<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(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 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         Commission file number 0-23897

                      EarthFirst Technologies, Incorporated
        (Exact name of small business issuer as specified in its charter)

            Florida                                     59-3462501
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

 5025 West Lemon Street, Tampa, Florida                   33609
(Address of principal executive offices)               (Zip Code)

Issuer's telephone number: (813) 287-9733

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

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

--------------------------------------------------------------------------------
(Title of Class)

     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 Company 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 contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year: $ None

     State the aggregate market value of voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date (March 25, 2003) within the past 60 days: $ 9,341,051

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date (March 25, 2003) 186,821,024
shares

     DOCUMENTS INCORPORATED BY REFERENCE: NONE.

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

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                                     PART I

<S>                                                                                <C>
Item 1.   Description of Business...................................................1
Item 2.   Description of Properties.................................................5
Item 3.   Legal Proceedings.........................................................6
Item 4.   Submission of Matters to a Vote of Security Holders......................10

                                     PART II

Item 5.   Market of the Registrant's Securities and Related Stockholder Matters....11
Item 6.   Management's Discussion and Analysis of
             Financial Condition and Result of Operations..........................13
Item 7.   Financial Statements and Supplementary Data..............................20
Item 8.   Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosures.............................................21

                                    PART III

Item 9.   Directors and Executive Officers of the Registrant.......................21
Item 10.  Executive Compensation...................................................23
Item 11.  Security Ownership of Certain Beneficial Owners and Management...........25
Item 12.  Certain Relationships and Related Transactions...........................26
Item 13.  Exhibits, Consolidated Financial Statements,
             Schedules and Reports on Form 8-K.....................................26
Item 14   Controls and Procedures..................................................27

          Signatures and Certifications
</TABLE>

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                                     PART I

     The information set forth in this Report on Form 10-KSB including, without
limitation, that contained in Item 6, Management's Discussion and Analysis and
Plan of Operation, contains "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended ("the Act"). The words "believes,"
"anticipates," "plans," "expects," "intends," "estimates," and similar
expressions are intended to identify forward-looking statements. In addition,
any statements concerning future financial performance, ongoing business
strategies or prospects, and possible future Company actions, which may be
provided by management, are also forward-looking statements as defined by the
Act. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause actual results, performance or
achievements of the Company to materially differ from any future results,
performance, or achievements expressed or implied by such forward-looking
statements and to vary significantly from reporting period to reporting period.
Actual results may materially differ from those projected in the forward -
looking statements as a result of certain risks and uncertainties set forth in
this report including, but not limited to the viability of the environmental
remediation and alternative fuel markets for BigSpark(TM) converters and the
Company's plasma arc technology as well as the proprietary rights to the
Company's intellectual property and the Company's ability to obtain additional
financing to continue operations. Although management believes that the
assumptions made and expectations reflected in the forward - looking statements
are reasonable, there is no assurance that the underlying assumptions will, in
fact, prove to be correct or that actual future results will not be different
from the expectations expressed in this report. The Company has no specific
intention to update these statements.

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

     EarthFirst Technologies, Incorporated and its subsidiaries (collectively
"EarthFirst" or the "Company"), has been engaged in the research, development
and commercialization of technologies for the production of alternative sources
of fuel and the destruction and / or remediation of liquid and solid wastes. The
Company is also reviewing alternative processes for the production of activated
carbon for use in water treatment and other industrial applications.

BACKGROUND

     Since its inception on July 28, 1997, the Company has acquired rights to
different technologies it believed could be developed into commercially viable
applications. Among the technologies the Company has pursued is the development
of processes intended to treat environmentally contaminated liquid wastes and
convert such wastes into energy. The Company has also pursued development of
several processes intended to recycle and process solid waste products.

THE BUSINESS

     The Company is developing technologies that seek to provide environmentally
friendly solutions to the problems associated with the destruction, disposal,
and reclamation of liquid and solid waste products. The Company is also seeking
to develop technologies for the manufacture of activated carbon products for the
safe and effective treatment of drinking water. Operations are conducted through
wholly-owned subsidiaries.

                                       1

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     ACTIVATED CARBON

     The Company is currently evaluating alternative processes for the
production of activated carbon for use in various water treatment applications.
Activated carbon is used by water utilities, the food and beverage industry and
others to remove impurities from water, including compounds that cause taste and
odor problems. Activated carbon is also used to remove mercury in
waste-to-energy and medical waste incinerators.

     The Company's efforts are focused on the development of one or more
processes to manufacture activated carbon having impurity removal
characteristics superior to those of existing activated carbon products on a
basis that is more economical than traditional methods.

     BIGSPARK(TM)CONVERTERS

     The Company has developed a technology for the treatment of carbon-based
liquid waste products such as waste oils and antifreeze. The technology involves
the use of a high temperature plasma incorporated into a machine, known as a
BigSpark(TM) Converter. The harmful properties contained in the liquid waste
products are broken down as they pass through the plasma and a clean burning
gas, known as NextGas(TM), is produced.

     The Company is seeking to develop applications of the plasma arc converters
to solve multiple environmental remediation issues. One such application is the
destruction of Poly-Chlorinated Biphenyls, commonly referred to as "PCBs".

     PCBs were commonly used in a variety of industrial applications until it
was learned that long-term exposure to PCBs might cause cancer in humans. It is
often difficult and costly to remove PCBs from the liquids and materials to
which they were added and it is extremely difficult to destroy PCBs.

     The Company has performed preliminary testing of its plasma arc technology
to determine whether the BigSpark(TM) converters effectively destroy PCBs.
Preliminary tests have indicated that the BigSpark(TM) converters can destroy
PCB molecules. While these test results are encouraging, there are many issues
that need to be overcome before the technology is commercially viable. Such
issues include the use of BigSpark(TM) in an environment where PCBs are
typically found, as well as processing significant quantities of PCB laden
materials in a commercially viable manner. Commercial application of this
technology to destroy PCBs is still far away and it is uncertain whether the
BigSpark(TM) technology can ever be refined to be a viable solution in resolving
this serious problem.

     The Company is also considering adaptations for the plasma arc converters
to develop solutions to issues involving the disposal and / or remediation of
other liquid wastes including waste disposal on naval vessels. The Company hopes
to obtain funding to allow further development of its technology in such
applications.

                                       2

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     SOLID SOLUTIONS

     The Company has made significant efforts in attempting to develop
technologies that allow for the reclamation of useful materials included in
various kinds of solid wastes. The Company has continued its efforts in
developing a vacuum distillation process for generating valuable gases, liquid
and solid components from scrap tires.

     The Company believes that certain issues need to be resolved with this
technology including enabling a vacuum distillation system to run continuously
achieving certain minimal levels of production over a prolonged period of time.
The Company also needs to identify alternative commercial uses for some of the
products reclaimed in the distillation process.

COMPETITION

     ACTIVATED CARBON

     Activated carbon is commonly sold in powdered, granular, and pelletized
forms. The largest users of activated carbon are water utilities and the food
and beverage industry. Calgon Carbon Corporation, NORIT Americas, Inc. and
MeadWestvaco Corporation are the primary suppliers of activated carbon in the
United States. Several smaller suppliers produce specialized types of activated
carbon in niche markets.

     The largest suppliers of activated carbon have extensive financial,
technical and logistical resources as well as long relationships with the buyers
of activated carbons. These suppliers may actively compete with the Company to
protect their existing markets and possibly attempt to improve the quality of
their own activated carbon products. The buyers of activated carbon will require
testing of new varieties of activated carbon to satisfy themselves of the
superior qualities of the Company's activated carbon.

     BIGSPARK(TM)CONVERTERS

     The Company is attempting to develop a technology for the effective and
cost efficient remediation of a variety of liquid wastes. The Company is
competing against a variety of other parties in attempting to develop these and
other solutions. Many of these competitors are well financed, well connected,
and have proven track records of bringing technological innovations to market.
The Company has limited resources and will likely need substantial infusions of
capital in order to pursue its goals in this area. There are no assurances that
even if such financial resources can be obtained that the Company's technology
will be financially successful. Furthermore, it is possible that competitors
might develop more effective and efficient waste treatment processes that would
render the Company's technology obsolete.

     SOLID SOLUTIONS

     There are many competitors seeking to develop efficient means of recycling
and disposing of various forms of solid wastes. The effect of numerous federal
and state environmental regulations has been to encourage the originators of the
waste, governmental entities, and entrepreneurial enterprises to seek to develop
more effective and efficient solutions. The Company has limited resources and
will likely need substantial infusions of capital in order to pursue its goals
in this area. There are no assurances that even if such financial resources can
be obtained that the Company's technology will be financially successful.
Furthermore, it is possible that competitors might develop more effective and
efficient waste treatment processes that would render the Company's technology
obsolete.

                                       3

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INTELLECTUAL PROPERTY

     The Company has performed extensive research and development on various
technologies focused on deriving solutions for liquid and solid waste problems
and in creating alternative fuels. These efforts have been conducted by the
Company through the efforts of its employees and consultants.

     Management believes that the Company owns all of the intellectual rights to
commercialize and further develop its liquid and solid waste technologies.

     The Company engaged outside legal counsel to review the history of the
Company's development of its technologies and the contractual arrangements
entered into by the Company with respect to such technologies. Legal counsel has
advised that it believes that the Company currently possesses all of the
intellectual property rights to commercialize its technologies and to further
develop these technologies in additional applications.

     Legal counsel has also reviewed in detail all aspects of the claims and
allegations made by a former consultant with respect to the underwater carbon
arc technology embodied in the Company's products including NextGas(TM)
synthetic fuel and the BigSpark(TM) converters. Legal counsel also reviewed the
Company's consulting agreements with the former consultant and entities related
to this individual.

     Based upon its review of these agreements and the relevant law, it is the
opinion of outside legal counsel that the former consultant, or entities related
to him, neither own nor control any US patents that are relevant to the
Company's technologies, and have no legal standing to assert any claims as to
patent infringement or misappropriation of any trade secrets. Legal counsel also
concluded that the former consultant's actions constitute tortious interference
with the legitimate business activities of the Company. As a result, the Company
pursued and obtained a Temporary Restraining Order that prohibits the
consultant, and entities related to the consultant, from engaging in various
activities that could detrimentally affect the Company's ongoing business.

     The former consultant and an entity affiliated with the former consultant
have initiated legal proceedings against the Company claiming various
infringements, among other things. The legal proceedings are more fully
described below under Item 3.

     Management believes that the Company has taken appropriate steps to protect
its intellectual property rights. However, the steps taken may not prove
sufficient to prevent misappropriation of the Company's technology rights.
Third-party development of similar technologies using different discoveries
remain a risk that could limit the Company's legal protection. The laws of
certain foreign countries might not protect the Company's services or
intellectual property rights to the same extent as do the laws of the United
States.

     Third parties could claim infringement by the Company with respect to
current or future uses. As the number of entrants into the market increases, the
possibility of an infringement claim against the Company might increase, and the
possibility exists that the Company could, either now or in the future,
inadvertently infringe on a third-party's patent. In addition, because patent
applications can take many years to allow, it is possible that the Company
could, now or in the future, infringe upon a third-party's patent application
now pending of which the Company is unaware. Any infringement claim, whether
meritorious or not, could consume a significant amount of management's time and
attention, could result in costly litigation, cause service delays or require
the Company to enter into royalty or licensing agreements which might or might
not be available on commercially acceptable

                                       4

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terms, if at all. As a result, any claim of infringement against the Company
could have a material adverse effect upon our business, financial condition or
results of operations.

RESEARCH AND DEVELOPMENT

     Research and development costs incurred in 2002 and 2001 aggregated
$1,042,244 and $2,701,716, respectively, and centered around the following
technologies:

     ACTIVATED CARBON

     The Company is currently evaluating alternative technologies for the
development of activated carbon. Further research will be needed to determine
whether activated carbon can be manufactured in commercial quantities and in an
economically viable manner.

     BIGSPARK(TM) CONVERTERS AND SOLID SOLUTIONS

     Significant additional research will be needed to attempt to develop
solutions to environmental problems with these technologies.

EMPLOYEES

     As of December 31, 2002, the Company had 10 full-time employees all of whom
are employed, at least partially, in the evaluation and development of the
activated carbon and plasma arc converter technologies. Management considers its
relations with its employees to be satisfactory. None of the employees is
represented by a union.

WHERE YOU CAN FIND MORE INFORMATION

     The Company files annual, quarterly, and special reports, and other
information with the SEC. SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document at the SEC's public reference rooms in Washington, D.C., New York,
New York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.

ITEM 2. DESCRIPTION OF PROPERTIES

     The Company maintains a 10,000 square-foot facility in Largo, Florida at
which it conducts research and development activities. This facility is leased
on a month-to-month basis at the rate of $3,600 per month plus sales tax. The
Company is required to provide six weeks notice to terminate the lease.

     The Company owns a parcel of real property located in Gibsonton, Florida.
The facility in Gibsonton includes a single story block structure. The Company
also owns a parcel of real property near Brooksville, Florida. Neither parcel of
real property is utilized in the business operations as of December 31, 2002.

