UNITED STATES
                       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 Year Ended December 28, 2001

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                For the transition period from _______ to _______

         Commission file number:            001-14753
                                            ---------

                        INTERNATIONAL SMART SOURCING, INC
                      (FORMERLY CHINAB2BSOURCING.COM, INC.)
        (Exact Name of Small Business Issuer as specified in its charter)

                  Delaware                                       11-3423157
         (State or other jurisdiction of                      (I.R.S. Employer
         incorporation or organization)                      Identification No.)

                              320 Broad Hollow Road
                              Farmingdale, NY 11735
                    (Address of principal executive offices)

                                 (631) 293-4650
                           (Issuer's telephone number)
      Securities registered under section 12(b) of the Exchange Act: None.
         Securities registered under section 12 (g) of the Exchange Act:
                          Common stock, Par value $.001
                   Redeemable Common Stock Purchase Warrants.

         Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days.

                  YES        X                                 NO
                       -------------                              ---------

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is 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.

                  YES                                          NO        X
                       -------------                              --------------

         The issuer's net sales for the most recent fiscal year were $9,159,643.
The aggregate market value of the voting stock held by non-affiliates based upon
the last sale price on February 4, 2002 was approximately $ 15,000,000. As of
February 4, 2002, the Registrant had 3,760,934 shares of its Common Stock,
$0.001 par value, issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be issued in
connection with the 2001 annual meeting of stockholders are incorporated by
reference into Part III

<PAGE>

                                     Part I


Item 1. Description of Business


The Company

International  Smart Sourcing,  Inc. (formerly  Chinab2bsourcing.com,  Inc.) was
organized  as  a  holding  company  for  its  three  wholly-owned   subsidiaries
(collectively, "ISS" or the Company):

  o      International Plastic Technologies, Inc. (IPT) which does business as
         International Smart Sourcing
  o      Electronic Hardware Corp. (EHC) and
  o      Compact Disc Packaging Corp. (CDP).

                    International Plastic Technologies (IPT)

At IPT, we specialize in assisting companies reduce their cost of manufacturing
by outsourcing work to China. Through our offices in the United States and
China, IPT has put in place the system necessary to simplify the transition of
moving work to China. IPT's product specialization includes:

  o      tooling
  o      injection molding and secondary operations
  o      castings
  o      mechanical assemblies
  o      electromechanical assemblies
  o      metal stampings
IPT generated revenue of $2,130,934 for the year ended December 28, 2001.

IPT has established an office in Shanghai, with engineering, quality, production
control and administrative personnel who provide:

  o      project management

  o      source selection

  o      engineering coordination

  o      quality assurance

  o      logistics

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<PAGE>

  o      cost reduction.

There are thirty-eight manufacturers in China presently providing products for
our customers. We believe that our service provides our customers with
significant competitive advantages. Savings for customers range from fifteen
percent to as much as seventy-five percent. The more labor intensive the
product, the more savings realized. Due to the low cost of tooling the
customer's return on investment is improved, and its overhead costs are reduced.

                      Electronic Hardware Corporation (EHC)

Our EHC subsidiary has over 30 years of experience in the design, marketing and
manufacture of injection molded plastic components used in industrial, consumer,
and military products. We also offer secondary operations on our molded
products. Services such as hand painting, pad printing, hot stamping and
engraving are provided at a customer's request. These marking systems can be
used on most materials and varying contours. EHC generated revenue of $7,026,317
for the year ended December 28, 2001.

EHC meets a full range of its customers' needs by maintaining early and total
involvement, from the design and development to the ultimate manufacture and
packaging of the product. When a custom-made product is initially requested,
experienced EHC application engineers assist the customer during the concept
design stage, which we consider critical to the success of the manufacturing
process. During this stage, EHC application engineers draw upon our experience,
expertise and technological innovation to assist customers in reducing costs,
meeting accelerated market schedules and ensuring high quality workmanship.

Our Farmingdale, New York facility was certified in January 2001, for the
International Quality Standard ("ISO") 9002, a manufacturing certification
required by European companies and looked upon favorably throughout the world.
ISO 9002 requires us to meet certain stringent requirements established in
Europe to ensure that the facility's manufacturing processes, equipment, and
associated quality control systems will satisfy specific customer requirements.

We believe that obtaining ISO 9002 certification will benefit EHC in the plastic
manufacturing market, both nationally and internationally.
We believe that our consolidated manufacturing approach results in high quality,
on-time delivery, competitive pricing, and a loyal customer base. Additionally,
we believe that it has created a cost-effective workplace by decreasing
inventory costs. Our "pull" (also known as "JIT," which stands for Just-in-Time)
system is designed to introduce raw materials and components at the time
necessary to fulfill customer orders. This system eliminates costs associated
with the storage and handling of large amounts of inventory. We believe that it
also accounts for a timelier rate of delivery. The "pull" system depends on
long-term relationships with suppliers. We believe that due to our strong
relationships with suppliers and our well-trained workforce, the system will
continue to provide efficient and prompt delivery.

Over the past year EHC has increased its sales by 23% due to aggressive
marketing efforts and to the success of the current government contract. EHC
received an Award from the United States government based on this contract, for
"Innovative Business Performer of the Year Award for Small Business" in 2000.
Based on the success of the government contract, we believe that we have put in

                                       3
<PAGE>

place the necessary infrastructure to provide superior service to the government
not only on this contract but on other contracts the government might look to
place in 2002. This same infrastructure will also provide the Company's
commercial knob business with many advantages in our ability to provide superior
service. The Company anticipates a user-friendly website which will allow
customers to order directly and obtain stock and delivery information on the web
by the third quarter of the year.

                       Compact Disc Packaging Corp. (CDP)

Our CDP subsidiary is currently inactive. It generated revenue of $2,392 for the
year ended December 28, 2001. Its business is the manufacturing, marketing and
sale of a compact disc packaging system.

The Company was originally formed in 1970 as EHC, a New York corporation, and
was reorganized as of December 24, 1998 as a Delaware holding company for its
two wholly owned subsidiaries, EHC and CDP. As part of the Reorganization, the
stockholders of each of the subsidiaries exchanged the following percentage
ownership in the respective subsidiaries for the percentage of shares of the
Company: David Kassel exchanged 33% of EHC and 90% of CDP for 46.3% of the
Company; Andrew Franzone exchanged 33% of EHC for 25.7% of the Company; Harry
Goodman exchanged 33% of EHC for 25.7% of the Company; and David Cowan exchanged
10% of CDP for 2.3% of the Company. On May 7, 1999, IPT, a Delaware Corporation
was formed.

We maintain our principal executive offices at 320 Broad Hollow Road,
Farmingdale, New York 11735. Our telephone number is (631) 293-0750 and our
Internet address is http://www.smart-sourcing.com.

Growth Strategy

Our IPT subsidiary is expanding its operations through specializing in assisting
companies to reduce their cost of manufacture by outsourcing work to China. The
Company has developed the infrastructure necessary to assist companies in
outsourcing. The Company has established an office in Shanghai and has
engineering, quality, production control and administrative personnel in place
to assist in the manufacture of our customer's products. Our China office
utilizes an intensive vendor selection process before placing purchase orders
with factories; presently we have 38 factories manufacturing products for our
customers. The products are being manufactured for customers include stamped
parts and stamped assemblies, and electronic assemblies.

Manufacturers in the USA are faced with the challenge associated with
globalization, as shown by the reduction in the number of manufacturers in the
U.S. Based on our experience to date we are able to reduce the cost of a
customers products, improve their return on investment and lower their overhead.
We believe that outsourcing provides customers with a competitive advantage.
However, there can be no assurance that we will be able to consummate, maintain
or establish additional manufacturing relationships in China or achieve any of
our growth strategies.


                                       4
<PAGE>

Products

Outsourcing

Our outsourcing operations produce products directly for the customers of the
Company. All products are special order and are not produced for the Company's
own inventory.

International Smart Sourcing specializes in assisting companies to reduce their
cost of manufacturing by outsourcing work to China. U.S. companies are faced
with increasing demands from their customers, compounded by aggressive
competition from overseas. To maintain a competitive edge, these companies look
to outsourcing to reduce cost while maintaining their core competency.

We provide a full range of outsourcing including design assistance, source
selection, price negotiation, quality assurance and transportation. In most
cases we charge our customer an agreed upon price for the order. We include in
the price the cost of our services and our profit. Sometimes we act as a
consultant. Our customer pays the direct costs of the order and an agreed upon
fee to us. We assume title of the manufactured goods while in transit from
China. These goods are insured while in transit.

Examples of types of products we make include a die-cast housing for vibratory
lab mixers, hinge support for smoke dampening units used in fire safety
equipment, clips to hold socks together, and filler neck caps for trucking
industry fuel tanks.

Control Knobs and Assemblies

Our EHC subsidiary, manufactures a full line of instrument control knobs,
handles, value-added custom molding, dials and similar devices for consumer,
industrial and military electronics equipment. EHC's knobs are used for precise
setting of switches, on/off switches, volume controls and critical setting of
instrumentation switches. EHC manufactures many of the knobs to order based on
the customers' exacting specifications as well as its standard line. Customers
of EHC order the knobs by specifying particular descriptions and features,
including the shaft diameter, outer diameter, overall size, height, color,
illumination, dials and markings, such as lines, dots or numbers. EHC also has a
standard product line of consumer, industrial and military knobs available for
sale through catalogs.

EHC is in the process of moving manufacturing to China in order to improve
profits. We expect to have transferred 85% of our manufacturing of non-military
products to China by the forth quarter of 2002. The balance of the production
should be complete by the end of the first quarter 2003. This should
significantly increase gross profits.

