<PAGE>

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

                               AMENDMENT NO. 1

                                    to the

                                  FORM 10-QSB

(Mark One)

     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
[X]  OF 1934

                 For the quarterly period ended June 30, 2001

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
                For the transition period from ______________ to _______________

                  Commission file number _______________________________________


                           Universal Ice Blast, Inc.
       (Exact name of small business issuer as specified in its charter)

<TABLE>
<S>                                                                <C>
                            Nevada                                             88-0360067
(State or other jurisdiction of incorporation or organization)     (IRS Employer Identification No.)
</TABLE>

                  533 6/th/ Street South, Kirkland, WA 98033
                   (Address of principal executive offices)

                                (425) 893-8424
                          (Issuer's telephone number)

________________________________________________________________________________
  (Former name, former address and former fiscal year, if changed since last
                                    report)

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [X] No [_]

                     APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 22,574,560
<PAGE>

                           Universal Ice Blast, Inc.

                                  Form 10-QSB

                               Table of Contents

<TABLE>
<S>                                                                        <C>
Part I.  Financial Statements............................................  1

         Notes to Consolidated Financial Statements......................  4

         Item 2.  Management's Discussion and Analysis...................  7

Part II. Other Information............................................... 12

         Signatures...................................................... 13
</TABLE>
<PAGE>

                           UNIVERSAL ICE BLAST, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              June 30,
                                                                                2001          December 31,
                                                                             (Unaudited)          2000
                                                                            -------------     ------------
<S>                                                                         <C>               <C>
                                     ASSETS
                                     ------
CURRENT ASSETS
    Cash and cash equivalents                                                $      2,843     $     66,413
    Accounts receivable - trade                                                    30,789           39,465
    Accounts receivable - related parties                                          35,531           28,492
    Inventory                                                                      31,573           10,943
    Prepaid expenses and other                                                     14,446                -
                                                                             ------------     ------------
       Total current assets                                                       115,182          145,313
EQUIPMENT, net                                                                    190,432          211,941
OTHER ASSETS                                                                        9,377            7,225
                                                                             ------------     ------------
       Total assets                                                          $    314,991     $    364,479
                                                                             ============     ============

                     LIABILITIES AND STOCKHOLDERS' DEFICIT
                     -------------------------------------
CURRENT LIABILITIES
    Accounts payable                                                         $    182,866     $    113,916
    Accrued liabilities                                                            45,469           53,949
    Due to related parties                                                         15,608           15,658
    Advances from officers                                                         70,327          124,601
    Current portion of capital lease obligations and long-term debt                81,993           72,655
                                                                             ------------     ------------
       Total current liabilities                                                  396,263          380,779
                                                                             ------------     ------------
LONG-TERM LIABILITIES
    Capital lease obligations, net of current portion                              71,696          100,291
    Long-term debt, net of current portion                                        114,677           81,982
    Deferred gains from sale/leasebacks                                            35,261           41,627
    Deferred officers' compensation                                               164,705          116,262
                                                                             ------------     ------------
       Total liabilities                                                          386,339          340,162
                                                                             ------------     ------------
STOCKHOLDERS' DEFICIT
    Preferred stock                                                                     -                -
    Common stock                                                                   22,575           20,842
    Additional paid-in capital                                                  2,478,074        2,219,907
    Deferred stock-based compensation                                              (1,489)          (4,489)
    Accumulated deficit                                                        (2,966,771)      (2,592,722)
                                                                             ------------     ------------
       Total stockholders' deficit                                               (467,611)        (356,462)
                                                                             ------------     ------------

                                                                             $    314,991     $    364,479
                                                                             ============     ============
</TABLE>

     The notes to the financial statements are an integral part of these
                             financial statements.
<PAGE>

