SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-KSB/A
                                Amendment No. 1
(Mark One)

x Annual Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
  Act of 1934

    For the fiscal year ended December 31, 2002

[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
    of 1934

    Commission file number: 0-24039


Industrial Rubber Products, Inc.
(Exact name of registrant as specified in its charter)

Minnesota
(State or other jurisdiction of incorporation or organization)

41-1550505
(I.R.S. Employer Identification No.)

3516 East 13th Ave, Hibbing, MN 55746
(Address of principal executive offices including zip code)

(218) 263-8831
(Issuer's telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value


Check whether the 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 x   No _

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of 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

The Company's revenues for its fiscal year ended December 31, 2002: $13,323,632.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant as of February 14, 2003 was $726,027,  based on the closing price
of $.28 for the  issuer's  Common Stock on such date as reported on the Over the
Counter Bulletin Board.  For purposes of determining  this number,  all officers
and directors of the issuer are  considered  to be affiliates of the issuer,  as
well  as  individual   stockholders  holding  more  than  10%  of  the  issuer's
outstanding  Common Stock.  This number is provided only for the purpose of this
report on Form 10-KSB and does not  represent  an admission by either the issuer
or any such person as to the status of such person.

The number of shares of the Company's Common Stock outstanding as of February
14, 2003 is 5,437,205.

Transitional Small Business Disclosure Form: Yes _ No x

Documents Incorporated by Reference

Portions of the Proxy Statement for the 2003 Annual Meeting of Shareholders are
incorporated by references in Part III.

                             EXPLANATORY STATEMENT

     Industrial  Rubber  Products,  Inc. (the  "Company") is amending its Annual
Report on Form 10-KSB for the year ended  December 31, 2002.  This  amendment is
being  made to  include  Items 7 and 8 which  in the  process  of  incorporating
electronically  transmitted  and received  changes and comments from the persons
responsible  for preparing and reviewing the report were  inadvertently  omitted
from the final draft of the report as filed.

     The following  sections of the  Company's  2002 Form 10-KSB/A were added to
its annual Form 10-KSB filed on March 28, 2003:

        Item 7.  Financial Statements

        Item 8.  Changes in and Disagreements with Accountants on Accounting and
                 Financial Disclosure

     Further,  pursuant to Regulation  Section  240.12b-15 of the Securities and
Exchange  Commission,  the  Company  has  provided  new  certifications  by  its
President  and Chief  Executive  Officer,  and its  Comptroller  as specified in
Regulation Section 240.15d-14 and under Section 906 of the Sarbanes-Oxley Act of
2002, codified as 18 U.S.C. Section 1350.

     Finally, the Company added the exhibit number to Exhibit 10(11).

     The  Company  will  provide a version of the annual Form  10-KSB/A  that is
marked to show changes upon request at no charge. Requests should be directed in
writing to: Industrial Rubber Products, Inc., 3516 13th Avenue East, Hibbing, MN
55746, Attention: Gerri Chapman.

     PART I

               Special Note Regarding Forward-Looking Statements

     Certain  matters  discussed  in  this  Annual  Report  on  Form  10KSB  are
"forward-looking  statements"  intended  to qualify  for the safe  harbors  from
liability  established by the Private Securities  Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the  statement  will  include  words such as the Company  "believes",
"anticipates", "expects", or words of similar import. Similarly, statements that
describe   the   Company's   future   plans,   objectives   or  goals  are  also
forward-looking  statements.  Such  forward-looking  statements  are  subject to
certain risks and  uncertainties  which are described in close proximity to such
statements and which would cause actual results to differ  materially from those
anticipated as of the date of this report. Shareholders, potential investors and
other  readers  are  urged  to  consider   these   factors  in  evaluating   the
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking  statements.  The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no obligation
to publicly update such forward-looking  statements to reflect subsequent events
or circumstances.

ITEM 1. Business

(a) General development of business

     Industrial Rubber Products,  Inc. (the "Company,"  "Industrial  Rubber" and
"Industrial  Rubber  Products")  was  founded in 1986 to acquire  and  operate a
rubber lining  facility then owned by Irathane  Systems  Incorporated,  a wholly
owned subsidiary of Illinois Tool Works, Inc.

     The Company was  incorporated as a Minnesota  corporation on March 5, 1986,
as Industrial  Rubber  Applicators,  Inc., and on January 30, 1998,  changed its
name to Industrial  Rubber Products,  Inc. The Company's  corporate  offices are
located at 3516 East 13th Avenue, Hibbing, MN 55746, and its telephone number is
(218) 263-8831.

     The Company  began  operations  in April of 1986.  The  Company's  business
originally  consisted of applying and then vulcanizing rubber (for corrosion and
abrasion resistance  purposes) to wearable parts that were used primarily in the
mining industry.

     In 1996  The  Company  entered  into a  major  contract  for  approximately
$10,000,000,  to provide  rubber-lining  services for a pipelining  project near
Salt Lake City,  Utah. To effectively  provide these services the Company leased
and opened a manufacturing facility in Clearfield, Utah in 1996. During 1997 and
1998 the Company  used the  facility to provide  products and services to copper
and gold producing customers in the Western United States and Canada.

     On January 20, 1999 the  Company  acquired  Sonwil  Products,  Inc.  dba TJ
Products in West  Jordan,  Utah.  TJ Products  provided  products  and  services
similar to  Industrial  Rubber in the  Inter-mountain  West region of the United
States.  In addition,  it produced cast urethane and rubber molded  products for
the military,  aerospace,  paper, utility and mineral processing industries.  TJ
Products had sales volume of approximately $2.5 million in 2001 and $2.1 million
in 2002.

     On January 31, 1999, the lease on the Clearfield  facility  expired and the
Company consolidated those operations at the facilities of the newly acquired TJ
Products.

     On March 31,  1999,  the Company  acquired  the assets of Irathane  Systems
Inc., ("Irathane" and "Irathane Systems") which was a wholly owned subsidiary of
Illinois Tool Works. Irathane had three manufacturing plants located in Colorado
Springs, Colorado;  Hibbing, Minnesota; and Sudbury, Ontario, Canada. The plants
produced primarily cast urethane products for the mineral processing,  aggregate
and utility industries. The Colorado Springs plant also produced the pre-polymer
liquids used to produce the cast products in all three Irathane  plants and sold
the liquids to licensees  in Chile and India.  Irathane  had  historical  annual
sales of approximately $10 million.

     The acquisition of Irathane was financed in substantial  part by short term
bank  financing.  On June 28, 2002, the Company entered into long term financing
arrangements and paid off the remaining short term acquisition financing for the
Irathane Systems acquisition.

     The Company has also,  from time to time,  entered  into  distribution  and
manufacturer's  representative  agreements with other  manufacturers in order to
supply additional products to its customers.

     Initially,  the Company  was taxed as a C  corporation  under the  Internal
Revenue Code. Effective January 1, 1989, the Company elected to be taxed as an S
corporation.  The Company  continued to be taxed as an S corporation until March
31, 1998, when the Company elected C Corporation status.

(b) Narrative description of Industrial Rubber's business

Principal Products, Services and Markets

     Industrial  Rubber  and  its  subsidiaries   design,   produce  and  supply
protective    materials,    abrasion    resistant    products   and   equipment,
erosion/corrosion   protective  linings  and  proprietary  urethane  and  rubber
products to the mineral  processing,  power, paper,  aerospace,  transportation,
military, agriculture, and construction industries.

Product Lines

     Industrial  Rubber  has four  product  lines that are sold  throughout  the
world.  Its  urethane  cast parts and liquids line  consists of urethane  molded
products for the hard rock mineral processing, aggregate, power, paper and pulp,
military  and  aerospace,   construction,   transportation,   and  oil  and  gas
industries.  Its pipe and pipe  lining  products  line  consists  of rubber  and
urethane  lined  pipe  and  pipe  parts  fabricated  primarily  for the  mineral
processing  industry.  Its  proprietary  products  line  consists of  engineered
replacement  parts  primarily for mineral  processing  facilities.  Its standard
rubber products line consists of products sold along with related  services,  to
the Company's customers in the various industry segments served by the Company.

     Urethane Cast Parts and Liquids.  Industrial  Rubber produces urethane cast
parts at its North American  Irathane  facilities and at TJ Products  located in
West Jordan,  Utah.  These parts include screens for the mineral  processing and
aggregate  industries,  pump  linings  and parts  for the  utility  and  mineral
processing industries, rollers for the paper industry, tie pads for the railroad
industry  and many other parts for the  mineral  processing  industry  including
cyclones, classifier shoes, discharge cones and launder liners. The Company also
applies  urethane  coating  to pipe and other  parts to prevent  wear.  Irathane
produces the liquid  prepolymer  used to produce the cast parts and  distributes
the liquid prepolymer  through  licensees in Chile.  These liquids are also used
internally in the Company's Minnesota, Salt Lake and Sudbury facilities.

     Pipe and Pipe Lining  Products.  Industrial  Rubber  produces  and supplies
rubber and urethane  lined  slurry pipe and  components  for  tailings  pipeline
systems.  Proprietary  formulated  rubber  and  urethane  compounds  are used to
protect these pipelines from abrasion and corrosion.

     In 1996,  the Company  designed and  developed  new processes and equipment
that  decreased  the cost and improved the overall  product  quality of overland
slurry pipelines.  Mechanical  couplings,  historically used in connecting lined
pipe for long distance overland slurry systems, are typically high cost items to
the  customer.  This  is  particularly  true in high  pressure,  large  diameter
pipelines.  The Company  believes  that prior to 1996,  industry  standards  and
equipment limitations only allowed for the production of 40' long pipe sections.
Industrial  Rubber has  designed its own  production  equipment,  and  presently
supplies to its customers  60'lined pipe sections,  eliminating one third of the
required mechanical  couplings,  and resulting in cost savings to the customers.
The Company  believes that the development of 60'lined pipe has set the standard
for the industry.

     The  Company  is not  aware of any  major  pipe  projects  that  have  been
installed since 1999.  Industrial  Rubber is aware of 5 major pipe projects that
are presently in the  engineering  and design  phase.  The Company is monitoring
these  projects  so that it can be  included  as a  possible  supplier  on those
projects.

     Proprietary and Engineered  Products.  Industrial Rubber's  proprietary and
engineered product line includes air bags,  pressure seals, fuel igniters,  auto
suspension parts,  screens,  bridge pads,  construction liners,  cyclone liners,
pump liners, sheet stock, classifier shoes and mill parts, all manufactured with
either  rubber  or  urethane  raw  materials.  Industrial  Rubber  has  over  20
proprietary  compounds  developed  specifically  for  high  wear  and  corrosive
applications.

     Standard  Rubber  Products.  Historically,  the Company's  standard  rubber
products  are  vulcanized  rubber  to  steel.  Examples  of  such  products  are
manifolds,  screens,  pulleys,  and  rolls.  The  Company  also  uses  sprayable
compounds for wear and  corrosion.  The  acquisition of TJ Products and Irathane
greatly expanded this line of products to include molded rubber products for the
military and  aerospace  industries;  as well as parts for the paper and mineral
processing   industries.   All   products   are  made  to  customer   engineered
specifications.  The Company's Quality Assurance Program seeks to insure product
conformity while limiting defects and reducing associated value added costs. The
Company's  Irathane/Elliott  division in Sudbury,  Ontario,  Canada, is ISO 9000
certified.

Markets

     The markets for the  Company's  products are hard rock mineral  processing,
aggregate,  power,  paper  and  pulp,  military  and  aerospace,   construction,
transportation, and oil and gas.

     In 2002,  these  eight  major  industries  that the  Company  serves  began
recovering  from a long  recession.  The Company led by its  Irathane  division,
experienced an increase of sales in its core manufactured  products, due to this
recovery.  During the fourth  quarter  of 2002 and into 2003 the  Company  began
experiencing a slight  downturn in sales due to a new mini  recession  caused by
the fear of war and federal,  state, and local government deficits.  The Company
expects  that during  2003,  the markets it serves will  recover  from this mini
recession and its customers  will again be spending  capital  dollars to replace
equipment and parts to take advantage of any economic recovery.

                          HARD ROCK MINERAL PROCESSING

     The mining industry, including aggregate related materials is served by the
Company's products.  The hard rock that hosts important minerals (iron,  copper,
gold, molybdenum),  is  generally  blasted from the earth and then  crushed, and
ground (processed),  to allow the extraction  (beneficiation) of these minerals.
The equipment needed to process and beneficiate this rock is subject to constant
abrasion,  corrosion,  and erosion.  Industrial Rubber has developed,  designed,
tested,  and  produced  rubber and  urethane  products  that protect the mineral
processing and  beneficiation  equipment,  extending their serviceable life, and
saving its  customers  money  through  decreased  replacement  cost and  reduced
downtime.  The  Company's  rubber and urethane  products  also  provide  further
benefits to it customers through noise abatement and dust and dirt reductions.

     In 2002,  the Company began to see recovery in worldwide  copper mining and
worldwide & domestic gold mining. The market for domestic taconite,  nickel, and
molybdenum,  mining has been  significantly  hurt by imported foreign steel. The
action in the first quarter of 2002 by the United States  Government in imposing
tariffs on certain steel imports,  particularly helped the taconite industry and
will  continue to stabilize  this  market.  With new  stronger  steel  companies
emerging, they again will need these important raw materials (taconite,  nickel,
and molybdenum).  In 2003, the Company expects that taconite mined in the United
States will recover from the 33 million tons produced in 2001 to over 37 million
tons.

     With  30 plus  steel  companies  in  bankruptcy,  this  relief  will  allow
consolidation and restructuring of the North American integrated steel industry.
When new stronger steel  companies  emerge they again will need these  important
raw materials (taconite,  nickel, and molybdenum).  This market alone will allow
the Company to recover some of the revenues lost over the last several years.

     In the 4th quarter of 2002,  the Irathane  Division  explored and presented
the  possibility  of  lining  pipe  for  the  phosphate   industry  of  Florida.
Preliminary  tests show that Irathane  Systems'  lined pipe for their matrix and
tailing systems will last up to 3 times longer than their present steel pipe. In
early 2003, Irathane Systems  proprietary  compound 2855 will be tested in these
lines and with  success  will open a  $10,000,000  per year market in  phosphate
mining.

                                    AGGREGATE

     Aggregate is the sand,  gravel and rock used in the  manufacture of asphalt
paving material,  concrete and for other construction purposes. The polyurethane
screen  market in the  United  States for  aggregate  is  $35,000,000.  With the
Company only capturing  $1,400,000 of this market,  it was  recognized  that the
Company's  product  needed a remake.  Recognizing  that a decline  in the market
beginning  in late 2000 would  give the  Company  time to remake  its  products,
tooling, and distribution, the Company began this change in 2001.