     The Company has its corporate office at 5025 West Lemon Street, Tampa,
Florida. This location is leased from a third party by an entity in which the
Company's Chief Executive Officer/Chairman of the Board has an interest. The
lease expires on December 31, 2003. Monthly rent payments paid by the Company
are $3,932 plus sales tax.

                                       5

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INVESTMENT POLICIES

     The Company does not have any limitations on the amounts that may be
invested in any one investment or type of investment. The Company has no
holdings in real estate, except as described above, or real estate mortgages and
similar securities or publicly traded securities. The Company does not have any
investments in persons or companies primarily devoted to such investments, and
it is not the policy of the Company to make investments for the purpose of
capital gain or passive income. Presently, all available monies fund day-to-day
operations.

ITEM 3. LEGAL PROCEEDINGS

     The Company has performed extensive research and development on various
technologies focused on deriving solutions for liquid and solid waste problems
and in creating alternative fuels. These efforts have been conducted by the
Company through the efforts of its employees and consultants.

     The Company began its research and development efforts involving underwater
carbon arc technologies shortly after its inception in 1997. During its
existence, the Company has engaged numerous individuals to work for the Company
in these efforts. In January 1998, the Company and Ruggero Maria Santilli
("Santilli") entered into an agreement whereby Santilli agreed to perform
consulting services for the Company with respect to the Company's existing
technology and rights.

     During all relevant periods subsequent to the implementation of the January
1998 consulting agreement between the Company and Santilli, up through his
resignation effective September 30, 2001, Santilli and / or The Institute for
Basic Research, Inc. ("IBR") performed research and other related services for
the Company related to the development of the Company's technologies. During
this period, the Company entered into several agreements involving Hadronic
Press, Inc. ("Hadronic"), IBR, and / or Santilli, including a series of
consulting agreements.

     Effective July 5, 2000, a World-Wide Exclusive Assignment, License and
Royalty Agreement (the "World-Wide Agreement") was entered into by and between
Hadronic and EarthFirst Technologies, Incorporated ("EarthFirst Technologies").
The World-Wide Agreement contemplated the transfer of an 80% interest in the
stock of USMagneGas, Inc. ("USMagneGas") to EarthFirst Technologies by Hadronic.
Hadronic owned the remaining 20% interest in USMagneGas.

     As part of the World-Wide Agreement, EarthFirst Technologies assigned
certain patent applications and Internet domains to Hadronic. EarthFirst
Technologies also issued 1,500,000 shares of its common stock to Hadronic and
agreed to make certain fundings to USMagneGas.

     USMagneGas was incorporated in the State of Florida on or about June 15,
2000. USMagneGas had no significant assets immediately prior to the execution of
the World-Wide Agreement.

     A Technology Exclusive License and Royalty Agreement (the "License
Agreement") was entered into effective July 5, 2000 between Hadronic and
USMagneGas for the licensing of certain intellectual property rights Hadronic
claimed that it owned. Pursuant to the License Agreement, USMagneGas was to pay
Hadronic a royalty equal to 3% of the gross proceeds received by USMagneGas
related to the technology as more fully described in the World-Wide Agreement.
The License Agreement also required USMagneGas to pay Hadronic advance royalty
payments equal to $10,000 per month during the first twelve months of the
License Agreement and $20,000 per month

                                       6

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during the next twelve months irrespective of the level of sales achieved by
USMagneGas. The Advance Royalties were to be creditable against whatever
royalties became due pursuant to the License Agreement on account of the receipt
of gross proceeds.

                                       7

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     Management believes that the Company owns all of the intellectual property
rights necessary to commercialize and further develop its liquid and solid waste
technologies without resort to a license from any third parties. The Company
decided to continue the development of its technology and intellectual property
rights involving its liquid waste technologies by forming EarthFirst NextGas,
Inc. ("EarthFirst NextGas") in November of 2001. The Company's legal counsel
believes that the Company currently possesses all of the intellectual property
rights necessary to commercialize its BigSpark(TM) converters and NextGas(TM)
synthetic fuel technologies and to further develop these technologies in
additional applications.

     Effective September 30, 2001, Santilli resigned as the Director, Research
and Development, for USMagneGas. During this same timeframe, USMagneGas and
Hadronic terminated their business relationship. The operations of USMagneGas
were curtailed in the later half of 2001.

     Subsequent to his resignation from USMagneGas, Santilli made various claims
that the Company does not possess the intellectual property rights to the liquid
waste technologies it developed. On numerous occasions, Santilli contacted both
the Company's vendors and potential customers and partners threatening these
parties if they continued their relationship with the Company. Many of these
parties were sent correspondence by Santilli captioned "Notice To Cease and
Desist Your Civil and Criminal Violations In Your Activities With
MagneGas-NextGas Technology," in which Santilli, among other things, alleged
violations of civil or criminal laws by the Company and other parties.

     These actions, as well as other activities carried on by Santilli, resulted
in the Company's seeking and obtaining a Temporary Injunction from the Civil
Court of the Thirteenth Judicial Circuit of the State of Florida, in and for
Hillsborough County ("the Court"), against Santilli, IBR and Hadronic. The
Temporary Injunction, which was ordered by the Court on February 15, 2002,
prohibits these parties from making and / or publishing any further or
additional Defamatory Statements, similar or related statements, regarding
EarthFirst Technologies and / or EarthFirst NextGas or any of their officers,
directors, shareholders, employees, affiliates or agents, or otherwise
contacting or communicating with any of EarthFirst Techonologies' and / or
EarthFirst NextGas' current or prospective customers, clients, employees,
affiliates or any agents thereof or parties related thereto, either in writing,
verbally, electronically, or otherwise, with respect to any matters addressed in
or related to the issues or claims asserted by the Notice To Cease and Desist
referred to above.

     On or about April 12, 2002, Santilli filed suit (the "Santilli Suit") in
the Circuit Court of the Sixth Judicial Circuit of the State of Florida, in and
for Pinellas County (the "Pinellas Court"), against EarthFirst Technologies,
EarthFirst NextGas, USMagneGas, Florida Engineered Construction Products,
Corporation, each member of the EarthFirst Technologies Board of Directors, and
certain unrelated parties with whom EarthFirst NextGas has or had business
relationships. The Santilli Suit alleges: (1) civil theft of technology, (2)
conversion, (3) breach of fiduciary duty, (4) fraud, (5) conspiracy to defraud,
(6) intentional interference with advantageous relations, (7) conspiracy to
interfere with advantageous business relations, and (8) breach of the Consulting
Agreement that was entered into effective July 7, 2000, by and between Santilli,
IBR, and USMagneGas. The Santilli Suit seeks damages and a temporary and
permanent injunction.

                                       8

<PAGE>

     On or about April 22, 2002, Hadronic filed suit (the "Hadronic Suit") with
the Pinellas Court against the parties named in the Santilli Suit but excluding
the unrelated parties with whom EarthFirst NextGas had business relationships.
The Hadronic Suit alleges: (1) breach of licensing and royalty contract, (2)
misappropriation of trade secrets, (3) civil theft of technology, and (4)
conspiracy to misappropriate trade secrets, and also seeks a temporary and
permanent injunction as well as damages.

     The Company believes that both the Santilli Suit and the Hadronic Suit are
unfounded and without merit. While the results of a legal proceeding can never
be predicted with certainty, the Company and its legal counsel believe that the
Company will ultimately prevail against both Santilli and Hadronic with respect
to the Company's commercial technology, which was developed by the Company using
Company funding, premises, personnel, and resources.

     Notwithstanding its belief that it will ultimately prevail against
Santilli, IBR, and Hadronic, it is likely that the Company will incur
significant legal costs in defending against these actions and in prosecuting
claims against Santilli, IBR, and Hadronic to help ensure a final and favorable
resolution of the Company's rights to the commercial technology the Company
developed. In addition, the Company's Management will be required to devote
significant time and resources to these matters that could otherwise more
productively be deployed in the commercialization of the Company's technologies.

     Subsequent to the filing of the lawsuits, the parties have agreed to
transfer both the Santilli Suit and the Hadronic Suit to the Civil Court of the
Thirteenth Judicial Circuit of the State of Florida, which is the court that has
jurisdiction of the action the Company filed that resulted in the Temporary
Injunction that was ordered on February 15, 2002. In addition, Santilli Suit
against the unrelated parties with whom EarthFirst NextGas has or had business
relationships with, were dismissed, with prejudice (meaning they cannot be
re-filed).

     In early 2003, the portions of both the Santilli Suit and the Hadronic Suit
against the members of the Board of Directors of EarthFirst Technologies were
dismissed with prejudice.

     At this time, the parties have exchanged interrogatories and are awaiting
responses. Depositions have not yet been scheduled. A court date has not yet
been set for a trial.

                                       9

<PAGE>

Other Litigation and Disputes

     The Company is also involved in disputes with vendors for various alleged
obligations associated with discontinued operations. Several disputes involve
deficiency balances associated with lease obligations for equipment acquired by
the Company for its contract manufacturing and BORS Lift operations. The
machinery and equipment associated with many of these obligations has been sold
with the proceeds paid to the vendor or the equipment has been returned to the
vendor. Several of the equipment leasing companies asserted that balances on the
leases are still owed. The Company is also involved in disputes with certain
service providers who rendered services prior to calendar 2001.

     Judgments have been entered against the Company in several of these
disputes. In other disputes, litigation is at various stages or is being
threatened. The Company intends to contest vigorously any continuing litigation
and, in certain instances, is considering filing counter claims against the
other party.

     The Company has accrued amounts for which it believes all of its disputes
will ultimately be settled.

Sales and use tax examination:

     The Company is involved in a sales and use tax examination conducted by the
Florida Department of Revenue (the "DOR") for the tax periods from the inception
of the Company through June 30, 2001. The DOR has provided the Company with a
Notice of Intent to Make Audit Changes reflecting its claim for $69,431 of
unpaid sales and use taxes plus $66,874 of penalties and interest. Substantially
all of the taxes the DOR claims is owed is attributable to unpaid use taxes on
purchases and leases made or entered into during the period from 1998 through
2000.

     The Company disputes substantially all of the amounts claimed by the DOR
and is in the process of working with the DOR to resolve the disputed issues.
The Company believes that it is entitled to refunds of taxes paid on various
transactions and that these refunds more than offset any amounts that the DOR is
claiming that are in fact owed. At this time, the DOR disagrees with the
Company's position.

     While it is uncertain the amount that will ultimately be agreed upon by the
parties, the Company has chosen to reflect the amounts reflected in the most
recent draft of the Notice of Intent to Make Audit Changes as a liability on its
financial statements as of December 31, 2002.

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

     None.

                                       10

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                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     EarthFirst shares trade on The National Association of Securities Dealers
("NASD") OTC Bulletin Board (the "Bulletin Board") under the trading symbol
"EFTI". EarthFirst shares commenced trading in June 1998, prior to which time
there was no public market for these securities. The following table sets forth,
for the periods indicated, the range of high and low closing bid quotations as
reported by the Bulletin Board for each quarter during the last two fiscal
years. The bid quotations set forth below reflect inter-dealer prices, without
retail mark-up, mark-down, or commission and may not necessarily represent
actual transactions.

                                                                     High    Low
                                                                    -----   ----
Fiscal Year Ended December 31, 2001
   First Quarter ................................................   $0.44   $.14
   Second Quarter ...............................................     .43    .19
   Third Quarter ................................................     .40    .14
   Fourth Quarter ...............................................     .17    .08

Fiscal Year Ended December 31, 2002
   First Quarter ................................................     .14    .08
   Second Quarter ...............................................     .13    .05
   Third Quarter ................................................     .10    .03
   Fourth Quarter ...............................................     .08    .05

     On March 20, 2003, the last reported sales price for EarthFirst shares on
the Bulletin Board was $.05 per share. At March 20, 2003, the Company had
approximately 434 stockholders of record. The Company estimates that there are
approximately 2,500 beneficial owners of its common stock.

     The Company has never paid cash dividends on its common stock and it is not
expected that any such dividends will be paid in the foreseeable future. The
Company currently intends to retain any future earnings for use in the business.
The payment of any future dividends on EarthFirst common stock will be
determined by the Board of Directors in light of future conditions then
existing, including the financial condition of the Company, funding requirements
for activities, future prospects, restrictions in financing agreements, business
conditions and other factors deemed relevant by the Board.

                                       11

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RECENT SALES OF UNREGISTERED SECURITIES

     The securities described below were issued by the Company during the period
covered by this report and were not registered under the Securities Act of 1933,
as amended. Each of the transactions is claimed to be exempt from registration
pursuant to Section 4 (2) of the Securities Act as transactions not involving a
public offering. All of such securities are deemed to be restricted securities
for the purposes of the Securities Act. All certificates representing such
issued and outstanding restricted securities have been properly legend, and
"stop transfer" instructions have been issued to the transfer agent with respect
to such securities. Except as noted, no commissions were paid in connection with
any of the issuances.