                           UNIVERSAL ICE BLAST, INC.
                     CONSOLIDATED STATEMENT OF OPERATIONS
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                               Three Months Ended               Six Months Ended
                                                          ----------------------------    ----------------------------
                                                            June 30,        June 30,        June 30,        June 30,
                                                              2001            2000            2001            2000
                                                          ------------    ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>             <C>
REVENUE
  Sales of machines and accessories                       $      7,130    $     62,028    $     10,313    $    127,694
  Service and rental income                                     55,656           3,250         121,120          39,851
                                                          ------------    ------------    ------------    ------------
                                                                62,786          65,278         131,433         167,545
                                                          ------------    ------------    ------------    ------------
COST OF REVENUE
  Machines and accessories                                       1,114          44,289           1,114          81,009
  Service and rental                                            19,441          34,071          55,160          51,059
                                                          ------------    ------------    ------------    ------------
                                                                20,555          78,360          56,274         132,068
                                                          ------------    ------------    ------------    ------------
GROSS PROFIT                                                    42,231         (13,082)         75,159          35,477
                                                          ------------    ------------    ------------    ------------
OPERATING EXPENSES
  General and administrative                                   182,793         140,127         307,724         277,507
  Research and development                                      49,757          41,572          95,931          72,419
  Selling and marketing                                         12,794          24,001          26,249          48,156
                                                          ------------    ------------    ------------    ------------
                                                               245,344         205,700         429,904         398,082
                                                          ------------    ------------    ------------    ------------
OPERATING LOSS                                                (203,113)       (218,782)       (354,745)       (362,605)
INTEREST EXPENSE                                                (9,551)         (9,772)        (19,304)        (20,358)
                                                          ------------    ------------    ------------    ------------
NET LOSS                                                  $   (212,664)   $   (228,554)   $   (374,049)   $   (382,963)
                                                          ============    ============    ============    ============

BASIC AND DILUTED NET LOSS PER SHARE                      $      (0.01)   $      (0.01)   $      (0.02)   $      (0.02)
                                                          ============    ============    ============    ============
WEIGHTED AVERAGE SHARES OUTSTANDING USED IN
    BASIC AND DILUTED PER-SHARE CALCULATION                 22,250,949      19,679,204      21,761,393      18,756,696
                                                          ============    ============    ============    ============
</TABLE>

     The notes to the financial statements are an integral part of these
                             financial statements.

                                       2
<PAGE>

                           UNIVERSAL ICE BLAST, INC.
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                    SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                           2001            2000
                                                                                        ----------      ----------
<S>                                                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                             $ (374,049)     $ (382,963)
   Adjustments to reconcile net loss to net cash from operating activities
       Depreciation and amortization                                                        43,769          40,531
       Common stock issued for goods and services                                           11,250          43,425
       Amortization of deferred stock-based compensation                                     3,000          12,276
       Amortization of deferred gain on sale/leaseback transactions                         (6,366)         (6,365)
       Changes in operating assets and liabilities                                               -               -
            Accounts receivable - trade                                                      8,676         (35,733)
            Accounts receivable - related parties                                           (7,039)         11,055
            Inventory                                                                      (20,630)         32,977
            Prepaid expenses and other                                                     (16,598)         (2,040)
            Accounts payable                                                                68,950         (21,933)
            Accrued liabilities                                                             (8,480)          6,352
            Due to related parties                                                             (50)           (140)
            Deferred officers' compensation                                                 48,443          48,440
            Customer deposits                                                                    -         (30,000)
                                                                                        ----------      ----------
                Net cash (used) in operating activities                                   (249,124)       (284,118)
                                                                                        ----------      ----------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of equipment                                                                  (22,260)         (3,829)
                                                                                        ----------      ----------
               Net cash used in investing activities                                       (22,260)         (3,829)
                                                                                        ----------      ----------
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from long-term debt borrowing                                                   49,500               -
   Payments on capital lease obligations                                                   (27,782)        (23,391)
   Payments on long-term debt                                                               (8,279)              -
   Proceeds from issuance of common stock                                                  248,649         384,951
   Advances from officers                                                                        -          35,706
   Payments on advances from officers                                                      (54,274)        (59,919)
   Payments of notes payable                                                                     -         (46,000)
                                                                                        ----------      ----------
               Net cash provided by financing activities                                   207,814         291,347
                                                                                        ----------      ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                           (63,570)          3,400
CASH AND CASH EQUIVALENTS
   Beginning of period                                                                      66,413           3,161
                                                                                        ==========      ==========
   End of period                                                                        $    2,843      $    6,561
                                                                                        ==========      ==========

NON-CASH INVESTING AND FINANCING TRANSACTIONS
   Common stock issued in settlement of notes payable                                   $       -       $   42,000
                                                                                        ==========      ==========
CASH PAID FOR INTEREST                                                                  $   19,036      $   21,337
                                                                                        ==========      ==========
</TABLE>

          The notes to the financial statements are an integral part
                        of these financial statements.