Overall, the number of different types of knobs EHC has manufactured in its
history is in the order of tens of thousands. Some knobs are manufactured with
mechanical devices built into the knob. For example, one of the Company's
locking knobs turns freely and sets upon depression, resisting shock, vibration,
or accidental movement. A clutch knob is one that continues to turn even after
the device has reached a pre-set limit so that the pressure of the turning knob
does not damage the equipment. Most knobs are resin-based and injection molded.
Some knobs are painted and some are delivered "as molded." Certain knobs are
made with aluminum inlays, caps, dials, or skirts and may have fittings of
screws, bushings, springs, or set screws.

EHC has been awarded a government contract valued at an average of approximately
3 million dollars per year for a possible 5-year period. The government has the
option to extend the contract on a yearly basis. The Company believes, with no
assurance that the contract will run for the full 5 years until June 2004.


                                       5
<PAGE>

CDP manufactures a compact disc packaging unit. CDP is currently inactive.


Competition

Outsourcing

We believe that the market of offshore manufacturing sources is highly
fragmented and that no one participant or small number of participants dominates
the market. We consider all manufacturers, both domestic and foreign, generally
to be our competition. The principal direct competition experienced by us is
from factories in China and manufacturers representatives and brokers acting on
behalf of those factories. We have identified only one domestic company engaged
in a similar business to that of the Company and the competitor relies upon its
direct ownership of a factory in China for its competitive advantage. We believe
that our competitive strengths are the knowledge and experience of our domestic
and Chinese engineering and administrative staffs, their experience working
together across two cultures and the network of 38 qualified factories in China
with whom we have already placed orders. We intend to expand the number of
qualified factories with to whom we can place orders on behalf of our customers.

Knob and Assembly Manufacturing/Injection Molding

We believe that our segment of the plastic injection molding industry is highly
fragmented and that no one participant dominates the industry. We believe that
the most important competitive factor in this industry is investment in tooling,
as the high cost of tooling relative to the low revenue of individual products
is a barrier to entry in this market. We currently own approximately 1,500
tools, which give us the ability to manufacture over 10,000 products and
assemblies. Other key competitive factors in this industry include quality of
products, depth of industry knowledge, a sizable customer base, ability to
provide products on a timely basis, level of experience, breadth of products and
services offered, responsiveness to customer requests and ability to produce a
wide variety of projects in a timely manner and at a competitive price. We
believe that our main competitors in the control knobs and components segment of
the injection molding industry are the following: Rogan Corporation, which
produces instrument and consumer knobs; Philips Plastic Manufacturing
Corporation, which produces consumer knobs; Davies Molding Company, which
produces instrument knobs; and Aerospace Knob Company, which produces military
avionic knobs.

Pull Pack TM

We believe that the primary competition for the Pull Pack TM is the current
Jewel Box manufactured by Atlanta Precision Molding, Auriga and International
Packaging Corp. Other companies have developed alternative Compact Disc
packaging. Three of these packages are the Laserfile, from Laserfile Inc., the
Utmost Rotary CD Case, from Co-Joint Corp. and the Alpha Pak, from Alpha
Enterprise, Inc.

Suppliers and Raw Materials

Our IPT subsidiaries are currently manufacturing products in China.
In such  manufacturing  projects the Chinese  manufacturers will arrange for all
raw  materials  from local  suppliers.  While we  believe  that there will be no
shortage of such  materials  overseas and that prices will remain  comparatively
low, there can be no assurance that no shortages  will occur.  In addition,  the
Company is subject to the risk of  political or economic  dislocation  in China,
which could affect the availability, or cost of raw materials.

                                       6
<PAGE>

EHC's principal raw materials consist of Lexan (polycarbonate), nylon, ABS, and
polypropylene. Such materials are generally available commodities sold to the
injection molding industry by a variety of suppliers; the Company does not have
any oral or written contracts or agreements with any suppliers.

No one vendor accounts for more than 10% of our purchases, except for Shanghai
Foodstuffs Export & Import Corporation and Royal Screw Machine Products. The
loss of the Company's business relationship with either principal supplier could
have a material adverse effect on the Company. Notwithstanding, while a shortage
of a particular supplier's raw materials would not materially affect the
Company, a general shortage of raw materials could adversely affect the Company.
The Company has never experienced a shortage in raw materials and does not
anticipate any shortages to occur in the reasonably foreseeable future, however,
there can be no assurance that there will not be a shortage of raw materials.


Distribution Methods

EHC sells its products to industrial  customers either directly or through major
distributors. EHC never sells directly to retail consumers. Approximately 20% of
EHC's products are principally sold through the following  distributors:  Newark
Electronics,   Allied   Electronics,   Inc.,  Bisco  Industries,   Inc.,  Alatec
Electronics,  Inc.  and  Peerless  Electronics,  Inc.  EHC does not have oral or
written  contracts  or  agreements  with such  distributors.  The  Company has a
Department  of Defense  contract to sell knobs,  dials and  pointers to the U.S.
military  and   government   customers   worldwide.   These  sales  account  for
approximately  fifty  percent of the sales of EHC. All sales are received from a
single source,  the Defense Supply Center of  Philadelphia,  and shipped to over
five hundred separate locations.


Patents, Trademarks, Licenses and Royalty Rights

Our CDP subsidiary, entered into a minimum five-year license agreement dated as
of March 1, 1998 with Inch, Inc., to obtain the exclusive worldwide licensing
rights to make, use, sell and sublicense the Pull Pack TM. In consideration of
the exclusive license, CDP agreed to pay Inch, Inc. royalties of (i) 2% of the
annual gross sales of Pull Pack less any returns, credits and allowances; (ii)
25% of sublicenses or fees from sublicenses payable within 30 days of receipt;
and (iii) a $30,000 reimbursement payment for expenses incurred in obtaining a
patent. CDP is entitled to exclusive license rights of Pull Pack TM for a
minimum of five years and a maximum of the United States life of the patent,
which expires in 2012. CDP paid to Inch Inc a royalty payment of $ 30,000 for
the period of February 1, 1999 to February 1, 2000. If royalties paid to Inch,
Inc. did not equal or exceed a minimum total of $40,000 from February 1, 2000 to
February 1, 2001 and $50,000 for each 12-month period thereafter Inch, Inc. had
the right to terminate the exclusive license agreement upon 30 days' notice.
Inch, Inc. did not earn any royalties in the period. CDP has not made the
minimum royalty payment required under the contract. Inch, Inc. terminated
the agreement effective August 7, 2001. CDP continues to hold a non-exclusive
license at the above referenced royalty rate. Inch, Inc. has also agreed to
provide consulting services to CDP at the rate of $50 per hour prior to the sale
of 10,000 units and $110 per hour after the sale of 10,000 units. CDP has agreed
to indemnify and hold harmless Inch, Inc. against all damages and liabilities
arising out of the manufacture of the Pull Pack. In 1995, David Cowan, a
principal of Inch, Inc. was issued Patent No.5,383,554, which expires in January
2012.


                                       7
<PAGE>

On June 16, 1998, EHC was issued Patent No.5,765,449, which expires on June 16,
2015. EHC has submitted a patent application on a tactile detent knob. However,
there can be no assurance that such patent will issue.

The Company may apply for additional patents relating to other aspects of its
production. There can be no assurance as to the degree of protection, which
existing or future patents, if any, may afford the Company, or that competitors
will not develop similar or superior methods or products outside the protection
of any patent issued to the Company.

Employees

As of December 28, 2001, we had a total of 68 employees based domestically. 13
of these employees work on a part-time basis. 31 employees work in Sales and
Administration, while 24 employees are factory workers. The Shanghai China
office had a total of 19 employees in sales marketing and administrative
support.

We believe we have a satisfactory relationship with our unionized labor and have
never experienced a work stoppage. The current collective bargaining agreement
with Local 531 of the International Brotherhood of Teamsters, AFL-CIO, was
renewed effective May 10, 2001 for a period of three years expiring May 9, 2004.
24 factory employees are represented by the collective bargaining agreement.
Union employees are covered by the Sick & Welfare Fund, Local 531, to which the
Company contributes a specified amount each year.

Trade Matters in China

On December 11, 2001, China became a member of the World Trade Organization. We
expect that China's entry into the World Trade Organization will be a great
benefit. We anticipate that it will improve economic relations between the
United States and China and increase the speed of its economic reform process.
As a result of China's entry industrial tariffs will be reduced, there will be
an increased liberalization regarding trade provisions, increases in service and
other reforms that China must adhere to in accordance with its membership in the
World Trade Organization. However, China's entry into the World Trade
Organization is relatively recent and we anticipate that there will be friction
between China and other nations as China adjusts to the new requirements and
policies.  Additionally, on December 20, 2001 Congress ordered the
International Trade Commission to launch an examination into the tool, die and
industrial molding industries in order to determine whether local manufacturers
are suffering as a result of unfair trade practices from countries such as
China. The information will be compiled over a ten-month period. A negative
report from the International Trade Commission could potentially lead to
Congress enacting legislation which would cause us to lose our competitive
advantage.


Segment Information

Segment information is set forth in Note 22 to the Consolidated Financial
Statements referred to in the "Financial Statements and Supplementary Data"
section hereof and incorporated herein by reference.

                                       8
<PAGE>

Item 2. Property


We operate from an approximately 20,000 square foot facility located in
Farmingdale, New York. The facility is owned and operated by K&G Realty
Associates, a partnership owned by David L. Kassel, our Chairman, and Harry
Goodman, our Vice President. The mortgage on the premises in the amount of
$452,817 at December 28, 2001 is guaranteed by EHC. Our lease, currently under a
10-year extension, expires in December 2005. The annual rent is currently
approximately $161,000 per year, and provides for annual adjustments equal to
the greater of the increase in the Consumer Price Index or 5%. Pursuant to a
rider to the lease agreement dated as of March 1, 1998, we shall pay as
additional rent, any and all real property taxes for the demised premises in
excess of $26,000 per annum. In 2001, the real estate taxes were approximately
$35,000 and our share was $9,000. We believe that the property is suitable for
its presently foreseen use. We lease approximately 6,000 square feet of office
space in Shanghai, China for $5,300 a month. The lease is for a 24 month period
expiring February 28, 2003.


