         Reclassifications
         -----------------

         Certain  reclassifications  have been made in the prior year financials
         to conform to the current year presentation.



                                       8
<PAGE>
<TABLE>
<CAPTION>

3.       Going Concern:
         -------------

         Through  December  31,  2001  the  Company  had  incurred   significant
         operating losses and has depended upon stock sales, stockholder/officer
         loans and loans  from  others to provide  the  liquidity  necessary  to
         maintain  ongoing  operations.  In 2001 the Company  continued to incur
         operating losses and showed a decrease in revenues from 2000 levels. As
         of  December  31, 2001 the  Company  had a working  capital  deficit of
         $1,348,296 and stockholders' deficit of $1,806,375. These factors raise
         substantial  doubt about the  Company's  ability to continue as a going
         concern.

         Management  is  exploring  various   alternative  sources  of  capital,
         including   refinancing  the  mortgage,   additional  equity  and  debt
         offerings  or some  combination  of equity  and  debt.  There can be no
         assurance  that the Company will achieve any level of financing or that
         the level achieved will be sufficient to maintain or grow the Company's
         operations.

4.       Trade Receivables:
         -----------------

         At December 31, 2001 and 2000, the allowance for doubtful  accounts was
         $34,124 and $36,145 respectively.

5.       Notes Payable:
         -------------

         Notes payable at December 31, 2001 and 2000 consists of the following:

                                                                 2001       2000
                                                               --------   --------
<S>                                                            <C>        <C>
         Term note, interest at 12%, dated June 26, 1998
         Lender received 50,000 shares of stock at inception
         and has option to purchase additional shares at 50%
         of market value. Renewable annually by consent of
         both parties                                          $ 60,000    125,000

         Promissory note dated May 16, 1995.  Interest
         at prime plus 1%                                          --          379

         Demand note to an individual, without interest         195,200    200,000

         Demand note, without interest                           60,000       --

         Bank term note, dated March 2001.  Interest at
         prime plus 1%.  Secured by business assets and
         shareholder residence.  Interest payable monthly,
         loan due March 2002                                    110,000       --
                                                               --------   --------


                  Total outstanding                            $425,200    325,379
                                                               ========   ========

</TABLE>


                                       9
<PAGE>

         During 2001 and 2000, the Company  recognized  total  interest  expense
         related  to  these  notes  in  the  amount  of  $21,144  and   $15,201,
         respectively.  Only $7,388 and $201,  respectively of this interest was
         paid in cash.

6.       Notes Payable - Stockholder:
         ---------------------------

         The  stockholder  loan is a demand loan without  interest.  The loan is
         from the president of the Company.

7.       Mortgage Note:
         -------------

         In 2000, the mortgage debt  outstanding is secured by land and building
         that houses the  operations.  The  interest on the note is variable and
         can  change by up to 2.0% per year  based on a defined  index.  For the
         period from 2000 to 2001 the rate varied  between 8.25% to 9.875%.  The
         maximum  rate on the loan is 14.5%.  The rate is subject to  adjustment
         each  year on July 1. For the  years  2001 and  2000 the  Company  paid
         interest of $19,976 and  $54,990  respectively.  This loan was paid off
         during 2001 as part of the sale-leaseback transaction discussed later.

8.       Capital Lease:
         -------------

         As of  December  31, 2001 the  Company is  obligated  under two capital
         leases. The first lease consists of phone equipment. This lease expires
         in  September  2005.  The second  lease  involves  computer  networking
         equipment.  This lease  expires in July 2003.  At December 31, 2000 the
         company was obligated  under a capital lease for phone  equipment  that
         expired in May 2001. The minimum annual  payments  required under these
         leases are as follows:

                                      2002                  $  15,064
                                      2003                     11,325
                                      2004                      6,089
                                      2005                      4,060
                                                            ---------

                 Total lease payments                          36,538
                 Amounts representing interest                  9,218
                                                            ---------