                                       3
<PAGE>

                           UNIVERSAL ICE BLAST, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Note 1 - Basis of Presentation of Unaudited Interim Financial Information

     The accompanying unaudited, condensed financial statements and related
notes have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted pursuant to such rules and regulations. The accompanying
financial statements should be read in conjunction with the audited consolidated
financial statements of the Company and the notes thereto for the year ended
December 31, 2000.

     The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results of the interim periods presented.  Operating results
of the interim period are not necessarily indicative of the amounts that will be
reported for the year ending December 31, 2001.

Note 2 - 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 the reported amounts of
assets and liabilities and disclosures 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.

Note 3 - Going Concern

     The accompanying consolidated, interim financial statements and related
notes have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business for the foreseeable future. The Company incurred
losses of $213,000 and $374,000 for the three-month and six-month periods ended
March 31, and June 30, 2001 respectively. The ability of the Company to continue
as a going concern is dependent upon achieving profitable operations and upon
obtaining additional financing of working capital. No assurances can be given
that the Company will be successful in raising sufficient additional capital.
Further, there can be no assurance, assuming the Company successfully raises
additional funds, that the Company will achieve positive cash flow. If the
Company is unable to obtain adequate additional financing, management will be
required to sharply curtail the Company's operating expenses. These financial
statements do not include any adjustments to the specific amounts and
classifications of assets and liabilities, which might be necessary should the
Company be unable to continue in business.

                                       4
<PAGE>

Note 4 - Common Stock

     During the six months ended June 30, 2001 the Company issued 1,657,667
shares of common stock through private placements under Section 4(2) of the
Securities Act in the aggregate amount of $248,649 to 20 investors, all of who
were accredited investors and/or existing shareholders of the Company. In
addition, during the same period, under Section 4(2) of the Securities Act the
Company issued 75,000 shares of common stock to one investor in settlement of an
account payable having a fair market value of $11,250. All common shares issued
above are restricted subject to Rule 144.

Note 5 - Segment Information

     The Company operates in one segment. At June 30, 2001 all identifiable
assets were located within the United States. The company attributes sales to
customers in individual foreign countries based on the location where the
product was shipped. Net sales by geographic area for the six months ended June
30, were as follows:

<TABLE>
<CAPTION>
                                                       2001       2000
                                                     --------   --------
     <S>                                             <C>        <C>
     Net Sales
      United States...............................   $124,714   $ 66,727
      The Netherlands.............................         --     46,000
      Australia...................................         --     54,818
      Japan.......................................      6,719         --
                                                     --------   --------
                                                     $131,433   $167,545
                                                     ========   ========
</TABLE>

Note 6 - Earnings (Loss) Per Share

     Basic earnings (loss) per common share is computed based upon net earnings
(loss) divided by the weighted average number of common shares outstanding
during each period. Diluted earnings (loss) per common share is computed based
upon net earnings (loss) divided by the weighted average number of common shares
outstanding during each period adjusted for the effect of dilutive potential
common shares calculated using the treasury stock method. The basic and diluted
earnings (loss) per common share are the same since the Company had a net loss
for both periods reported and the inclusion of outstanding stock options would
be anti-dilutive.

Note 7 - Inventory

     The Company values its raw materials and parts, work-in-progress and
finished good inventories at the lower of cost or market, first-in first-out
basis. At June 30, 2001 inventory in the amount of $31,573 consisted entirely of
raw materials and parts.

Note 8 - Long-term Debt

     In May of 2001 the Company borrowed $49,500 from an unrelated entity. The
debt is payable over five years at $1,173 per month including interest at 14.8%.
The debt is secured by ice blast equipment and is not subject to prepayment.

                                       5
<PAGE>

Note 9 - Subsequent Events

     In July of 2001 the Company received its first purchase order from the Ford
Motor Company for a precision cleaning, ice blast system to be installed in the
production line of Ford's Sharonville, Ohio transmission gear facility. The
purchase order is for the design, manufacture, and installation of one ice blast
cleaning station with commitments for an additional eight similar systems.
Ford's commitments will be automatically triggered upon Ford's acceptance of the
first system. The Company expects to commence manufacture of the system in
August, and pre-test it at the Company's Kirkland, Washington facility for at
least 20 days prior to shipment and installation at Ford during the Christmas
holiday. The Company has agreed to a maximum of 90 days for Ford's acceptance of
the first system, although such acceptance is expected by management to come
sooner. The Company expects that no revenue from Ford sales will be reported
before the first quarter of 2002.