     CONVERSION OF SERIES 1999-A CONVERTIBLE NOTES

In March 2000, the Company issued and sold $700,000 of Series 2000-A Eight
Percent (8%) Convertible Notes due March 31, 2002 to an accredited investor. The
notes were convertible into common stock after a period of 90 days from the date
of the note at a conversion price equal to the lesser of (1) $.75; or (2) eighty
percent (80%) of the lowest of the closing bid prices for the Company's common
stock for the five (5) trading days immediately preceding the conversion date,
as defined.

     During 2002, the investor converted $161,000 of the principal balance of
the notes, plus accrued interest and liquidated damages for failure to obtain
certain registration rights totaling $52,758, into 3,356,071 shares of the
Company's common stock.

     DEBT CONVERSIONS OF SHAREHOLDER LOANS AND CASH INVESTMENTS

     In January 2002, the Company issued 40,811,966 shares of the Company's
common stock to John Stanton, the Ralph W. Hughes Revocable Family Trust, and
certain other parties, in connection with the satisfaction of a portion of the
revolving credit line owed by the Company and additional cash totaling
$2,387,500 at a conversion rate of $.0585 per share.

                                       12

<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The following discussion and analysis provides information which management
believes is relevant for an assessment and understanding of the results of
operations and financial condition. The discussion should be read in conjunction
with the audited consolidated financial statements and notes thereto.

     The Company is currently evaluating alternative technologies for the
manufacture of activated carbon products. As part of this process, the Company
is conducting research and development efforts intended to produce activated
carbon having characteristics for removing impurities from water that are
superior to other products currently available on the market and manufacture the
product on a lower cost structure than traditional methods. The Company is also
performing market research to determine whether there is sufficient demand for a
product having such qualities and a willingness on the part of existing users of
activated carbon to change from their existing relationships with suppliers of
activated carbon and at prices that will need to be charged to achieve
acceptable profit margins.

     Currently approximately $280 million of activated carbon is used annually
in the United States. If its research efforts are successful in producing a
higher quality activated carbon at a lower cost, the Company will initially
attempt to achieve a significant share of the activated carbon market in the
States of Florida, Georgia, Alabama, and the Carolinas.

     If the Company's research determines that the Company can manufacture
activated carbon having the desired qualities, the Company will need to build a
manufacturing plant. It is currently anticipated that the cost of such a plant
could exceed $2 million. Additional capital will be needed for the start up
phase of the operation of the plant and to initiate a successful marketing
strategy to achieve the necessary level of sales at a level of prices that will
make the venture economically viable. There are no assurances that such a
strategy will be achieved.

     The Company will need to obtain financing to implement the above strategy.
Given the Company's current financial position and its disputes with various
third parties, obtaining such financing may be extremely difficult to obtain if
it can be obtained at all.

     The Company is also continuing to attempt to identify and implement
commercially viable applications of its plasma arc converter technology embodied
in the BigSpark(TM) converter. The Company's BigSpark(TM) plasma based
technology splits apart the complex molecular bonds of water and hydrocarbon
wastes to produce the clean burning, hydrogen-based fuel called NextGas(TM).
BigSpark(TM) compares favorably with conventional combustion technologies used
in the disposal of liquid wastes in several significant areas. First, the waste
is subjected to higher temperatures for longer periods of time (7,000 degree
temperature of the plasma arc; and materials spend minutes, not seconds, in the
reaction zone). Second, BigSpark(TM) has a second stage combustion in a

                                       13

<PAGE>

very high temperature oxygen flame. Third, BigSpark(TM) converters are compact
and can be moved to the source of contaminated waste.

     One application of the plasma arc technology that the Company has been
investigating involves the destruction of Poly-Chlorinated Biphenyls, commonly
referred to as "PCBs". PCBs have many stable qualities that led to its use in
various industrial applications before it was learned that long-term exposure to
PCBs may increase the risk of cancer in humans.

     Preliminary tests have indicated that passing PCB laden liquids through a
plasma arc similar to that found in the BigSpark(TM) converters results in the
destruction of the PCB molecules. While the results of such tests are
encouraging, in order to be commercially successful, the technology will need to
be adapted to destroy PCBs in surroundings where such elements are commonly
found and on a sufficient scale to economically address the problems faced in
PCB disposal.

     If the Company's efforts to continue to develop commercially viable
solutions to cost effectively destroying PCBs and other liquid waste problems
are to continue, the Company will need significant additional financing. At this
time, it is uncertain whether such financing can be obtained, and if so, whether
such financing can be obtained on terms and conditions that would be acceptable
to the Company.

     The Company also has solid waste technologies under development and has
gained extensive knowledge over the past five years of a number of approaches to
distill used tires into usable oils, gases and carbon products. The Company has
focused on two primary objectives: 1) developing process improvements to achieve
continuous, reliable throughput from its next proto-type and 2) improving the
quality of the solid char (a pyrolysis product) to meet the specifications
required by mass buyers.

     The Company believes the development of commercial scale facilities is a
longer-term endeavor that will ultimately require building a "proof of concept"
facility. At this time, the Company does not have the financial resources
necessary to proceed with this endeavor.

     These financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. As indicated from the discussion above, the
Company will need significant infusions of capital in order to attempt to
carryout any of its objectives or even to continue as a going concern.
Litigation and the threats of litigation have placed the continued existence of
the Company, in its current structure, in substantial doubt. While the Company
believes that its technologies show promise, commercialization is still some
time away and there are no assurances that the Company's efforts will be
commercially successful and the auditors' report accompanying the financial
statements includes an uncertainty paragraph regarding the Company's ability to
continue as a going concern.

                                       14

<PAGE>

     The Company has attempted to settle its disputes with various third
parties, and in fact was successful in settling many disputes with other parties
over the past two and one-half years. However, the lack of resolution of several
matters still confront the Company.

The Company also continues to incur operating losses. The operating losses give
rise to additional debt, or to equity dilution of the Company. The Company is
exploring all options to resolve its prior obligations, including reorganization
in or out of bankruptcy proceedings.

     Regardless of whether a formal bankruptcy petition is filed, the Company
will need to obtain funding from outside sources during 2003 and beyond to
continue its planned operations. There can be no assurance that the Company will
be successful in obtaining the necessary debt or equity financing needed to
achieve its objectives.

FISCAL 2002 COMPARED TO FISCAL 2001

     There were no revenues, cost of sales, and gross profits for the years
ended December 31, 2002 and 2001. Note that revenues were generated by the
Company's demolition and recycling operations during calendar 2001; however,
because these operations were discontinued during 2001, all revenue and expenses
attributable to the discontinued operation is combined as part of the
discontinued operations line on the Consolidated Statements of Operations.

     Selling, general and administrative expenses for the year ending December
31, 2002 decreased to $1,401,379 from $2,851,556 for the year ending December
31, 2001, a decrease of approximately 51%. This decrease was due to the
contraction in the level of activities undertaken by the Company during 2002.

     Direct research and development expenses decreased from $2,701,716 in
fiscal 2001 to $1,042,244 in fiscal 2002, a 61% decrease. The decrease is
attributable to the Company's shift to focus on commercializing its NextGas(TM)
synthetic fuel during 2002 as well as the significant curtailment in the
Company's efforts in its Vacuum Distillation Process technology.

     Interest expense decreased to $179,597 during fiscal 2002 from $344,276 in
the prior year due principally to the beneficial conversion of the convertible
debentures during 2001 and January of 2002.

     Losses from continuing operations decreased approximately $3,366,648 from
$6,143,232 during fiscal 2001 as compared to $2,776,584 in fiscal 2002. This was
the result of the decreased level of activity in developing both the liquid and
solid waste technologies during fiscal 2002 that was more focused on specific
areas.

                                       15

<PAGE>

FISCAL 2001 COMPARED TO FISCAL 2000

     Revenues, cost of sales, and gross profits for the years ended December 31,
2001 and 2000 were not comparable because the businesses that generated revenues
in 2000 were discontinued during 2000 and 2001. Accordingly, the results of
these operations are included under the Discontinued Operations section of the
Consolidated Statements of Operations.

     Selling, general and administrative expenses for the year ending December
31, 2001 increased to $2,851,556 from $1,382,924 for the year ending December
31, 2000, an increase of approximately 106%. This increase was due to increased
overhead associated with a higher level of research and development activity,
increased personnel costs, and related expenditures.

     Direct research and development expenses increased from $1,588,600 in
fiscal 2000 to $2,701,716 in fiscal 2001, a 70% increase. The increase is
attributable to an increase in the level of activity in the development of both
the liquid and solid waste technologies. Non-cash charges relating to
research-related stock-based compensation and licensing agreements that totaled
approximately $600,000 during fiscal 2000 while no such charges were incurred
during fiscal 2001.

     Interest expense increased during fiscal 2001 over that in the prior year
due principally to the beneficial conversion of the convertible debentures.
Fiscal 2000 interest expense also included a non-cash charge of $641,200 related
to the beneficial conversion feature embedded within the convertible debenture.
Additional interest expense was incurred in connection with the note obligation
owed to the related party.

     Losses from continuing operations increased approximately $2,200,000 from
$3,930,611 to $6,143,232 during fiscal 2001 as compared to fiscal 2000. This was
the result of the increased level of activity in developing both the liquid and
solid waste technologies during fiscal 2001. This activity began in May 2000 and
continued for all of fiscal 2001.

LIQUIDITY AND CAPITAL RESOURCES

     These financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. The Company has experienced recurring net losses
since inception and, as such has experienced negative operating cash flows in
both fiscal 2002 ($2,516,455) and fiscal 2001 ($7,820,150). The Company
continues to experience negative operating cash flows thus far in 2003. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.

The Company has historically funded these negative operating cash flows with
proceeds from sales of common and preferred stock, as well as notes and
convertible debentures

                                       16

<PAGE>

payable. In December 2000, the Company entered into a revolving credit line
agreement with an entity related to Mr. Stanton secured by all of the assets of
the Company. The revolving line of credit is a demand loan which means that the
lender can demand full repayment of the loan at any time. If this were to occur
at this time, the Company would be unable to repay the amount owed and
consequently, the lender might foreclose on all of the assets of the Company
under the security agreement. As of December 31, 2002, the Company owed
$3,118,882 pursuant to this agreement.

     During 2002, the Company continued to rely almost entirely on additional
loans made by the related party pursuant to the revolving line of credit in
order to finance its operations and / or amounts invested for the Company's
common stock from related parties or persons affiliated with that entity. The
promissory note related to the revolving line of credit merely provides for a
loan of up to $2,500,000. There is no obligation on the part of the related
party to make any loan pursuant to this agreement even if the loan balance is
less than $2,500,000. The related party is also not under any obligation to make
any additional loans pursuant to a revolving line of credit or otherwise.

     Historically, the related party lender has periodically agreed to convert a
portion of the loan balance into shares of the Company's common stock. There is
no obligation on the part of the lender to convert any additional portion of the
outstanding loan balance owed to it into common stock of the Company.

     The amount received during 2002 and 2001 from the sources described above
totaled approximately $2,700,000 and $6,400,000, respectively. Notwithstanding
the proceeds of these financing sources, the Company had a negative working
capital of approximately $4,700,000 as of December 31, 2002.

     The Company is focused on the commercialization and further development of
its liquid and solid waste technologies. Efforts to commercialize these
technologies will require significant additional inflows of cash. These
technologies are as yet unproven on a commercial basis and there is significant
uncertainty as to whether such commercialization will ultimately be successful
even if sufficient financing can be obtained.

     The Company is involved in various disputes as described more fully in Item
3 above. These disputes have made it increasingly difficult to raise capital and
to engage in business with third parties.

     The Company anticipates that its operations will not be self-sustaining
until some time in calendar 2004 at the earliest, if at all. There is
significant risk that the Company will never be able to generate sufficient cash
flow to fund its operations. The Company will need to raise additional capital
in order to continue operations and the development of its technologies.

                                       17

<PAGE>

INCOME TAXES

     The Company has a net operating loss carry forward for federal income tax
purposes of approximately $34,000,000 that is available to offset federal
taxable income through fiscal 2022. A portion of this carry forward may be
limited under Section 382 of the Internal Revenue Code ("the Code") due to the
occurrence of an ownership change as defined in the Code. A 100% valuation
allowance has been provided on deferred tax assets resulting from the net
operating loss carry forwards discussed above.

EFFECTS OF INFLATION

     Management does not believe that inflation has had a significant impact on
the financial position or results of operations of the Company since its
inception.

CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. We evaluate our estimates and
judgments on an on-going basis. We base our estimates on historical experience
and on assumptions that we believe to be reasonable under the circumstances. Our
experience and assumptions form the basis for our judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may vary from what we anticipate and different
assumptions or estimates about the future could change our reported results. We
believe the following accounting policies are the most critical to us, in that
they are important to the portrayal of our financial statements and they require
our most difficult, subjective or complex judgments in the preparation of our
financial statements:

Revenue Recognition: The Company currently has no revenue recognizing
activities.