                 Present value of future minimum payments      27,320
                 Less: current portion                         10,315
                                                            ---------

                 Long-term portion                          $  17,005
                                                            =========




                                       10
<PAGE>

         The total of the assets under capitalized lease as of December 31, 2001
         and 2000 are as follows:

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

               Computers and office equipment   $ 36,343      41,370
               Accumulated depreciation          (13,966)    (23,389)
                                                --------    --------

                        Total                   $ 22,377      17,981
                                                ========    ========

9.       Sale-Leaseback Transaction:
         --------------------------

         In June 2001, the Company entered into a sale-leaseback  transaction on
         its primary facilities.  The building and land was sold for $1,400,000.
         Simultaneously,  the Company  signed a 5 year  lease,  with a five year
         option,  for $16,900 per month. The gain from this transaction has been
         deferred and is being  recognized over a ten year period.  The lease is
         being  accounted for as an operating  lease,  therefore the  statements
         show no value for the land and  building,  nor any of the related lease
         payment obligations.

         The lease contains a provision for the repurchase of the facilities for
         $1,600,000, which the company has negotiated to $1,550,000. The Company
         is  currently  negotiating  with a lender to  secure a loan that  would
         allow  repurchase.  This transaction is expected to close in the second
         quarter of 2002.

10.      Operating Leases:
         ----------------

         The Company  leases its main  facilities  and certain  warehouse  space
         under  agreements  that expire in 2006. The Company also leases certain
         vehicles under operating  leases that expire in 2002. Total expense for
         operating   leases  was   $152,310  and  $30,668  for  2001  and  2000,
         respectively.  The following  are the minimum  payments due under these
         leases:

                             2002             $   225,224
                             2003                 202,800
                             2004                 202,800
                             2005                 202,800
                             2006                  84,500
                                              -----------
                                              $   918,124
                                              ===========

11.      Stockholders' Deficit:
         ---------------------

         During  2000,  in  conjunction  with the  reorganization  into a Nevada
         corporation,  the  number  of  authorized  shares  was  increased  from
         25,000,000 to 50,000,000.



                                       11
<PAGE>

         In 2001, the company issued 238,000 shares of stock in lieu of interest
         on a note  payable.  The shares were valued at  approximately  $.16 per
         share.  A total of $37,726 of interest was satisfied  with the issuance
         of these  shares.  None of  these  shares  were  registered  under  the
         Securities Act of 1933 or any securities laws.

         In 2000 the Company  issued  3,184,534  shares of common stock.  One of
         these transactions involved the issuance of 2,764,534 shares and raised
         $498,329.  The second  transaction  involved  the  transfer  of $52,500
         previously  accounted  for as a note  payable  by  issuance  of 120,000
         shares.  Finally,  300,000  shares were issued in exchange for services
         rendered.  The issuance of the 300,000 shares was valued by the company
         at $.17 per share,  approximately  the value of shares  sold during the
         year. None of these shares were registered  under the Securities Act of
         1933,  as  amended,  or any  state  securities  laws.  Also in 2000 the
         Company  cancelled  55,000  shares of stock  that had  previously  been
         issued in connection with underwriting  services.  Because the services
         were never rendered,  the shares were cancelled.  This  transaction has
         been  reflected  as a reversal in the equity  section of the portion of
         the shares cancelled.

12.       Income Taxes:
          ------------

         The income tax  provision is net of the  deferred  taxes that have been
         recorded to account for differences between book and tax accounting. In
         2001, those differences related primarily to accounting for the gain on
         sale of the building. A valuation allowance has been recorded to offset
         100% of these assets. Future profitability and therefore realization of
         those  assets is not assured,  so the  valuation  allowances  have been
         recorded.