Note 10 - Management's Plans

     The planned expansion of the Company's business will require significant
capital to fund capital expenditures, working capital needs, debt service and
the cash flow deficits expected to be generated over the next six to nine months
by operating losses. Current cash balances and the realization of accounts
receivable will not be sufficient to fund the Company's current business plan
beyond the next two months. As a consequence, the Company is currently seeking
convertible debt and/or equity financing as well as the placement of a credit
facility to fund the Company's immediate liquidity needs. There can be no
assurance that the Company will be able to raise additional capital on
satisfactory terms or at all.

                                       6
<PAGE>
Item 2.  Management's Discussion and Analysis

Certain forward-looking statements contained herein regarding the Company's
business and prospects are based upon numerous assumptions about future
conditions, which may ultimately prove to be inaccurate and actual events, and
results may materially differ from anticipated results described in such
statements. The Company's ability to achieve such results is subject to certain
risks and uncertainties, such as the impact of competition and pricing, changing
market conditions, general economic conditions, and other risks as more fully
disclosed as Risk Factors in the Company's Registration Statement on Form 10-SB.
Forward-looking statements are identified by words such as "believe",
"anticipate", "expect", "intend", "plan", "will", "may", "confident" and other
similar expressions. Any forward-looking statements contained herein represent
the Company's judgment as of the date hereof. The Company disclaims, however,
any intent or obligation to update such forward-looking statements. As a result,
the reader is cautioned not to place undue reliance on any forward-looking
statements contained herein.

Overview

          The Company reports its revenues as sales of machines and accessories
and as services and rental income. Services and rental income includes primarily
cleaning services and income from the renting of equipment to customers who have
not yet purchased Company equipment or only have a limited use of such
equipment. Typically, the Company performs services at customer locations and
receives rental income for equipment use and fees for time incurred. The Company
has experienced growth in the rental aspect of its business. As the cost of
monthly rental is significantly less than the purchase price of a machine,
rental "sales" have a much lower customer-pricing hurdle to overcome and
accordingly are closed with a relatively higher frequency. Further, follow-on
"sales" of rentals are similarly more common and provide the basis for
expectation of future revenues from the same customers. The Company has
customers in industries including precision cleaning (automotive deburring and
cleaning applications), environmental cleaning (lead based paint or asbestos
removal and abatement), and industrial cleaning (marine, aircraft, and general
equipment cleaning), which are located in various locations throughout the
United States (including New York, Ohio, Hawaii and Washington) and the World
(including Canada, Holland, Japan and Australia).

     The Company reports its costs and expenses as cost of revenues, research
and development, selling and marketing, and general and administrative. Research
and development costs consist primarily of compensation and related costs of
personnel engaged in product design and enhancements and patent related costs.
Selling and marketing costs relate to product sales and promotion and costs
associated with responding to requests for proposals, including on-site
demonstrations. General and administrative costs are comprised primarily of
compensation and related expenses, occupancy and professional legal and
accounting fees.

Company History

     Since its inception in 1995, the Company has been primarily engaged in
technology and market research for the Company's products on specific
applications and to develop machines tailored for those applications. In
addition to sales of machines and sales of cleaning services and machine
rentals, the Company has also been involved with development and installation of
cleaning stations in automotive and other factory assembly line applications,
which require "precision cleaning" within defined tolerances and other quality
assurance measures. In this regard, the Company has submitted proposals to two
of the major US automotive manufacturers for factory cleaning systems, or
stations, which, if accepted, could have a significant effect on the Company.
The proposed systems, while centered on the Company's ice blast technology, also
include other "assembly line" or "conveyor belt" components and housings, which
the Company would expect to outsource.