Item 3. Legal Proceedings

We have been named as a defendant in two employment discrimination actions
before the Division of Human Rights of the State of New York. During the year
ended December 28, 2001, one of these actions was settled for an immaterial
amount. We are vigorously defending the other action and believe that it is
without merit. As of December 28, 2001, we have made no provision for this legal
action.


Item 4. Bank Debt


In April, 2001, we, through our subsidiary EHC, entered into a credit agreement
with the Connecticut Bank of Commerce to provide up to $1.5 million dollars in a
revolving credit line for EHC's working capital purposes and to allow EHC to
repay monies owed to approved affiliates. EHC is barred from obtaining loans
under the revolving credit line if the aggregate amount of the loans exceeds a
formula specified in the credit agreement. All monies loaned under the credit
line are to be paid in full on April, 2003. Interest on the monies loaned is due
in monthly installments at the rate of 1 3/4 % per annum above Connecticut Bank
of Commerce's prime commercial lending rate (6.5% at December 28, 2001).

         The credit agreement will terminate on April, 2003, or earlier upon an
event of default. However, the credit agreement may be renewed for periods of
time up to one year after April, 2003, unless a party to the agreement notifies
the other party that it does not wish to renew the agreement. The loan is
secured by almost all of our assets and the obligations due under such loan are
guaranteed (to the extent set forth in executed guarantee agreements) by ISS,
IPT, and CDP. The loan is also guaranteed by Andrew Franzone, Harry Goodman and
David L. Kassel, each guarantee limited to $250,000.

The credit agreement requires us to provide the bank with financial reports and
statements. The agreement provides that, among other requirements, we maintain a
tangible net worth of at least $1,750,000 from the date of the agreement to and
including December 30, 2001 and $2,000,000 through April 2003, when the
outstanding balance is due. The credit agreement contains a formula, based on
our accounts receivable that determines the portion of the $1.5 million dollars
which we may borrow at any time. At December 28, 2001 based on this formula we
were permitted to borrow up to approximately $798,000.  The balance
outstanding on the line of credit at December 28, 2001 amounted to $511,808.


                                       9
<PAGE>

At December  28,  2001,  the Company  was below the minimum  tangible  net worth
amount required in its covenant with the bank which  constitutes a breach of the
credit line agreement.  The Company and the bank are currently in discussions to
amend the minimum tangible net worth covenant to the credit line agreement.  The
amendment,  when  executed,  would  have the  effect of curing the breach of the
tangible  net worth  covenant  for the last  quarter of fiscal year 2001 and the
first  quarter of fiscal year 2002 and  establishing  a new  tangible  net worth
covenant  for the balance of fiscal year 2002.  There is no  assurance  that the
Company  will be able to  satisfactorily  negotiate  an  amendment to the credit
agreement with the bank. In the event that the Company is unable to do so, there
can be no  assurance  that the  Company  will be able to find  other  sources of
credit or working capital in which event operations of the Company would have to
be limited.

We and all of our subsidiaries are barred from taking on additional debt except
for the following:

         o debt to the Connecticut Bank of Commerce;

         o trade payables in the ordinary course of business;

         odebt covered under the terms of a Debt Subordination Agreement with
           the Connecticut Bank of Commerce;

         o debt covered under the terms of an Intercreditor Agreement among the
         Long Island Development Company and the Connecticut Bank of Commerce;
         and

         o debt under a loan or equipment lease for the sole purpose of
         acquiring machinery and equipment not to exceed $50,000 in the
         aggregate during each fiscal year.



Item 4. Submission of Matters to a vote of Security Holders.
------------------------------------------------------------

The Company held its Annual Meeting of Stockholders on August 15, 2001. At the
Annual Meeting, our stockholders voted (i) to elect David Kassel, Andrew
Franzone, Harry Goodman, Mitchell Solomon, Bao-Wen Chen, and Carl Seldin Koerner
to serve as directors of the Company until the 2002 Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified; (ii) to approve an amendment to our Certificate of Incorporation to
change our name from ChinaB2Bsourcing.com, Inc. to International Smart Sourcing,
Inc., each as described in our Proxy Statement distributed to stockholders in
connection with the Annual Meeting. The election of directors and the amendment
to change our name were both approved by a majority vote of stockholders


                                       10
<PAGE>

                                     Part II


Item 5. Market for Common Equity and Related Matters


We completed our initial public offering pursuant to a Registration Statement on
Form SB-2 Registration No. 333-48701, declared effective on April 23, 1999.
As of February 4, 2002, we had outstanding 3,760,934 shares of Common Stock $
..001 par value ("Common Stock"). Our Common Stock is traded on the NASDAQ
Bulletin Board under the symbol ISSG.

 The following table sets forth the high and low bid prices for the Common Stock
as reported on the Nasdaq Small Cap. The high and low bid prices reflect
inter-dealer prices, without mark-up, mark-down or commission, and may not
represent actual transactions.

                                           Common Stock Sale Prices
                                           -------------------------
Fiscal 2001                                High                  Low
--------------------------------------------------------------------
First Quarter                              4.875              3.3125
Second   Quarter                           5.80               3.05
Third Quarter                              5.20               4.15
Fourth Quarter                             5.20               4.00




                                          Common Stock Sale Prices
                                          -------------------------
Fiscal 2000                               High                  Low
--------------------------------------------------------------------
First Quarter                             7.625                5.50
Second   Quarter                          8.3125               5.00
Third Quarter                             7.00                 5.50
Fourth Quarter                            6.9375               2.50



On February 4, 2002 there were approximately 24 holders of record of our
3,760,934 outstanding shares of Common Stock.

On February 4, 2002, the last sale price of the Common Stock as reported on the
Nasdaq Bulletin Board was $ 4.00.

There are 1,437,500 warrants with an exercise price of $5.00 per share, that
were issued in connection with the Company's IPO in April 1999, that have been
re-priced to $4.85 per share with 1,481.959 shares now available for purchase.
The number of shares of common stock issuable upon exercise of the warrants and
the exercise price of each warrant, was adjusted to reflect the dilution that
resulted from the private placement of 333,334 shares of the Company's common
stock, that were issued below market in June and July 2000. In addition to the
warrants issued with the IPO, 125,000 underwriter's warrants, originally granted
with an exercise price of $7.20 per share, were likewise adjusted due to the
dilution that occurred with the private placement, to $6.91 per share. However,
unlike the warrants issued with the IPO, the numbers of shares available to be
purchased by the underwriter's warrants have not been effected by the dilution.



                                       11
<PAGE>


Dividend Policy

We intend, for the foreseeable future, to retain future earnings for use in our
business. The payment of cash dividends, if any, in the future is within the
discretion of the Board of Directors and will depend upon our earnings, capital
requirements, financial condition, and other relevant factors.


Item 6. Management's Discussion and Analysis


The following discussion should be read in conjunction with the historical
financial statements, including the notes thereto, of the Company included
elsewhere herein.


Results of Operations

For the year ended December 28, 2001 compared to the year ended December 29,
2000:

Net Sales

Net Sales for the year ended December 28, 2001 were $9,159,643, as compared to
net sales of $8,101,634 for the year ended December 29, 2000. The increase of
$1,058,009, or 13 % for the period was attributed to an increase in shipments
under the contract with the Defense Supply Center in Philadelphia (DSCP) and an
increase in sales volume by IPT of completed production and tooling orders.

Gross Profits

The Company realized an overall gross profit margin percentage for the year
ended December 28, 2001 of 30.93%, which represents a decrease from the 31.55%
experienced during the year ended December 29, 2000. This decrease can be
attributed to the increase in sales of tooling. Orders for tooling are typically
followed by production orders. Tooling generally has a lower gross profit then
product manufactured from tooling.

Selling and Shipping

Selling and shipping expenses for the year ended December 28, 2001 were
$1,150,055 as compared to $1,082,475 for the year ended December 29, 2000. The
increase of $67,580 or 6% for the period is primarily attributable to an
increase in consulting fees.

General, and Administrative Expenses

General and administrative expenses for the year ended December 28, 2001 were
$2,678,003 as compared to $2,901,851 for the year ended December 29, 2000. The
decrease of $223,848 or 8% for the period is primarily attributable to a
reduction in factory and office expenses of $100,848 and a reduction in
accounting fees of $123,000.

Impairment Charge - Long Lived Assets

In December 2001 the Company evaluated its carrying value for the fixed assets,
related to its 1998 acquisition of CDP, and determined that impairment in value
had incurred for the remaining unamortized balance of the fixed assets of
$254,613. During December 2000, the Company evaluated its carrying value for the

                                       12
<PAGE>

license and goodwill and determined that impairment in value had occurred,
related to its 1998 acquisition of CDP license and goodwill of $400,000 and
$1,390,400 respectively.

Reserve for Loan and Interest Receivable

As discussed on page 11, the Company in the year ended December 29, 2000
incurred a charge of $517,616 related to the reserve of the entire note and
interest receivable due from Azurel Ltd.

Liquidity and Capital Resources

The Company's liquidity needs arise from working capital requirements, capital
expenditures, and principal and interest payments. Historically, the Company's
primary source of liquidity has been cash flow generated internally from
operations. Because the cash flow was insufficient to meet the Company's cash
needs, the Company supplemented its cash needs with bank borrowings and long
term equipment financing. The Company's cash decreased to $146,478 on December
28, 2001 from $188,213 on December 29, 2000.