     The Company hired a screen  designer whose 2001  objectives  were to remake
and fix tooling and design new nonblinding  products for this market.  These two
objectives were met in the year 2001 and the new products were introduced at the
Con-Agg show in Las Vegas on March 17 - 23, 2002.  These products have currently
been installed in various properties for testing. The Company expects to see the
results in mid - 2003.  Previously,  the  distribution  for  aggregate  products
depended on many small  distributors that could not be supported by direct sales
personnel  on a regular  basis.  In March  2002,  a new master  distributor  was
contracted to distribute  all of the  Company's  aggregate  products east of the
Mississippi.  Two direct sales  engineers will be  responsible  for training and
supporting this marketing  effort.  These efforts have proven  successful with a
substantial  order of 1400  screens  placed in the first month of 2003.  Further
larger  orders are pending.  The goal of this  marketing  and sales effort is to
increase the Company's  market share of  polyurethane  screens to $10,000,000 in
three years.

                                      POWER

     The polyurethane  products  supplied by the Company have been in testing in
coal-fired power plants with F.Q.D. circuits for over three years. The tests are
now  complete  and these  products  have  proven  to be the best  value for this
process.  In February 2002,  the Company hired a marketing  person to develop an
Internet  catalogue to bring these products to market.  This person will use the
F.Q.D.  market  study  commissioned  by  Irathane  Systems  in 1999 to  identify
potential  customers.  The goal for the Company is to add 10 power plants to its
customer base by the end of 2003.

                                 PAPER AND PULP

     The paper  industry  is a small  market  for the  Company's  products.  The
opportunities  for  growth  in this  industry  will be to expand  the  Company's
products from a single  customer with multiple  plants to other paper  companies
throughout the United States and Canada.  The Company's Utah division began this
marketing  effort in 2002 by identifying and entering the Company's  products in
an Internet business-to-business catalogue for paper manufactures.

                             MILITARY AND AEROSPACE

     This market has been in a recession for the Company's  products since 1993.
With the United States government funding the largest military spending increase
in 20 years,  the Company  expects its specialty  precision  molded  products to
increase  sales  starting in the 4th quarter of 2002 and continue to increase in
2003.  The Company is already the approved  manufacturer  for these products and
with plant  availability  of 80% it is expected  that our military and aerospace
business will grow to $1,500,000 annually from its present $170,000.

                                  CONSTRUCTION

     The  construction  industry  segment  that uses the  Company's  products is
concrete. In 2002, the markets for original equipment  manufacturers (OEM's) for
batch  plants,  aggregate  mixers,  and concrete  mixers held  relatively  flat.
Contrary to this overall scenario was an increase of the market share of the OEM
that  Irathane  serves.  The  Company  received  and filled an order from an OEM
currently  being serviced by a competitor.  These  positives,  yielded  increase
sales of $150,000 for this segment. The Company is now working with a new "start
up" OEM for batch plants to provide its wear  components.  Sales in this segment
are expected to grow 10% in 2003.

                                 TRANSPORTATION

     Industrial Rubber Products manufactures products for rail, highway, and air
travel.  With an ever-growing  need for  infrastructure  improvements  for these
industries the Company expects its market to grow at 10% per year for the next 5
years.

     The  Company's  rail  products  are  American   Railway   Engineering   and
Maintenance  of Way  Association  (AREMA)  specified and approved.  In 2002, the
manufacturing  phase of the Kansas  City  Highline  project was  completed.  The
Company expect to utilize the successful completion of this project to introduce
this  product to other end users.  The  Company  has  currently  quoted  another
project in Florida for $680,000.  If  successful,  manufacturing  could begin in
late 2003. As major municipalities utilize mass transit, the Company expects the
market for these products to grow.

     The  Company  serves the  trucking  and airline  industry  with custom made
products. These products,  although specific in nature, are used as springboards
for development of new products. As an example the Company's airbag manufactured
for truck air ride  systems  gave the Company  technicians  the idea for P.U.R.L
system.  P.U.R.L.  is an advanced  suspension  systems for automobiles and light
trucks  that  reduces the weight of a vehicle by 16 pounds and is expected to be
introduced in 2005 vehicles.  This product has a market potential of $20,000,000
per year,  is patented  and is  contracted  by the Company for 10 years from the
time it is developed and ready for manufacture.

                                   OIL AND GAS

     In 2002,  Irathane  Systems  began  testing its Irathane  2825  proprietary
compound for riser pipe  linings.  Early tests  showed this lining  material out
lasted  conventional  steel riser pipe  material by 26 times.  Through  repeated
tests for  temperature,  salt  water,  abrasion,  oil  contamination,  and other
radical testing,  the Irathane 2825 material has far exceeded any other material
tested  including  steel,   high  brinell  steel,   chromium   carbide,   epoxy,
polyethylene, urethanes, rubber, Teflon, Kevlar, and other high tech materials.

     Irathane  2825 has been  tested  successfully  both on  standard  steel and
aluminum  substrates.  Tests continue on other composite material.  During 2003,
Irathane  2825 lined riser pipe will be  installed  in sub sea  applications  on
deep-sea  oil drill  rigs for  future  tests.  Subject  to  successful  results,
Industrial Rubber Product's  Irathane Division should begin  manufacturing  pipe
and license  successful  bidders to manufacture  pipe for customers that include
Shell, Exxon, Mobil, Petrabrass,  Noble Industries, and many other oil producers
and drillers that operate offshore.

     With  thousands of miles of riser pipe in use and more produced every year,
this market could provide  significant growth for the Company.  Exposure to this
market, could also lead into products utilizing other of the Company's products.

Marketing and Distribution of Products

     The Company markets its products through a direct sales force,  independent
sales representatives, distributors, licensees, and OEM alliances.

     The  Company's  present sales force  consists of sales and  marketing  vice
president,  nine direct sales people, two inside sales people,  approximately 40
independent sales representatives and distributors,  one licensee representative
in Chile, four OEM alliances, and sales and marketing clerks.

     Industrial  Rubber  seeks  to grow  through  increased  penetration  of all
current  markets with its present  products,  the  development  and sales of new
products,  sales to new markets  outside the United  States and sales of present
and new products to new markets.

     Industrial  Rubber's marketing  strategy is to maximize  penetration of new
markets, including the auto industry, the aggregate industry, and coal and power
generating  facilities,  with its  present  products.  The  Company is acting to
expand its product lines and new products will be cross-sold to existing and new
customers.

     The marketing plan includes prospective customer  identification;  customer
needs  analysis and  increased and  strategic  placement of the sales force,  to
facilitate  geographic  market and product  expansion.  The  Company  intends to
develop business  partnerships  with existing  customers.  The marketing plan is
being implemented in the U.S., Canadian,  Mexican, and Chilean markets and, when
appropriate,  will be implemented  elsewhere.  At the present time, Chile, Peru,
Brazil, Argentina, Mexico, and Australia are major mineral processing countries,
as are certain Southeast Asian countries.

     Industrial Rubber utilizes general and product specific brochures and sales
literature.  Video is used as an additional marketing resource.  Advertising and
articles in industry trade magazines, journals, newsletters and papers have been
increased.  Trade show  attendance and  participation  has increased to become a
larger part of the marketing effort.

     The Company has identified other protective  material  products,  including
steel and iron products that are not presently produced by Industrial Rubber but
are used by its customers.  Through its distribution agreements with a number of
companies,  the Company seeks to be able to supply cast iron and steel  products
to its customers and is seeking strategic  relationships  with the manufacturers
of related products.

     The goal is to allow the Company to supply its  customers  with a full line
of  protective  products  eliminating  the  disadvantage  to the  customers  and
acquiring  components from multiple suppliers.  Customers should further benefit
by having a single  source  for the design and  testing  of  protective  product
improvements.

     In connection with the sale of its products, the Company from time to time,
provides  its  customers  with  written   limited   warranties,   including  the
establishment of performance  related standards.  The Company's products subject
to such  performance  related  standards  are under  continuing  review  and the
failure to meet performance  related standards can result in credits back to the
customers.  As of year end, no significant  warranty claims or other performance
related claims have had to be accrued.

Competitive Conditions

     The  protective   material   products  business  that  serves  the  mineral
processing and other heavy industries is competitive.  These protective material
products  are made of steel,  iron,  rubber,  urethane,  ceramics,  plastics and
hybrids of these materials.  The Company's  competitors  fabricate,  cast, mold,
shape,  machine,  and form the material into finished  products.  Both large and
small  companies  throughout  the world  compete on price and by adding value to
their  products  through fit and function,  using physical  design,  chemical or
physical make up or proprietary data (patents).  The competition  falls into two
categories.

     The first category is the regional  manufacturer/supplier that services the
mineral  processing  and  power  generation  properties  that  are  close to its
production  facility.   Standard  rubber  liners,  urethane  castors  and  metal
fabricators  typically fall within this category.  They use personalized service
and quick delivery as an advantage to their regional customers.

     The second category is national  manufacturers of products that are used by
a large  number of  mineral  processing  and  power  generating  plants.  Rubber
molders,  cast  iron  and  metal  makers,  ceramic  manufacturers  and  original
equipment  manufacturers typically fall into this category. They use proprietary
design,  large  distribution  networks  and high volume to reduce  manufacturing
costs.  Sophisticated  quality  programs,  managed  inventories and just-in-time
deliveries are  advantages to their  customers and their size provides them with
access to greater financial and other resources.

     The Company  believes that it can  successfully  compete with  companies in
both  categories,   through  focused  service  to  customers  located  near  its
Minnesota,  Ontario,  and Utah  facilities  and  through  its ability to provide
quality  products in  increasingly  large  quantities  to  customers  located in
geographically distant areas.

Raw Materials and Supplies

     The Company  obtains  rubber used to manufacture  its rubber  products from
numerous  rubber   suppliers  using  Industrial   Rubber  Products   proprietary
compounds.  The Company  produces its own pre-polymer  liquids for cast urethane
production  through a supply of raw material  from large  nationally  recognized
chemical  companies.  The Company obtains numerous metal fabrications from metal
fabricators in Minnesota,  other states and Canada. The Company anticipates that
it will continue to obtain this material from these suppliers, but other sources
are available for all such materials.

Dependence on Major Customers

     The Company had one major  customer  (10% of sales) in the year 2002.  This
occurred  because of a small  rebound in the local market for iron ore products.
The Company's  continuing strategy is to diversify both its products and markets
served away from cyclical industries so that there will be no major customers in
the future. However, a major project could change this.

Proprietary Rights and Labor Contracts

     The Company holds numerous patents and trademarks.  Industrial Rubber holds
a patent for a Discharge  Millhead,  which will  terminate on April 7, 2013. The
Irathane  division  holds various  patents for  elastomeric  railroad pads and a
railroad tie repair  system.  The Company is continually  developing  additional
potentially patentable products including rubber compounds, grinding mill parts,
screens  and  cyclone  products,  pipe  coupling  products  and  parts  for  the
automobile  industry.  The  Company  also has  several  proprietary  rubber  and
urethane compounds.

     The Company has not made it a practice to apply for patent  protection  for
its potentially  patentable products for several reasons,  including the cost of
obtaining patent protection. Further, because many of the Company's developments
are extensions of existing knowledge,  there is no assurance that patents can be
obtained  for either the  products  or  processes,  that the scope of any patent
protection would exclude  competitors or provide  competitive  advantages to the
Company,  that the patents would be held valid if  subsequently  challenged,  or
that  others  will not claim  rights in or  ownership  to the  patents and other
proprietary rights held by the Company.  In addition,  there can be no assurance
that  competitors  have not  developed  or will not  develop  similar  products,
duplicate  the  Company's  products  or, if patents  are issued to the  Company,
design around such patents.  Finally,  whether or not patents are issued, others
may hold or receive  patents,  which  contain  claims having a scope that covers
products developed by the Company.

     Industrial  Rubber's  proprietary  rubber  and  urethane  formulae  are not
patentable.  While  the  Company  obtains  confidentiality  agreements  from its
suppliers and its key employees,  competitors  could  independently  develop the
formulae.  Further,  litigation to protect either  patents or trade secrets,  to
enforce  patents  issued to the Company,  to protect  trade  secrets or know how
owned by the Company, and to defend the Company against claimed infringement may
be necessary.

     The Minnesota  production employees at the Industrial Rubber Products plant
are covered by a collective  bargaining  agreement with the United Steel Workers
of America,  Local  #6860-1,  which  terminates on April 15, 2004. The Minnesota
production  employees  at  the  Irathane  plant  are  covered  by  a  collective
bargaining  agreement with Midwestern  Industrial  Council,  which terminates on
June 30, 2003. The Sudbury,  Ontario production  employees at the Irathane plant
are  covered  by  a  collective  bargaining  agreement  with  the  International
Brotherhood of Painters and Allied Trades,  Local 1904,  which terminates on May
31, 2004. There is no union affiliation at the TJ Products facility.

Research and Development

     The Company has not incurred  significant  research and development  costs,
although it has incurred certain of such costs on a job-by-job basis,  which are
expensed as incurred.  During 2002, the Company moved its research facility from
Colorado Springs to Hibbing, Minnesota. The move was made to further consolidate
both costs and  operational  efficiency  within the  Company.  This new facility
performs  research and development  functions for all Industrial Rubber Products
divisions.

Governmental Regulation

     While Industrial  Rubber's  products are not subject to, and do not require
any governmental approvals before sale, the Company is subject to a wide variety
of governmental  regulations.  As a manufacturing company,  Industrial Rubber is
subject to safety  regulations  established  by the United States  Department of
labor and the Minnesota  Department of Labor and Industry under the Occupational
Safety and Health Act  ("OSHA").  Because  its  products  are sold to the mining
industry,  workplace  safety at the Company is also subject to regulation by the
Mine Safety and Health Administration.  The Company's operations are continually
being  monitored and inspected.  During 2002, the Company  received no reporting
deficiencies.  In 2001 all  deficiencies  from an OSHA  report  that  year  were
addressed, none of which had a material effect on the Company's operations.  The
Company  participates  with OSHA in a program to limit or  correct  deficiencies
before fines are assessed.

Environmental Regulation

     The  Company  uses  hazardous  solvents  in its  production  processes  and
disposes of waste products such as used solvents.  These and other activities of
the Company are subject to various federal, state and local laws and regulations
governing  the  generation,  handling,  storage,  transportation,  treatment and
disposal  of  hazardous  wastes.  Under such  laws,  and owner or lessee of real
estate  may be liable  for,  among  other  things,  (i) the costs of  removal or
remediation of certain hazardous or toxic substances located on, in or emanating
from,  such  property,  as well as related costs of  investigation  and property
damage  and  substantial  penalties  for  violations  of  such  laws,  and  (ii)
environmental  contamination  at  facilities  where  its  waste  is or has  been
disposed.  Such laws often impose such  liability  without regard to whether the
owner or lessee knows of, or was responsible for, the presence of such hazardous
or toxic substances.