Employee stock-based compensation: The Company accounts for compensation costs
associated with stock options issued to employees under the provisions of
Accounting Principles Board Opinion No. 25 ("APB 25") whereby compensation is
recognized to the extent the market price of the underlying stock at the date of
grant exceeds the exercise price of the option granted. Stock-based compensation
to non-employees is accounted for using the fair-value based method prescribed
by Financial Accounting Standard No. 123 ("FAS 123"). The fair-value based
method requires management to make estimates regarding the expected life of the
options and warrants.

Impairment of Long-Lived Assets: In assessing the recoverability of the
Company's long-lived assets, we must make assumptions regarding estimated future
cash flows and other factors to determine the fair value of the respective
assets. If these estimates or their related assumptions change in the future, we
may be required to record impairment charges for these assets.

                                       18

<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

FASB Statement No. 148 Accounting for Stock-Based Compensation--Transition and
Disclosure (Statement 148)

     During December 2002, the Financial Accounting Standards Board (FASB)
issued Statement 148. Statement 148 establishes standards for two alternative
methods of transition to the fair value method of accounting for stock-based
employee compensation of FASB Statement 123 Accounting for Stock-Based
Compensation (Statement 123). Statement 148 also amends and augments the
disclosure provisions of Statement 123 and Accounting Principles Board Opinion
28 Interim Financial Reporting to require disclosure in the summary of
significant accounting policies for all companies of the effects of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
The transitions standards and disclosure requirements of Statement 148 are
effective for fiscal years and interim periods ending after December 15, 2002.

     The Company does not currently plan to transition to the fair value
approach in Statement 123 and required disclosures regarding stock-based
employee compensation have been included herein as a result of the adoption of
this standard.

FASB Interpretation 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others
(Interpretation 45)

     During November 2002, the FASB issued Interpretation 45. Under
Interpretation 45 guarantees, contracts and indemnification agreements are
required to be initially recorded at fair value. Current practice provides for
the recognition of a liability only when a loss is probable and reasonably
estimable, as those terms are defined under FASB Statement 5 Accounting for
Contingencies. In addition Interpretation 45, requires significant new
disclosures for all guarantees even if the likelihood of the guarantor's having
to make payments under the guarantee is remote. The disclosure requirements are
effective for financial statements of interim and annual periods ending after
December 15, 2002. The initial recognition and measurement provisions of
Interpretation 45 are applicable on a prospective basis to guarantees, contracts
or indemnification agreements issued or modified after December 31, 2002.

     The Company currently has no guarantees, contracts or indemnification
agreements that would require fair value treatment under the new standard. The
Company's current policy is to disclose all material guarantees and contingent
arrangements, similar to the disclosure requirements of Interpretation 45, which
provide for disclosure of the approximate term, nature of guarantee, maximum
potential amount of exposure, and the nature of recourse provisions and
collateral.

                                       19

<PAGE>

FASB Statement No.146 Accounting for Costs Associated with Exit or Disposal
Activities (Statement 146)

     During July 2002, the FASB issued Statement 146. Statement 146 addresses
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force Issue No. 94-3 Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). Statement 146 requires
the recognition of a liability for costs associated with exit or disposal
activities when the liability is actually incurred. Under EITF 94-3, such costs
were generally recognized in the period in which an entity committed to and exit
plan or plan of disposal. While both standards covered costs associated with
one-time termination benefits (e.g. severance pay or stay-bonus arrangements),
Statement 146 provides standards that provide for the timing of recognition of
these types of benefits. Statement 146 is effective for exit or disposal
activities initiated after December 31, 2002.

     Management's plans with respect to the continuation of the Company are
described in Note 2. While there are currently no specific plans to exit
activities as part of these plans, any such activity would require the
application of Statement 146.

FASB Statement 145 Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections (Statement 145)

     During April 2002, the FASB issued Statement 145. Statement 145 rescinds
FASB Statement No. 4, Reporting Gains and Losses from Extinguishments of Debt,
which required all gains and losses from extinguishments of debt to be
aggregated and, if material, classified as an extraordinary item, net of related
income tax effect. As a result of the rescission of Statement No. 4, the
classification of gain and losses arising from debt extinguishments requires
consideration of the criteria for extraordinary accounting treatment provided in
Accounting Principles Board Opinion No. 30 Reporting the Results of Operations.
In the absence of Statement No. 4, debt extinguishments that are not unusual in
nature and infrequent in occurrence would be treated as a component of net
income or loss from continuing operations. Statement 145 is effective for
financial statements issued for fiscal years beginning after May 15, 2002.
Adoption of this standard is not anticipated to have a significant effect on the
Company's results of operations in the future.

ITEM 7. FINANCIAL STATEMENTS

     The consolidated 2002 financial statements for the Company, including the
notes thereto, together with the report thereon of Aidman, Piser & Company, P.A.
is presented beginning at page F-1.

                                       20

<PAGE>

     The Company has not entered into any transactions using derivative
financial instruments or derivative commodity instruments and believe that its
exposure to market risk associated with other financial instruments and interest
rate risk is not material.

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

     There have been no changes in or disagreements with accountants on
accounting and financial disclosure issues with respect to any financial
statements for the Company for 2002 or 2001. Aidman, Piser & Company, P.A. has
served as the independent public accountants for the Company for the 2002 and
2001 audited financial statements.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.

     The executive officers, directors and other significant employees of the
Company, and their ages and positions, are as follows:

Name of Individual       Age   Position
------------------       ---   --------

John D. Stanton           54   Chairman of the Board of Directors
                               Chief Executive Officer and President

Nicholas R. Tomassetti    67   Director

The following is a brief description of the professional experience and
background of the directors and officers.

     John D. Stanton assumed the role of Chairman of the Board of Directors,
President and Chief Executive Officer on May 15, 2000 in connection with the
acquisition of SAC-1. On July 30, 2001, Mr. Stanton brought in James V. Mahoney
to assume the role of President and Chief Executive Officer but resumed these
roles upon Mr. Mahoney's resignation in August 2002. From 1987 through the
present, Mr. Stanton has served as the President and Chief Executive Officer of
Florida Engineered Construction Products, Corporation. Since the early 1990's,
Mr. Stanton has been, and continues to be, involved in turn-around management
for financially distressed companies, providing both management guidance and
financing. In 1981, Mr. Stanton assumed the role of Chief Financial Officer for
Florida Engineered Construction Products, Corporation, a privately held
manufacturer of residential and commercial construction products, located in
Tampa, Florida. Mr. Stanton worked as an auditor with the international
professional services firm that is now known as Ernst & Young, LLP

                                       21

<PAGE>

from 1973 through 1981. Mr. Stanton, a Vietnam veteran of the United States
Army, graduated from the University of South Florida with a Bachelors Degree in
Marketing and Accounting in 1972, and with an MBA in 1973. Mr. Stanton earned
the designation of Certified Public Accountant in 1974 and was a Sells Award
winner in the CPA examination.

     Nicholas R. Tomassetti joined the Board of Directors effective August 1,
2001. Mr. Tomassetti has served as the President and Chief Operating Officer of
Airbus Industrie of North America, Inc. Mr. Tomassetti's former business
associations include serving as Vice President and General Manager of Twin-Jet
Business Development for McDonnell Douglas Corporation and Vice President of
Pratt & Whitney's Commercial Engine Business Organization. Mr. Tomassetti served
with Pratt & Whitney for over 30 years during which time he held various
positions including Vice President, Commercial Engine Organization and Vice
President Sales and Service, Commercial Products Division. In 1987, Mr.
Tomassetti was tapped to serve as President for the International Aero Engines,
a five nation consortium formed to develop and market the LAE V2500 aircraft
engine. Mr. Tomassetti earned a degree in Engineering from the General Motors
Institute and a Master's Degree in Engineering from MIT.

AUDIT COMMITTEE

     The Company's Board of Directors currently does not have an Audit
Committee.

COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT

     Section 16 (a) of the Securities Exchange Act of 1934 requires a company's
officers, directors and persons who own more than ten percent of a registered
class of such company's equity securities to file reports of ownership and
changes in ownership with the SEC. Officers, directors and ten percent
stockholders are required by regulation to furnish the Company with copies of
all Section 16 (a) forms they file. Based on its records, Management believes
that all required filings have been made by the Company's officers, directors,
and ten percent beneficial owners.

                                       22

<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth information for each of the fiscal years
ended December 31 concerning the compensation paid and awarded to our President
and Chief Executive Officer. There were no other executive officers or key
employees whose total annual salary and bonus exceeded $100,000 for these
periods who remain with the Company.

<TABLE>
<CAPTION>
                                                      Long-term
                              Annual                Compensation
                           Compensation                 Awards               Payouts
                     -----------------------   -----------------------   ---------------
                                               Restricted   Securities              All
      Name and                                   Stock      Underlying    LTIP     Other
Principal Position   Year    Salary    Bonus     Award       Options     Payouts    Comp
------------------   ----   --------   -----   ----------   ----------   -------   -----

<S>                  <C>    <C>         <C>       <C>        <C>           <C>      <C>
James V. Mahoney     2002   $251,203    $-0-      $-0-             -0-     $-0-     $-0-
Chief Executive      2001   $110,890    $-0-      $-0-             -0-     $-0-     $-0-
Officer and          2000   $    -0-    $-0-      $-0-             -0-     $-0-     $-0-
President (1)(2)

John D. Stanton      2002   $  1,000    $-0-      $-0-             -0-     $-0-     $-0-
Chairman of the      2001   $  1,000    $-0-      $-0-       2,000,000(4)  $-0-     $-0-
Board (3)            2000   $    -0-    $-0-      $-0-       2,000,000(4)  $-0-     $-0-
</TABLE>

(1)  Mr. Mahoney assumed the role of Chief Executive Officer and President
     effective July 30, 2001. Prior to this date, Mr. Mahoney was not employed
     by the Company.
(2)  Mr. Mahoney resigned his position as the Chief Executive Officer and
     President on or about August 6, 2002. Compensation for 2002 includes
     $33,755 paid to Mr. Mahoney's consulting company after his resignation for
     services rendered to the Company.
(3)  Mr. Stanton assumed the role of Chief Executive Officer and President as of
     May 16, 2000. Prior to this date, Mr. Stanton was not employed by the
     Company. Effective August 1, 2001, Mr. Stanton relinquished the role of
     Chief Executive Officer and President retaining his role as the Chairman of
     the Board of Directors. Mr. Stanton resumed his role as Chief Executive
     Officer and President upon Mr. Mahoney's resignation in August 2002.
(4)  During 2001, Mr. Stanton was granted options to acquire 2,000,000 shares of
     the Company's stock at prices ranging from $.195 to $.2145 per share.
     During 2000, Mr. Stanton was granted options to acquire 2,000,000 shares of
     the Company's stock at $1.00 per share.

                                       23

<PAGE>

     No stock options were issued during calendar 2002 to any of the individuals
identified in the table above. The following table sets forth, for the
individuals named in the Summary Compensation Table above, certain information
concerning stock options granted during 2002. The Company has never issued stock
appreciation rights. Options were granted at an exercise price above the fair
market value of the common stock at the date of grant. The term of the options
is three years from the date of grant.

<TABLE>
<CAPTION>
                                                                           Potential
                                                                        Realizable Value
                                                                        At Assumed Rates
                      Percentage   Exercise                            Rate of Stock Price
                       Of Total     or base     Market                  Appreciation For
                       Options     Price Per   Price on                  Option Term (1)
           Options     Granted       Share      Date of   Expiration   -------------------
Name       Granted     In 2001       ($/Sh)      Grant       Date          5%       10%
-------   ---------   ----------   ---------   --------   ----------   --------   --------
<S>       <C>             <C>        <C>         <C>      <C>          <C>        <C>

John D.
Stanton     466,200        6%        $.2145      $.195    April 2006   $127,600   $161,100
          1,533,800       20%        $.195       $.195    April 2011   $463,847   $775,529
</TABLE>

(1)  The dollar amounts under this column are the result of calculations at the
     5% and 10% rates set by the Commission and therefore are not intended to
     forecast possible future appreciation, if any, of the stock price of the
     Company's common stock. If the price of the Company's stock were in fact to
     appreciate at the assumed 5% or 10% annual rate for the term of the option,
     a $1,000 investment in the Common Stock would be worth $1,276 and $1,611,
     respectfully, at the end of the 5-year term and $1,629 and $2,594,
     respectively, at the end of the 10-year term.

     The following table sets forth, for the individual named in the Summary
Compensation Table, certain information concerning the options exercised during
fiscal 2002 and the number of shares subject to exercisable and unexercisable
stock options as of December 31, 2002. The values for "in-the-money" options are
calculated by determining the difference between the fair market value of the
securities underlying the options as of December 31, 2002 ($.06 per share) and
the exercise price of the options.

                   Number of                   Unexercised Options at
                    Shares                        December 31, 2002
                   acquired       Value    -------------------------------
Name              on exercise   realized   Exercisable (1)   Unexercisable
---------------   -----------   --------   ---------------   -------------

John D. Stanton       None         $0         4,000,000          -0-

(1)  None of the options were "in-the-money" at December 31, 2002.