Cash flow used in operating activities was $116,096 for the year ended December
28, 2001 on a net loss of $1,271,854. The decrease in accounts receivable is the
result of controlled collection efforts. The decrease in inventory is the result
of the Company's continued control and monitoring of government components. The
increase in prepaid expenses and other current assets is a result of deposits
placed and costs associated with tooling and production orders in process but
not completed at December 28, 2001. Cash used in investing activities for the
year ended December 28, 2001 was $170,364, which consisted of cash for the
purchase of tooling, molds, machinery and equipment and a decrease in notes
receivable from related parties.

Net cash provided by financing activities for the year ended December 28, 2001
was $244,725. Cash of $608,217 was provided from the bank line of credit. Cash
of $268,857 was used to make principal payments on loans and the bank credit
line. Cash of $94,635 to make capital lease repayments.

In April 2001, we closed on a revolving line of credit agreement with a bank
that provides for a maximum borrowing of up to $1,500,000, subject to certain
conditions, at an interest rate of prime plus 1.75%. The loan is secured by
substantially all the assets of the company and is unconditionally guaranteed by
three officers/shareholders, each limited to $250,000. The agreement provides
that, among the other requirements, we maintain a tangible net worth of at least
$1,750,000 from the date of the agreement to and including December 30, 2001 and
$2,000,000 through April 2003, when the outstanding balance is due.

At December 28, 2001, the Company was below the minimum tangible net worth
amount required in its covenant with the bank which constitutes a breach of the
credit agreement. The Company and the bank are currently in discussions to amend
the minimum tangible net worth covenant to the credit agreement. The amendment,
when executed, would have the effect of curing the breach of the tangible net
worth covenant for the last quarter of fiscal year 2001 and the first quarter of
fiscal year 2002 and establishing a new tangible net worth covenant for the
balance of fiscal year 2002. There is no assurance that the Company will be able
to satisfactorily negotiate an amendment to the credit agreement with the bank.
In the event that the Company is unable to do so, there can be no assurance that
the Company will be able to find other sources of credit or working capital in
which event operations of the Company would have to be limited.


                                       13
<PAGE>

The auditors' report on the Company's financial statements included elsewhere
herein contains an explanatory paragraph about the Company's ability to continue
as a going concern. The Company expects that it will require a minimum of
$550,000 over the next twelve months to fund its operations and meet its debt
service obligation. As of April 8, 2002, the Company has approximately $235,000
of availability on its credit line. In addition, management is seeking to raise
additional funds through additional debt and/or equity financing, although there
is no assurance it will be successful in securing such financing. If the Company
is not successful, the Company may need to make certain reductions in its
operations to maximize its available cash resources until additional funds can
be raised.


Note Receivable  Reserve and Exclusive Supply Agreement  between the Company and
Azurel Ltd.

We entered into an exclusive supply agreement with Azurel Ltd. (Azurel) dated
July 7, 1999 ("the Agreement"). Pursuant to the Agreement, we loaned $500,000 to
Azurel in exchange for the exclusive right to supply Azurel with any and all
products imported by or on behalf of Azurel. In addition, the Company received
warrants, expiring December 31, 2004, to purchase 100,000 shares of Azurel
common stock at a purchase price of $1.50 per share. The Company has not
received any orders through December 2001.

On December 23, 1999, the terms of the loan agreement were extended allowing
principal payments to begin on January 15, 2000. In consideration for extending
the principal payments, the Company received an additional 50,000 warrants to
purchase shares of Azurel Ltd. Common stock at an exercise price of $1.50 per
share.

In June 2000, the Company renegotiated the loans it had made to Azurel Ltd. This
agreement granted the Company a security interest in the inventory of Azurel as
collateral for the loan and accrued interest.

In consideration of the security agreement, the Company granted an extension of
maturity of the notes to January 31, 2001.

In February 2001, the borrower declared bankruptcy under Chapter 11 of the
Federal bankruptcy code in the Bankruptcy Court for the District of New Jersey,
Newark Division. As of December 29, 2000 the Company had reserved for the entire
note and interest receivable aggregating $517,616.

On January 29, 2002, the Bankruptcy Court approved Azurel's Plan of
Reorganization. Pursuant to the terms of the Plan, the Company is scheduled to
receive 1,682,844 shares of the reorganized debtor which represents
approximately 3 shares for each dollar owed to the Company at the time of the
filing of the bankruptcy petition, which aggregated to 517,616.

Cautionary Factors Regarding Future Operating Results

The matters discussed in this form 10-KSB other than historical material are
forward-looking statements. Any such forward-looking statements are based on
current expectations of future events and are subject to risks and uncertainties
which could cause actual results to vary materially from those indicated. Actual
results could differ due to a number of factors, including negative developments
relating to unforeseen order cancellations or push outs, the company's strategic
relationships, the impact of intense competition and changes in our industry.
The Company assumes no obligation to update any forward-looking statements as a
result of new information or future events or developments.


                                       14
<PAGE>


Item 7. Financial Statements


Index to Consolidated Financial Statements
                                                                     Page

Independent Auditors' Report                                         F-1
Consolidated Balance Sheet                                           F-2
Consolidated Statement of Operations                                 F-3
Consolidated Statement of Changes in Stockholders Equity             F-4
Consolidated Statement of Cash Flows                                 F-5
Notes to Consolidated Financial Statements                           F-6 to F-19











                                       17


<PAGE>



                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors of
International Smart Sourcing, Inc. and Subsidiaries
Farmingdale, New York


We have audited the accompanying consolidated balance sheet of International
Smart Sourcing, Inc. (formerly ChinaB2Bsourcing.com, Inc.) and Subsidiaries, as
of December 29, 2001 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 28, 2001 and
December 29, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 misstatements. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Smart Sourcing, Inc. and Subsidiaries as of December 28, 2001 and the
consolidated results of their operations and their cash flows for the years
ended December 28, 2001 and December 29, 2000 in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2(a) to the
financial statements, the Company has suffered recurring losses and is not in
compliance with a financial covenant on their credit line, which raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2(a). The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                                 /s/Feldman Sherb & Co., P.C.
                                                    ----------------------------
                                                    Feldman Sherb & Co., P.C.
                                                    Certified Public Accountants

New York, New York
March 1, 2002



                                       F-1
<PAGE>

               INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
             (FORMERLY CHINAB2BSOURCING.COM, INC. AND SUBSIDIARIES)

                           CONSOLIDATED BALANCE SHEET

                               December 28, 2001


                                     ASSETS

CURRENT ASSETS:
     Cash                                                      $        146,478
     Accounts receivable - net of allowance for
        doubtful accounts of $15,000                                    776,400
     Note receivable-related party                                       50,983
     Inventories                                                      1,239,621
     Prepaid expenses and other current assets                          448,164
                                                                  --------------
        TOTAL CURRENT ASSETS                                          2,661,646

Property and equipment - net                                            630,408

Note receivable-related party                                           104,710

Other assets                                                             79,514
                                                                  --------------
                                                               $      3,476,278
                                                                  ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable and accrued expenses                     $      1,148,217
     Deferred revenue                                                   201,632
     Line of credit                                                     511,808
     Current portion of long tem debt
     (including $36,756 to officer/shareholders)                        119,433
     Current portion of obligations under capital leases                 66,480
                                                                  --------------

        TOTAL CURRENT LIABILITIES                                     2,047,570

     Long term debt (including $122,160 to officer/shareholders)        302,786
     Obligations under capital leases                                    87,089
                                                                  --------------
        TOTAL LIABILITIES                                             2,437,445
                                                                  --------------


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Common Stock, $0.001 par value, 10,000,000 shares authorized,
        issued and outstanding 3,760,934                                  3,761
     Additional paid-in capital                                       7,971,928
     Accumulated deficit                                             (6,936,856)
                                                                  --------------
        TOTAL STOCKHOLDERS' EQUITY                                    1,038,833
                                                                  --------------
                                                               $      3,476,278
                                                                  ==============

                See notes to consolidated financial statements.

                                     F - 2
<PAGE>
               INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
             (FORMERLY CHINAB2BSOURCING.COM, INC. AND SUBSIDIARIES)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                    Years Ended
                                        ----------------------------------------
                                          December 28,           December 29,
                                             2001                   2000
                                        ------------------    ------------------

NET SALES                               $        9,159,643    $       8,101,634
COST OF GOODS SOLD                               6,326,445            5,545,613
                                        ------------------    ------------------
       GROSS PROFIT                              2,833,198            2,556,021
                                        ------------------    ------------------


OPERATING EXPENSES
       Selling and shipping                      1,150,055            1,082,475
       General and administrative                2,678,003            2,901,851
       Impairment charge - long lived assets       254,613            1,790,400
       Reserve for loan and interest receivable          -              517,616
                                        ------------------    ------------------
           TOTAL OPERATING EXPENSES              4,082,671            6,292,342
                                        ------------------    ------------------


LOSS FROM OPERATIONS                            (1,249,473)          (3,736,321)

       Interest and other income                   142,535               96,178
       Interest and other expenses                (164,916)            (193,847)
                                        ------------------    ------------------
NET LOSS                                $       (1,271,854)   $      (3,833,990)
                                        ==================    ==================

NET LOSS PER SHARE - BASIC AND DILUTED  $           (0.34)    $           (1.08)
                                        ==================    ==================
WEIGHTED AVERAGE COMMON SHARES                  3,735,000             3,545,000
                                        ==================    ==================


                 See notes to consolidated financial statements.

