UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB


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


     [ ]  TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2001


                         Commission file number: 0-11419


                                  ARMITEC, INC.
             (Exact Name of Registrant as specified in its Charter)


DELAWARE                                                              22-2435595
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

                       4479 Atlanta Road, Smryna, GA 30080
          (Address of principal executive offices of Incorporation or
                           organization and zip code)

                    Issuer's telephone number: (770) 432-8140
               (Registrants telephone number, including area code)


     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                                  $0.00167 per share

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by section 13 or 15(d) of the  Securities  and Exchange Act
of 1934  during the  preceding  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 last 90 days.

   YES [X]                                                       NO [ ]

<PAGE>

     At December 31, 2001,  30,513,629  shares of the Registrant's  Common Stock
were issued and  outstanding  and the  estimated  aggregate  market value of the
Registrant's  outstanding  common stock held by non-affiliates of the Registrant
was approximately $1,430,740.

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

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

In this report, references to the "Registrant",  the "Company",  "we", "us", and
"our" refer to  Armitec,  Inc.,  a Delaware  corporation.  This report  includes
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example,
statements  included in this report regarding our financial  position,  business
strategy and other plans and objectives for future  operations,  and assumptions
and  predictions  about future product  demand,  supply,  manufacturing,  costs,
marketing and pricing factors are all  forward-looking  statements.  When we use
words like "intend," "anticipate," "believe," "estimate," "plan" or "expect," we
are making  forward-looking  statements.  We believe  that the  assumptions  and
expectations reflected in such forward-looking statements are reasonable,  based
on  information  available  to us as of present,  but we cannot  assure you that
these  assumptions and  expectations  will prove to have been correct or that we
will take any  action  that we may  presently  be  planning.  We have  disclosed
certain  important  factors  that  could  cause  our  actual  results  to differ
materially from our current  expectations  elsewhere in this report.  You should
understand that  forward-looking  statements made in this report are necessarily
qualified by these factors.  We are not undertaking to publicly update or revise
any  forward-looking  statement  if  we  obtain  new  information  or  upon  the
occurrence of future events or otherwise.

<PAGE>

                                     PART I

I.   Description of Business.

     A.   Business Development.

          Armitec,  Inc. ("Armitec," or "Registrant"),  a Delaware  corporation,
     was   incorporated   on  January   20,   1983  to   provide   comprehensive
     administrative,  marketing and consulting services to physicians,  dentists
     and  professional  corporations  operating  full service dental centers and
     emergency/industrial  medical  centers.  Armitec  found this activity to be
     unprofitable  and it exited the business  service  activity in October 1987
     and became  inactive,  except for the management of a limited  portfolio of
     securities.

          As a result of the  disposition of the net assets of the Registrant in
     August  2000,  the  Registrant  became a  development  stage  company as of
     September 1, 2000. On December 29, 2000, the Registrant  issued  13,940,785
     shares of its  $0.00167  par value  common stock in exchange for all of the
     common stock of  Armitec.com,  Inc.  ("Armitec.com"),  which  resulted in a
     change of control of the Registrant,  and Armitec.com became a wholly owned
     subsidiary  of Armitec.  On May 2, 2002,  Jack Young  Associates,  Inc.,  a
     wholly-owned  subsidiary of the  Registrant  purchased the assets of Pocono
     Knits, Inc., a manufacturer of sweaters for the military.

     B.   Business of Issuer.

          During  fiscal year 1999 and the  majority  of fiscal  year 2000,  the
     Registrant was inactive,  except for the management of a limited  portfolio
     of securities.

          Armitec,  Inc is a provider of uniforms for the police,  fire, postal,
     security  and  EMS.  The  company  will be  manufacturing  sweaters  at its
     wholly-owned  subsidiary.  The company will contract for the manufacture of
     shirts  and  trousers  with  independent  contractors.   The  company  will
     distribute  its products  through  facilities  it presently  leases both in
     Atlanta, GA and Hazelton, PA.

          The company sell its products primarily through the use of independent
     sales  representatives  located throughout the U.S. The company also intend
     to sell its products  through a catalog it is developing as well as through
     a web site presently under development.