     While  the  Company's  operations,  to its  best  knowledge,  are  in  full
compliance with all existing laws and regulations, environmental legislation and
regulations  have changed rapidly in recent years and the Company cannot predict
what,  if any,  impact  future  changes  in  such  legislation  may  have on the
Company's business. Further, environmental legislation has been enacted, and may
in the future be enacted,  that  creates  liability  for past  actions that were
lawful  at the  time  taken.  As in the case  with  manufacturing  companies  in
general,  if damage to persons or the environment has been caused,  or is in the
future  caused,  by the  Company'  facilities,  the Company may be fined or held
liable for the cost of remediating such damage.

     Imposition of such fines or the incurrence of such  liability  could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of  operations.  Further,  changes in  environmental  regulations in the
future could require the Company to make  significant  capital  expenditures  to
change methods of disposal of hazardous  solvents or otherwise  alter aspects of
its operations.

Employees

     As of March 14, 2003,  Industrial Rubber had 96 employees,  94 of whom were
full-time;  67 were production  workers (51 union); the other 27 full time and 2
part time were in sales, engineering,  accounting,  administrative and clerical,
and production supervision.

     The Company  believes that its relations  with its employees are excellent,
demonstrated   by  a  low  turnover   rate.   The  Company   believes  that  the
representation  of employees by unions acts to remove a potential barrier to the
sale of certain of the  Company's  products  to the  taconite  mining  plants by
responding to union contract language that limits outsourcing of work.

ITEM 2. Properties

     The Company currently has four manufacturing  facilities.  Two of these are
owned and two are leased. Two are in Hibbing,  Minnesota  (Industrial Rubber and
Irathane); and one each is in West Jordan, Utah and Sudbury, Ontario.

     The Hibbing, Minnesota (Industrial Rubber) facility is a 30,000 square foot
manufacturing facility and office facility that the Company owns, subject to two
mortgages,  including the Northern State Bank mortgage  placed on June 28, 2002,
which together have a total balance of $1,204,061 as of December 31, 2002.  This
facility is used to produce  proprietary  rubber and rubber lined  products that
are used in the taconite industry and also shipped  throughout North America for
use in copper, gold, molybdenum and other mineral processing operations.

     The  Hibbing,  Minnesota  (Irathane)  facility  is  a  42,000  square  foot
manufacturing and office facility that the Company leases. This facility is used
to produce  urethane cast  products used in the taconite  industry in Minnesota,
other mineral  processing  operations  throughout the world, and screens for the
aggregate  industry.  This  facility  also houses  sales and  technical  support
staffs.  This  facility also houses the Company's  corporate  headquarters.  The
Company has an option to purchase the facility during the term of the lease.

     The West  Jordan,  Utah  facility  is a 25,000  square  foot  manufacturing
facility that is leased.  The facility produces  urethane cast products,  rubber
molded products and rubber lined products for the mineral  processing,  military
and  aerospace,  paper and power  industries  in the  Inter-mountain  West.  The
Company has an option to purchase the facility during the term of the lease.

     The  Sudbury,  Ontario  facility  is a  15,000  square  foot  manufacturing
facility used to produce  urethane  cast products and rubber lined  products for
the mineral processing industry in Canada. The Company owns the facility.

     The Company  believes that all  facilities are in  satisfactory  conditions
given their age and use, and expects only normal maintenance in the near future.

ITEM 3. Legal Proceedings

     On October 24,  2002,  the  Company  was named as one of three  third-party
defendants  in a lawsuit  involving  a slurry  pipe  project.  The  Company  has
responded  to the  lawsuit  denying  any  liability.  Damages are alleged by the
Plaintiff  to be  $2,400,000.  At this time,  it is too early to  determine  the
probability  of the outcome and the  Company's  ultimate  liability,  if any. No
provision for a loss has been recorded.

ITEM 4. Submission of Matters to a Vote of Security Holders

     No matters have been  submitted  to a vote of the  security  holders of the
Company since the date of its previous annual meeting, May 23, 2002, through the
solicitation of proxies or otherwise.

                                     PART II

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters

     The  Company's  Common  Stock  trades on the OTC BB Market under the symbol
INRB.  The  following  table sets forth the high and low bid  quotation  for the
quarters shown.  The prices quoted  represent prices between trades in the stock
without adjustments for markups, markdowns or commissions and do not necessarily
reflect actual  transactions.  The Company's  initial  public  offering date was
April 24, 1998.

<TABLE>
<CAPTION>
                  2002     Quarter           High              Low
                  ------------------------------------------------
<S>                          <C>            <C>               <C>
                             1st            .51               .31
                             2nd            .72               .37
                             3rd            .53               .27
                             4th            .35               .21

                  2001     Quarter           High              Low
                  ------------------------------------------------
                             1st            1.06              .38
                             2nd            1.23              .43
                             3rd             .90              .20
                             4th             .55              .20

</TABLE>

     The   approximate   number  of   shareholders   of  record  and  beneficial
shareholders  of the  Company's  $.001 par value common stock as of December 31,
2001 and December 31, 2002, was 1,000.

     The Company has not paid any dividends on its Common Stock,  and intends to
follow a policy of retaining  all of its earning to finance its business and any
future  acquisitions.  The terms of the  Company's  covenants  with its bank and
other financing institutions further limits its ability to pay dividends.

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

     This commentary should be read in conjunction with the Financial Statements
and Notes,  presented  immediately  following the signature  page of this 10-KSB
Report, for a full  understanding of Industrial  Rubber's financial position and
results of operations.

Fiscal 2002 Compared With 2001

     Net sales in the year ended  December 31, 2002,  of  $13,323,632  decreased
5.7%, or $805,243 when compared with 2001 sales of $14,128,875.  The decrease is
attributable   to  a  reduction  in  the  sales  of   distributed   products  of
approximately  $1,250,000.  This  was  due to  the  loss  of the  Metso/Nordberg
distributorship for wear products and other equipment discussed in the Company's
2001 Annual Report on Form 10-KSB.

     The  Company's  order  backlog on  December  31,  2002,  was  approximately
$1,250,000.

     Cost of sales as a percentage  of net sales was 73.9% in 2002 compared with
76.4% in 2001.  The  decrease  was the  result of  selling  product  at a higher
margin. Nearly $1,250,000 of lower margin distributor sales were reduced between
2001 and  2002.  This  decrease  in the  percentage  of cost of  sales  was also
partially  helped by the  Company's  ability  to reduce  variable  manufacturing
expenses at nearly all subsidiaries.

     Selling,  general  and  administrative  expenses  increased  slightly  from
$2,654,616  in 2001  to  $2,668,292  in  2002.  The  small  increase  was due to
increased  sales and marketing  efforts by the Company.  The Company was able to
partially offset these costs by restructuring  and cost  consolidation  efforts.
These  consolidations  and  cost  reductions  came  from  all of  the  Company's
operating  units.  The Company  believes that it has  strategically  reorganized
these  expenses and is well  positioned on the return of many of its  historical
markets. As a percentage of sales, selling,  general and administrative expenses
increased from 18.8% in 2001 to 20.0% in 2002.

     Net  non-operating  expenses for 2002 of $369,289 compared with $546,251 in
2001.  Included in the 2002  expenses  were  $368,184 of interest  expense,  all
except $62,451 of which was on bank debt. The $62,451 represents interest on the
capital lease of the Hibbing Irathane  facility.  Interest expense  decreased in
2002 compared with 2001 primarily  because of two factors.  First,  management's
aggressive plan of reducing bank debt exceeded expectations. The Company reduced
debt  by  approximately  $2,172,000.   The  debt  was  reduced  $1,672,000  from
operations and $500,000 from a sale of capital stock.  Secondly, the majority of
the Company's loans are variable rate loans and there were significant  interest
rate reductions in the market once again in 2002.

     The Company  recorded  an income tax  provision  of $206,604 in 2002.  This
compares with a provision of $89,740 in 2001. In addition,  the Company recorded
$347,704 of deferred tax assets in connection  with the  cumulative  effect of a
change in goodwill  accounting.  The Company does not  anticipate the payment of
income taxes for 2002 income due to operating  loss carry forwards from previous
years.  Additional information is provided in Note 8, Income Tax Matters, of the
Financial Statements, presented in Item 13 of this 10-KSB Report.

     The 2002 net  income  before  cumulative  effect of  accounting  change was
$229,305 or $.05 per basic and diluted share, compared to the 2001 net income of
$38,656, or $.01 per basic and diluted share. However, in 2002 the Company had a
$521,556  net of tax  charge  for a  cumulative  effect of change in  accounting
principles  that resulted in a net loss $292,251 or .06 per share.  The increase
in operating  income was due to the  increases in profit margin and the decrease
in interest expense discussed above.

Fiscal 2001 Compared With 2000

     Net sales in the year ended  December 31, 2001,  of  $14,128,875  decreased
23.6%, or $4,363,672 when compared with 2000 sales of $18,492,547.  The decrease
is attributable to the general  decline in business  activity  production in the
industries served by the Company.

     The  Company's  order  backlog on  December  31,  2001,  was  approximately
$1,500,000.

     Cost of sales as a percentage  of net sales was 77.8% in 2001 compared with
77.2% in 2000.  The increase was the result of reductions in sales volume having
an adverse  affect on fixed  manufacturing  costs.  This  increase was partially
offset by the Company's  ability to reduce  variable  manufacturing  expenses at
nearly all subsidiaries.

     Selling,  general and administrative  expenses decreased from $3,610,906 in
2000 to $2,654,616  in 2001.  The decrease was the result of  restructuring  and
cost consolidation  efforts.  These consolidations and cost reductions came from
all of the Company's operating units in 2001. As a percentage of sales, selling,
general and  administrative  expenses  decreased  from 19.5% in 2000 to 18.8% in
2001.

     Net  non-operating  expenses for 2001 of $546,251 compared with $475,747 in
2000.  Included in the 2001  expenses  were  $546,499 of interest  expense,  all
except $67,423 of which was on bank debt. The $67,423 represents interest on the
capital lease of the Hibbing Irathane facility.  During 2000, the Company signed
a seven-year  extension to the original  three-year  lease.  This  extension was
signed after the Company  moved the Colorado  equipment to the Hibbing  facility
and  invested  nearly  $400,000  in  leasehold  improvements.  Interest  expense
decreased in 2001 compared with 2000  primarily  because of two factors.  First,
management's   aggressive   plan  of  reducing  bank  debt  by  $1,000,000   was
accomplished.  Secondly,  the majority of the Company's  loans are variable rate
loans and there were significant interest rate reductions in the market in 2001.
Excluding  the  $248,207  gain  from  the  sale  of  assets  in  2000,  the  net
non-operating expenses improved by $177,703.

     The  Company  recorded  an income tax  provision  of $89,740 in 2001.  This
compares with a provision of $52,731 in 2000. Additional information is provided
in Note 8, Income Tax Matters, of the Financial Statements, presented in Item 13
of this 10-KSB Report.

     The 2001 net  income  of  $38,656,  or $.01 per basic  and  diluted  share,
compared to the 2000 net income of $84,465, or $.02 per basic and diluted share.
This reduction of income was based on sales and expenses previously discussed.

Liquidity and Capital Resources

     The Company's cash flows provided by operating  activities  were $1,735,752
for 2002,  which is a significant  improvement  over the $1,095,805  provided by
operating activities in 2001. There were several significant differences between
the two periods.  The Company generated $638,063 of cash by reducing receivables
through an  improved  collection  effort  and a slight  decrease  in sales.  The
Company also continued to reduce  inventory  levels which added $132,338 of cash
flow.  These  items  were  partially  offset by uses of cash  which  included  a
reduction  of $380,439 in accounts  payable and accrued  expenses as well as the
net loss of  $292,251.  The  Company  was able to reduce  accounts  payable  and
accrued expenses because of the significant cash flow generated during the year.
In 2002 non-cash adjustments provided $836,900,  while favorable working capital
changes provided $459,098.

     Cash flows used by investing  activities  were  $141,152 in 2002,  compared
with $86,400 used for investing  activities in 2001. The major difference was an
increase of $34,994 for the purchase of assets.

     The Company's net cash used for financing activities was $1,809,973 in 2002
compared  with  $1,048,202  used by financing  activities  in 2001.  In 2002 the
Company reduced bank debt by $2,172,116  compared with $1,048,202 in 2001. These
reductions  of debt had  been a  primary  goal of the  Company  and the  Company
exceeded any payback required by its lenders.  Included as an offset in the 2002
net cash used was the $500,000 of cash provided by the sale of common stock. The
Company also incurred  $137,857 of loan costs in  originating  the new financing
package.

     In total,  the Company had a decrease in cash of  $223,033,  resulting in a
cash balance of $101,574 as of December 31, 2002.  This compares with a decrease
of $63,744 in 2001.  The Company has been trying to keep cash at lower levels to
minimize debt costs.

     During  2002 the Company  replaced  all of its short term debt with US Bank
with new financing agreements.

     Two  long  term  secured  loans  were  closed  on June  28,  2002;  one for
$1,600,000  (at a fixed rate of 7.75%  payable  monthly  over 7 years)  with the
Northland  Foundation of Duluth,  Minnesota and the other for  $1,000,000  (at a
floating rate of 2% above Wall Street Journal Prime,  adjusted monthly,  payable
monthly  over  10  years)  with  Northern  State  Bank  of  Virginia,  Virginia,
Minnesota.  The Northland  Foundation loan is secured by the Company's machinery
and equipment at Hibbing,  Minnesota and West Jordan,  Utah.  The Northern State
Bank loan is secured by a mortgage on the Company's Hibbing  (Industrial Rubber)
manufacturing facility and the Company's furniture,  fixtures,  tools, molds and
vehicles.

     The Company also entered into a loan with Itasca Business Credit Co. of St.
Louis Park,  Minnesota  providing for up to $1,750,000 of operating  line credit
secured by inventory,  accounts  receivable,  general intangibles and equipment.
The  operating  line is payable on demand and provides  for monthly  installment
payments of interest at a variable  rate of 3.75% above US Bank Prime Rate.  The
Company's  operating  line balance was $69,653 on December 31, 2002. The line of
credit expires on June 28, 2003.

     The  President  of the Company has  personally  guaranteed  the above three
loans.  The  new  loan  agreements  contain  certain  loan  covenants  including
restrictions on dividends.

     The Company  believes that it can fund proposed  capital  expenditures  and
operational  requirements from operations,  currently available cash and renewed
lines of credit.  Proposed capital expenditures for the year ending December 31,
2003 are  estimated at $100,000 and compare with $106,863 in 2002 and $71,869 in
2001.