                                     F - 3
<PAGE>
               INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
             (FORMERLY CHINAB2BSOURCING.COM, INC. AND SUBSIDIARIES)

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>




                                                      Common Stock           Additional
                                               ---------------------------     Paid In      Accumulated
                                                 Shares         Amount         Capital         Deficit         Total
                                               ------------   ------------   ------------   -------------   ------------
<S>              <C> <C>                         <C>        <C>            <C>            <C>             <C>
Balance December 31, 1999                        3,382,500  $       3,383  $   6,852,204  $   (1,831,012) $   5,024,575

    Net loss                                             -              -              -      (3,833,990)    (3,833,990)
    Issuance of stock from exercise of warrants     10,100             10         50,490               -         50,500
    Sale of stock - private placement              333,334            333        813,019               -        813,352
                                               ------------   ------------   ------------   -------------   ------------
Balance December 29, 2000                        3,725,934          3,726      7,715,713      (5,665,002)     2,054,437

    Net loss                                             -              -              -      (1,271,854)    (1,271,854)
    Issuance of stock to consultants                35,000             35        168,715               -        168,750
    Issuance of stock options to consultants             -              -         87,500               -         87,500
                                               ------------   ------------   ------------   -------------   ------------
Balance December 28, 2001                        3,760,934  $       3,761 $    7,971,928 $    (6,936,856)$    1,038,833
                                               ============   ============   ============   =============   ============

</TABLE>






                See notes to consolidated financial statements.

                                      F-4
<PAGE>
               INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
             (FORMERLY CHINAB2BSOURCING.COM, INC. AND SUBSIDIARIES)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                  Years Ended
                                                                                         ------------------------------
                                                                                         December 28,    December 29,
                                                                                             2001            2000
                                                                                         -------------   --------------
Cash flows from operating activities:
<S>                                                                                    <C>            <C>
     Net loss                                                                          $   (1,271,854)$     (3,833,990)
                                                                                         -------------   --------------
Adjustments to reconcile net loss to net cash used in operating activities:
        Non-cash expenses related to issuance of stock and stock warrants                     256,250                -
        Depreciation                                                                          215,580          265,258
        Amortization                                                                            6,555          223,800
        Forgiveness of interest payable to officer                                            (21,444)               -
        Impairment charge - long lived assets                                                 254,613        1,790,400
        Reserve for loan and interest receivable                                                    -          517,616

Changes in assets and liabilities:
     Accounts receivable                                                                      551,803         (749,880)
     Inventories                                                                              119,353         (571,643)
     Prepaid expenses and other current assets                                               (158,085)          (9,691)
     Other assets                                                                             207,666          184,625
     Accounts payable and accrued expenses                                                   (308,470)         694,321
     Due to related party                                                                     (61,752)          61,752
     Deferred revenue                                                                          93,689          107,943
                                                                                         -------------   --------------
           Total adjustments                                                                1,155,758        2,514,501
                                                                                         -------------   --------------
Net cash used in operating activities                                                        (116,096)      (1,319,489)
                                                                                         -------------   --------------
Cash flows from investing activities:
     Note receivable from related parties                                                      54,563           42,894
     Expenditures for property and equipment                                                 (224,927)        (404,750)
                                                                                         -------------   --------------
Net cash used in investing activities:                                                       (170,364)        (361,856)
                                                                                         -------------   --------------
Cash flows from financing activities:
     Capital lease repayments                                                                 (94,635)         (78,347)
     Sale of common stock and exercise of warrants                                                  -          863,852
     Proceeds from borrowings                                                                 608,217          200,000
     Principal payments and repayment of loans                                               (268,857)      (1,108,212)
                                                                                         -------------   --------------
Net cash  provided by (used in) financing activities                                          244,725         (122,707)
                                                                                         -------------   --------------
Decrease in cash                                                                              (41,735)      (1,804,052)

Cash - beginning of year                                                                      188,213        1,992,265
                                                                                         -------------   --------------
Cash - end of year                                                                     $      146,478 $        188,213
                                                                                         =============   ==============
Supplemental disclosure of cash flow information:
     Cash paid during the year for interest                                            $      164,916 $        170,757
                                                                                         =============   ==============
     Purchase of equipment through capital leases payable                              $       77,011 $        159,664
                                                                                         =============   ==============
     Conversion of accounts payable to note payable                                    $       12,982 $        150,000
                                                                                         =============   ==============

</TABLE>
                 See notes to consolidated financial statements.

                                      F - 5

<PAGE>

               INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
              (Formerly CHINAB2BSOURCING.COM INC. AND SUBSIDIARIES)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               YEARS ENDED DECEMBER 28, 2001 AND DECEMBER 29, 2000


1.   BUSINESS OF THE COMPANY

     International Smart Sourcing,  Inc. (formerly  ChinaB2Bsourcing.com,  Inc.)
     ("International")  was  incorporated  in  February  1998 in  Delaware  as a
     holding company for the purpose of acquiring the common stock of Electronic
     Hardware  Corp.  ("EHC")  and  Compact  Disc  Packaging  Corp.  ("CDP")  in
     contemplation of an initial public offering of  International's  stock (the
     "Offering"),  which was successfully  completed in April of 1999. On May 7,
     1999   International   formed  a  company  called   International   Plastic
     Technologies, Inc., ("IPT") a Delaware corporation.

     Hereinafter,  International  Smart  Sourcing,  Inc.,  EHC, CDP, and IPT are
     collectively   referred  to  as  the   "Company".   On  August  17,   2001,
     ChinaB2Bsourcing.com,   Inc.  changed  its  name  to  International   Smart
     Sourcing, Inc.

     The Company and its subsidiaries specialize in the marketing,  out-sourcing
     and  manufacturing  of injection  molded plastic  components,  products and
     assemblies used in industrial, consumer and military products. The Company,
     performs  their  manufacturing  functions,  and  other  services  for their
     customers,  through  their  United  States  facilities  and  through  their
     out-sourcing contacts in the Peoples Republic of China.


2.   SIGNIFICANT ACCOUNTING POLICIES

     (a)  Basis of  Presentation - The  accompanying  financial  statements have
          been  prepared  assuming  that the  Company  will  continue as a going
          concern.  The Company has incurred losses of approximately  $1,272,000
          and $3,834,000, for the years ended December 28, 2001 and December 29,
          2000,  respectively.  In addition, as discussed in Note 8, the Company
          is not in  compliance  with their credit line's  minimum  tangible net
          worth covenant.  These  conditions raise  substantial  doubt about the
          Company's ability to continue as a going concern.  Management's  plans
          with respect to this matter include,  raising additional funds through
          equity  or  debt   financing  and  ultimately   achieving   profitable
          operations.  The Company is in discussions  with the bank to amend the
          minimum tangible net worth  requirement.  The  accompanying  financial
          statements  do not include  any  adjustments  that might be  necessary
          should the Company be unable to continue as a going concern.

     (b)  Fiscal Year - The Company  operates on a "52-53 Week"  reporting  year
          ending the last Friday of the month.

                                      F-6
<PAGE>

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

     (d)  Recognition of Revenue - Income from sales of goods is recognized when
          the orders are completed and shipped,  provided that collection of the
          resulting  receivable is reasonably assured.  Substantially all of the
          Company's goods are shipped F.O.B.  shipping point.  Amounts billed to
          customers are recorded as sales while the shipping  costs are included
          in cost of sales.

     (e)  Principles of  Consolidation - The consolidated  financial  statements
          include the accounts of the Company and its subsidiaries. All material
          intercompany transactions have been eliminated.

     (f)  Inventories -  Inventories  are stated at the lower of cost or market.
          Cost is determined  principally by the use of the first-in,  first-out
          method.

     (g)  Depreciation  and  Amortization - Fixed assets are  depreciated on the
          straight  line basis over the  estimated  useful  lives of the related
          assets.  Leasehold  improvements  are being  amortized on the straight
          line  basis  over the  shorter  of the  estimated  useful  life of the
          improvements, which is 10 years, or the life of the lease.

     (h)  Income  Taxes  -  The  Company  recognizes  deferred  tax  assets  and
          liabilities based on the difference between the financial  statements'
          carrying amount and the tax basis of the assets and liabilities, using
          the  effective  tax rates in the years in which  the  differences  are
          expected to reverse. A valuation allowance related to the deferred tax
          asset is also  recorded  when it is  probable  that some or all of the
          deferred tax asset will not be realized.

     (i)  Net Loss  Per  Share - Net loss  per  share is  computed  based on the
          weighted  average of number of common shares  outstanding  during each
          period.  Potential  common shares are included in the  computation  of
          diluted per share amounts  during each period that income is reported.
          In periods that the Company  reports a loss,  potential  common shares
          are not included in the diluted earnings per share  calculation  since
          the   inclusion   of  those  shares  in  the   calculation   would  be
          anti-dilutive.

     (j)  Accounting  for  Long-Lived  Assets - The Company  reviews  long-lived
          asserts for impairment  whenever  circumstances  and situations change
          such that there is an indication that the carrying  amounts may not be
          recovered. Recoverability of assets to be held and used in operations,
          is measured by a comparison  of the  carrying  amount of the assets to
          the future net cash flows expected to be generated


                                      F-7
<PAGE>

          by the  assets.  If such assets are  considered  to be  impaired,  the
          impairment  to be  recognized  is  measured by the amount by which the
          carrying amount of the assets exceeds the fair value of the assets.