          The  primary  competitors  are much larger than the company and have a
     significantly  more  financial  resources  than the  company.  The  company
     purchases its raw materials  for  manufacture  from fabric mills located in
     the U.S.

          The principal  customers are uniform retail  stores,  the military and
     various police and fire agencies located throughout the U.S.


<PAGE>

          Employees.

          During the three  previous  years,  the  Registrant  had no  full-time
     employees  other  than  executive  officers.  At  December  31,  2000,  the
     executive  officers of the  Registrant  were Bruce R. Davis,  President and
     Chief Executive Officer and Sandra Davis, Secretary.

II.  Properties.

     As of February 15, 2002, the Registrant is headquartered in leased premises
at 4479  Atlanta  Road,  Smryna,  GA  30080.  The  leased  premises  are under a
five-year  lease  agreement  for 12,000  square  feet of office,  showroom,  and
warehouse  facilities.  The  Registrant  has a five  year  renewal  option.  The
following is a schedule of base annual lease rentals payable monthly for each of
the next five years commencing February 15, 2002:

                     2002                   $81,638
                     2003                   $96,099
                     2004                   $98,982
                     2005                   $101,952
                     2006                   $105,012
                     Total                  $483,683


     In addition,  the Registrant entered into a twenty-two (22) month lease for
a 58,000 square foot portion of an industrial  building  located at East Diamond
Avenue and Cedar Streets, Hazleton, Pennsylvania. The total rent for the term of
the lease is $107,300,  payable monthly in the amount of $8,941.  The Registrant
also agreed to pay $40,000 in back rent at the date of lease  commencement,  and
in  addition  to  the  monthly  rental  payment  of  approximately  $8,941,  the
Registrant  will pay $5,740 per month  towards  back rent for a total of $14,682
per  month  until  the  total of  $177,782  in back  rent is paid in  full.  The
registrant has a three-year  renewal  option,  with an annual increase of 3% for
the rental payments each year of the three year term.

III. Legal Proceedings.

     From time to time,  we may be  involved  as a  plaintiff  or  defendant  in
various  legal  actions  arising in the normal  course of  business.  We are not
currently  engaged in any litigation,  and our officers and directors  presently
know of no threatened or pending  litigation in which it is contemplated that we
will be made a party.

<PAGE>

IV.  Submission of Matters to a Vote of Security Holders.

     There were no matters  submitted to our security  holders for a vote during
the fiscal year ending December 31, 2001.

                                     PART II

V.   Market For Registrant's Common Equity And Related Stockholder Matters.

     A.   Market information.

          Until July 31, 2001, the  Registrant's  common stock was traded on the
     "pink sheets."  Beginning on August 1, 2001, the Registrant's  common stock
     was listed on the OTC Bulletin Board under the symbol "AMTI."

          The following chart outlines the range of high and low bid information
     for the  Registrant's  common  stock  for the last two  fiscal  years.  The
     following quotations reflect  inter-dealer prices,  without retail mark-up,
     mark-down or commission and may not represent actual transactions.


     2000                           High                    Low
     -----------------       -----------------       -----------------
     First quarter           No trading              No trading
     -----------------       -----------------       -----------------
     Second Quarter          No trading              No trading
     -----------------       -----------------       -----------------
     Third Quarter           No trading              No trading
     -----------------       -----------------       -----------------
     Fourth Quarter          No trading              No trading
     -----------------       -----------------       -----------------
     2001
     -----------------       -----------------       -----------------
     First Quarter           No trading              No trading
     -----------------       -----------------       -----------------
     Second Quarter          No trading              No trading
     -----------------       -----------------       -----------------
     Third Quarter           $            1.62       $            0.01
     -----------------       -----------------       -----------------
     Fourth quarter          $            0.30       $            0.06
     -----------------       -----------------       -----------------
     2002
     -----------------       -----------------       -----------------
     First Quarter           $            0.14       $            0.01
     -----------------       -----------------       -----------------

<PAGE>

     B.   Holders.

          As of December 31, 2001, the  approximate  number of holders of record
     of the  Registrant's  common  stock was 575.  This  number may not  include
     individuals whose shares are held in "street names."