                                       24

<PAGE>

DIRECTORS' COMPENSATION

     The Company does not pay cash compensation to directors for serving on the
Board. Each director, other than the Chairman of the Board and CEO, is granted
options to acquire 100,000 shares of the Company's common stock at an exercise
price equal to the fair market value of the stock on the date of grant.

EMPLOYMENT AGREEMENTS

     In July 2001, the Company extended to Mr. Mahoney a one page written offer
of employment, which he accepted. No formal employment agreement was ever
executed between the parties. On or about August 6, 2002, Mr. Mahoney resigned
his position as Chief Executive Officer and President of the Company. Mr.
Mahoney, through an entity he controls, provided services to the Company
subsequent to August 6, 2002 through the end of 2002. The Company is not
obligated to pay Mr. Mahoney any further amounts or issue any common stock or
options to acquire stock.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding ownership of
the Company's common stock as of March 20, 2003 by each person known to us to
own beneficially more than 5% of the outstanding common stock of the Company, by
each person who is a director, by each person listed in the Summary Compensation
Table and by all directors and officers as a group.

     The information reflected in the following table was furnished by the
persons listed therein. The calculations of the percent of shares beneficially
owned are based on 186,821,024 shares of common stock outstanding on March 20,
2003 plus, with respect to each such person, the number of additional shares
that will be outstanding upon exercise of the warrants and options exercisable
within sixty (60) days set forth herein.

  Name and Address of        Beneficial      Percentage
   Beneficial Owner          Ownership        of Class
------------------------     ----------      ----------

John D. Stanton              76,001,925(1)     38.84%
P.O. Box 24567
Tampa, Florida 33623

Nicholas R. Tomassetti          400,000(3)       .20%
853 Vanderbilt Beach Rd.
Naples, Florida 34108

                                       25

<PAGE>

Ralph W. Hughes Revocable    32,016,719        16.36%
   Family Trust
P.O. Box 24567
Tampa, Florida 33623
                             ----------        -----
All Officers and Directors   76,401,925        39.04%
  (Two persons)

(1)  Includes options to purchase 2,000,000 shares of Common Stock at an
     exercise price of $1.00 per share and options to purchase 2,000,000 shares
     of Common Stock at prices ranging from $.195 to $.2145 per share.

(2)  Mr. Tomassetti was granted an option to acquire 100,000 shares of Common
     Stock at an exercise price of $.20 per share in 2001. In addition, Mr.
     Tomassetti was granted 300,000 shares of the Company's common stock
     effective January 1, 2003.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     On December 15, 2000, EarthFirst Technologies and Florida Engineered
Construction Products, Corporation ("FECP Corporation") executed a Revolving
Line of Credit Promissory Note and a related Security Agreement. In addition,
additional Promissory Notes have been entered into between EarthFirst
Technologies and several of its subsidiaries and affiliates and FECP Corporation
having a similar Security Agreement. Collectively, Mr. Stanton and Mr. Hughes
own over 80% of the outstanding common stock of FECP Corporation and are the
President and Chairman of the Board, respectively, for FECP Corporation. All
Promissory Notes are payable on demand. The promissory note executed by
EarthFirst Technologies bears interest at the rate of 9.9% per annum. As of
December 31, 2002, the balance owed to FECP Corporation was $3,118,882.

     FECP Corporation has paid for various administrative services on behalf of
the Company subsequent to the May 15, 2000. The cost of these services have been
added to the balance of the Promissory Notes. The cost of various insurance
coverage for the Company that has been paid by FECP Corporation has also been
included in the balance of the Promissory Notes.

     The transactions described above are on terms no less favorable to the
Company than those that could have been obtained from independent third parties
in arms-length negotiations.

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 10-KSB.

     (a)  Exhibits

                                       26

<PAGE>

ITEM 14. CONTROLS AND PROCEDURES

     As required by Rule 13a-15 under the Securities Exchange Act of 1934,
within the 90 days prior to the filing date of this report, the Company carried
out an evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. This evaluation was carried out
under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer/Chief Financial Officer, who
concluded that the Company's disclosure controls and procedures are effective.
There have been no significant changes in the Company's internal control or in
other factors, which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.

     Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in the Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in Company reports filed under the Exchange
Act is accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer as appropriate, to allow timely
decisions regarding required disclosure.

EarthFirst Technologies, Incorporated and Subsidiaries


/s/ John Stanton              Chief Executive Officer,           March 31, 2003
------------------------      President and Chief
John Stanton                  Financial Officer

                                       27

<PAGE>

                          Independent Auditors' Report

Board of Directors
EarthFirst Technologies, Incorporated
Tampa, Florida

We have audited the accompanying consolidated balance sheet of EarthFirst
Technologies, Incorporated and Subsidiaries (the "Company"), as of December 31,
2002, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the years ended December 31, 2002 and 2001.
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 consolidated financial position of
EarthFirst Technologies, Incorporated and Subsidiaries, at December 31, 2002,
and the consolidated results of their operations and their cash flows for the
years ended December 31, 2002 and 2001 in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
has working capital and net capital deficiencies and is involved in significant
litigation, all of which raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters, which include
a possible bankruptcy filing, are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


                                         /s/ Aidman, Piser & Company, P.A.

March 12, 2003
Tampa, Florida

                                      F-1

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2002

<TABLE>
<S>                                                                  <C>
                                     ASSETS

Property and equipment, net                                          $    159,620
                                                                     ------------

                                                                     $    159,620
                                                                     ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Accounts payable                                                  $    498,185
   Accrued expenses and other current liabilities                         731,831
   Lease obligations                                                      350,000
   Note payable, related party                                          3,118,882
                                                                     ------------
      Total current liabilities                                         4,698,898
                                                                     ------------
Commitments and contingencies                                                  --

Stockholders' deficit:
   Common stock, par value $.0001, 250,000,000
      shares authorized, 186,821,024 shares issued and outstanding         18,682
   Additional paid-in capital                                          42,996,889
   Accumulated deficit                                                (46,286,789)
                                                                     ------------
                                                                       (3,271,218)

   Less: treasury stock (1,950,000 shares at cost)                     (1,268,060)
                                                                     ------------
      Total stockholders' deficit                                      (4,539,278)
                                                                     ------------
                                                                     $    159,620
                                                                     ============

</TABLE>

                 See notes to consolidated financial statements.

                                      F-2

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                             2002            2001
                                                         ------------   -------------
<S>                                                      <C>            <C>
Revenue                                                  $         --   $          --

Cost of sales                                                      --              --
                                                         ------------   -------------
Gross profit                                                       --              --

Selling, general and administrative expenses                1,401,379       2,851,556
Research and development expenses                           1,042,244       2,701,716
                                                         ------------   -------------

Loss from continuing operations before income
   taxes and other items                                   (2,443,623)     (5,553,272)
                                                         ------------   -------------

Other expenses:
   Interest expense                                          (179,597)       (344,276)
   Other expense                                             (153,364)       (245,684)
                                                         ------------   -------------
                                                             (332,961)       (589,960)
                                                         ------------   -------------

Loss from continuing operations before income taxes        (2,776,584)     (6,143,232)

Income tax expense                                                 --              --
                                                         ------------   -------------
Loss from continuing operations                            (2,776,584)     (6,143,232)

Discontinued operations:
   Loss from discontinued operations (no applicable
      income taxes)                                           (75,000)     (1,959,636)
   Loss on disposal of discontinued business segment
      (no applicable income taxes)                                (--)     (6,498,857)
                                                         ------------   -------------

Net loss                                                   (2,851,584)    (14,601,725)

Preferred stock dividends                                         (--)         (5,355)
                                                         ------------   -------------
Net loss attributable to common stockholders              ($2,851,584)   ($14,607,080)
                                                         ============   =============
Loss per common share attributable to common
   stockholders:
      Continuing operations                                     ($.02)          ($.05)
      Discontinued operations                                      --            (.07)
                                                         ------------   -------------
      Net loss                                                  ($.02)          ($.12)
                                                         ============   =============

Weighted average shares outstanding, basic and diluted    183,587,219     122,599,354
                                                         ============   =============
</TABLE>

                 See notes to consolidated financial statements.

                                      F-3

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                 Preferred Stock       Common Stock        Additional
                                 ---------------   ---------------------     Paid-in      Accumulated    Treasury
                                 Shares   Amount      Shares      Amount     Capital        Deficit        Stock          Total
                                 ------   ------   -----------   -------   -----------   ------------   -----------   ------------
<S>                               <C>     <C>      <C>           <C>       <C>           <C>            <C>           <C>
Balances, January 1,
   2001                            461    $ 461     84,834,825   $ 8,484   $30,479,037   ($28,828,125)  $(1,268,060)  $    391,797

Conversion of related party
   debt to equity                   --       --     45,848,855     4,585     7,155,706             --            --      7,160,291

Preferred stock
   dividends                        --       --             --        --            --         (5,355)           --         (5,355)


Conversion of preferred stock
   and dividends payable
   to common stock                (461)    (461)     4,601,000       460        87,116             --            --         87,115

Conversion of convertible
   debentures to common
   stock                            --       --      3,868,307       387       668,504             --            --        668,891

Capital contribution resulting
   from sale of subsidiary to
   a principal stockholder          --       --             --        --     1,677,959             --            --      1,677,959

Net loss                            --       --             --        --            --    (14,601,725)           --    (14,601,725)
                                  ----    ------   -----------   -------   -----------   ------------   -----------   ------------
Balances,
   December 31, 2001                --       --    139,152,987    13,916    40,068,322    (43,435,205)   (1,268,060)    (4,621,027)
                                  ====    =====    ===========   =======   ===========   ============   ===========   ============

Conversion of related party
   debt to equity                   --       --     40,811,966     4,081     2,383,419             --            --      2,387,500

Conversion of convertible
   debentures to common
   stock                            --       --      3,356,071       335       213,423             --            --        213,758

Additional stock issued to
   settle equity claim and
   issuance of stock options        --       --      3,500,000       350       331,725             --            --        332,075

Net loss                            --       --            --        --            --      (2,851,584)           --     (2,851,584)
                                  -----   ------   -----------   -------   -----------   ------------   -----------   ------------
Balances
   December 31, 2002                --    $  --    186,821,024   $18,682   $42,996,889   ($46,286,789)  ($1,268,060)   ($4,539,278)
                                  ====    =====    ===========   =======   ===========   ============   ===========   ============
</TABLE>

                See notes to consolidated financial statements.

                                      F-4

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                    2002          2001
                                                                -----------   ------------
<S>                                                             <C>           <C>
Cash flows from operating activities:
   Net loss                                                     ($2,851,584)  ($14,601,725)
   Adjustments to reconcile net loss to net cash flows
      from operating activities:
         Expenses funded through the issuance of common stock       215,000             --
         Depreciation and amortization                               12,780         20,000
         Amortization of goodwill                                        --        146,965
         (Gain)/loss on disposal of asset                             6,318         (8,175)
         Write-down of assets to net realizable value               140,301             --
         Write-down of assets in connection with
            discontinued operations and loss on disposal                 --      4,820,898
         Gain on business segment disposal accounted for as
            capital contribution                                         --      1,677,959
         Stock-based compensation                                    17,075             --
         Increase (decrease) in cash due to changes in:
            Accounts receivable                                          --        (26,132)
            Prepaid expenses and other assets                           820          1,208
            Accounts payable                                        (43,640)       177,626
            Accrued expenses                                         42,576        (53,773)
            Other liabilities                                       (56,101)        24,999
                                                                -----------   ------------
Net cash flows from operating activities                         (2,516,455)    (7,820,150)
                                                                -----------   ------------

Cash flows from investing activities:
   Acquisition of property and equipment                           (164,529)       (31,175)
                                                                -----------   ------------
Net cash flows from investing activities                           (164,529)       (31,175)
                                                                -----------   ------------

Cash flows from financing activities:
      Proceeds from related party note payable                    2,680,984      6,332,604
                                                                -----------   ------------
Net cash flows from financing activities                          2,680,984      6,332,604
                                                                -----------   ------------

Net change in cash                                                       --     (1,518,721)
Cash, beginning of year                                                  --      1,518,721
                                                                -----------   ------------

Cash, end of year                                               $        --   $         --
                                                                ===========   ============
</TABLE>

                                  (Continued)

                                      F-6

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

                 Supplemental schedule of cash flow information

                                                                     2002   2001
                                                                     ----   ----

Cash paid during the year for interest                                $--    $--
                                                                      ===    ===

      Supplemental schedule of non-cash financing and investing activities

During 2002, the Company

     .    Converted $161,000 of convertible debentures along with accrued
          interest and penalties of $52,758 to 3,356,071 shares of common stock.
     .    Converted $2,387,500 of related party debt to 40,811,966 shares of
          common stock.
     .    Settled disputed claims against the Company for 3,500,000 shares of
          common stock valued at $315,000.
     .    Issued options to acquire 250,000 shares of common stock to a
          consultant valued at $17,075.