     (k)  Stock Based  Compensation  - The Company  accounts for its stock based
          compensation  plan under APB  Opinion  No. 25,  "Accounting  for Stock
          Issued  to  Employee,"  ("APB  25").  The  Company  has  also  adopted
          Statement of Accounting Standards No. 123, "Accounting for Stock-Based
          Compensation," (SFAS 123) and for disclosure purposes, Has adopted the
          proforma disclosure requirements of SFAS 123

     (l)  New Accounting Standards

          (i)  In July 2001,  the Financial  Accounting  Standards  Board issued
               Statement  of  Financial  Accounting  Standards  ("SFAS") No. 141
               "Business Combinations" and SFAS No. 142 "Goodwill and Intangible
               Assets ("SFAS No. 142").  SFAS No. 141 requires that all business
               combinations initiated after June 30, 2001 be accounted for using
               the purchase  method of  accounting  and prohibits the use of the
               pooling-of-interests  method for such transactions.  SFAS No. 142
               applies to all  goodwill  and  intangible  assets  acquired  in a
               business  combination.  Under  the new  standard,  all  goodwill,
               including  goodwill  acquired  before initial  application of the
               standard,  should  not be  amortized  but  should be  tested  for
               impairment at least annually at the reporting  level,  as defined
               in the standard.  Intangible assets other than goodwill should be
               amortized  over their useful lives and reviewed for impairment in
               accordance  with SFAS no. 121. The new standard is effective  for
               fiscal years  beginning after December 15, 2001. The Company must
               adopt this standard on December 29 2001. As of December 28, 2001,
               the Company had no unamortized goodwill.

          (ii) In August 2001, the FASB issued Statement of Financial Accounting
               Standards No. 144 ("SFAS 144"), "accounting for the Impairment or
               Disposal of Long-lived Assets".  SFAS 144 superceded Statement of
               Financial  Accounting  Standards  No.  121,  "accounting  for the
               Impairment of Long-lived Assets and Assets to be Disposed of" and
               the accounting and reporting provisions of Accounting  Principles
               Board  Opinion No. 30,  "reporting  the Results of  Operations  -
               Reporting the Effects of Disposal of a Segment of a Business, and
               Extraordinary,  Unusual  and  Infrequently  Occurring  Events and
               Transaction".  SFAS 144 also amends Accounting  Research Bulletin
               No. 51,  "Consolidated  Financial  Statements,"  to eliminate the
               exception to consolidation  for a subsidiary for which control is
               likely  to be  temporary.  The  provision  of  SFAS  144  will be
               effective for fiscal years beginning after December 15, 2001. The
               Company has not yet  determined  the effect SFAS 144 will have on
               its  financial  position  or  results  of  operations  in  future
               periods.

                                      F-8
<PAGE>


3.       CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

         Financial instruments that potentially subject the Company to
         significant concentrations of credit risk consists of cash and trade
         receivables. At times, the cash in any one bank account may exceed the
         Federal Deposit Insurance Corporations $100,000 limit. The Company
         places its cash with high credit quality financial institutions. In
         regards to trade receivables, management believes the risk is
         relatively limited due to the credit assessment of its customers.

         During the years ended December 28, 2001 and December 29, 2000, two
         customers accounted for approximately 54% and 38%, respectively of the
         Company's sales. The customer also accounted for approximately 47% of
         the Company's outstanding accounts receivable as of December 28, 2001.


4.       INVENTORIES

         Inventories consist of the following at December 28, 2001:

                 Raw Materials                    $            61,344
                 Work in Process                               64,380
                 Finished Goods                               724,679
                 Components                                   389,218
                                                      ----------------
                                                  $         1,239,621
                                                      ================


5.       PROPERTY AND EQUIPMENT

         Property and equipment are comprised of the following at December 28,
         2001:



                                               Life
                                            ---------------     ----------------
              Machinery and Equipment        5-10 Years       $       3,496,388
              Tools, Dies and Molds          5-10 Years               1,526,665
              Leasehold Improvements         10 Years                   276,883
              Office Furniture and Fixtures  5 Years                    218,576
                                                                ----------------
                                                                      5,518,512
                   Less: Accumulated Depreciation                    (4,888,104)
                                                                ----------------
                                                              $         630,408
                                                                ================

         At December 28, 2001 the Company had $373,186 of its property and
         equipment under capital leases, with accumulated depreciation of
         $171,583.

         During the year ended December 31, 2001, the Company determined that
         the value of the fixed assets of its CDP subsidiary has been impaired
         due to CDP's losses since inception, with only minimally expected
         revenues in the near term. Accordingly, the Company incurred a charge
         for the remaining umamortized balance of $254,613.


                                      F-9
<PAGE>

6.       INTANGIBLE ASSETS

         In March 1998, the Company entered into an exclusive license agreement
         with a corporation, which grants the Company the rights to manufacture,
         market and sell a compact disc packaging system.

         During December 2000, the Company evaluated its carrying value for the
         license, and the goodwill that resulted from the purchase of CDP. The
         Company has had only minimal sales of its compact disc packaging
         product. In addition, management was unable to reasonably estimate
         expected cash flows from future revenues to substantiate the carrying
         value. Based on these circumstances management determined that an
         impairment in value had occurred for the remaining unamortized balance
         of the license and goodwill of $400,000 and $1,390,000, respectively.

         In August 2001, the Company's exclusive license agreement was
         terminated due to non payment of minimum royalty fees.


7.       OBLIGATIONS UNDER CAPITAL LEASES

         The Company leases certain equipment under various capital lease
         arrangements expiring in December 2002 through November 2005. Following
         is a summary of future minimum payments under capital leases:

                    2002                                          $      86,068
                    2003                                                 45,798
                    2004                                                 34,798
                    2005                                                 13,381
                                                                 ---------------

                                                                        180,045
                    Less: amounts representing interest                  26,476
                                                                 ---------------

                    Present value of lease payments                     153,569
                    Less: current portion                                66,480
                                                                 ---------------

                    Long-term portion of capital lease obligations $     87,089
                                                                 ===============


8.       LINE OF CREDIT

         In March 2001, the Company entered into a line of credit agreement with
         a commercial bank. The line has a maximum credit limit of $1,500,000,
         which is advanced against the following criteria: (a) up to 80% of
         eligible accounts receivable, not more than 90 days from the invoice
         date, (b) up to 50% of eligible finished goods inventory maximized at
         $500,000 and (c) up to 70% of the liquidation value of machinery and
         equipment owned by the Company's EHC subsidiary, maximized at $500,000,
         based on an appraisal value by an appraiser acceptable to the
         commercial bank. As of December 28, 2001, the Company has drawn
         $511,808 from their available credit line.

                                      F-10
<PAGE>


         The line of credit agreement bears interest at prime plus  1.75% (6.50%
         at December 28, 2001) for  advances up to  $1,500,000,   and prime plus
         3.75% for  advances  greater  than  $1,500,000.   The credit  agreement
         required  the  Company  to  maintain  a minimum  tangible  net worth of
         $2,000,000 as of  December 28, 2001. As of such date, the Company had a
         tangible net worth  of  approximately  $1,039,000 and therefore was not
         in  compliance  with  the  minimum  tangible  net worth  covenant.  The
         Company is in discussions  with  the bank to amend the minimum tangible
         net worth requirement.  There is  no assurance that the Company will be
         able to satisfactorily  negotiate  an amendment to the credit agreement
         with the bank. In the event that the  Company is unable to do so, there
         can be no  assurance  that  the  Company  will be  able to find  other
         sources of credit or working capital in  which event  operations of the
         Company  would have to be limited.  This  credit line expires two years
         from the date of issuance.

9.       LOANS PAYABLE

         Loans payable are comprised of the following at December 28, 2001:

         (a)Loan agreement payable in monthly  installments of $2,903 of
            principal  and interest at 7% per annum due  February  2007.
            The   loan   is   guaranteed   by   the   Company's    three
            officers/shareholders....................................  $ 150,652

         (b)Various loans payable to  officer/shareholders,  all bearing
            interest at 10% per annum,  payable in monthly  installments
            ranging from $2,125 to $4,840 including interest.  The loans
            are due in dates  ranging  from July 2001  through  February
            2004.....................................................    158,916

         (c)In  December  2000  the  Company  converted  an  outstanding
            payable to an outside  consultant  into a loan  payable with
            monthly  installments of $4,840 of principal and interest at
            10% per annum due January 2004...........................    104,889

         (d)In July 2001 the Company converted an outstanding payable to
            the union  welfare  fund into a loan  payable  with  monthly
            installments  of $1,153 of principal and interest at 12% per
            annum due July 2002 .....................................      7,762
                                                                       ---------
                                                                         422,219
                  Less: current portion                                  119,433
                                                                       ---------
                  Long-term portion                                    $ 302,786
                                                                       =========

                                      F-11
<PAGE>

         Long term debt matures as follows:

                2002                  $            119,433
                2003                               122,553
                2004                                73,695
                2005                                67,625
                2006                                33,159
                Thereafter                           5,754
                                          -----------------
                                      $            422,219
                                          =================

         The  Company  estimates  that  the  fair  value  of  the  above  loans
         approximates their carrying value.


10.      STOCKHOLDERS' EQUITY

         a.    In June and July 2000,  the Company  sold an aggregate of 333,334
               shares of its common  stock at $3.00 per share  through a private
               placement.  Net proceeds from the offering after the underwriting
               commissions and other related fees were $813,352. In additions to
               commissions  and fees paid from the private  placement  proceeds,
               warrants  to  purchase  53,334  shares  of  common  stock,  at an
               exercise  price of $3.00 were  granted for  services  provided in
               connection with the private placement.

         b.    In July and September  2000,  the Company  issued an aggregate of
               10,100  shares of  common  stock,  pursuant  to the  exercise  of
               warrants at $5.00 per share, for net proceeds of $50,500.

         c.    In April 2001,  the Company  issued 10,000 shares of stock,  at a
               fair value of $68,750, pursuant to a consulting agreement.

         d.    In  April  2001,  the  Company  issued  options  to  purchase  an
               aggregate  of 25,000  shares of its common stock  exercisable  at
               $3.50  per  share  to  a  consultant   for   services   provided.
               Accordingly,  the  Company  has valued the  options at their fair
               value and has  recorded a charge to  operations  in the amount of
               $87,500.

         e.    In December  2001, the Company issued 25,000 shares of stock at a
               fair value of $100,000 pursuant to a consulting agreement.