     C.   Dividends.

          Cash  dividends  have not  been  paid by the  Registrant  since it was
     formed and the Registrant does not plan to issue any dividends. The Company
     entered into a Convertible  Note Purchase  Agreement  dated as of April 23,
     2002, in which the Registrant  covenanted  that it would not declare or pay
     any dividends so long as the  Convertible  Note remained  outstanding.  The
     Convertible Note matures on April 23, 2004.

     D.   Recent Sales of Unregistered Securities.

          In January,  2000, the Registrant issued an aggregate of 18,000 shares
     of its  common  stock to Harold  Gaffin in  settlement  of a prior  account
     payable at $0.01 per share. These shares were sold pursuant to Section 4(2)
     of the Securities Act and have been marked "restricted."

          In February,  2000, the Registrant issued an aggregate of 2,000 shares
     of its common stock to Debra Blatz for services provided to the Registrant.
     The  services  were valued at $20.00 or $0.01 per share.  These shares were
     sold  pursuant to Section 4(2) of the  Securities  Act and have been marked
     "restricted."

          On June 1, 2000,  the  Registrant  issued an  aggregate  of  1,000,000
     shares of its common  stock to Donald  Carman and William  Bryant as salary
     for their previous services provided to the Registrant for 15 and 12 years,
     respectively.  The services  were valued at  $10,000.00 or $0.01 per share.
     These shares were sold pursuant to Section 4(2) of the  Securities  Act and
     have been marked "restricted."

          In  September,  2000,  the  Registrant  issued an  aggregate of 25,100
     shares of its common stock to Donald Carman as salary for previous services
     provided to the  Registrant.  The services  were valued at $251.00 or $0.01
     per  share.  These  shares  were  sold  pursuant  to  Section  4(2)  of the
     Securities Act and have been marked "restricted."

          In December,  2000, the Registrant agreed to issue 1,815,990 shares of
     its common stock to Kevin Masters and Ari Berman for services  provided and
     to be provided to the Registrant. The services were valued at $18,159.90 or
     $0.01 per share.  These  shares were sold  pursuant to Section  4(2) of the
     Securities Act and have been marked "restricted."

          On December 29, 2000, the Registrant issued an aggregate of 13,940,785
     shares of its common stock to Galt Capital  Corporation in exchange for all
     of the  outstanding  common shares of  Armitec.com,  Inc. These Shares were
     sold  pursuant to Section 4(2) of the  Securities  Act and have been marked
     "restricted."

<PAGE>

          In November,  2001,  the  Registrant  issued an aggregate of 1,600,000
     shares to Jim Solmson,  Mitchell Davis,  Glenn Michael  Financial,  Richard
     Otte, Joe Johnson, Jerry Roniger, Drew Corley and Kevin Masters for various
     services.  The  services  were valued at $16,000 or $0.01 per share.  These
     shares were sold  pursuant to Section 4(2) of the  Securities  Act and have
     been market "restricted."

          In November,  2001,  the  Registrant  issued  5,750,000  shares of its
     common stock to Galt Capital  Corporation  as  consideration  for arranging
     financing for the Registrant's working capital through related parties. The
     shares were valued at $9,200 or $0.0016 per share.  These  shares were sold
     pursuant  to  Section  4(2) of the  Securities  Act and  have  been  marked
     "restricted."

          In April,  2002,  the  Registrant  entered into a securities  purchase
     agreement with the  Stonestreet  Limited  Partnership for the issuance of a
     $350,000 7% convertible note and 3,500,000  common stock purchase  warrants
     in reliance on Section 4(2) of the Act and Rule 506. Each warrant  entitles
     the holder to purchase  one share of common  stock at an exercise  price of
     $.042.  The commission for the  transaction  was 10% ($35,000) and a common
     stock  purchase  warrant for  3,500,000  shares of our stock at an exercise
     price per share of $.042. Net proceeds amounted to $315,000.