During 2001, the Company

     .    Converted 461 shares of preferred stock outstanding at the beginning
          of the year plus accrued dividends of $87,115 to 4,601,000 shares of
          common stock.
     .    Converted $539,000 of convertible debentures along with accrued
          interest of $129,891 to 3,868,307 shares of common stock.
     .    Converted $7,160,291 of related party debt to 45,848,855 shares of
          common stock.

                 See notes to consolidated finicial statements.

                                      F-7

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies:

     Nature of business:

     EarthFirst Technologies, Incorporated, a Florida corporation, and its
     subsidiaries (collectively the "Company" or "EarthFirst") is focused on the
     research, development, and commercialization of technologies for the
     production of alternative sources of fuel and the destruction and / or
     remediation of liquid and solid waste.

     The Company is currently evaluating alternative technologies for the
     manufacture of activated carbon products. Activated carbon is used by water
     utilities, the food and beverage industry and others to remove impurities
     from water, including compounds that cause taste and odor problems.
     Activated carbon is also used to remove mercury in waste to energy and
     medical waste incinerators.

     Currently approximately $280 million of activated carbon is used annually
     in the United States. Activated carbon is sold in the form of powdered,
     granular, and pellets. The largest users are water treatment plants and the
     food and beverage industry.

     It is hoped that one or more processes can be further developed to
     manufacture activated carbon more economically than traditional methods as
     well as manufacture a higher quality activated carbon having removal
     characteristics superior to existing activated carbon products. The
     Company's initial efforts are focused on providing more attractive
     solutions to mercury removal at waste-to-energy plants and taste and odor
     problems at water plants located in Florida, Georgia, Alabama, and the
     Carolinas.

     At December 31, 2002, the Company's resources are focused on the
     development of certain activated carbon technologies. Efforts to further
     develop its liquid and solid waste technologies have been assigned a lower
     priority. It is uncertain when, if ever, significant efforts will be made
     to attempt to further advance these technologies; however a description of
     these technologies follows:

                                      F-8

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Nature of business (continued):

     Liquid waste technology: This technology is embodied in the Company's
     plasma arc converters, known as BigSpark(TM) converters, which are designed
     to process liquid waste products, such as waste oils, greases, and
     antifreezes, and produce a clean-burning gas, known as NextGas(TM)
     synthetic fuel. The BigSpark(TM) converters create a high-temperature
     plasma that breaks down or destroys harmful compounds contained in the
     liquid and produces a clean-burning gas. The Company is also considering
     adaptations for the liquid waste technology to solve other liquid waste
     disposal problems such as waste disposal on naval vessels. The Company
     hopes to obtain funding to allow further development of its technology in
     such applications.

     Plasma arc converters:

     The Company is seeking to develop applications of the plasma arc converters
     to destroy Poly-Chlorinated Biphenyls, commonly referred to as "PCBs". PCBs
     have many stable qualities that once led to its use in various industrial
     applications with other compounds. Many people believe that long-term
     exposure to PCBs can increase the risk of cancer in humans and accordingly
     the use of PCBs was discontinued in the United States.

     The stable qualities of PCBs that at one time made them highly desirable in
     industrial uses also make them extremely difficult to destroy. The Company
     believes that it would be highly desirable to develop a process for the
     effective remediation of substances containing PCBs and consequently has
     made efforts to destroy PCBs by passing them through the high temperature
     plasma arc created in its BigSpark(TM) converters.

     Preliminary tests have indicated that the BigSpark(TM) converters have
     destroyed PCB molecules. While these test results are encouraging, in order
     to be commercially successful, the technology will need to be adapted to
     destroy PCB molecules in the surroundings where such elements are commonly
     found and on a sufficient scale to economically address the problems faced
     in PCB disposal.

     The Company's solid waste technology includes its Vacuum Distillation
     Process which is designed to transform waste motor vehicle tires into
     recyclable solid materials and a combustible gas stream. Gases produced in
     this process can be used as alternative sources of energy.

                                      F-9

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Background of the Company:

     EarthFirst was formed on July 29, 1997, and commenced operations on
     November 1, 1997 to facilitate market applications through the licensing of
     late-stage technologies.

     In 2000, the Company acquired SAC-I, Inc. ("SAC-I"), an entity engaged in
     the businesses of recycling, demolition, and government contracting. In
     connection with this acquisition, substantially all of the Company's
     officers and the members of the Company's Board of Directors resigned.

     John D. Stanton, Chairman of the Board and Chief Executive Officer of SAC-I
     ("Stanton"), assumed control of the Company.

     Subsequent to the May 2000 acquisition, in addition to the technologies
     segment, the Company operated its Recycling and Demolition operations, as
     well as its government contract operations, through its subsidiary SAC-I.
     During calendar 2001, management decided it was in the best interest of the
     shareholders to discontinue these operations so that the Company's
     resources could be utilized to commercialize its liquid and solid waste
     technologies.

     During the second half of 2001, SAC-I wound down its operations and
     liquidated assets to pay creditors. The Company sold its stock in SAC-I on
     December 1, 2001 to an entity controlled by a principal stockholder.

     During the later half of calendar 2001, the Company continued its efforts
     to develop its liquid waste technologies. In the first part of calendar
     2002, the Company built its first two BigSpark(TM) converter units for the
     purpose of producing NextGas(TM) for use as a cutting fuel to be sold
     commercially.

     During the third quarter of 2002, the Company's efforts to commercialize
     NextGas(TM) as a cutting fuel were indefinitely placed on hold for several
     reasons, including the inability to enter into an arrangement with one or
     more gas distributors, the difficulties of breaking into the market with a
     new product, the economics of the gas, and litigation with certain parties
     with whom the Company was previously associated. The Company's efforts
     during the remainder of 2002 to license NextGas(TM) as a cutting fuel were
     unsuccessful and have also effectively been placed on hold.

                                      F-10

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Background of the Company (continued):

     During the third quarter of 2002, the Company began more actively
     revisiting opportunities to further develop its technologies involving the
     production of carbon-based products. This included discussions with APEX
     Adsorbents Corporation ("APEX") with respect to the possible formation of a
     joint venture entity for the commercialization of the Thermal Rapid
     Activation ("TRAC(TM)") technology controlled by APEX. A nonbinding letter
     of intent was entered into between the parties on or about August 27, 2002.
     At this time APEX and the Company are negotiating the terms of a formal
     agreement.

     Principles of Consolidation:

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries, some of which are inactive at December 31, 2002.
     Those subsidiaries include, among others, EarthFirst NextGas, Inc. and
     EarthFirst Solid Solutions, Inc.

     Significant intercompany accounts and transactions have been eliminated in
     consolidation.

     Revenue recognition:

     The Company currently has no revenue generating activities.

     Property and equipment:

     Property and equipment are stated at cost. Depreciation is provided on the
     straight-line method over the estimated useful lives of the assets, which
     range from 5-7 years for machinery, computer equipment, office equipment
     and furniture.

     Advertising costs:

     The costs associated with producing and communicating advertising are
     expensed in the period incurred. There were no advertising expenditures
     associated with continuing operations during 2002 or 2001 and any other
     advertising was nominal.

                                      F-11

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Use of estimates:

     Preparation of these financial statements in conformity with accounting
     principles generally accepted in the United States of America requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the dates of the financial statements and the reported
     amounts of revenues and expenses during the reporting periods. Actual
     results could differ from those estimates.

     Stock-based compensation:

     The Company accounts for compensation costs associated with stock options
     issued to employees under the provisions of Accounting Principles Board
     Opinion No. 25 ("APB 25") whereby compensation is recognized to the extent
     the market price of the underlying stock at the date of grant exceeds the
     exercise price of the option granted. Stock-based compensation to
     non-employees is accounted for using the fair-value based method prescribed
     by Financial Accounting Standard No. 123 ("FAS 123").

     The Black-Scholes option pricing model was developed for use in estimating
     the fair value of traded options that have no vesting restrictions and are
     fully transferable. In addition, option valuation models require the input
     of highly subjective assumptions including the expected stock price
     volatility. Because the Company's employee stock options have
     characteristics significantly different from those of traded options, and
     because changes in the subjective input assumptions can materially affect
     the fair value estimate, in management's opinion, the existing models do
     not necessarily provide a reliable single measure of the fair value of its
     employee stock options.

     The Company accounts for unregistered common stock issued for services or
     asset acquisitions at the estimated fair value of the stock issued. Fair
     value is determined based substantially on the average cash price of recent
     sales of the Company's unregistered common stock.

                                      F-12

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Stock-based compensation (continued):

     Differences between APB25 and the fair value method are as follows:

<TABLE>
<CAPTION>
                                                               2002           2001
                                                           ------------   ------------
<S>                                                        <C>            <C>
     Net loss, as reported                                  ($2,851,584)  ($14,601,725)
                                                           ============   ============
     Stock-based compensation, as reported                 $     17,075             --
                                                                          ============
     Stock-based compensation under fair value method      $     17,075      ($376,000)
                                                           ============   ============
     Pro-forma net loss under fair value method             ($2,851,584)  ($14,977,725)
                                                           ============   ============

     Net loss per share, as reported                              ($.02)         ($.12)
     Proforma net loss per share under fair value method          ($.02)         ($.12)
                                                           ============   ============
</TABLE>

     The "Black-Scholes" option-pricing model assumptions for options are as
     follows:

<TABLE>
<CAPTION>
                                                               2002          2001
                                                            ----------    ----------
<S>                                                         <C>           <C>
          Underlying stock price at grant date              $      .05    $      .15
          Exercise price                                    $      .05    $      .15
          Dividend yield                                             0%            0%
          Risk free interest rate                                    6%            6%
          Expected volatility                                       50%           50%
          Expected life of options                           2-3 years     2-3 years
</TABLE>

     Impairment of long-lived assets:

     The Company reviews the carrying value of its long-lived assets whenever
     events or changes in circumstances indicate that the historical
     cost-carrying value of an asset may no longer be appropriate. The Company
     assesses recoverability of the carrying value of the asset by estimating
     the future net cash flows expected to result from the asset, including
     eventual disposition. If the future net cash flows are less than the
     carrying value of the asset, an impairment loss is recorded equal to the
     difference between the asset's carrying value and fair value.

                                      F-13

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Income taxes:

     Deferred tax assets and liabilities are recognized for the estimated future
     tax consequences attributable to differences between the financial
     statement carrying amounts of existing assets and liabilities and their
     respective tax bases. This method also requires the recognition of future
     tax benefits such as net operating loss carryforwards, to the extent that
     realization of such benefits is more likely than not. Deferred tax assets
     and liabilities are measured using enacted tax rates expected to apply to
     taxable income in the years in which those temporary differences are
     expected to be recovered or settled. The deferred tax assets are reviewed
     periodically for recoverability and valuation allowances are provided, as
     necessary.

     Net loss per share:

     Net loss per share was computed based on the weighted average number of
     shares outstanding during the periods presented.

     Diluted earnings per share is considered to be the same as basic earnings
     per share since the effect of common stock options and warrants and
     convertible debentures is anti-dilutive.

     Securities outstanding that were excluded from the computation of diluted
     earnings per share because they would have been anti-dilutive are as
     follows:

                                                            2002         2001
                                                         ----------   ----------
     Stock options                                       16,130,000   17,930,000
     Warrants                                             4,428,370    6,485,872
     Convertible debentures                                      --    3,339,969

                                      F-14

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Recent Accounting Pronouncements

     FASB Statement No. 148 Accounting for Stock-Based Compensation--Transition
     and Disclosure (Statement 148)

     During December 2002, the Financial Accounting Standards Board (FASB)
     issued Statement 148. Statement 148 establishes standards for two
     alternative methods of transition to the fair value method of accounting
     for stock-based employee compensation of FASB Statement 123 Accounting for
     Stock-Based Compensation (Statement 123). Statement 148 also amends and
     augments the disclosure provisions of Statement 123 and Accounting
     Principles Board Opinion 28 Interim Financial Reporting to require
     disclosure in the summary of significant accounting policies for all
     companies of the effects of an entity's accounting policy with respect to
     stock-based employee compensation on reported net income and earnings per
     share in annual and interim financial statements. The transitions standards
     and disclosure requirements of Statement 148 are effective for fiscal years
     and interim periods ending after December 15, 2002.

     The Company does not currently plan to transition to the fair value
     approach in Statement 123 and required disclosures regarding stock-based
     employee compensation have been included herein as a result of the adoption
     of this standard.

     FASB Interpretation 45, Guarantor's Accounting and Disclosure Requirements
     for Guarantees, Including Indirect Guarantees of Indebtedness of Others
     (Interpretation 45)

     During November 2002, the FASB issued Interpretation 45. Under
     Interpretation 45 guarantees, contracts and indemnification agreements are
     required to be initially recorded at fair value. Current practice provides
     for the recognition of a liability only when a loss is probable and
     reasonably estimable, as those terms are defined under FASB Statement 5
     Accounting for Contingencies. In addition Interpretation 45, requires
     significant new disclosures for all guarantees even if the likelihood of
     the guarantor's having to make payments under the guarantee is remote. The
     disclosure requirements are effective for financial statements of interim
     and annual periods ending after December 15, 2002. The initial recognition
     and measurement provisions of Interpretation 45 are applicable on a
     prospective basis to guarantees, contracts or indemnification agreements
     issued or modified after December 31, 2002.