     A summary of the Company's  contractual  cash  obligations  at December 31,
2002 is as follows:

<TABLE>
<CAPTION>
Contractual Obligations                     2003        2004         2005        2006       2007       After
---------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>         <C>        <C>         <C>        <C>
Long-term debt including interest       $ 687,991     $ 448,380   $ 447,331  $ 434,652   $ 434,652  $1,090,069
Operating Leases                          109,952        14,617       3,612          0           0          0
Capital leases including interest         109,080       109,080     109,080    109,080     109,080     218,160
                                       ------------------------------------------------------------------------
Total Contractual cash obligations      $ 907,023     $ 572,077   $ 559,913  $ 543,732   $ 543,732  $1,308,229
</TABLE>

Critical Accounting Policies

     The  Company's  significant  accounting  policies  are  summarized  in  the
footnotes to its financial  statements.  Some of the most critical  policies are
also discussed below.

     Accounts receivable. The Company performs ongoing credit evaluations of its
customers  and  adjusts  credit  limits  based  upon  payment  history  and  the
customer's  current  creditworthiness,  as  determined  by review of the current
credit information.  The Company continuously  monitors collections and payments
from its customers and  maintains a provision for doubtful  accounts  based upon
historical experience and any specific customer collection issues that have been
identified.  The general payment terms are net 30-45 days for domestic customers
and net 90-120 days for foreign customers.

     Income taxes.  Deferred taxes are provided on an asset and liability method
whereby deferred tax assets are recognized for deductible temporary  differences
and operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable  temporary  differences.  Temporary  differences  are the
differences between the reported amounts of assets and liabilities and their tax
bases.  Deferred tax assets are reduced by a valuation  allowance  when,  in the
opinion of  management,  it is more likely than not that some  portion or all of
the  deferred  tax  assets  will  not  be  realized.  Deferred  tax  assets  and
liabilities  are adjusted for the effects of change in tax laws and rates on the
date of enactment.

     Inventories. Inventories are stated at the lower of cost or market. Cost is
determined  by  the  first-in,   first-out  method.  The  Company  monitors  its
inventories for obsolescence and records allowances when required.

     Revenue  Recognition.  The  Company  recognizes  revenue  upon  shipment of
product (FOB shipping point).  Returns and allowances are recorded in the period
the need for such is identified.

     Significant  management  judgment is required in determining  the Company's
provision  for  income  taxes and its  deferred  tax  assets.  The  Company  has
estimated  that its deferred tax assets will be  recovered  from future  taxable
income.  The  deferred  tax asset as of December  31, 2002 was  $1,385,000.  The
Company will need to generate  future federal  taxable  income of  approximately
$3,600,000  to utilize the  deferred  tax asset.  During  2002,  the Company had
federal  taxable income of over $500,000.  Management  believes that the Company
will  generate  sufficient  taxable  income to utilize  all net  operating  loss
carryforwards  before they expire. State net operating loss carryforwards expire
in 2013 through 2016 and federal net operating loss carryforwards expire in 2018
through 2021. Footnote 8 to the audited financial statements  identifies the net
operating loss carryforwards by amount and year of expiration.

Significant  Transactions and Nonrecurring Items

     As  more  fully  described  herein  and in  the  related  footnotes  to the
accompanying consolidated financial statements,  the comparability of Industrial
Rubber  Products'  operating  results has been  affected by certain  significant
transactions and nonrecurring items in each period.

     During 2001,  the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standards  No.  142  "Goodwill  and  Other
Intangible Assets" ("FAS 142"), which required that,  effective January 1, 2002,
goodwill,  including the goodwill  included in the carrying value of investments
accounted  for  using  the  equity  method  of  accounting,  and  certain  other
intangible  assets deemed to have an indefinite  useful life, cease  amortizing.
Under the new rules goodwill and certain  intangible assets must be assessed for
impairment using fair value  measurement  techniques.  The Company completed its
initial  goodwill  impairment  testing  during the first  quarter  of 2002,  and
initially  determined  that there was no  impairment of goodwill.  However,  the
Company  subsequently  revised its conclusion as a result of further  impairment
testing, including considerations of its market capitalization,  as requested by
the SEC.  Therefore,  the Company  restated its results for the first quarter of
2002,  and  recorded a $869,260  noncash  pretax  charge for the  impairment  of
goodwill,  substantially  all of which was generated in the  acquisitions  of TJ
Products and Irathane Systems. The charge reflects overall market declines since
the acquisitions were completed.  The charge is reflected as a cumulative effect
of an accounting change in the accompanying  consolidated  financial statements.
In order to enhance comparability,  the Company compares current year results to
the prior year exclusive of this charge.

Related Party Transactions

     Under the terms of an  agreement  with Nelson  Roofing,  Inc.,  the Company
provided management and administrative  services based upon actual employee cost
plus  overhead  and  received a management  fee for such  services  during 2001.
Management fees received from Nelson  Roofing,  Inc.  amounted to  approximately
$83,000 in 2001. This agreement was not renewed in 2002. The Company paid $9,642
in 2002 and $7,158 in 2001 to Nelson Roofing,  Inc. for  construction  services.
Nelson Roofing, Inc. is owned by the majority stockholder.

     The Company rented warehouse space on a month-to-month basis from a company
owned by the majority stockholder for $46,120 in 2002 and $6,000 in 2001.

     The Company rents a portion of an office and  production  facility from the
majority  stockholder  under the terms of a ten-year  capital lease  expiring on
December 31, 2009. The lease provides that the Company pays all property  taxes,
insurance,  and maintenance  plus a monthly rental of $9,090.  The Company has a
purchase  option at any time of $650,000 to December 31, 2002 at which time, the
purchase  price  changes by an  inflation  adjustment.  Rent also changed by the
inflation  adjustment on January 1, 2003.  The Company also leased the remaining
portion of the  office and  production  facility  on a month to month  basis for
$3,060 per month.

     During 2002 the Company renewed its employment  agreement for an additional
year with its  President,  who is also the  majority  stockholder,  without  any
change in its terms.  Under the  employment  agreement the President  receives a
base salary of $175,000 in  addition  to  quarterly  bonuses,  as defined in the
agreement,  and annual  bonuses based upon the  performance  of the Company,  as
determined  by  the  Board  of  Directors.   The  agreement   contains   certain
noncompetition provisions.

     The  Company  accrued  unpaid  salary and other  expenses  to the  majority
stockholder   of  $11,700  and  $90,242  as  of  December  31,  2002  and  2001,
respectively.  The Company had advances to the majority  stockholder  of $39,947
and $112,000 as of December 31, 2002 and 2001, respectively.  No new advances or
loans have been made to the  President  since the passage of the  Sarbanes-Oxley
Act of 2002.

     The Company acquired 10 percent of the stock of Acotec S.A. (Acotec) during
2001.  The  remaining  90  percent  of Acotec is owned by one of the  members of
Industrial  Rubber's Board of Directors.  Sales to Acotec amounted to $1,246,840
and $419,994 in 2002 and 2001,  respectively.  Accounts  receivable  from Acotec
were $197,695 and $236,805 at December 31, 2002 and 2001, respectively.

New Accounting Standards

     In August 2001,  the  Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting Standards No. 143, Accounting for Obligations
Associated with the Retirement of Long-Lived  Assets. The provisions of SFAS 143
apply to all entities that incur  obligations  associated with the retirement of
tangible long-lived assets. This statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002 and will become  effective
for  the  Company   commencing  with  its  2003  fiscal  year.  This  accounting
pronouncement  is not  expected to have a  significant  impact on the  Company's
financial position or results of operations.

     In April 2002, the FASB issued Statement of Financial  Accounting Standards
No. 145,  Rescission  of FASB  Statements  No. 4, 44 and 64,  Amendment  of FASB
Statement  No. 13,  and  Technical  Corrections.  SFAS 145  rescinds  and amends
certain  previous  standards  related  primarily  to debt and  leases.  The most
substantive  amendment  requires  sale-leaseback  accounting  for certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions. The provisions of SFAS 145 related to the rescission of SFAS 4 are
effective for financial  statements  issued for fiscal years beginning after May
15, 2002 and will become  effective  for the  Company  commencing  with its 2003
fiscal year.  The  provisions  of SFAS 145 related to the  rescission of SFAS 13
became  effective  for  transactions  occurring  after May 15,  2002.  All other
provisions of SFAS 145 are effective for financial statements issued on or after
May  15,  2002.  This  accounting  pronouncement  is  not  expected  to  have  a
significant impact on the Company's financial position or results of operations.

     In June 2002, the FASB issued Statement of Financial  Accounting  Standards
No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  SFAS
146 addresses financial  accounting and reporting for costs associated with exit
or disposal  activities  and nullifies  EITF Issue No. 94-3.  This SFAS requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recorded at fair value when the liability is incurred. SFAS 146 is effective for
exit or disposal  activities  that are initiated  after December 31, 2002.  This
accounting  pronouncement  is not expected to have a  significant  impact on the
Company's financial position or results of operations.

     In  December  2002,  the FASB  issued  Statement  of  Financial  Accounting
Standards No. 148,  Accounting for  Stock-Based  Compensation  -- Transition and
Disclosure.  SFAS 148 amends SFAS 123, Accounting for Stock-Based  Compensation,
to provide  alternative  methods of transaction  for an entity that  voluntarily
changes  to  the  fair  value  based  method  of  accounting   for   stock-based
compensation.  It also amends the disclosure  provisions of that statement.  The
disclosure  provisions of this statement are effective for the December 31, 2002
financial statements and have been included in the current presentation.

     In  November  2002 the  FASB  issued  Interpretation  No.  45,  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness of Others.  The  Interpretation  expands  disclosure
requirements for certain  guarantees and requires the recognition of a liability
for the fair value of an  obligation  assumed  under a guarantee.  The liability
recognition  provisions  apply on a prospective  basis to  guarantees  issued or
modified after December 31, 2002, and the disclosure  provisions apply to fiscal
years ending after December 15, 2002.  Management  does not believe the adoption
of this  Interpretation  will have a material impact on the Company's  financial
position or results of operations.

     In January 2003 the FASB issued  Interpretation  No. 46,  Consolidation  of
Variable Interest  Entities.  In general, a variable interest entity is one with
equity  investors  that do not have voting  rights or do not provide  sufficient
financial  resources  for the entity to support  its  activities.  Under the new
rules,  variable  interest  entities will be  consolidated  by the party that is
subject to the  majority of the risk of loss or entitled to the  majority of the
residual returns. The new rules are effective  immediately for variable interest
entities  created  after  January 31, 2003 and in the third  quarter of 2003 for
previously existing variable interest entities.  Management does not believe the
adoption of this  Interpretation  will have a material  impact on the  Company's
financial position or results of operations.

Item 7.  Financial Statements

     The Company's  financial  statements  are filed as a part of this report on
Form 10-KSB immediately following the signature page.

Item  8.  Changes  in  and  Disagreements  with  Accountants  on Accounting  and
Financial Disclosure

     The Company has not, during the past two years and through the date of this
report,  had a change in its independent  certified public  accountants or had a
disagreement  with such  accountants  as any  matter of  accounting  principles,
practices or financial statement disclosure.


Part III

     Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons;
Compliance with Section 16 (a) of the Exchange Act

     The information  included in the Company's  definitive  proxy statement for
the 2003  Annual  Meeting  of  Shareholders  under  the  captions  "Election  of
Directors",   "Executive  Officers"  and  "Section  16(a)  Beneficial  Ownership
Reporting Compliance" is incorporated by reference.

Item 10.  Executive Compensation

     The information  included in the Company's  definitive  proxy statement for
the 2003  Annual  Meeting  of  Shareholders  under  the  captions  "Election  of
Directors--Director Compensation",  "Summary Compensation Table", "Option Grants
in Last Fiscal Year", "Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values" and "Employment Contracts; Termination of Employment and
Change-In-Control Arrangements" is incorporated by reference.

     Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

     The information  included in the Company's  definitive  proxy statement for
the 2003 Annual Meeting of Shareholders under the caption "Security Ownership of
Principal  Shareholders  and Management" is incorporated by reference in partial
response to this Item 11. The  following  information  completes  the  Company's
response to this Item 11.

                      Equity Compensation Plan Information

     The following  table sets forth  information  with respect to the Company's
Common Stock that may be issued  under its Stock  Option Plan.  The Stock Option
Plan is the only  equity  compensation  plan of the Company in  existence  as of
December 31, 2002 and has been approved by the Company's shareholders.

<TABLE>
<CAPTION>

                                                                                               Number of securities
                                Number of securities to be                                 future issuance under equity
                                  issued upon exercise of      Weighted-average exercise        compensation plans
                                   outstanding options,          price of outstanding          (excluding securities
        Plan Category               warrants and rights      options, warrants and rights     reflected in column 1)
        -------------               -------------------               -------------------     ----------------------

<S>                                       <C>                            <C>                          <C>
Equity compensation plans
approved by shareholders                  199,900                        $1.61                        200,100

Equity compensation plans not
approved by shareholders                        0                            0                              0
                                       -----------                      --------                     ---------
Total                                     199,900                        $1.61                        200,100
                                          =======                        =====                        =======
</TABLE>

Item 12.  Certain Relationships and Related Transactions

         The information included in the Company's definitive proxy statement
for the 2003 Annual Meeting of Shareholders under the caption "Certain
Relationships and Related Transactions" is incorporated by reference.

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

     Exhibits  designated  by the symbol * are filed with this Annual  Report on
Form 10-KSB.  All exhibits not so designated are  incorporated by reference to a
prior filing as indicated.

(a) Required Exhibits

     Industrial Rubber Products,  Inc.  undertakes to furnish to any shareholder
so  requesting  a copy of any of the  following  exhibits  upon  payment  to the
Company of the  reasonable  costs incurred by the Company in furnishing any such
exhibit.

Exhibits Number

3(a)(1) Restated Articles of Incorporation of Company dated as of January 30,
        1998 (Filed as Exhibit 3.1 to Form SB-2 dated February 20, 1998, File
        No. 333-46643.

3(a)(2) Restated Bylaws of Company as of January 30, 1998 (Filed as Exhibit 3.1
        to Form SB-2 dated February 20, 1998 File No. 333-46643).

10(1)   Employment Agreement between the Company and Daniel O. Burkes dated
        January 30, 2000. (Filed as Exhibit 10(1) to Form 10-KSB dated April 3,
        2000, File No. 000-24039) which contract has been extended to January 31
        2003.