     During June of 2001, a senior engineer from Ford visited the Company's
Kirkland, Washington facility to witness the prototype, precision cleaning
machine being developed for Ford's Sharonville, Ohio transmission gear facility.
As a result of the success of this visit, management was subsequently advised
that a Ford purchase order for the first precision cleaning system to be
installed in Ford's transmission gear facility, production line had been
approved. In July of 2001 the Company received its first purchase order from
Ford. The purchase order is for the design, manufacture, and installation of one
ice blast cleaning station with commitments for an additional eight similar
machines. Ford's commitments will be triggered automatically once Ford accepts
the first system. The Company expects to commence manufacture of the system in
August, and pre-test it at the Company's Kirkland, Washington facility for at
least 20 days prior to shipment and installation at Ford during the Christmas
holiday. The Company has agreed to a maximum of 90 days for Ford's acceptance of
the first system, although acceptance is expected by management to come sooner.
The Company anticipates that no revenue resulting from Ford sales will be
reported until 2002. Each system has an approximate sales price of $225,000 and
the initial system order additionally provides $55,000 for engineering design.

                                       7
<PAGE>

     The success of achieving approval from Ford will have both a short and long
term impact on the company. In the short term an additional burden will be
placed on both the Company's liquidity and Engineering staff. The estimated
additional working capital required for the initial order is estimated to be
approximately $350,000 which includes materials, consulting design engineers,
non-cash allocations and direct labor. The company does not expect to achieve
its projected margins on the first 3 ice blast systems because of the initial
design costs associated with the project. However, Management fully expects that
future systems will provide the Company with margins that will secure the
profitability of the company in the long term.


     The successful implementation of the first installation is expected to give
rise to additional orders from Ford. The company is extremely confident that
this first machine will stand up to the rigors of the production line at the
Ford factory. The Company has been given to understand that its blast technology
will become a new standard by which Ford clean gears used in transmissions.


     Because of this project the company has been requested to test and develop
other cleaning and deburring applications within Ford.


Results of Operations

     The following discussion and analysis of operations for the six months
ended June 30, 2001 and 2000 and the three months ended March 31, 2001 and 2000
is based on the Company's unaudited, internally prepared, consolidated interim
financial statements which have been prepared in accordance with accounting
principles generally accepted in the United States of America. In the opinion of
the Management, all adjustments necessary for fair representation have been
included. Additionally, the following discussion and analysis should be read in
conjunction with the Company's audited consolidated financial statements and
related notes, included in the Company's Form 10-SB (Amendment 1) Registration
Statement for the years ended December 31, 2000 and 1999.

Three months ended June 30, 2001 compared to three months ended June 30, 2000

     During the three months ended June 30, 2001, revenues decreased by 3% to
$63,000 as compared to the three months ended June 30, 2000. There was, however,
a significant shift in the composition of such revenues. Second quarter 2001
sales of machines and accessories declined 89% to $7,000 from $62,000 during the
comparable three month period of 2000, while service and rental income increased
1900% to $56,000 during the three months ended June 30, 2001 from $3,000 during
the comparable period of 2000. The reason for the decline in machine and
accessories is the result of no machine sales during the three months ended June
30, 200, whereas the Company recorded one machine sale during the comparable
period of 2000. The increase in service and rental income is attributable to the
Company's increased focus on the rental of its equipment.

     Gross profit increased to $42,000 during the three months ended June 30,
2001 as compared to ($13,000) during the comparable period of the prior year. As
a percent of sales, gross profit increased to 67% during the three months ended
June 30, 2001 as compared to a negative 20% during the comparable period of
2000. Gross profits from sales of machines and accessories declined to $6,000
during the first three months of 2001 from $18,000 during the three months ended
June 30, 2000, due primarily to no machine sales during the three months ended
June 30, 2001. Gross profits from services and rental income increased to
$36,000 during the three months ended June 30, 2001 as compared to a loss of
$31,000 for the comparable period of 2000. The principal reason for the increase
in service and rental income is the result of the Company's focus on increasing
rental income together with 2001 rental/lease contracts covering extended time
frames which spreads out delivery, setup and training costs. Included in the
cost of sales related to service and rental income is depreciation expense
related to the ice blast equipment that generates such income as well as staff
travel and related expenses. The loss on service and rental income reported
during the three months ended June 30, 2000 is the result of minimal income
reduced by $24,000 in depreciation expense plus $6,000 in travel and related
expenses associated with demonstration projects that generated no immediate
income.