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

         Deferred tax assets (liabilities):
                  Net operating loss
                     carryforwards                   $ 2,125,000      2,125,000
                  Tax differences related
                     to sale-leaseback transaction       200,600           --
                                                     -----------    -----------
                           Total                       2,325,600      2,125,000

                  Valuation allowance                 (2,325,600)    (2,125,000)
                                                     -----------    -----------
                           Total                            --             --
                                                     ===========    ===========

         At  December  31,  2001,  the  Company  had  federal  and state tax net
         operating loss (NOL's) carry forwards of  approximately  $6,250,000 and
         $4,100,000, respectively. These NOL's expire in various amounts through
         the years 2005 to 2020.  No cash was paid for  income  taxes in 2001 or
         2000.





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<PAGE>

13.      401(K) Plan:
         -----------

         The Company  has a 401 (k) plan  (Plan)  covering  all  employees.  The
         Company made no  contributions to the Plan for the years 2001 and 2000.
         It however, pays all administrative fees relating to the Plan.

14.      Other Income:
         ------------

         Included  in other  income  for the year  ended  December  31,  2000 is
         approximately  $200,000 in income related to the environmental segment.
         More information was obtained during that year that allowed  management
         to better clarify  issues for which  liabilities  had  previously  been
         recorded and to determine that the recorded  liabilities were no longer
         necessary.

15.      Risks and Uncertainties:
         -----------------------

         The Company's future  operating  results may be affected by a number of
         factors.  The Company is dependent upon a number of major suppliers for
         sorbent raw  materials.  Although  some of the raw  materials  could be
         purchased  from other  sources if a critical  supplier had  operational
         problems or ceased making material available to the Company, operations
         could be adversely  affected.  In particular,  approximately 85% of the
         sorbent raw materials purchased are from two suppliers.

         The Company's  environmental  services are provided  principally to one
         customer who accounted for approximately  99% of environmental  revenue
         in 2000.  This customer  experienced a  catastrophic  event during 2000
         that  significantly  reduced the revenue from this segment.  Management
         does not expect this category to generate  significant revenues anytime
         in the foreseeable future.

16.      Commitments and Contingent Liabilities:
         --------------------------------------

         The  Company is subject to legal  proceedings  and claims that arise in
         the ordinary course of its business. 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.

17.      Business Segment Data:
         ---------------------

         The Company's two operating segments within the environmental  industry
         are  containment/cleanup  (sorbents) and waste disposal  (environmental
         services). These are the only two components of the Company about which
         separate  financial  information  is  available  and that is  evaluated
         regularly  by  the  chief  operating   decision  maker.  The  Company's
         operating decision maker is its president.

         During  2000  the  primary  customer  for the  company's  environmental
         services segment  experienced a catastrophic  event that  significantly
         reduced  operations.  During  2000 the  company  continued  to  provide
         services to the customer as a result of the cleanup work related to the
         event. However in 2001, revenue from that segment became negligible.


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<PAGE>


         Information  concerning  operations by business segment is presented in
         the following table:

                                           2001         2000
                                        ----------   ----------
                   Revenues:
                     Environmental      $  124,644    1,493,771
                     Sorbents            2,160,406    2,118,511
                                        ----------   ----------
                   Total Revenues        2,285,050    3,612,282

                   Gross Profits:
                     Environmental           7,171      311,048
                     Sorbents              326,899      323,145
                                        ----------   ----------
                   Total Gross Profit   $  334,070      634,193


         The  Company's   environmental   services  business  is  operated  with
         sub-contractors performing substantially all the required services. The
         Company performs billings,  collection and follow-up services. However,
         these services are not  substantial and the company does not report the
         cost of these  services on a stand  alone basis to the chief  operating
         decision maker.  Therefore,  the Company's gross profit is equal to its
         operating  profit,  and  represents  the  difference  between  what the
         Company bills for the services and what it pays the sub-contractors.

         The  Company's  assets,  excluding any amounts  receivable  and payable
         related to the waste disposal segment, are entirely associated with the
         Company's sorbents business.







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