11.      NOTE RECEIVABLE

         In July and August 1999, the Company loaned to another company (the
         "borrower") with which it had an exclusive supply agreement, an
         aggregate of $500,000 at an interest rate of 8% per annum. The Company
         received 150,000 warrants to purchase the common stock of the company
         to which it issued these loans. The original terms of the loan were to
         have the loan repaid by November 15, 1999. In June 2000, the Company

                                      F-12
<PAGE>

         renegotiated the loans, whereby a security interest, as collateral for
         the loan and accrued interest, was granted on the inventory of the
         borrower. In consideration for the security agreement, the Company
         granted an extension of maturity of the notes to January 31, 2001. In
         February 2001, the borrower declared bankruptcy under Chapter 11 of the
         Federal bankruptcy code. As of December 29, 2000, the Company reserved
         for the entire note and interest receivable aggregating $517,616. On
         January 29, 2002, The Bankruptcy Court approved the borrower's Plan of
         Reorganization. Pursuant to the terms of the Plan, the Company is
         scheduled to receive 1,682,844 shares of the reorganized debtor which
         represents approximately 3 shares for each dollar owed to the Company
         at the time of the filing of the bankruptcy petition.


12.      INCOME TAXES

         The  Company  accounts for income taxes  under  Statement  of Financial
         Accounting  Standards  No. 109,  Accounting for Income Taxes ("SFAS No.
         109"). SFAS No. 109 requires the recognition of deferred tax assets and
         liabilities for both the expected impact  of  differences  between the
         financial statements  and  tax basis of assets and  liabilities,  and
         for the expected  future tax  benefit  to  be derived from tax loss and
         tax credit  carry  forwards.  SFAS No. 109  additionally  requires the
         establishment of a valuation allowance to reflect the likelihood of
         realization of deferred tax assets.

         The major tax deferred asset (liability) items are as follows:

                                                     Years ended
                                       -----------------------------------------
                                       December 28, 2001       December 29, 2000
                                       ------------------      -----------------
         Depreciation                  $          14,000       $         20,000
         Amortization                                  -                 76,000
         Write-off of loan receivable                  -                176,000
         Impaired long lived assets               67,000                609,000
         Other                                         -                      -
         Net operating loss carryforwards      2,245,000              1,055,000
                                       ------------------      -----------------
                                               2,326,000              1,936,000
         Less: valuation allowance            (2,326,000)            (1,936,000)
                                       ------------------      -----------------
                                       $               -       $              -
                                       ==================      =================

                                      F-13
<PAGE>

         The income tax benefit differs from the amount computed by applying the
         statutory federal income tax rate to the loss before the income taxes
         income as follows:
<TABLE>
<CAPTION>
                                                                                        Years ended
                                                                         ------------------------------------------
                                                                         December 28, 2001      December 29, 2000
                                                                         ------------------     -------------------
<S>                                                                 <C>                     <C>
         Income tax benefit computed at the Federal statutory rate  $             432,000   $         1,304,000
         Effect of permanent differences                                          (89,000)             (885,000)
         Effect of temporary differences                                          (14,000)              (20,000)
         Deductions for which no benefit is recognized                           (329,000)             (399,000)
                                                                         ------------------     -------------------
                                                                    $                   -   $                 -
                                                                         ==================     ===================
</TABLE>

         The Company has a net operating loss carryforward for tax purposes
         totaling approximately $6,600,000 at December 28, 2001 expiring between
         the years 2010 through 2021. The resulting deferred tax asset of
         approximately $2,245,000 has been offset by a corresponding valuation
         allowance.


13.      RETIREMENT PLAN

         The Company sponsors a 401(k) savings plan covering all non-union
         employees who have attained the age of 21 and have completed 3 months
         of service. Participants may contribute up to 15% of their annual
         compensation, subject to certain limitations. In addition, the Company
         may make contributions to the plan. During the years ended December 28,
         2001 and December 29, 2000, the Company did not make any contributions
         to the plan.

14.      CASH GAIN SHARING PROGRAM

         The Company's full time, non-union employees and other key company
         employees receive additional compensation as determined by cash
         profits, as defined, under the Cash Gain Sharing Program. For the years
         ending December 28, 2001 and December 39, 2000 there was no additional
         compensation earned.


15.      STOCK OPTION AND GRANT PLAN

         In March 1998, the Company adopted the Stock Option and Grant Plan (the
         "Plan") which as amended in June 2000 provides for an aggregate grant
         of 800,000 options to purchase shares of the Company's common stock.
         Options may be granted to employees, officers, directors, consultants
         and independent contractors. Under the Plans, options may be issued for
         periods up to 10 years and become exercisable in varying amounts based
         on a vesting schedule. Generally, options are granted at prices equal
         to market value on the date of the grant with lives of five years.

                                      F-14
<PAGE>

         In April 2000, the Company granted 310,500 stock options to key
         employees and a member of the board of directors at an exercise price
         of $5.125 per share. The 60,500 options for the employees vest on the
         second anniversary of the agreement and expire on the fifth anniversary
         of the agreement. The remaining 250,000 options were granted to a
         member of the board of directors, vest at 20% per year, over the five
         year life of the options.

         In June and July 2000, the Company granted warrants to purchase 53,334
         shares of common stock, at an exercise price of $3.00, for services and
         fees in connection with a private placement for the sale of common
         stock. Such warrants expire 5 years from the date of issue.

         In connection with the private placement of 333,334 share of common
         stock in June and July 2000, the Company was required to adjust the
         exercise price and the number of warrants sold in connection with the
         Company's initial public offering ("IPO") in April 1999. In additions
         the Company was required to adjust the exercise price of the
         underwriter's warrants. These adjustments were required due to the
         dilutive effect of the private placement. Such adjustments and
         additional issuances of warrants are based on formulas specified in the
         Company's Warrant Agreement filed with the Company's IPO.

         In January 2001, the Company granted 67,500 stock options to
         key employees and members of the board of directors at an exercise
         price of $2.50 per share. The stock options vest on the second
         anniversary of the agreement and expire on the fifth anniversary of the
         agreement. In April 2001, the Company granted 25,000 stock warrants to
         a consultant at an exercise price of $3.50 per share. The stock
         warrants are exercisable on the date of grant and expire on the fifth
         anniversary of the agreement.

         For disclosure purposes the fair value of each stock option grant is
         estimated on the date of grant using the Black-Scholes option-pricing
         model with the following weighted average assumptions used for stock
         options granted during the years ended December 28, 2001 and December
         29, 2000: (i) annual dividends of $0.00, (ii) expected volatility of
         200% and 79% for the years ended December 28, 2001 and December 29,
         2000, respectively, (iii) risk-free interest rate of 5.7%, and (iv)
         expected option lives of three years for the years ended December 28,
         2001 and December 29, 2000. The weighted average fair value of the
         stock options granted for the years ended December 28, 2001 and
         December 29, 2000 was $2.31 and $4.08, respectively.

         The following tables illustrates the Company's stock option and warrant
         issuances and balances outstanding as of, and during the years ended
         December 28, 2001 and December 29, 2000, retroactively restated for the
         aforementioned anti-dilution provisions related to the Company's common
         stock warrants.


                                      F-15
<PAGE>

<TABLE>
<CAPTION>

                                                                 OPTIONS                          WARRANTS
                                                      ------------------------------    ------------------------------
                                                                         Weighted                          Weighted
                                                         Shares           Average          Shares           Average
                                                       Underlying        Exercise        Underlying        Exercise
                                                        Options            Price          Warrants           Price
                                                      -------------     ------------    -------------     ------------
<S>                              <C> <C>                   <C>       <C>                   <C>         <C>
         Outstanding at December 31, 1999                  161,000   $         4.08        1,731,959   $         5.01
                  Granted                                  310,500             5.13           53,334             3.00
                  Canceled                                 (4,000)             4.00                -                -
                  Exercised                                     -                 -          (10,100)            5.00
                                                      -------------     ------------    -------------     ------------
         Outstanding at December 29, 2000                  467,500             4.77        1,775,193             4.95
                  Granted                                   67,500             2.50           25,000             3.50
                  Canceled                                 (3,000)             4.00                -                -
                  Exercised                                     -                 -                -                -
                                                      -------------     ------------    -------------     ------------
         Outstanding at December 28, 2001                 531,500    $         4.49        1,800,193   $         4.93
                                                      =============     ============    =============     ============
</TABLE>

         The following is additional information with respect to the Company's
options and warrants as of December 28, 2001:
<TABLE>
<CAPTION>
                                  OPTIONS OUTSTANDING                                            OPTIONS
                                                                                               EXERCISABLE
         ----------------------------------------------------------------------     ----------------------------------
                              Number of         Weighted                            Number of
                              Outstanding       Average            Weighted         Exercisable
                              Shares            Remaining          Average          Shares             Weighted
                              Underlying        Contractual        Exercise         Underlying         Average
           Exercise Price     Options           Life               Price            Options            Exercise Price
         ----------------    --------------    ---------------    -------------     --------------     ---------------
<S>          <C>                   <C>           <C>                 <C>               <C>                 <C>
             $ 2.50                 67,000       4.00 years          $ 2.50               -                    -
             $ 4.00                129,000       2.58 years          $ 4.00            129,000             $4.00
             $ 4.50                 25,000       2.58 years          $ 4.50             25,000             $4.50
             $ 5.13                310,500       3.29 years          $ 5.13             50,000             $5.13
         ----------------    --------------    ---------------    -------------     --------------     ---------------
                                   531,500       3.15 years          $ 4.49            204,000             $4.34
                             ==============    ===============    =============     ==============     ===============