     For the three months ended June 30, 2001, general and administrative
expense increased 31% to $183,000 from $140,000 during the comparable period of
2000. The $43,000 increase is primarily the result of an increase in
professional fees of $21,000 resulting from audit and SEC related expenses in
connection with becoming a reporting company, a $29,000 increase in promotional
expenses in an effort to create a greater awareness of the Company and its
technology, a $5,000 increase in facility rent expense, and offset by a
reduction in payroll related expenses of $12,000.

     Research and development expenses increased 19% to $50,000 during the three
months ended June 30, 2001 as compared to $42,000 during the comparable period
of 2000. The $8,000 increase in research and development expenses is primarily
the result of costs associated with the design and prototype, precision cleaning
system being developed for the Ford Motor Company. Ford related R&D totaled
$22,000 during the quarter ended June 30, 2001. Additionally, R&D payroll
related costs for the three

                                       8





<PAGE>

months ended June 30, 2001 increased by $4,000. These increases were offset by a
reduction of $4,000 in other engineering consultant costs, a reduction of $7,000
in experimental nozzles and a reduction of $6,000 in patent related costs. The
Company expects to incur additional R&D costs in connection with the Ford
project throughout the actual manufacturing process, which is scheduled for
completion in late October of 2001. The actual amount of such costs, while
expected to be significant, cannot be determined at this time. All costs of
engineering consulting and prototype development related to the Ford project are
being expensed as research and development costs.

     Selling and marketing expenses decreased $11,000 to $13,000 during the
three months ended June 30, 2001 as compared to $24,000 for the comparable prior
year period. The reduction in selling and marketing expenses is attributable to
reduced travel and related costs as the Company's management focused more on
development of the Ford project during the first six months of 2001 and less on
developing machine sales to other market segments.

     Although gross profit increased $55,000 during the three months ended June
30, 2001 as compared to the comparable three months of the prior year, increased
operating expenses of $41,000 resulted in a decreased operating loss of $14,000
during 2001 as compared to 2000. Management anticipates incurring additional
future operating losses through the remainder of 2001.

     Interest expense remained relatively unchanged at $10,000 during the second
quarter of 2001. However, as a result of the Company's working capital deficit
of $283,000, interim financing necessary to manufacture the first Ford precision
cleaning system as well as to cover other operating expenses is anticipated to
be expensive if adequate equity capital cannot be raised. Should the Company be
required to finance anticipated future operations with debt as opposed to
equity, future interest expense can be expected to increase significantly.


Six months ended June 30, 2001 compared to six months ended June 30, 2000

     Revenues decreased $36,000, or 21%, during the six months ended June 30,
2001 as compared to the six months of the prior year. Sales of machines and
accessories decreased 92% to $10,000 during the six months ended June 30, 2001
from $128,000 during the comparable period of 2000, and revenues from services
and rental income increased 204% to $121,000 during the six months ended June
30, 2001 from $40,000 during the comparable period of 2000. The decline in
machines and accessories revenue of $118,000 is the result of no machines being
sold during the six months ended June 30, 2001, whereas the comparable period of
2000 included 2 machine sales. All 2001 revenue for the six months ended June
30, consisted of accessory sales ($4,000) and the amortization of deferred gain
from previous sale and leaseback transactions ($6,000). The lack of machine
sales during the first six months of 2001 is the result of management and staff
being primarily focused on the design of a prototype, precision cleaning system
for the Ford Motor Company as well as sales and marketing trips to the
Netherlands and Japan in an effort to secure future machine sales. The increase
of $81,000 in service and rental income during the six months ended June 30,
2001 over the comparable period of 2000 is primarily the result of the Company's
continuing effort to promote and increase the rental and/or lease of its ice
blast equipment. As part of rental and service income for the six months ended
June 30, 2001, the Company recorded $15,000 of revenue in connection with
engineering services for the conceptual design of a precision, ice blast
cleaning system for the General Motors, Saginaw Metal Casting Operations Plant.
Although the Company has not received any intention or commitment from GM to
proceed with the manufacture of such a design, management is confident that a
future order(s) will be forthcoming.