10(2)   Labor Agreement between the Company and United Steelworkers of America
        dated June 26, 2000. (Filed as Exhibit 10(3) to Form 10-KSQ dated March
        12, 2001, File No. 333-46643)

10(3)   Labor Agreement between Irathane Systems and Midwestern Industrial
        Council dated June 30, 1999. (Filed as Exhibit 10(4) to Form 10-KSB
        dated April 3, 2000, File No. 000-24039).

10(4)   Labor Agreement between Industrial Rubber Products-Canada Inc. and
        International Brotherhood of Painters and Allied Trades Local 1904 dated
        April 1, 1999. (Filed as Exhibit 10(5) to Form 10-KSB dated April 3,
        2000, File No. 000-24039).

10(5)   Stock Option Plan, Including Specimen Stock Option Agreement as of
        January 30, 1999 (Filed as Exhibit 10.5 to Form SB-2 dated February 20,
        1998 File No. 333-46643).

10(6)   Stock Bonus Plan adopted on October 12, 1999. (Filed as Exhibit 10(7) to
        Form 10-KSB dated April 3, 2000, File No. 000-24039).

10(7)   Lease Agreement between DGW Enterprises, L.C. and Industrial Rubber
        Products - Utah, Inc. dated January 20, 1999 (Filed as Exhibit 10(7) to
        Form 10-KSB dated March 29, 1999, File No. 000-24039).

10(8)   First Amendment to Lease Agreement between DGW Enterprises, L.C. and
        Company dated October 5, 1999. (Filed as Exhibit 10(11) to Form 10-KSB
        dated April 3, 2000, File No. 000-24039).

10(9)   Lease Agreement between Daniel O. Burkes and Irathane Systems, Inc.
        dated January 1, 2000. (Filed as Exhibit 10(12) to Form 10-KSB dated
        April 3, 2000, File No. 000-24039).

10(10)  Lease Addendum Agreement between Daniel O. Burkes and Irathane Systems,
        Inc. dated June 30, 2000.  (Filed as Exhibit  10(3) to Form  10-KSB
        dated March 12, 2001, File No. 000-24039).

10(11)* Second Lease Addendum Agreement between Daniel O. Burkes and Irathane
        Systems, Inc. dated as of January 1, 2002.

10(12)  Purchase Agreement between Industrial Rubber Products - Utah, Inc. and
        Company and Sonwil Products, Inc., dba T.J. Products and Dean G. Wilson
        dated January 20, 1999 (Filed as Exhibit 2.1 to Form 8-K dated February
        4, 1999, File No. 000-24039).

10(13)  Purchase Agreement between Illinois Tool Works Inc. and Industrial
        Rubber Products, Inc. dated March 25, 1999 (Filed as Exhibit 10.8 to
        Form 10-KSB dated March 29, 1999, File No. 000-24039).

10(14)  Secrecy and Supply Agreement between Illinois Tool Works, Inc. and
        Company dated March 31, 1999 (Filed as Exhibit 10.9 to Form 8-K dated
        April 12, 1999 File No. 000-24039).

10(15)  Non-Competition Agreement between Illinois Tool Works, Inc. and Company
        dated March 31, 1999 (Filed as Exhibit 10.10 to Form 8-K dated April 12,
        1999, File No. 000-24039).

10(16)  Loan Agreement between the Company and Northland Foundation dated June
        28, 2002 (Filed as Exhibit 10(26) to Form 10-QSB dated August 14, 2002,
        File No. 000-24039)

10(17)  Financing Agreement between the Company and Itasca Business Credit, Inc.
        dated June 28, 2002 (Filed as Exhibit 10(27) to Form 10-QSB dated August
        14, 2002, File No. 000-24039)

10(18)  Real Estate Mortgage from Company to Northern State Bank of Virginia
        dated June 28, 2002 (Filed as Exhibit 10(28) to Form 10-QSB dated August
        14, 2002, File No. 000-24039)

10(19)  U.S. Small Business Administration Note from Company to Northern State
        Bank of Virginia dated June 28, 2002 (Filed as Exhibit 10(29) to Form
        10-QSB dated August 14, 2002, File No. 000-24039)

99(1)   Certification of Annual Report dated April   , 2003, signed by Daniel O.
        Burkes.

99(2)   Certification of Annual Report dated April   , 2003, signed by James
        Skalski.

Item 14. Controls and Procedures.

     The  Company  maintains  a system of controls  and  procedures  designed to
provide reasonable  assurance as to the reliability of the financial  statements
and other  disclosures  included in this report,  as well as to safeguard assets
from unauthorized use or disposition. The Company evaluated the effectiveness of
the design and operation of its  disclosure  controls and  procedures  under the
supervision  of and with  the  participation  of the  Company's  President,  its
principal  executive  officer,  and its  Comptroller,  its  principal  financial
officer,  within  90 days of the  filing  of this  Form  10-KSB.  Based  on that
evaluation,  the  Company's  President  and  Comptroller  believe the  Company's
disclosure  controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) are effective in timely  alerting the  Company's  management to material
information required to be included in this Form 10-KSB and other SEC filings.

     There were no  significant  changes in the Company's  internal  controls or
other factors that could  significantly  affect these controls subsequent to the
date of their evaluation and there were no significant  deficiencies or material
weaknesses which required corrective actions.

21. List of Subsidiaries

Industrial Rubber Products-Utah, Inc., a Utah corporation which does business as
"TJ Products".

Irathane Systems Inc., a Minnesota Corporation.

Industrial Rubber Products-Canada, Inc., an Ontario Canada corporation which
does business as "Irathane/Elliott Systems".

Industrial Rubber Products, Arizona, Inc., an Arizona Corporation.
Currently inactive.

Industrial Rubber Applicators, Inc., a Minnesota Corporation.

Industrial Rubber Products-Montana, Inc., a Montana Corporation.
Currently inactive.

(b)  Reports on Form 8K
     None


SIGNATURES

     In accordance  with Section 13 and 15(d) of the Securities  Exchange Act of
1934,  the  registrant  caused  this  report to be  signed on its  behalf by the
undersigned thereunto duly authorized.



                                               Industrial Rubber Products, Inc.

Dated: April   , 2003                            /s/ James A. Skalski
                                                        Comptroller

     Pursuant to the requirement of the Exchange Act this report has been signed
by the following person on behalf of the registrant and in the capacities and on
the dates indicated by the undersigned thereunto duly authorized.


SIGNATURE                          TITLE                          DATE
                                   President
/s/ Daniel O. Burkes               Chief Executive Officer
Daniel O. Burkes                   and Director                   April   , 2003

                                   Vice President
/s/ Christopher M. Liesmaki        Chief Operating Officer
Christopher M. Liesmaki            and Director                   Arpil   , 2003

/s/ Paul A. Friesen
Paul A. Friesen                    Director                       April   , 2002


/s/ James D. Mackay
James D. Mackay                    Director                       April   , 2002

/s/ John R. Ryan, Jr.
John R. Ryan, Jr.                  Director                       April   , 2002

<PAGE>

                                CERTIFICATION

    I, Daniel O. Burkes, certify that:

     1. I  have  reviewed  this  amended  annual  report  on  Form  10-KSB/A  of
Industrial Rubber Products, Inc.;

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows on the
registrant as of, and for, the periods presented in this annual report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
annual report (the "Evaluation Date"); and

     c)  presented  in  this  annual   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
annual report whether there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of the most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.


Dated:  April   , 2003                     /s/ Daniel O. Burkes
                                        ----------------------------------------
                                        Daniel O. Burkes, President and Chief
                                        Executive Officer


                                 CERTIFICATION

    I, James Skalski, certify that:

     1. I  have  reviewed  this  amended  annual  report  on  Form  10-KSB/A  of
Industrial Rubber Products, Inc.;

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows on the
registrant as of, and for, the periods presented in this annual report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
annual report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
annual report whether there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of the most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.


Dated:  April   , 2003                    /s/ James Skalski
                                        ----------------------------------------
                                        James Skalski, Comptroller


<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
Industrial Rubber Products, Inc.
Hibbing, Minnesota


     We have audited the accompanying  consolidated balance sheets of Industrial
Rubber Products, Inc. and Subsidiaries as of December 31, 2002 and 2001, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the years  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material  respects,  the financial position of Industrial
Rubber Products, Inc. and Subsidiaries as of December 31, 2002 and 2001, and the
results  of their  operations  and their  cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

     As described in Note 13 to the financial  statements,  the Company  changed
its method of accounting for goodwill in 2002.



                                                    McGLADREY & PULLEN, LLP


Duluth, Minnesota
February 12, 2003



<PAGE>

INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31, 2002 and 2001

ASSETS (Note 4)                                                 2002               2001
-------------------------------------------------------------------------------------------
Current Assets
<S>                                                         <C>                  <C>
Cash and cash equivalents                                    $ 101,574            $ 324,607
Trade receivables, less allowance for doubtful
accounts 2002 $400,000; 2001 $380,500                        1,711,994            2,343,243
Income tax refund receivable                                    10,477                    0
Inventories (Note 3)                                         1,033,743            1,166,081
Prepaid expenses                                               148,813              287,432
Prepaid pension costs (Note 9)                                       0               14,974
Deferred taxes (Note 8)                                        247,000              261,000
                                                        -------------------------------------
Total current assets                                         3,253,601            4,397,337
                                                        -------------------------------------

Other Assets
Cash value of life insurance                                   279,509              238,720
Investment in common stock of Acotec S.A.                      120,000              120,000
Deferred debt expense less accumulated
amortization of $19,536 in 2002                                118,321                    0
Goodwill (Note 13)                                                   0              869,260
                                                        --------------------------------------
                                                               517,830            1,227,980
                                                        --------------------------------------

Deferred Taxes (Note 8)                                      1,138,000              980,000
                                                        --------------------------------------

Intangible Pension Asset (Note 9)                               40,255                    0
                                                        --------------------------------------

Property and Equipment (Note 5)
Land                                                           511,576              511,576
Buildings and leasehold improvements                         1,610,551            1,610,551
Automotive equipment                                           518,022              527,560
Machinery and equipment                                      6,353,331            6,303,351
                                                        --------------------------------------
                                                             8,993,480            8,953,038
Less accumulated depreciation                                4,173,097            3,413,095
                                                        --------------------------------------
                                                             4,820,383            5,539,943
                                                        --------------------------------------
                                                           $ 9,770,069         $ 12,145,260
                                                        ======================================

See Notes to Consolidated Financial Statements.
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY                         2002                 2001
----------------------------------------------------------------------------------------------
Current Liabilities
Bank notes payable (Note 4)                                   $ 69,653          $ 4,699,996
Current maturities of long-term debt (Note 5)                  565,194               67,088
Accounts payable                                               501,427              794,369
Accrued expenses                                               521,166              608,663
Income taxes payable                                                 0               51,296
                                                        --------------------------------------
Total current liabilities                                    1,657,440            6,221,412
                                                        --------------------------------------


Long-Term Debt, less current maturities (Note 5)             2,735,419              775,298
                                                        --------------------------------------


Accrued Pension Costs (Note 9)                                  45,622                    0
                                                        --------------------------------------

Commitments and Contingencies (Notes 11, 12, and 14)


Stockholders' Equity (Note 6)
Common stock, $.001 par value; authorized 25,000,000
 shares; issued 2002 - 5,437,205; 2001 - 4,187,205 shares        5,437                4,187
Additional paid-in capital                                   6,137,612            5,638,862
Accumulated deficit                                           (786,732)            (494,481)
Accumulated other comprehensive loss                           (24,729)                 (18)
                                                        -----------------------------------------
                                                             5,331,588            5,148,550
                                                        -----------------------------------------
                                                           $ 9,770,069         $ 12,145,260
                                                        =========================================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2002 and 2001

                                                                  2002                 2001
------------------------------------------------------------------------------------------------
<S>                                                          <C>                  <C>
Net Sales (Notes 2 and 10)                                    $ 13,323,632         $ 14,128,875

Cost of Sales                                                    9,850,142           10,799,612
                                                           -----------------------------------------
Gross profit                                                     3,473,490            3,329,263

Operating Expenses                                               2,668,292            2,654,616
                                                           -----------------------------------------
Operating income                                                   805,198              674,647
                                                           -----------------------------------------

Nonoperating Income (Expense)
Interest and other income                                           1,454                6,442
Interest expense                                                 (368,184)            (546,499)
Loss on sale of equipment                                          (2,559)              (6,194)
                                                           -----------------------------------------
                                                                 (369,289)            (546,251)
                                                           -----------------------------------------

Income before income taxes                                        435,909              128,396

Federal and State Income Taxes (Note 8)                           206,604               89,740
                                                           -----------------------------------------
Income before cumulative effect of change
in accounting principle                                           229,305               38,656

Cumulative Effect of Accounting Change in Goodwill
Accounting Method, net of tax (Note 13)                          (521,556)                   0
                                                           -----------------------------------------
Net income (loss)                                              $ (292,251)            $ 38,656
                                                           =========================================

Earnings per common share - basic
Income before cumulative effect of change in
accounting principle                                           $     0.05              $  0.01
Cumulative effect of accounting change                              (0.11)                   0
                                                           -----------------------------------------
Net income (loss)                                              $    (0.06)             $  0.01
                                                           =========================================

Earnings per common share - diluted
Income before cumulative effect of change in
accounting principle                                           $     0.05              $  0.01
Cumulative effect of accounting change                              (0.11)                   0
                                                           -----------------------------------------
Net income (loss)                                              $    (0.06)             $  0.01
                                                           =========================================

Weighted average number of shares and share equivalents:
Basic                                                            4,934,739           4,187,205
                                                           =========================================
Diluted                                                          4,934,739           4,468,555
                                                           =========================================

See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2002 and 2001

                                                                                  Accumulated
                                                      Additional                     Other          Total           Total
                                   Common Stock         Paid-in    Accumulatd    Comprehensive   Stockholder   Comprehensive
                                Shares      Amount      Capital      Deficit      Income(Loss)      Equity     Income (Loss)
-----------------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>        <C>            <C>             <C>            <C>            <C>
Balance, December 31,2000      4,187,205  $ 4,187    $ 5,638,862    $ (533,137)     $ 24,929       $5,134,841

Foreign currency
  translation adjustment               0        0              0             0       (24,947)         (24,947)    $ (24,947)
Net income                             0        0              0        38,656             0           38,656        38,656
Total comprehensive
 income                                                                                            $   13,709
                                                                                                   ===========

Balance, December 31, 2001     4,187,205    4,187      5,638,862      (494,481)          (18)       5,148,550

Foreign currency
 translation adjustment                0        0              0             0        (7,660)          (7,660)    $  (7,660)
Unrecognized pension costs             0        0              0             0       (17,051)         (17,051)      (17,051)
Sale of 1,250,000 shares
 of common stock               1,250,000    1,250        498,750             0             0          500,000
Net loss                               0        0              0      (292,251)            0         (292,251)     (292,251)
Total comprehensive
 loss                                                                                                             $(316,962)
                                                                                                                  ===========