                                      F-15

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Recent Accounting Pronouncements (continued):

     FASB Interpretation 45, Guarantor's Accounting and Disclosure Requirements
     for Guarantees, Including Indirect Guarantees of Indebtedness of Others
     (Interpretation 45) (continued):

     The Company currently has no guarantees, contracts or indemnification
     agreements that would require fair value treatment under the new standard.
     The Company's current policy is to disclose all material guarantees and
     contingent arrangements, similar to the disclosure requirements of
     Interpretation 45, which provide for disclosure of the approximate term,
     nature of guarantee, maximum potential amount of exposure, and the nature
     of recourse provisions and collateral.

     FASB Statement No.146 Accounting for Costs Associated with Exit or Disposal
     Activities (Statement 146)

     During July 2002, the FASB issued Statement 146. Statement 146 addresses
     accounting and reporting for costs associated with exit or disposal
     activities and nullifies Emerging Issues Task Force Issue No. 94-3
     Liability Recognition for Certain Employee Termination Benefits and Other
     Costs to Exit an Activity (including Certain Costs Incurred in a
     Restructuring). Statement 146 requires the recognition of a liability for
     costs associated with exit or disposal activities when the liability is
     actually incurred. Under EITF 94-3, such costs were generally recognized in
     the period in which an entity committed to and exit plan or plan of
     disposal. While both standards covered costs associated with one-time
     termination benefits (e.g. severance pay or stay-bonus arrangements),
     Statement 146 provides standards that provide for the timing of recognition
     of these types of benefits. Statement 146 is effective for exit or disposal
     activities initiated after December 31, 2002.

     Management's plans with respect to the continuation of the Company are
     described in Note 2. While there are currently no specific plans to exit
     activities as part of these plans, any such activity would require the
     application of Statement 146.

                                      F-16

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

1.   Nature of business, basis of presentation and summary of significant
     accounting policies (continued):

     Recent Accounting Pronouncements (continued)

     FASB Statement 145 Rescission of FASB Statements No. 4, 44 and 64,
     Amendment of FASB Statement No. 13 and Technical Corrections (Statement
     145)

     During April 2002, the FASB issued Statement 145. Statement 145 rescinds
     FASB Statement No. 4, Reporting Gains and Losses from Extinguishments of
     Debt, which required all gains and losses from extinguishments of debt to
     be aggregated and, if material, classified as an extraordinary item, net of
     related income tax effect. As a result of the rescission of Statement No.
     4, the classification of gain and losses arising from debt extinguishments
     requires consideration of the criteria for extraordinary accounting
     treatment provided in Accounting Principles Board Opinion No. 30 Reporting
     the Results of Operations. In the absence of Statement No. 4, debt
     extinguishments that are not unusual in nature and infrequent in occurrence
     would be treated as a component of net income or loss from continuing
     operations. Statement 145 is effective for financial statements issued for
     fiscal years beginning after May 15, 2002. Adoption of this standard is not
     anticipated to have a significant effect on the Company's results of
     operations in the future.

2.   Management's plans regarding liquidity and capital resources:

     These financial statements have been prepared on a going concern basis,
     which contemplates the realization of assets and satisfaction of
     liabilities in the normal course of business.

     The Company has experienced recurring net losses since its inception and,
     as such, experienced negative operating cash flows through December 31,
     2002. As such, the Company has significant working capital and net capital
     deficiencies at December 31, 2002. These conditions raise substantial doubt
     about the Company's ability to continue as a going concern. Historically,
     negative operating cash flows have been funded with proceeds from sales of
     common and preferred stock, notes and convertible debentures payable. In
     addition in December of 2000, a party related to a principal stockholder
     provided an aggregate $2,500,000 in revolving lines of credit.

     The revolving line of credit is secured by all of the assets of the
     Company. The revolving line of credit is a demand loan which means that the
     lender can demand the full repayment of the loan at any time. If this were
     to occur at this time, the Company would be unable to repay the amount owed
     and consequently, the lender might foreclose on all of the assets of the
     Company under the security agreement.

                                      F-17

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

2.   Management's plans regarding liquidity and capital resources (continued):

     During 2002, the Company has continued to rely almost entirely on
     additional loans made by the related party pursuant to the revolving line
     of credit in order to finance its operations and / or amounts invested for
     the Company's common stock from the related party or persons affiliated
     with that entity ($2,680,984 received during calendar 2002). The promissory
     note related to the revolving line of credit merely provides for a loan of
     up to $2,500,000. There is no obligation on the part of the related party
     to make any loan pursuant to this agreement even if the loan balance is
     less than $2,500,000. The related party is also not under any obligation to
     make any additional loans pursuant to a revolving line of credit or
     otherwise.

     Historically, the related party lender has periodically agreed to convert a
     portion of the loan balance into shares of the Company's common stock.
     There is no obligation on the part of the lender to convert any additional
     portion of the outstanding loan balance owed to it into common stock of the
     Company.

     The total amount received from all sources identified above approximated
     $2,700,000 during 2002 and $6,400,000 during 2001. Notwithstanding the
     proceeds of these financing sources, the Company had negative working
     capital of approximately $4,700,000 at December 31, 2002.

     It is reasonable to conclude that the Company will continue operations only
     if additional financing can be raised, such as through the sale of stock or
     additional borrowings. There can be no assurance that the Company will be
     successful in obtaining the necessary debt or equity financing needed to
     achieve its objectives.

     The divestiture or curtailment of certain subsidiaries during the fourth
     quarter of 2001 has significantly reduced the Company's rate of
     expenditures during calendar 2002 as compared to that of prior years.
     However, litigation involving several matters, including allegations made
     by a former consultant, as well as the minority interest shareholder of a
     now inactive subsidiary, has resulted in an increased level of expenditures
     for legal services. It is anticipated that additional expenditures will be
     incurred to protect the Company's interests in these matters.

     The Company is focused on the commercialization and further development of
     its liquid and solid waste technologies. Efforts to commercialize these
     technologies will require significant additional inflows of cash. These
     technologies are as yet unproven on a commercial basis and there is
     significant uncertainty as to whether such commercialization will
     ultimately be successful even if sufficient financing can be obtained.

                                      F-18

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

2.   Management's plans regarding liquidity and capital resources (continued):

     The Company is involved in numerous disputes, particularly involving
     activities that occurred prior to May 15, 2000, which are discussed in
     depth in Note 12. Judgments have been entered against EarthFirst
     Technologies, Incorporated and that entity is being sued or suits
     threatened by various parties. EarthFirst Technologies, Incorporated is
     also involved in the litigation with a former consultant and the minority
     interest shareholder of USMagneGas, Inc. EarthFirst Technologies,
     Incorporated is also involved in a dispute with the Florida Department of
     Revenue involving sales and use tax liabilities primarily related to
     periods prior to calendar 2001. (See Notes 5 and 12.)

     The disputes contemplated above have made it increasingly difficult to
     raise capital and to engage in business with third parties. Consequently,
     the Board of Directors is considering alternative strategies for handling
     these disputes.

     EarthFirst Technologies, Incorporated has attempted to settle its disputes
     with these parties in the past and in fact was successful in settling many
     disputes with other parties over the past two and one-half years. However,
     the lack of resolution of these disputes with some of these parties still
     confront the Company.

     The Company also continues to incur operating losses. The operating losses
     give rise to additional debt, or to equity dilutions of the Company. The
     Company is exploring all options to resolve its prior obligations,
     including reorganization in or out of bankruptcy proceedings.

     Regardless of whether a formal bankruptcy petition is filed, the Company
     will need to obtain funding from outside sources during 2003 and beyond to
     continue its planned operations. There can be no assurance that the Company
     will be successful in obtaining the necessary debt or equity financing
     needed to achieve its objectives and continue as a going concern. The
     financial statements do not include any adjustments to the carrying amount
     of assets and the amounts and classifications of liabilities that might
     result from the outcome of this uncertainty.

                                      F-19

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

3.   Fair value of financial instruments and concentrations of credit risk:

     Fair value of financial instruments:

     All financial instruments are held or issued for purposes other than
     trading. The carrying amount of accounts payable and other current
     liabilities approximates fair value because of their short maturity. The
     carrying amount of related party notes payable and lease obligations
     approximates their fair value based on their demand nature and current
     market interest rates offered to the Company.

     Concentrations of credit risk:

     The Company owns no financial instruments that potentially subject the
     Company to significant concentrations of credit risk.

4.   Property and equipment:

     Property and equipment at December 31, 2002 consists of the following:

     Property not used in business - land                              $ 93,315
     Machinery and equipment                                             65,304
     Office furniture, equipment, computers and software                 35,100
                                                                       --------
                                                                        193,719
     Accumulated depreciation                                           (34,099)
                                                                       --------
                                                                       $159,620
                                                                       ========

5.   Accrued expenses and other liabilities:

     As discussed further under Litigation in Note 12, the Company is involved
     in several disputes with vendors who provided goods and services primarily
     related to the time during which the Company conducted manufacturing
     operations prior to May 15, 2000. In addition to the above, as is also
     discussed in the Litigation footnote, the Company is involved in a dispute
     with the Florida Department of Revenue concerning sales and use taxes.

     Included in the balance of Accrued expenses and other current liabilities
     is the Company's estimate of the amount at which the matters contemplated
     above will ultimately be resolved. Substantially all of the balance
     reflected is attributable to the disputed matters contemplated above.

                                      F-20

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

5.   Accrued expenses and other liabilities (continued):

     The amount of the loss from discontinued operations reflected on filings of
     Form 10-QSBs filed for the first three quarters of calendar 2002 was in
     large part attributable to a provision for estimated sales and use taxes
     attributable to the examination being conducted by the Florida Department
     of Revenue. The estimated taxes were based in part upon preliminary amounts
     of unpaid taxes alleged by the Florida Department of Revenue. These
     preliminary amounts were reduced significantly as a result of extensive
     discussions and numerous correspondence during the latter portion of
     calendar 2002. Based upon the revisions made by the Florida Department of
     Revenue to its earlier drafts of its proposed assessment, the Company
     reversed a substantial amount of its provision for sales tax obligations on
     the Consolidated Statements of Operation during the fourth quarter of 2002.

     The Company believes that, after offsetting the Company's claims for refund
     of sales taxes it has paid, the Company is due a net refund from the
     Florida Department of Revenue. The Florida Department of Revenue does not
     as yet share this opinion. Accordingly, the Company has included an accrual
     for the amounts that the Florida Department of Revenue alleges are due and
     no amounts will be reported for the contingent gain associated with the
     refunds until such time as such refunds are approved. Total amounts
     reflected as due on the most recent drafts of the proposed assessment by
     the Florida Department of Revenue, including penalties and interest,
     aggregated $136,305 and are included in accrued expenses and other
     liabilities in the accompanying 2002 balance sheet. This matter is
     discussed further under Litigation in Note 12.

6.   Lease, financing and certain other obligations:

     Prior to 2000, the Company entered into numerous lease arrangements for
     assets used in its BORS Lift and contract manufacturing operations. In
     addition, the Company also financed the purchase of machinery and equipment
     for use in its manufacturing operations prior to 2000. The Company has
     defaulted on substantially all of these obligations. In May of 2000, the
     Company closed its manufacturing operations and began to liquidate the
     assets used in the business to satisfy the claims of creditors.

     The Company negotiated with parties having secured interests in the
     machinery and equipment to either return the assets to offset or satisfy
     its obligation or to obtain the secured party's consent to sell the
     machinery and equipment with the proceeds being distributed to the secured
     party. In August of 2000, the Company conducted an auction to sell
     substantially all of its machinery and equipment.

                                      F-21

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

6.   Lease, financing and certain other obligations (continued):

     The proceeds received from the return or sale of assets was insufficient to
     satisfy the obligations owed. Several creditors have obtained judgments
     against the Company for amounts owed under these obligations or with
     respect to other aspects of the conduct of discontinued operations. Other
     creditors are currently in various stages of litigation with the Company
     over amounts claimed to be owed.

     The Company is disputing amounts claimed by these and other creditors and
     is attempting to negotiate settlements with respect to all claims. It is
     uncertain as to the ultimate resolution of these amounts. The balance
     reflected on the financial statements for Lease Obligations is the
     Company's estimate of the amount for which these disputed obligations will
     ultimately be settled.

7.   Note payable, related party:

     Note payable, related party consists of a note payable to an entity
     controlled by the Company's Chief Executive Officer (John Stanton) (also a
     principal stockholder) pursuant to a $2,500,000 revolving line of credit
     secured by all of the assets of EarthFirst. Interest is at 9.9%. The amount
     outstanding at December 31, 2002, including interest was $3,118,882. The
     loan is payable on demand. Interest expense associated with notes payable
     owed to the related party was $172,951 and $339,309 in 2002 and 2001,
     respectively.