     During June of 2001, a senior engineer from Ford visited the Company's
Kirkland, Washington facility to witness the prototype, precision cleaning
machine being developed for Ford's Sharonville, Ohio transmission gear facility.
As a result of the success of this visit, management was subsequently advised
that a Ford purchase order for the first precision cleaning system to be
installed in Ford's transmission gear facility, production line had been
approved. In July of 2001 the Company received its first purchase order from
Ford. The purchase order is for the design, manufacture, and installation of one
ice blast cleaning station with commitments for an additional eight more similar
machines. Ford's commitments will be

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<PAGE>

triggered automatically once Ford accepts the first system. The Company expects
to commence manufacture of the system in August, and pre-test it at the
Company's Kirkland, Washington facility for at least 20 days prior to shipment
and installation at Ford during the Christmas holiday. The Company has agreed to
a maximum of 90 days for Ford's acceptance of the first system, although
acceptance is expected by management to come sooner. The Company anticipates
that no revenue resulting from Ford sales will be reported until 2002. Each
system has an approximate sales price of $225,000.

     Gross profit increased 112% to $75,000 during the six months ended June 30,
2001 as compared to $35,000 during the comparable period of the prior year. As a
percent of sales, gross profit increased to 57% during the six months ended June
30, 2001 as compared to 21% during the comparable period of 2000. Gross profits
from sales of machines and accessories declined to $9,000 during the first six
months of 2001 from $47,000 during the six months ended June 30, 2000, due
primarily to no machine sales during the six months ended June 30, 2001. Gross
profits from services and rental income increased to $66,000 (54% of sales)
during the six months ended June 30, 2001 as compared to a loss of $11,000 (29%
of sales) for the comparable period of 2000. The principal reason for the
increase in service and rental income is the result of two rental/lease
contracts of extended duration during the six months ended June 30, 2001. These
two contracts accounted for $67,000 or 55% of total service and rental income
and required considerably less attention and expense than single month rentals,
which comprised the majority of rental income during the six months ended June
30, 2000.

     During the six months ended June 30, 2001, general and administrative
expenses increased 11% to $308,000 as compared to $278,000 during the comparable
period of 2000. The $30,000 increase in cost was comprised of a $4,000 increase
in payroll related expense, a $15,000 increase in professional fees as a
resulting from audit and SEC related expenses in connection with becoming a
reporting company, a $14,000 increase in public and shareholder relation
expenses in an effort to create a greater awareness of ice blast technology and
the Company, and a $5,000 increase in facility rent expense. These increases
were offset by an overall reduction of $7,000 in general office expenses.

     Research and development expenses increased 32% to $96,000 during the six
months ended June 30, 2001 as compared to $72,000 during the comparable period
of 2000. The $24,000 increase in research and development expenses is primarily
the result of costs associated with the design and prototype, precision cleaning
system being developed for the Ford Motor Company. Ford R&D costs, new in 2001,
totaled $22,000 during the first six months of 2001. Additionally, payroll
related costs which aggregate $60,000 of total R&D costs increased by $4,000,
other engineering consultant costs increased by $5,000, and these increases were
offset by a reduction of $7,000 in experimental nozzles. The Company expects to
incur additional R&D costs in connection with the Ford project throughout the
actual manufacturing process. The actual amount of such costs, while expected to
be significant, cannot be determined at this time. All costs of engineering
consulting and prototype development related to the Ford project is being
expensed as research and development costs.

     Selling and marketing expenses decreased $22,000 to $26,000 during the six
months ended June 30, 2001 as compared to $48,000 for the comparable prior year
period. The reduction in selling and marketing expenses is attributable to
reduced travel and related costs as the Company's management focused more on
development of the Ford project during the first six months of 2001 and less on
developing machine sales to other market segments. With the receipt of its first
purchase order from Ford, followed by subsequent orders for similar precision
cleaning systems, management anticipates that it will be able to expend more
time and resources on developing machine sales in other market segments.
Additionally, and subsequent to the date of this filing, the Company's
President, Mr. Sam Visaisouk, PhD., will be relocating to the Detroit, Michigan
area in order to be closer to the automotive industry in an effort to further
promote additional future sales of precision cleaning, ice blast equipment to
the big three auto makers. Mr. Visaisouk's day-to-day duties at the Company's
Kirkland, Washington facility will be assumed by the Company's CEO, Mr. Rory
Clarke.