Balance, December 31, 2002     5,437,205  $ 5,437    $ 6,137,612     $(786,732)    $ (24,729)      $5,331,588
                               ==============================================================================

See Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2002 and 2001

                                                               2002                 2001
--------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
<S>                                                        <C>                    <C>
Net income (loss)                                          $ (292,251)            $ 38,656
Adjustments to reconcile net income (loss) to
 net cash provided by operating activities:
 Depreciation                                                 817,364              828,930
 Amortization                                                  19,536               72,130
 Cumulative effect of accounting change                       869,260                    0
 Recovery of bad debts                                         (6,814)             (25,000)
 Loss on sale of equipment                                      2,559                6,194
 Deferred taxes (credits)                                    (133,000)              35,000
 Changes in assets and liabilities:
  Decrease in trade receivables                               638,063              205,486
  Increase in income tax refund receivable                    (10,477)                   0
  Decrease in inventories                                     132,338              559,053
  (Increase) decrease in prepaid expenses                     138,619             (201,805)
  Decrease in accounts payable and accrued expenses          (380,439)            (473,135)
  Increase (decrease) in income taxes payable                 (51,296)              50,296
  Other prepaids and accruals, net                             (7,710)                   0
                                                          ---------------------------------
    Net cash provided by operating activities               1,735,752            1,095,805
                                                          ---------------------------------

Cash Flows from Investing Activities
 Purchase of property and equipment                          (106,863)             (71,869)
 Proceeds from sale of equipment                                6,500               11,750
 Increase in cash value of life insurance                     (40,789)             (26,281)
                                                          ----------------------------------
   Net cash used in investing activities                     (141,152)             (86,400)
                                                          ----------------------------------

Cash Flows from Financing Activities
 Net payments on short-term borrowings                     (4,630,343)            (985,000)
 Proceeds from long-term borrowings                         2,641,168                    0
 Payment of debt issue costs                                 (137,857)                   0
 Principal payments on long-term borrowings                  (182,941)             (63,202)
 Proceeds from sale of common stock                           500,000                    0
                                                          ---------------------------------
   Net cash used in financing activities                   (1,809,973)          (1,048,202)
                                                          ---------------------------------

Effect of Foreign Currency Exchange Rate Changes
 on Cash and Cash Equivalents                                  (7,660)             (24,947)
                                                          ---------------------------------

   Net decrease in cash and cash equivalents                 (223,033)             (63,744)

Cash and Cash Equivalents
Beginning                                                     324,607              388,351
                                                           --------------------------------
Ending                                                      $ 101,574            $ 324,607
                                                           ================================

                               (Continued)
<PAGE>
Supplemental Disclosures of Cash Flow Information
 Cash payments for:
  Interest                                                  $ 357,438            $ 582,395
                                                           ================================

  Income taxes                                               $ 53,673            $   3,050
                                                           ================================

Supplemental Schedule of Noncash Investing
 and Financing Activities
 Change in intangible pension asset for unrecognized
  pension costs, net of deferred taxes of $11,000
  in 2002                                                    $ 17,051            $       0
                                                           ================================

 Accounts receivable exchanged for investment
  in common stock of Acotec S.A.                             $      0            $ 120,000
                                                           ================================

See Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.

<PAGE>
               INDUSTRIAL RUBBER PRODUCTS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Note 1.  Nature of Business and Significant Accounting Policies

     Nature of  business:  The  Company's  operations  consist of  applying  and
vulcanizing  rubber and applying urethane (for corrosion and abrasion  resistant
purposes) to pipes,  pumps and other wear  material  surfaces.  The Company also
produces cast urethane parts and rubber molded parts. The Company's products are
primarily  for  the  mineral  processing  industry,  but  are  also  used in the
aggregate,  paper,  utility and military and aerospace  industries.  The Company
extends credit to its  customers,  all on an unsecured  basis,  on terms that it
establishes for individual customers.

     A summary of the Company's significant accounting policies follows:

     Basis of consolidation:  The consolidated  financial statements include the
accounts  of the  Company  and  its  wholly  owned  subsidiaries.  All  material
intercompany accounts and transactions are eliminated in consolidation.

     Cash and cash  equivalents:  For  purposes of  reporting  cash  flows,  the
Company  considers all highly liquid debt instruments  purchased with a maturity
of three  months or less to be cash  equivalents.  Cash  equivalents  consist of
money market funds.

     The Company  maintains its cash in accounts,  which,  at times,  may exceed
insured limits. The Company has not experienced any losses in such accounts.

     Trade receivables: Trade receivables are carried at original invoice amount
less an  estimate  made  for  doubtful  receivables  based  on a  review  of all
outstanding amounts on a monthly basis.  Management determines the allowance for
doubtful accounts by regularly  evaluating  individual customer  receivables and
considering  a  customer's  financial  condition,  credit  history,  and current
economic   conditions.   Trade   receivables   are   written   off  when  deemed
uncollectible.  Recoveries  of  trade  receivables  previously  written  off are
recorded  when  received.  The  general  repayment  terms are net 30-45 days for
domestic customers and net 90-120 days for foreign customers.

     Inventories: Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.

     Investment  in common stock:  The Company is accounting  for its 10 percent
investment in Acotec S.A., a Chilean company, at cost.

     Property  and  equipment:   Property  and  equipment  is  stated  at  cost.
Depreciation  is  computed  using the  straight-line  method for  buildings  and
leasehold  improvements  and a combination of the accelerated and  straight-line
methods  for  equipment  over  the  following   estimated   useful  lives.   The
depreciation  expense on assets  acquired  under capital leases is included with
depreciation expense on owned assets.

<TABLE>
<CAPTION>
                                                                           Years
--------------------------------------------------------------------------------
<S>                                                                 <C>
Buildings including building under capital lease                      10 - 39
Leasehold improvements                                             Term of lease
Automotive equipment                                                   3 - 5
Machinery and equipment                                                5 - 10
</TABLE>

<PAGE>

     The building  under  capital  lease had a cost of $650,000 and  accumulated
depreciation   of  $195,000   and  $130,000  at  December  31,  2002  and  2001,
respectively.

     Impairment  of  long-lived  assets:  Management  periodically  reviews  the
carrying  value of long-term  assets for  potential  impairment by comparing the
carrying value of these assets to the estimated  undiscounted  future cash flows
expected to result from the use of these assets.  Should the sum of the related,
expected  future net cash flows be less than the carrying  value,  an impairment
loss would be measured.  An  impairment  loss would be measured by the amount by
which the carrying  value of the asset  exceeds the fair value of the asset with
fair value being  determined using discounted cash flows. To date management has
determined that no other impairment of these assets exists.

     Deferred  debt  expense:  Deferred  debt  expense  is  amortized  using the
effective  interest  method over the period of  financing  and is reported  with
interest expense on the statement of operations.

     Income taxes:  Deferred taxes are provided on an asset and liability method
whereby deferred tax assets are recognized for deductible temporary  differences
and operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable  temporary  differences.  Temporary  differences  are the
differences between the reported amounts of assets and liabilities and their tax
bases.  Deferred tax assets are reduced by a valuation  allowance  when,  in the
opinion of  management,  it is more likely than not that some  portion or all of
the  deferred  tax  assets  will  not  be  realized.  Deferred  tax  assets  and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

     Employee health benefits  self-insurance:  The Company is self-insured  for
employee health benefits.  The Company has purchased  reinsurance to limit claim
exposure.  The estimated expense from uninsured claims,  including  incurred but
not reported claims, is accrued as losses occur.

     Advertising  costs: The Company follows the policy of charging the costs of
advertising  to expense as incurred.  For the years ended  December 31, 2002 and
2001, advertising expense totaled $28,083 and $28,161 respectively.

     Revenue  recognition:  The  Company  recognizes  revenue  upon  shipment of
product (FOB shipping point).  Returns and allowances are recorded in the period
the need for such is identified.

     Shipping fees and costs: The Company classifies amounts billed to customers
for shipping fees as revenue. Shipping costs are included in cost of sales.

     Foreign currency  translation:  For the Company's Canadian  operation,  the
results of operations  and cash flows are  translated at average  exchange rates
during the year, and assets and liabilities are translated at end of year rates,
except for property and  equipment,  which is translated  at  historical  rates.
Translation  adjustments  are included as a separate  component  of  accumulated
other comprehensive income in stockholders' equity.

     Disclosures about fair value of financial instruments:  The carrying amount
of current assets and liabilities  approximates  fair value because of the short
maturity  of  those   instruments.   The  carrying   amount  of  long-term  debt
approximates  fair value since the fair value of the long-term debt is estimated
based on  interest  rates for the same or similar  debt  offered to the  Company
having the same or similar remaining maturities and collateral requirements.


<PAGE>

     Use  of  estimates  in  the  preparation  of  financial   statements:   The
preparation of financial  statements  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.

     Reclassification: Certain reclassifications were made to the 2001 financial
statements to conform to the 2002 presentation.  These  reclassifications had no
impact on net income or stockholders' equity as previously reported.

     Earnings per common share (EPS):  Basic EPS is calculated  using net income
divided by the weighted  average of common shares  outstanding  during the year.
Diluted  EPS is  similar to basic  except  that the  weighted  average of common
shares  outstanding  is  increased to include the number of  additional  commons
shares that would have been outstanding if the dilutive  potential common shares
such as options and warrants had been issued.

     Shares used in the calculation of diluted EPS are summarized below:

<TABLE>
<CAPTION>
                                                              2002        2001
--------------------------------------------------------------------------------
<S>                                                        <C>         <C>
Weighted average of common shares outstanding              4,934,739   4,187,205
Dilutive effect of stock options and warrants                      0     281,350
                                                          ----------------------
Weighted average common and common equivalent
shares outstanding                                         4,934,739   4,468,555
                                                          ======================
</TABLE>

     Options  to  purchase  199,900  and  133,650  shares of common  stock  were
outstanding  during the years ended  December  31, 2002 and 2001,  respectively.
Warrants to purchase 126,000 shares of common stock were outstanding  during the
years ended  December  31, 2002 and 2001.  The options and  warrants to purchase
were excluded from the computation of common stock equivalents because they were
anti-dilutive for the year ended December 31, 2002.


<PAGE>

     Employee  Stock Plans:  The Company has a  stock-based  compensation  plan,
which is  described  more fully in Note 6. The Company  accounts for those plans
under  the  recognition  and  measurement  principles  of APB  Opinion  No.  25,
Accounting  for  Stock  Issued  to  Employees,   and  related   interpretations.
Accordingly,  no stock-based employee compensation cost has been recognized,  as
all options  granted under those plans had an exercise price equal to the market
value of the underlying  common stock on the date of grant.  The following table
illustrates  the effect on net income and  earnings  per share had  compensation
cost for all of the stock-based  compensation plans been determined based on the
grant date fair values of awards (the method  described  in FASB  Statement  No.
123, Accounting for Stock-Based Compensation):

<TABLE>
<CAPTION>

                                                               2002                 2001
--------------------------------------------------------------------------------------------
Net income (loss):
<S>                                                         <C>                    <C>
As reported                                                 $ (292,251)            $ 38,656
Deduct total stock-based employee compensation
expense determined under fair value based method
for all awards, net of tax                                       6,618               12,509
                                                           ----------------------------------
Pro forma                                                   $ (298,869)            $ 26,147
                                                           ==================================

Basic earnings (loss) per share:
As reported                                                    $ (0.06)              $ 0.01
Pro forma                                                        (0.06)                0.01

Diluted earnings (loss) per share:
As reported                                                    $ (0.06)              $ 0.01
Pro forma                                                        (0.06)                0.01

</TABLE>

Note 2. Revenue by Products and Services

     The  Company's  revenue is attributed  to a single  reportable  segment and
results from the sale of products or services which consist of liquid urethanes,
urethane  moldings and rubber and urethane  linings for the mineral  processing,
aggregate, transportation, and power industries.

     The following table presents net sales from external  customers for each of
the Company's  groups of products and services for the years ended  December 31,
2002 and 2001:

<TABLE>
<CAPTION>
                                                   2002                 2001
--------------------------------------------------------------------------------
<S>                                            <C>                  <C>
Urethane cast parts                            $ 7,004,330          $ 6,532,774
Pipe and pipe lining products                      815,980            1,201,129
Liquids                                          1,475,733              663,083
Spray                                              670,682              488,767
Proprietary engineered products                    818,543              977,877
Standard rubber products                         1,932,028            2,488,281
Steel cast parts                                    72,966              970,831
New equipment                                            0              470,633
Other                                              533,370              335,500
                                            ------------------------------------
                                              $ 13,323,632         $ 14,128,875
                                            ====================================
</TABLE>
<PAGE>
     The  Company's  revenue  (based on location of the  customer) for the years
ended December 31, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                  2002                 2001
--------------------------------------------------------------------------------
<S>                                           <C>                  <C>
United States                                 $ 10,179,849         $ 11,355,875
Canada                                           1,637,964            2,088,000
Chile                                            1,246,840              419,994
Other countries                                    258,979              265,006
                                            ------------------------------------
                                              $ 13,323,632         $ 14,128,875
                                            ====================================
</TABLE>

     Net sales for the year ended  December 31, 2002  included  sales to a major
customer which accounted for $1,720,447 or 12.9 percent of net sales. There were
no sales to a single customer in excess of 10 percent of net sales in 2001.

     The  Company's  property and  equipment as of December 31, 2002 and 2001 is
located as follows:

<TABLE>
<CAPTION>
                                                   2002                 2001
--------------------------------------------------------------------------------
<S>                                            <C>                  <C>
United States                                  $ 4,286,697          $ 4,913,120
Canada                                             533,686              626,823
                                            ------------------------------------
                                               $ 4,820,383          $ 5,539,943
                                            ====================================
</TABLE>

Note 3.  Inventories

     Inventories consist of the following as of December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                     2002                 2001
---------------------------------------------------------------------------------
<S>                                               <C>                  <C>
Raw materials                                     $ 834,182            $ 977,065
Work in process                                      31,871                8,856
Finished goods                                      302,007              354,603
                                                 --------------------------------
                                                  1,168,060            1,340,524
Raw materials purchased on behalf of customers       25,540               26,531
                                                 --------------------------------
                                                  1,193,600            1,367,055
Less allowance for obsolescence                     159,857              200,974
                                                 --------------------------------
                                                 $1,033,743           $1,166,081
                                                 ================================
</TABLE>

     The Company  incurs  costs on behalf of its  customers  for the purchase of
pipes,  pumps and launders and is reimbursed  for these costs by the  customers.
The Company does not receive a commission or recognize gross profit upon sale of
these  components;  therefore,  net sales and cost of sales in the statements of
operations do not include amounts for sales and purchases of components.