     In January of 2002, the related party and persons affiliated with the
     related party acquired 40,811,966 shares of the Company's common stock in
     exchange for a portion of the note payable totaling $2,387,500.

8.   Convertible debentures:

     On March 30, 2000, an unrelated investor loaned the Company $700,000
     through the purchase of Series 2000-A 8% Convertible Notes.

     The Series 2000-A Convertible Notes permitted the investor to elect to
     convert all or a portion of the notes into shares of the Company's common
     stock at a conversion price for each common share equal to the lesser of
     (1) $.75; or (2) eighty percent (80%) of the lowest of the closing bid
     prices for the common stock for the five trading days immediately preceding
     the conversion date.

                                      F-22

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

8.   Convertible debentures (continued):

     As part of the Series 2000-A 8% Convertible Notes, the Company executed a
     Registration Rights Agreement with the investor. Under this agreement, the
     Company was required to use its best efforts to file with the Securities
     and Exchange Commission a registration statement for these securities. The
     Company has been unable to file the required registration statements. The
     agreement provides for liquidated damages in the amount of 1.5% per month
     of the note balance for each month such registration rights cannot be
     granted.

     During 2001, the creditor converted $539,000 of the principal of the Series
     2000-A Convertible Notes and $129,891 of accrued interest and liquidated
     damages into 3,868,307 shares of the Company's common stock. The investor
     converted the remaining $161,000 of principal and $52,758 of accrued
     interest and liquidated damages into 3,356,071 shares of the Company's
     common stock in January of 2002.

9.   Stockholders' equity:

     Stock Options:

     During calendar 2002, the Company issued options to acquire 250,000 shares
     of its common stock to a consultant at an exercise price of $.05 per share.
     This resulted in the Company's recognition of stock-based compensation
     expense of $17,500 in 2002. No other stock options or warrants to acquire
     shares were issued during calendar 2002.

     In 2001, the Board of Directors approved the 2001 Equity Incentive Plan.
     The total number of shares to which options may be granted under the plan
     is 20,000,000 shares. Generally the option price is fixed at no less than
     100% of the fair market value of the shares at the date the option is
     granted and expire on the earlier of three months after termination of
     employment or ten years from the date of grant.

                                      F-23

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

9.   Stockholders' equity (continued):

     A summary of the status of the Company's outstanding stock options as of
     December 31, 2002 and 2001, and the changes during the years ending on
     those dates, is presented below:
<TABLE>
<CAPTION>

                                                                   Weighted Average
                                                        Shares      Exercise Price
                                                      ----------   ----------------
<S>                                                   <C>                <C>
     Options outstanding, January 1, 2001             10,230,000         $.54
     Options granted                                   3,600,000          .15
     Options expired                                          --           --
                                                      ----------         ----
     Options outstanding, December 31, 2001           13,830,000          .44

     Options granted                                     250,000          .05
     Options expired                                  (4,650,000)         .67
                                                      ----------         ----
     Options outstanding, December 31, 2002, all of
       which are exercisable                          9,430,000          $.32
                                                      ==========         ====
</TABLE>

     The following table summarizes information for options and warrants
     outstanding and exercisable at December 31, 2002.

                                           Options and Warrants
                                        Outstanding and Exercisable
                                    -------------------------------------------
      Range of                                   Weighted Avg.    Weighted Avg.
       Prices                         Number    Remaining Life   Exercise Price
     ----------                     ---------   --------------   --------------
     $0.01-1.00                     9,430,000      6.73 yrs.         $.32
                                    =========      =========         ====

     Weighted average grant date fair values are as follows:

                                             Number of   Exercise   Grant date
                                              Options     Price     fair value
                                             ---------   --------   ----------
     Exercise price:
     Equals market                           6,903,800     $.12        $.08
     Exceeds market                          2,466,200     $.85        $.10
     Less than market                           60,000     $.31        $.34


                                      F-24

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

     Common stock warrants:

     The following table summarizes information for stock warrants outstanding
     and exercisable at December 31, 2002.

                                      Warrants Outstanding and Exercisable
                                    --------------------------------------------
                         Range of                 Weighted Avg.    Weighted Avg.
                          Prices      Number     Remaining Life   Exercise Price
                         --------   ----------   --------------   --------------
                           $2.40       143,750      15 months         $2.40
                           $ .40     3,800,000      22 months           .40

                           $1.54        70,000       3 months          1.54
                           $ .52        95,274       4 months           .52
                           $ .54       319,346       4 months           .54
                           -----    ----------      ---------         -----
     Outstanding
       December 31,
       2001 and 2002                $4,428,370      20 months
                                    ==========      =========

     There were no warrants granted during 2002 or 2001.

     The fair value of the options and the warrants granted were estimated on
     the date of grant using the Black-Scholes option pricing model with the
     following assumptions:

                                                             2002        2001
                                                           ---------   ---------
     Expected life of options                              2-3 years   2-3 years
     Risk free interest rate                                   5%          6%
     Expected volatility                                      50%         50%
     Expected dividend yield                                   0%          0%

     Stock issuances for services:

     During 2002, the Company issued shares of unregistered common stock to
     settle a dispute. No shares were issued for services during 2002 or 2001.
     The shares issued during 2002 have been valued at prices that approximate
     prices for cash sales of similar stock to others during the same periods.

                                      F-25

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

10.  Income taxes:

     Deferred tax assets consist of the following at
        December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                    2002           2001
                                                                ------------   ------------
<S>                                                             <C>             <C>
        Net operating loss carryover                            $ 13,976,000   $ 12,926,000
        Deferred tax asset valuation allowance                   (13,976,000)   (12,926,000)
                                                                ------------   ------------
                                                                $         --   $         --
                                                                ============   ============

     Income tax (expense) benefit consists of the following:
                                                                   2002            2001
                                                                ------------   ------------
        Current:
        Federal                                                 $         --   $         --
                                                                ------------   ------------

        Deferred:
          Benefit of net operating loss carryover                  1,050,000      5,475,000
          Change in deferred tax asset valuation allowance        (1,050,000)    (5,475,000)
                                                                ------------   ------------
                                                                          --             --
                                                                ------------   ------------
                                                                $         --   $         --
                                                                ============   ============
</TABLE>

     The expected income tax benefit at the statutory tax rate differed from
     income taxes in the accompanying statements of operations as follows:

                                                       Percentage of loss before
                                                             income taxes
                                                       -------------------------
                                                             2002     2001
                                                            -----    -----
        Statutory tax rate                                   34.0%    34.0%
        State tax, net of federal benefit                     3.5%     3.5%
        Change in deferred tax asset
          valuation allowance                               (37.5%)  (37.5%)
                                                            -----    -----

        Effective tax rate in accompanying
          statement of operations                               0%       0%
                                                            =====    =====

     The Company has net operating loss carryovers of approximately $34,000,000
     at December 31, 2002. The net operating loss carryover principally expires
     from 2018 through 2022.

                                      F-26

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

11.  Related party transactions:

     As discussed in Note 2, during 2002 and 2001 the Company obtained funding
     through a secured revolving line of credit with an entity related to the
     Chief Executive Officer/Principal Stockholder of the Company. (See Note 7.)

     The entity with whom the Company has the secured line of credit paid for
     various administrative services on behalf of the Company and its
     subsidiaries during 2002 and 2001. Such services included accounting,
     payroll processing, human resource, information technology, engineering and
     other services. This entity also paid the costs of various insurance
     coverage for the Company and its subsidiaries as well as the cost of
     vehicles used by employees, rent for the Company's headquarters, legal
     services rendered on behalf of the Company and its subsidiaries, as well as
     the services of independent contractors related to the wind up of certain
     operations. The cost of these items has been charged to general and
     administrative expenses and included in the balance of the secured
     revolving line of credit.

12.  Commitments and contingencies:

     Legal proceedings:

     The Company is involved in litigation with Ruggero Maria Santilli
     ("Santilli"), The Institute for Basic Research, Inc. ("IBR"), and Hadronic
     Press, Inc. ("Hadronic") concerning certain aspects of the Company's liquid
     waste technologies. The matters contemplated above will be referred to as
     the "Santilli Suit" and the "Hadronic Suit". Hadronic claims to own the
     intellectual property rights to one or more aspects of the Company's liquid
     waste technologies.

     Management continues to believe that the Company owns all of the
     intellectual property rights necessary to commercialize and further develop
     its liquid and solid waste technologies without resorting to a license from
     any third parties. Similarly, the Company's legal counsel continues to
     believe that the Company currently possesses all of the intellectual
     property rights necessary to commercialize its NextGas(TM) synthetic fuel
     and Big Spark(TM) converter technologies and to further develop these
     technologies in additional applications.

     The Company continues to believe that both litigation brought against the
     Company by the above parties is unfounded and without merit and that the
     Company will ultimately prevail against these parties with respect to the
     Company's commercial technology.

                                      F-27

<PAGE>

             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

12.  Commitments and contingencies (continued):

     Legal proceedings (continued):

     Nevertheless, Management believes that the Santilli Suit and the Hadronic
     Suit have been harmful to the Company in that they have resulted in
     creating uncertainty in the minds of potential customers and joint venture
     partners as to the Company's ability to successfully commercialize its
     technologies. This litigation has also been harmful to the Company in that
     significant resources, both financial and in terms of the efforts of
     Management, have been committed to contest this matter and defend the
     Company's right to its technologies. It is likely that defending this
     matter will continue to drain the Company's resources. Management believes
     that these resources could be better utilized to advance the interests of
     the shareholders of the Company. No liability, if any, that might result
     from this matter has been recorded in the financial statements.

     The Company is also involved in disputes with vendors for various alleged
     obligations associated with operations that were discontinued in prior
     years. Several disputes involve deficiency balances associated with lease
     obligations for equipment acquired by the Company for its contract
     manufacturing and BORS Lift operations that were discontinued during
     calendar 2000. The machinery and equipment associated with many of these
     obligations has been sold with the proceeds paid to the vendor or the
     equipment has been returned to the vendor. Several of the equipment leasing
     entities claim that balances on the leases are still owed.

     The Florida Department of Revenue (the "DOR") has conducted an examination
     of the Company's Florida Sales and Use Tax Returns from its inception
     through June 30, 2001. The DOR currently alleges that the Company owes
     approximately $136,305 of taxes, penalties and interest. Included in this
     amount is a relatively small amount of unpaid sales taxes related to sales
     made during 1998 through 2000. The remainder of this amount is attributable
     primarily to unpaid use taxes on the purchase or lease of machinery,
     equipment, and materials used to construct machinery for resale.

     There are many disputed items between the parties. The DOR and the Company
     continue in discussions at the local level in an attempt to resolve these
     issues. If these issues cannot be satisfactorily resolved at the local
     level, the Company intends to utilize its rights in the appeals process
     within the DOR and, if such efforts are unsuccessful, may consider remedies
     in the courts. Notwithstanding the Company's position in this matter, it
     has recorded the amounts allegedly owed in the accompanying 2002 financial
     statements.

                                      F-28

<PAGE>
             EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

13.  Quarterly information(unaudited):

                        March           June         September      December
                     ------------   ------------   ------------   ------------
     2002
     Revenues        $         --   $         --   $         --   $         --
     Net loss           ($745,262)   ($1,039,831)     ($554,198)     ($512,293)
     EPS                ($    .00)   ($      .01)     ($     00)     ($    .00)

                        March           June         September      December
                     ------------   ------------   ------------   ------------
     2001
     Revenues        $         --*  $         --   $         --   $         --
     Net loss         ($1,896,141)   ($5,762,782)   ($3,115,317)   ($3,827,485)
     EPS              ($      .02)   ($      .05)   ($      .02)   ($      .03)

     * Restated to reflect effect of discontinued operations.

                                      F-29

<PAGE>

CERTIFICATIONS

I, John Stanton, certify that:

1. I have reviewed this annual report on Form 10-KSB of EarthFirst Technologies,
Incorporated and Subsidiaries;

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 of the
registrant as of, and for, the periods presented in this annual report;

4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have: designed such disclosure controls and procedures to
ensure that material information relating to the registrant is made known to me
by others, particularly during the period in which this annual report is being
prepared; 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 presented in this annual report my
conclusions about the effectiveness of the disclosure controls and procedures
based on my evaluation as of the Evaluation Date;

5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the registrant's board of directors;

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
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. I have indicated in this annual report whether or not there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: March 31, 2003


/s/ John Stanton
----------------------------------
John Stanton
Chief Executive Officer, President
and Chief Financial Officer

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 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.

Dated:  March 31, 2003


        By: /s/ JOHN D. STANTON
            -----------------------------------------------
            John D. Stanton
            Chairman of the Board, Chief Executive
            Officer, President, and Chief Financial Officer


        By: /s/ NICHOLAS R. TOMASSETTI
            -----------------------------------------------
            Nicholas R. Tomassetti
            Director