                                 WARRANTS OUTSTANDING                                           WARRANTS
                                                                                               EXERCISABLE
        -----------------------------------------------------------------------     ----------------------------------
          Exercise Price         Number of         Weighted                          Number of
                               Outstanding        Average           Weighted         Exercisable
                                 Shares          Remaining          Average          Shares            Weighted
                               Underlying       Contractual         Exercise         Underlying        Average
                               Warrants            Life             Price            Warrants          Exercise Price
        -----------------   --------------    ---------------    -------------     --------------     ---------------

        $3.00-$3.50                 78,334       3.89 years          $ 3.16               78,334            $3.16
        $4.85-$6.91              1,721,859       3.29 years          $ 5.01            1,721,859            $5.01
                             --------------    ---------------    -------------     --------------     ---------------
                                 1,800,193       2.38 years          $ 4.93            1,800,193            $4.93
                             ==============    ===============    =============     ==============     ===============
</TABLE>
                                      F-16
<PAGE>


         Had compensation cost for the Company's two option plans been
         determined in accordance with SFAS 123, the Company's net loss and loss
         per share would have been increased to the pro forma amounts indicated
         below:

<TABLE>
<CAPTION>

                                                                                            Years ended
                                                                            -------------------    -------------------
                                                                            December 28, 2001      December 29, 2000
                                                                            -------------------    -------------------

<S>                                                                      <C>                    <C>
         Net loss:                                          As reported  $         (1,271,854)  $         (3,833,990)

                                                              Pro forma  $         (1,741,063)  $         (4,207,777)
         Net loss per share:
                    Basic and diluted                       As reported  $              (0.34)  $              (1.08)
                    Basic and diluted                         Pro forma  $              (0.47)  $              (1.19)
</TABLE>


16.      KEY MAN LIFE INSURANCE

         The Company is the beneficiary of a $500,000 life insurance policy on
         the life of the President of the Company.


17.      COLLECTIVE BARGAINING AGREEMENT

         The Company's factory employees and factory supervisors are represented
         by a collective bargaining agreement between a local branch of a major
         national labor trade union and the Company. Such agreement expires in
         May 2004.


18.      RELATED PARTY TRANSACTIONS

         a.       Sales  during  the years ended  December 28, 2001 and December
                  29, 2000   included  $682,000 and  $809,000,  respectively  to
                  another company owned by  three   officer/stockholders  of the
                  Company.  Gross   profit  on  such  sales  was  approximately
                  $257,000 and $235,000  for  the years ended  December 28, 2001
                  and  December 29, 2000,   respectively.  Accounts  receivable
                  from the related  company  was  $32,144 at December  28, 2001.
                  In  September  1999,  the   Company   converted   outstanding
                  accounts  receivable  of $253,150 into  a  term loan at 8% per
                  annum,  with monthly  payments of $5,133  per month inclusive
                  of principal  and interest for 5 years   starting   January 1,
                  2000.  The balance of the note  receivable  on  December  28,
                  2001 is $155,693.

         b.       The Company leases its premises from a company owned by two of
                  the officer/stockholders of the Company at an annual rental of
                  $161,444. Such lease expires in December 2005. The mortgage on
                  the premises in the amount of $452,817 at December 28, 2001 is
                  guaranteed by the Company.

                                      F-17
<PAGE>

         c.       In March 1998, the Company entered into employment agreements
                  with its three officer/stockholders for a period of 10 years
                  at an aggregate annual base salary of $325,000. Such agreement
                  provides for increases at the greater of 5% or the consumer
                  price index and an annual bonus to be determined by the Board
                  of Directors.

         d.       In March 1998, the Company and an affiliate entered into an
                  engineering consulting and services agreement on a fee for
                  services basis under which the Company will have the right to
                  manufacture certain of the affiliate's products.


19.      CONSULTING AGREEMENT

         In March 1998, the Company entered into a ten year consulting agreement
         in connection with the Company's plans to develop manufacturing
         resources in the People's Republic of China ("China"). The consultant,
         who is board member of the Company, will be paid at an hourly rate as
         mutually determined and agreed upon by the Company and the consultant
         from time to time and 1.5% of the net cost, as defined, of all products
         manufactured in China up to $5,000,000 per year and 1% of net costs in
         excess of $5,000,000. The Company expensed $12,785 and $31,775,
         respectively, in the years ended December 28, 2001 and December 29,
         2000 under this consulting agreement.

20.      PREFERRED STOCK

         The Board of Directors of the Company is authorized, without further
         action of the stockholders of the Company, to issue up to 1,000,000
         shares of Preferred Stock in one or more classes or series and to fix
         the rights, preferences, privileges and restrictions thereof, including
         dividend rights, conversion rights, voting rights, terms of redemption,
         liquidation preferences, and the number of shares constituting any
         series or the designation of such series.

21.      STOCKHOLDERS' AGREEMENTS

         In March 1998, the Company entered into an agreement with each of its
         three officers/stockholders which provides that in the event of the
         death of the stockholder within 24 months after the consummation of a
         public offering of the Company's stock, the estate of the stockholder
         can require the Company to repurchase 250,000 shares of the
         stockholder's stock for $500,000. The repurchase of stock can only be
         made though the use of insurance proceeds payable to the Company upon
         the death of the stockholder.

                                      F-18
<PAGE>

22.      SEGMENT AND GEOGRAPHIC INFORMATION

         The Company views its operations as principally two segments, the
         manufacturing and assembly of injection molded plastic components and
         outsourcing of injection molded plastic components and their
         assemblies. The segments share a common workforce and office
         headquarters, which preclude an allocation of all overhead components.
         Overhead items that are specifically identifiable to a particular
         segment are applied to such segment. The Company's segment information
         for the years ended December 28, 2001 and December 29, 2000 are as
         follows:

<TABLE>
<CAPTION>

                                                     Manufacturing                        Corporate
                                                          and                                and
                                                       Assembly        Outsourcing          Other          Consolidated
                                                    ----------------   -------------------------------    ----------------
      Year ended December 28, 2001
<S>                                              <C>                <C>              <C>               <C>
           Sales to unaffiliated customers       $        7,026,317 $     2,133,326  $        -        $        9,159,643
           Interest and other income                         76,098          18,045            48,392             142,535
           Interest and other expenses                      115,198           8,650            41,068             164,916
           Depreciation and amortization                    114,444          93,099            14,592             222,135
           Segment assets                                 2,340,577         886,320           249,381           3,476,278
           Long lived asset expenditures                    135,748          89,179           -                   224,927
           Segment income (loss)                 $          246,903 $    (1,090,952) $       (427,805) $       (1,271,854)



                                                     Manufacturing                        Corporate
                                                          and          Outsourcing           and           Consolidated
                                                       Assembly                             Other
                                                    ----------------   -------------    --------------    ----------------
      Year ended December 29, 2000
           Sales to unaffiliated customers       $        5,733,691 $     2,315,891  $         52,052  $        8,101,634
           Interest Income                                   16,676          18,702            60,800              96,178
           Interest Expense                                  68,888           3,112           121,847             193,847
           Depreciation and amortization                    213,768          10,463           264,827             489,058
           Segment assets                                 2,522,382       1,706,645           239,098           4,468,125
           Long lived asset expenditures                    172,241         108,154           284,019             564,414
           Segment loss                          $          239,000 $      (735,862) $     (3,337,128) $       (3,833,990)
</TABLE>

23.      COMMITMENTS AND CONTINGENCIES

         -     The Company  leases  office space in Shanghai,  China at a rental
               rate of $5,300  per month.  The lease is for 24  monthly  periods
               expiring on February 28, 2003.

         -     The  Company  has been  named  as a  defendant  in an  employment
               discrimination  action which it believes is without merit, and is
               vigorously defending itself against such matter. Consequently, no
               provision for this matter has been made as of December 28, 2001.


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


Not Applicable
                                      F-19
<PAGE>


                                    Part III

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


Incorporated by reference from the Registrant's definitive proxy statement, to
be filed in accordance with rule 14a-101 with the Commission not later than 120
days after the end of the fiscal year covered by this form.


Item 10. Executive Compensation


Incorporated by reference from the Registrant's definitive proxy statement, to
be filed in accordance with rule 14a-101 with the Commission not later than 120
days after the end of the fiscal year covered by this form.


Item 11. Security Ownership of Certain Beneficial Owners and Management


Incorporated by reference from the Registrant's definitive proxy statement, to
be filed in accordance with rule 14a-101 with the Commission not later than 120
days after the end of the fiscal year covered by this form.


Item 12. Certain Relationships and Related Transactions


Incorporated by reference from the Registrant's definitive proxy statement, to
be filed in accordance with rule 14a-101 with the Commission not later than 120
days after the end of the fiscal year covered by this form.


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


(A) Exhibits (Numbered in accordance with item 601 of regulation S-B)

Exhibit
No.      Description of Exhibit

None



(B) Reports on Form 8-K

None


                                       15
<PAGE>

                                   SIGNATURES




In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Annual Report on Form 10-KSB to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                              INTERNATIONAL SMART SOURCING, INC.



April 11, 2002                                /s/ David Kassel
--------------                                    -----------------------
Date                                              David Kassel
                                                  Chairman and
                                                  Chief Executive Officer





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


Signature               Title                                       Date

/s/ David Kassel
----------------        Chairman of the Board                   April 11, 2002
                        of Directors and Chief Executive
                        Officer

/s/ Andrew Franzone     President of EHC, Director              April 11, 2002
-------------------

/s/ Harry Goodman       Vice President and Secretary,           April 11, 2002
-----------------       Director


/s/ Arthur Myers        Chief Financial Officer                 April 11, 2002
----------------

/s/ Bao-Wen Chen        Director                                April 11, 2002
----------------

/s/ Carl Seldin Koerner Director                                April 11, 2002
-----------------------

/s/ Mitchell Solomon    Director                                April 11, 2002
--------------------


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