Note 4.       Notes Payable and Liquidity

     During 2002, the Company entered into a $1,750,000 revolving line of credit
agreement with a bank for working capital  financing.  The agreement  expires on
June 28, 2003. Advances under the line of credit are subject to a borrowing base
of eligible  trade  receivables  and  inventories,  as defined in the agreement.
Advances  under  the line of credit  are  collateralized  by trade  receivables,
inventories,  equipment, general intangibles, and assignment of a life insurance
policy, and are personally guaranteed by the majority  stockholder.  Interest on
the revolving line of credit is payable  monthly at the bank's  reference  rate,
plus 3.75  percent (8.5  percent at December  31,  2002).  At December 31, 2002,
$69,653 was outstanding on the revolving line of credit.


<PAGE>

     Among other  things,  the  agreement  requires  the Company to refrain from
declaring or paying any dividends on its common stock, to refrain from acquiring
any of its capital stock in excess of $25,000,  to limit the purchase,  sale, or
disposal of property and equipment to $150,000 in any year,  and to refrain from
making any change in its capital structure.

Note 5.  Long-Term Debt

     A summary of long-term debt as of December 31, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                                          2002                 2001
------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>
Capital lease obligation to Company president for use of
 building, payable in monthly installments of $9,090 to
 December 31, 2009, discounted at a rate of 11.3%                      $ 525,558            $ 572,187
Note payable, Northland Foundation, due in monthly
 installments of $24,739 including interest at 7.75% to
 June 2009, at which time the remaining balance is due                 1,530,969                    0
Note payable, bank, due in monthly installments of $11,482
 including interest at 2% above the prime rate as published in the Wall Street
 Journal (6.75% at December 31, 2002)
 to June 2012, at which time the remaining balance is due                964,450                    0
Note payable, bank, due in monthly installments of $1,576
 including interest at 8.5% to April 2003, at which time
 the remaining balance is due                                            125,491              138,094
Note payable, bank, in participation with the Iron Range
 Resources Rehabilitation Board, due in monthly
 installments of $1,144 including interest at 3.5% to
 April 2003, at which time the remaining balance is due                  114,120              128,561
Other note payable due in monthly installments of $1,144
 to November 2005, collateralized by a vehicle                            40,025                    0
Other notes paid in full during 2002                                           0                3,544
                                                                  -----------------------------------------
                                                                       3,300,613              842,386
Less current maturities                                                  565,194               67,088
                                                                  -----------------------------------------
                                                                     $ 2,735,419            $ 775,298
                                                                  =========================================
</TABLE>


     The 7.75  percent  note  payable to  Northland  Foundation  (Northland)  is
collateralized  by machinery and  equipment,  and assignment of a life insurance
policy, and guaranteed by the majority stockholder. Among other things, the note
requires the Company to:

     a. Not pay any  dividends to its  shareholders  without  Northland's  prior
written consent.
     b.  Not  increase  the  compensation  of  any  officer  who  is a  majority
shareholder or the spouse thereof, without Northland's prior written consent.
     c. Maintain a current ratio of at least 1.4 to 1.
     d. Maintain a minimum working capital of $1,500,000.
     d. Maintain a debt to worth ratio of not less than 1.5 to 1.
     e. Limit capital expenditures or sales of property and equipment in any one
year to $250,000.
     f. Obtain bank approval for the issuance of additional debt.

<PAGE>

     The  8.5  percent  and  3.5   percent   notes   payable  to  the  bank  are
collateralized by real estate and guaranteed by the majority stockholder.  Among
other things, these notes require the Company to:

     a. Maintain a current ratio of at least 1.2 to 1.
     b. Maintain a ratio of total liabilities to tangible net worth of less than
3 to 1.
     c.  Maintain  a ratio of  traditional  cash flow to current  maturities  of
long-term debt of at least 1.5 to 1.
     d.  Refrain from  declaring or paying  dividends in excess of 50 percent of
after tax net income.
     e. Limit capital expenditures to $500,000.
     f. Obtain bank approval for the issuance of additional debt.
     g.  Refrain  from  consolidating,  combining  or  merging  with  any  other
corporation or purchase or acquire the assets of another business.

     The 6.75 percent note  payable to the bank is  collateralized  by machinery
and equipment (subordinated to creditor in Note 4) and secured by a mortgage and
guaranteed by the majority stockholder.

     Aggregate maturities required on long-term debt as of December 31, 2002 are
as follows:

<TABLE>
<CAPTION>
Years Ending December 31,
-------------------------------------------------------------------------------
<C>                                                                <C>
2003                                                               $ 565,194
2004                                                                 351,866
2005                                                                 379,304
2006                                                                 397,815
2007                                                                 431,643
Thereafter                                                         1,174,791
                                                               -----------------
                                                                     $ 3,300,613
                                                               =================
</TABLE>

     Gross  lease  payments  under the  building  lease are  $109,080  each year
through December 31, 2009.  Total lease payments  remaining at December 31, 2002
amount to $763,560 including imputed interest of $238,002.

Note 6.       Stock Option and Bonus Plan

     Stock option plan:  The Company has a Stock Option Plan which  provides for
the  granting  of stock  options to  employees,  directors  and  officers of the
Company.  The number of shares issued  pursuant to the options granted shall not
exceed 400,000  shares.  Options are  exercisable at various  amounts per share,
which  approximate  fair market value at the date of grant and expire five years
after date of grant. Options vest immediately.

     The fair value of stock  options  used to compute  pro forma net income and
income per share disclosures is the estimated fair value at grant date using the
Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
Weighted-Average Assumptions                                         Amount
-------------------------------------------------------------------------------
<S>                                                                       <C>
Dividend rate                                                             0
Price volatility                                                      80.37%
Risk-free interest rate                                                4.64%
Expected lives of options                                                 5
</TABLE>

     A summary of the stock option plan is as follows:

<TABLE>
<CAPTION>
                                                   2002                            2001
                                           ---------------------------     --------------------------
                                                           Weighted-                     Weighted-
                                                            Average                       Average
                                                           Exercise                      Exercise
                                             Shares          Price          Shares         Price
-----------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>           <C>             <C>
Under option, beginning of year              133,650         $ 1.95        177,650         $ 1.96
 Granted                                      66,250           0.93              0              0
 Exercised                                         0              0              0              0
 Forfeited/canceled                                0              0        (44,000)          2.00
Under option, end of year                    199,900         $ 1.61        133,650         $ 1.95
                                           ===========                   ===========

Options exercisable, end of year             199,900                       133,650
                                           ===========                   ===========

Weighted-average fair value per option
 of options granted during the year             0.17                          N/A
                                           ===========                   ===========
</TABLE>
     A further  summary of options  outstanding  as of  December  31, 2002 is as
follows:

<TABLE>
<CAPTION>
                                             Options Outstanding and Exercisable
----------------------------------------------------------------------------------------
                                                       Weighted-
                                                        Average               Weighted-
                                  Number               Remaining               Average
                                Outstanding           Contractual             Exercise
Exercise Price                and Exercisable         Life (Years)              Price
----------------------------------------------------------------------------------------
<C>                                <C>                    <C>                 <C>
$0.350                             8,750                  4.25                $ 0.350
$1.000                            50,000                  4.25                $ 1.000
$1.125                             7,500                  2.91                $ 1.125
$1.150                             7,500                  4.25                $ 1.150
$1.875                             3,750                  1.78                $ 1.875
$2.000                           122,400                  2.08                $ 2.000
                            -----------------                             -------------
                                 199,900                                      $ 1.611
                            =================                             =============
</TABLE>

     Stock bonus plan: The Company has a stock bonus plan which provides for the
granting of stock to  employees,  directors  and  officers of the  Company.  The
number of  shares  which may be issued  pursuant  to the plan  shall not  exceed
50,000 shares.  The Company issued 43,205 shares under the plan during  previous
years.

Note 7.  Stockholders' Equity

     In connection  with the initial public  offering in April 1998, the Company
issued warrants to the  underwriters to purchase 126,000 shares of the Company's
common stock.  The warrants are  exercisable at a price equal of $6.00 per share
through April 2003.

<PAGE>

Note 8.  Income Tax Matters

     The  components  of the  income tax  provision  on income  from  continuing
operations for the years ended December 31, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                    2002                 2001
--------------------------------------------------------------------------------
Current:
<S>                                               <C>                  <C>
State                                             $ 2,100              $ 3,050
Foreign                                           (10,200)              51,690
                                       -----------------------------------------
                                                   (8,100)              54,740
                                       -----------------------------------------
Deferred:
Federal                                           195,904               25,000
State                                              18,800               10,000
                                       -----------------------------------------
                                                  214,704               35,000
                                       -----------------------------------------
                                                $ 206,604             $ 89,740
                                       =========================================
</TABLE>

     The total tax provision (credits) for the years ended December 31, 2002 and
2001 was ($152,100) and $89,740, respectively.  Those amount have been allocated
to the following financial statement items:

<TABLE>
<CAPTION>
                                                           2002                  2001
----------------------------------------------------------------------------------------
<S>                                                     <C>                 <C>
Income from continuing operations                       $  206,604          $    89,740
Cumulative effect of change in accounting principle       (347,704)                   0
Stockholders' equity, unrecognized pension costs           (11,000)                   0
                                                      ----------------------------------
                                                        $ (152,100)              89,740
                                                      ==================================
</TABLE>

     The income tax provision on income from continuing  operations differs from
the amount of income tax  determined by applying the US federal  income tax rate
to pretax income due to the following:

<TABLE>
<CAPTION>
Year Ended December 31,                                    2002                 2001
----------------------------------------------------------------------------------------
<S>                                                     <C>                   <C>
Computed "expected" tax expense                         $ 153,000             $ 45,000
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal tax benefit             28,000                3,050
Benefit of income taxed at lower rates                     (6,400)               4,500
Nondeductible expenses and other                           32,004               37,190
                                                      ----------------------------------
                                                        $ 206,604             $ 89,740
                                                      ==================================
</TABLE>
<PAGE>

     Net deferred tax assets consist of the following  components as of December
31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                  2002                 2001
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C>
Property and equipment                                                      $ (574,000)          $ (606,000)
                                                                          -----------------------------------

Additional costs capitalized to inventory for income tax purposes               10,000               12,000
Accrued expenses not currently deductible for tax purposes                      34,000               28,000
Allowance for doubtful accounts                                                152,000              145,000
Net operating loss carryforwards                                             1,353,000            1,551,000
Allowance for obsolete inventory                                                61,000               76,000
Foreign tax credit carryforward                                                 35,000               35,000
Intangible assets                                                              303,000                    0
Unrecognized pension costs                                                      11,000                    0
                                                                          -----------------------------------
Total deferred tax assets                                                    1,959,000            1,847,000
                                                                          -----------------------------------
Net deferred tax assets                                                    $ 1,385,000          $ 1,241,000
                                                                          ===================================
</TABLE>

     The  deferred  tax amounts  have been  classified  on the balance  sheet as
follows:

<TABLE>
<CAPTION>
                                                   2002                 2001
--------------------------------------------------------------------------------
<S>                                             <C>                  <C>
Current deferred tax assets                     $ 247,000            $ 261,000
Noncurrent deferred tax assets                  1,138,000              980,000
                                             -----------------------------------
Net deferred tax assets                       $ 1,385,000          $ 1,241,000
                                             ===================================
</TABLE>

     The  Company  has  determined  that it is more  likely  than  not  that the
deferred tax assets will be realized and a valuation  allowance  for such assets
is not required.

     At  December  31,  2002,   the  Company  has  federal  net  operating  loss
carryforwards of approximately $3,600,000 and state operating loss carryforwards
for Minnesota and Utah of approximately  $1,800,000 and $720,000,  respectively,
which are  available to reduce future  taxable  income.  The net operating  loss
carryforwards expire as follows:

<TABLE>
<CAPTION>
Expiration Date                                    Federal              State
--------------------------------------------------------------------------------
<S>      <C> <C>                               <C>                    <C>
December 31, 2013                              $        0             $ 98,892
December 31, 2014                                       0            1,445,930
December 31, 2015                                       0              807,376
December 31, 2016                                       0              168,121
December 31, 2018                                  88,221                    0
December 31, 2019                               2,093,412                    0
December 31, 2020                               1,170,958                    0
December 31, 2021                                 244,626                    0
                                            ------------------------------------
                                              $ 3,597,217          $ 2,520,319
                                            ====================================
</TABLE>
<PAGE>

Note 9.  Retirement Plan

     The Company has a defined  benefit  pension plan that covers  certain union
employees and retirees.  Information  relative to the Company's  defined benefit
pension plan is presented below:

<TABLE>
<CAPTION>
                                                           2002                 2001
----------------------------------------------------------------------------------------
Changes in benefit obligations:
<S>                                                     <C>                  <C>
Obligations at beginning of year                        $ 224,228            $ 186,493
Service cost                                               14,867               14,562
Interest cost                                              15,690               13,989
Benefits paid                                              (3,928)                (876)
Actuarial gains                                            29,334               10,060
                                                      ----------------------------------
Obligations at end of year                              $ 280,191            $ 224,228
                                                      ==================================

Changes in plan assets:
Fair value of assets at beginning of year               $ 202,841            $ 171,949
Actual return on assets                                     7,130                9,342
Company contributions                                      28,526               22,426
Benefits paid                                              (3,928)                (876)
                                                      ----------------------------------
Fair value of assets at end of year                     $ 234,569            $ 202,841
                                                      ==================================

Funded status at end of year:
Plan assets less than obligations                       $ (45,622)           $ (21,387)
Unrecognized gains                                         28,051               (7,122)
Unrecognized transition obligation                         40,255               43,483
                                                      ----------------------------------
                                                         $ 22,684             $ 14,974
                                                      ==================================

Amounts recognized on balance sheet as:
Accrued pension costs                                   $ (45,622)            $      0
Prepaid pension costs                                           0               14,974
Intangible pension asset                                   40,255                    0
Accumulated comprehensive income reduction                 28,051                    0
                                                      ----------------------------------
                                                         $ 22,684             $ 14,974
                                                      ==================================

Costs recognized during the year:
Service cost                                             $ 14,867             $ 14,562
Interest cost                                              15,690               13,989
Expected return on plan assets                            (12,969)             (11,018)
Amortization of transition obligation                       3,228                3,228
                                                      ----------------------------------
Total costs recognized in expense                        $ 20,816             $ 20,761
                                                      ==================================

                                                            2002                 2001
----------------------------------------------------------------------------------------
Assumptions used in computing ending obligations:
Discount rate                                               6.50%               7.25%
Expected return on plan assets                                6%                   6%
</TABLE>
<PAGE>

     The Company also has a Salary  Savings Plan and Trust (401(k)) which covers
substantially all employees of the Company.  The plan provides for contributions
in such  amounts  as the Board of  Directors  may  annually  determine.  Company
contributions for 2002 and 2001 were $28,097 and $26,556, respectively.