     While gross profit increased $40,000 during the six months ended June 30,
2001 as compared to the comparable six months of the prior year, increased
operating expenses of $33,000 resulted in a decreased operating loss of $7,000
during 2001 as compared to 2000. Management anticipates incurring additional

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<PAGE>

future operating losses through the remainder of 2001, but expects the Company
to report a modest profit by the second quarter of 2002.

     Interest expense decreased by $1,000 to $19,000 during the six months ended
June 30, 2001 due primarily to the continuing amortization of capital lease
obligations and the elimination of its operating line of credit. However, as a
result of the Company's working capital deficit of $281,000, interim financing
necessary to manufacture the anticipated first Ford precision cleaning system as
well as to cover other operating expenses is anticipated to be expensive if
adequate equity capital cannot be raised. Should the Company be required to
finance anticipated future operations with debt as opposed to equity, future
interest expense can be expected to increase significantly.

The Company continues to record a valuation allowance for the full amount of its
deferred income tax asset, which would otherwise be recorded for tax benefits
relating to operating losses, as realization of such deferred assets cannot be
determined to be more likely than not.

Financial Condition, Liquidity and Capital Resources

     At June 30, 2001 the Company had cash and cash equivalents of $2,800.
During the six months ended June 30, 2001 operating activities used cash of
$249,000 resulting primarily from the net loss for the period of $374,000 and
reduced by depreciation and amortization and by other changes in working capital
accounts. Investing activities used cash of $22,000 for the purchase of
additional computing equipment ($7,000) and 2 additional air compressors
($15,000) for use in its equipment rental activities. Financing activities
provided cash of $208,000. Unregistered sales of the Company's common stock
provided cash of $249,000 and proceeds from long-term debt borrowing provided
cash of $49,000. Principal payments on capital lease obligations and secured
debt used cash of $36,000 and repayment of advances from stockholders used cash
of $54,000.

     As of June 30, 2001, the Company had a working capital deficit of $281,000.
Current cash balances and the realization of accounts receivable will not be
sufficient to fund the Company's current business plan beyond the next two
months. Additionally, the Company has incurred net losses since inception,
including net losses of $723,000, $761,000 and $374,000 during 2000, 1999 and
the six months ended June 30, 2001 respectively, and anticipates reporting net
losses in the future, at least through 2001. The Company has historically funded
its operations and business development primarily through the sale of
unregistered shares of its Common Stock. However, the Company is subject to the
risks and challenges associated with other companies at a similar stage of
development, including dependence on key individuals, successful development and
marketing of its products and services, competition from alternative products
and services and larger companies with greater financial and other resources,
and raising of sufficient funds to further develop the Company's products,
markets and business. While the Company has raised sufficient working capital in
the past, market conditions are ever changing, and there can be no assurance
that the Company will be able to obtain additional financing.


     Consequently, the Company is currently seeking convertible debt and/or
additional equity financing as well as the placement of a credit facility, in
the aggregate amount of at least $500,000, to fund the Company's immediate
liquidity needs including the initial Ford project. Management is currently
negotiating with existing shareholders as well as other individuals and
organizations in order to obtain the working capital necessary to meet both
current and future obligations and commitments. However, there can be no
assurance that the Company will be able to raise additional capital on
satisfactory terms or at all. In the event that the Company is unable to obtain
such additional capital or to obtain it on acceptable terms or in sufficient
amounts, the impact thereof would have a material adverse effect on the
Company's business, operating results and financial condition as well as its
ability to service debt requirements.


     As disclosed in Note 3 to the unaudited consolidated financial statements
for the six months ended June 30, 2001, the foregoing liquidity and financial
conditions raise substantial doubt about the Company's ability to continue as a
going concern.


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<PAGE>

                         PART II -- OTHER INFORMATION


Item 1.  Not applicable

Item 2.  See note 4 - Common Stock, in notes to financial statements

Item 3.  Not applicable

Item 4.  None

Item 5.  See Note 9 - Subsequent Events, in notes to financial statements

Item 6.  None

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<PAGE>

                                  Signatures

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

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                Ernie Dantini Jr. CPA, CFO
                                        --------------------------------------
                                                     (Registrant)

Date        October 9, 2001                 /s/ Ernie Dantini Jr. CPA, CFO
     -----------------------------      --------------------------------------
                                                     (Signature)*

Date
     -----------------------------      --------------------------------------
                                                     (Signature)*

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

* Print the name and title of each signing officer under his signatures.

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