Note 10. Related Party Transactions

     Under the terms of an  agreement  with Nelson  Roofing,  Inc.,  the Company
provided management and administrative  services based upon actual employee cost
plus  overhead  and  received a management  fee for such  services  during 2001.
Management fees received from Nelson  Roofing,  Inc.  amounted to  approximately
$83,000 in 2001.  The  Company  paid $9,642 in 2002 and $7,158 in 2001 to Nelson
Roofing,  Inc. for construction  services.  Nelson Roofing, Inc. is owned by the
majority stockholder.

     The Company rented warehouse space on a month-to-month basis from a company
owned by the majority stockholder for $46,120 in 2002 and $6,000 in 2001.

     The Company rents a portion of an office and  production  facility from the
majority  stockholder  under the terms of a ten-year  capital lease  expiring on
December 31, 2009. The lease provides that the Company pays all property  taxes,
insurance,  and maintenance  plus a monthly rental of $9,090.  The Company has a
purchase  option at any time of $650,000 to December 31, 2002 at which time, the
purchase  price  changes by an  inflation  adjustment.  Rent also changes by the
inflation  adjustment on January 1, 2003.  The Company also leased the remaining
portion of the  office and  production  facility  on a month to month  basis for
$3,060 per month.

     During 2002 the Company renewed its employment  agreement for an additional
year with its  president,  who is also the  majority  stockholder,  in which the
president  will  receive a base salary of  $175,000  in  addition  to  quarterly
bonuses,  as  defined  in the  agreement,  and  annual  bonuses  based  upon the
performance  of the  Company,  as  determined  by the  Board of  Directors.  The
agreement contains certain noncompetition provisions.

     The  Company  accrued  unpaid  salary and other  expenses  to the  majority
stockholder   of  $11,700  and  $90,242  as  of  December  31,  2002  and  2001,
respectively.  The Company had advances to the majority  stockholder  of $39,947
and $112,000 as of December 31, 2002 and 2001, respectively.

     The Company acquired 10 percent of the stock of Acotec S.A. (Acotec) during
2001.  The  remaining  90  percent  of Acotec is owned by one of the  members of
Industrial  Rubber  Products'  Board of Directors.  Sales to Acotec  amounted to
$1,246,840 and $419,994 in 2002 and 2001, respectively. Accounts receivable from
Acotec were $197,695 and $236,805 at December 31, 2002 and 2001, respectively.

Note 11.      Lease Commitments and Total Rental Expense

     The Company leases two office and production facilities under noncancelable
operating  lease  agreements  which  expire in  January  2003 and March 2005 and
require various  minimum annual rentals.  The leases also require the payment of
the property taxes, normal maintenance and insurance on the properties.

     The Company also leases automobiles and other equipment on annual leases.

     Total rent expense,  including  rent paid to related  parties,  amounted to
approximately $274,000 in 2002 and $215,000 in 2001.


<PAGE>


     The total minimum rental commitment at December 31, 2002 is due as follows:

<TABLE>
<CAPTION>
Years Ending December 31,                                      Amount
----------------------------------------------------------------------------
<C>                                                          <C>
2003                                                         $ 109,952
2004                                                            14,617
2005                                                             3,612
                                                        --------------------
                                                             $ 128,181
                                                        ====================
</TABLE>

Note 12. Recent Accounting Pronouncements

     In August 2001,  the  Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting Standards No. 143, Accounting for Obligations
Associated with the Retirement of Long-Lived  Assets. The provisions of SFAS 143
apply to all entities that incur  obligations  associated with the retirement of
tangible long-lived assets. This statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002 and will become  effective
for  the  Company   commencing  with  its  2003  fiscal  year.  This  accounting
pronouncement  is not  expected to have a  significant  impact on the  Company's
financial position or results of operations.

     In April 2002, the FASB issued Statement of Financial  Accounting Standards
No. 145,  Rescission  of FASB  Statements  No. 4, 44 and 64,  Amendment  of FASB
Statement  No. 13,  and  Technical  Corrections.  SFAS 145  rescinds  and amends
certain  previous  standards  related  primarily  to debt and  leases.  The most
substantive  amendment  requires  sale-leaseback  accounting  for certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions. The provisions of SFAS 145 related to the rescission of SFAS 4 are
effective for financial  statements  issued for fiscal years beginning after May
15, 2002 and will become  effective  for the  Company  commencing  with its 2003
fiscal year.  The  provisions  of SFAS 145 related to the  rescission of SFAS 13
became  effective  for  transactions  occurring  after May 15,  2002.  All other
provisions of SFAS 145 are effective for financial statements issued on or after
May  15,  2002.  This  accounting  pronouncement  is  not  expected  to  have  a
significant impact on the Company's financial position or results of operations.

     In June 2002, the FASB issued Statement of Financial  Accounting  Standards
No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  SFAS
146 addresses financial  accounting and reporting for costs associated with exit
or disposal  activities  and nullifies  EITF Issue No. 94-3.  This SFAS requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recorded at fair value when the liability is incurred. SFAS 146 is effective for
exit or disposal  activities  that are initiated  after December 31, 2002.  This
accounting  pronouncement  is not expected to have a  significant  impact on the
Company's financial position or results of operations.

     In  December  2002,  the FASB  issued  Statement  of  Financial  Accounting
Standards No. 148,  Accounting for  Stock-Based  Compensation  -- Transition and
Disclosure.  SFAS 148 amends SFAS 123, Accounting for Stock-Based  Compensation,
to provide  alternative  methods of transaction  for an entity that  voluntarily
changes  to  the  fair  value  based  method  of  accounting   for   stock-based
compensation.  It also amends the disclosure  provisions of that statement.  The
disclosure  provisions of this statement are effective for the December 31, 2002
financial statements and have been included in the current presentation.


<PAGE>

     In  November  2002 the  FASB  issued  Interpretation  No.  45,  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness of Others.  The  Interpretation  expands  disclosure
requirements for certain  guarantees and requires the recognition of a liability
for the fair value of an  obligation  assumed  under a guarantee.  The liability
recognition  provisions  apply on a prospective  basis to  guarantees  issued or
modified after December 31, 2002, and the disclosure  provisions apply to fiscal
years ending after December 15, 2002.  Management  does not believe the adoption
of this  Interpretation  will have a material impact on the Company's  financial
position or results of operations.

     In January 2003 the FASB issued  Interpretation  No. 46,  Consolidation  of
Variable Interest  Entities.  In general, a variable interest entity is one with
equity  investors  that do not have voting  rights or do not provide  sufficient
financial  resources  for the entity to support  its  activities.  Under the new
rules,  variable  interest  entities will be  consolidated  by the party that is
subject to the  majority of the risk of loss or entitled to the  majority of the
residual returns. The new rules are effective  immediately for variable interest
entities  created  after  January 31, 2003 and in the third  quarter of 2003 for
previously existing variable interest entities.  Management does not believe the
adoption of this  Interpretation  will have a material  impact on the  Company's
financial position or results of operations.

Note 13. Goodwill - Adoption of Statement 142

     In June 2001, the FASB issued Statements of Financial  Accounting Standards
("Statement")  No. 141,  Business  Combinations and No. 142,  Goodwill and Other
Intangible  Assets  ("FAS  142").  These  standards  change the  accounting  for
business combinations by, among other things, prohibiting the prospective use of
pooling-of-interests  accounting  and  requiring  companies  to stop  amortizing
goodwill and certain intangible assets with an indefinite useful life.  Instead,
goodwill and intangible  assets deemed to have an indefinite useful life will be
subject to an annual review for impairment. The new standards were effective for
the Company in the first quarter of 2002 and for purchase business  combinations
consummated  after June 30, 2001.  The Company  completed  its initial  goodwill
impairment  testing during the first quarter of 2002,  and initially  determined
that there was no  impairment  of goodwill.  However,  the Company  subsequently
revised its  conclusion  as a result of further  impairment  testing,  primarily
consideration of the Company's  market  capitalization.  Therefore,  the Company
restated  its results for the first  quarter of 2002 and the Company  recorded a
one-time,  noncash charge of $521,556 net of tax to reduce the carrying value of
its  goodwill.  Such charge is  non-operational  in nature and is reflected as a
cumulative  effect  of an  accounting  change in the  accompanying  consolidated
statement of operations.



<PAGE>


     Had  SFAS  No.  142  been   effective  at  the   beginning  of  2001,   the
non-amortization  provisions  would have had the following effect on the results
of the years ended December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                      2002                 2001
---------------------------------------------------------------------------------------------------
<S>                                                               <C>                    <C>
Reported net income                                               $ (292,251)            $ 38,656
Add back:  Goodwill amortization                                           0               43,279
Add back:  Cumulative effect change in accounting principle          521,556                    0
                                                                -----------------------------------
Adjusted net income                                                $ 229,305            $  81,935
                                                                ===================================

Basic earnings (loss) per share
Reported net income                                                  $ (0.06)              $ 0.01
Goodwill amortization                                                      0                 0.01
Cumulative effect change in accounting principle                        0.11                    0
                                                                -----------------------------------
Adjusted net income                                                   $ 0.05               $ 0.02
                                                                ===================================

Diluted earnings (loss) per share:
Reported net income                                                  $ (0.06)              $ 0.01
Goodwill amortization                                                      0                 0.01
Cumulative effect change in accounting principle                        0.11                    0
                                                                -----------------------------------
Adjusted net income                                                   $ 0.05               $ 0.02
                                                                ===================================
</TABLE>


     The change in the carrying amount of goodwill for the year ended December
31, 2002 is as follows:

<TABLE>
<CAPTION>
                                                                    Amount
------------------------------------------------------------------------------
<S>                   <C>                                          <C>
Balance as of January 1, 2002                                      $ 869,260
Impairment loss on the adoption of FAS 142                          (869,260)
                                                             ------------------
Balance as of December 31, 2002                                    $       0
                                                             ==================
</TABLE>

Note 14. Litigation

     The Company has been named as a third-party defendant in a lawsuit. Damages
are alleged to be  $2,400,000.  At this time,  it is too early to determine  the
probability  of the outcome and the  Company's  ultimate  liability,  if any. No
provision for a loss has been recorded.


<PAGE>
                                 EXHIBIT 10(11)

                         SECOND LEASE ADDENDUM AGREEMENT

     This Second Lease Addendum is made effective the 1st day of January,  2002,
between Daniel O. Burkes  ("Landlord") and Irathane  Systems,  Inc., a Minnesota
corporation ("Tenant"), for the following reasons:

     A. The Landlord and Tenant  entered into a lease dated January 1, 2000 (the
"Lease")  whereby  Landlord  leased to Tenant  certain  portions of the premises
legally  described  as  Lots  6  and  8,  Block  4,  Hibbing   Industrial  Park,
specifically,  the portion of the building and improvements shown on the Exhibit
A  attached  to  the  Lease  and a  portion  of the  parking  lot,  all as  more
particularly described in the Lease;

     B.  Subsequent  to the Lease,  Irathane  Systems  transferred  to  Hibbing,
Minnesota  certain of the  assets,  facilities  and  equipment  of its  Colorado
facility and incurred substantial expenses in connection with the remodeling and
reconfiguration  of the leased  premises and the  Landlord and Tenant  agreed an
amendment to the Lease,  which was as a Lease Addendum  Agreement  dated July 1,
2000;

     C. The parties desire to further amend and clarify the lease.

     NOW, THEREFORE, the parties hereto in consideration of the mutual covenants
herein  contained  and for other good and valuable  consideration,  hereby agree
that the Lease is hereby amended as follows:

     1. The parties agree that the Tenant is leasing the portion of the premises
described in the Lease formerly  occupied by Earthmover Tire Service,  Inc. on a
month-to-month  basis for a monthly  rental of $3,060  per month  together  with
taxes,  insurance,  and the other operating costs all as set forth in the Lease.
Either party may terminate this month to month lease of the former  Earthmover's
space upon 30 days written notice to the other party.

     2. Any  inconsistency  in the Lease  regarding the Lease's status as a "net
net net" lease,  and in particular,  the conflict  between the express  language
that the Lease is a "net net net" lease, the express language that provides that
the Landlord shall keep the premises insured,  and the absence of language as to
who pays the cost of the insurance is hereby  resolved as follows:  Tenant shall
procure and maintain a policy of insurance for fire and extended coverage naming
the  Landlord as the insured and Tenant shall pay for the cost of that policy of
insurance.  The amount of  insurance  shall be  determined  by the  Landlord and
Tenant but in no event shall it exceed the  insurable  value of the building and
the improvements.

     3. Except as otherwise  amended  herein,  the terms and  conditions  of the
Lease remain in full force and effect.

<PAGE>


     IN WITNESS WHEREOF the undersigned  have executed this agreement  effective
as of the 1st day of January, 2002.


                                         IRATHANE SYSTEMS, INC.

 /s/                                     By: /s/ James Skalski
--------------------------               ---------------------------------------
Daniel O. Burkes                         Its:  Comptroller
                                         ---------------------------------------



<PAGE>

                                  Exhibit 99(1)

                        INDUSTRIAL RUBBER PRODUCTS, INC.

                         CERTIFICATION OF ANNUAL REPORT

     I, Daniel O. Burkes,  President and Chief  Executive  Officer of Industrial
Rubber  Products,  Inc.  (the  "Company"),  certify,  pursuant  to  906  of  the
Sarbanes-Oxley Act of 2002, 18 U.S.C Section 1350, that:

     (1) The Amended  Annual Report on Form 10-KSB/A of the Company for the year
ended December 31, 2002 (Report) fully complies with the requirements of section
13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Company.


                                              /s/ Daniel O. Burkes
                                             -----------------------------------
                                                Daniel O. Burkes
                                                President and
                                                Chief Executive Officer
                                                April   , 2003

<PAGE>

                                  Exhibit 99(2)

                        INDUSTRIAL RUBBER PRODUCTS, INC.
                         CERTIFICATION OF ANNUAL REPORT

     I, James Skalski,  Comptroller  of Industrial  Rubber  Products,  Inc. (the
"Company"), certify, pursuant to 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C
Section 1350, that:

     (1) The Amended  Annual Report on Form 10-KSB/A of the Company for the year
ended December 31, 2002 (Report) fully complies with the requirements of section
13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Company.


                                              /s/ James Skalski
                                             -----------------------------------
                                                James Skalski
                                                Comptroller
                                                April   , 2003