VI.  Management's  Discussion And Analysis Of Financial Condition And Results Of
     Operations

          The following is a discussion of the Registrant's  financial condition
     and results of operations.  This  discussion  should be read in conjunction
     with the  Consolidated  Financial  Statements of the  Registrant  appearing
     under Item VII of this Report.  Statements  contained in this "Management's
     Discussion and Analysis of Financial Conditions and Results of Operations,"
     which are not  historical  facts may be  forward-looking  statements.  Such
     information  involves risks and  uncertainties,  including those created by
     general market conditions,  competition and the possibility that events may
     occur  which  could  limit the  ability of the  Registrant  to  maintain or
     improve  its  operating  results or execute its  primary  growth  strategy.
     Although   management   believes  that  the   assumptions   underlying  the
     forward-looking  statements are reasonable, any of the assumptions could be
     inaccurate,   and   there  can   therefore   be  no   assurance   that  the
     forward-looking  statements included herein will prove to be accurate.  The
     inclusion of such information should not be regarded as a representation by
     management  or any  other  person  that  the  objectives  and  plans of the
     Registrant will be achieved.  Moreover, such forward-looking statements are
     subject to certain risks and uncertainties which could cause actual results
     to differ  materially  from those  projected.  Readers are cautioned not to
     place undue reliance on these forward-looking statements that speak only as
     of the date hereof.

<PAGE>

     A.   General Overview.

          Armitec,  Inc.  became a development  stage company as of September 1,
     2000 as a result of or the  disposition of the net assets of Armitec,  Inc.
     in  August  2000.  The  operations  of  Armitec,   Inc.  are  reflected  as
     development  stage  activities  since  July  24,  2000,  the  date  of  its
     formation.  Armitec,  Inc.,  is focused on entering  the  uniform  industry
     either  through a purchase of any  existing  entity or the start of its own
     operations.

          The  par  value  of the  shares  in the  Financial  Statements  of the
     Registrant  appearing  under  Item  VII of this  Report  was  inadvertently
     reported as $0.0016,  which was the par value reported in the  Registrant's
     Certificate of Amendment of Certificate of  Incorporation  filed as Exhibit
     5.1 to  the  Registrant's  Form  8-K  filed  on  September  22,  2000.  The
     Registrant subsequently filed a Certificate of Correction with the State of
     Delaware to reflect the par value as $0.00167.  Management does not believe
     that this materially affects the information in the Registrant's  Financial
     Statements.

     B.   Results of Operations.

          Since  September  1, 2000 (date of  inception),  the  Company  has had
     significant  operating  losses  aggregating  $636,690,  and working capital
     deficit . As of December  31,  2001,  current  liabilities  exceed  current
     assets by $531,997. The Company's continued existence has been dependant on
     cash  proceeds  received from the sale of its common stock and loans from a
     major  shareholder.  The Company  hopes to reverse this trend by generating
     cash inflows  through its  acquisition  of Pocono  Knits,  Inc.  (described
     below).  To accomplish  this  objective,  the Company will require  working
     capital to satisfy present  obligations,  current operating expenses and to
     produce inventory.

          On December 12, 2000, the Registrant entered into a Plan and Agreement
     to Exchange Stock by and among Registrant,  JRO Group, Inc. ("JRO") and the
     Shareholders  of JRO. On March 20, 2001,  the parties  completed  the share
     exchange.  In March 2001, a report of the accounts  receivable  status by a
     Special Master for the acquired company was presented to the Superior Court
     of Fulton  County,  pursuant to a request by the acquired  company's  bank.
     Based on this report and the subsequent  events  resulting  therefrom,  the
     acquired  company is unable to finance  its  current  assets as it had done
     formerly.  On April 23, 2001,  the parties  mutually  agreed to rescind the
     share exchange because of the foregoing, and the inability of JRO to obtain
     the audits  necessary for the  Registrant to complete its filings under the
     Securities Exchange Act of 1934. On that same date, Armitec and JRO entered
     into a  letter  of  intent  whereby  Armitec  will  act as a  receiver  and
     liquidator over a one-year period. In June 2001, the fiancial  condition of
     JRO further deteriorated and the Registrant decided to abandon its interest
     therein.

<PAGE>


          In December,  2001,  the Company moved to a new location  providing it
     with a uniform retail showroom, a warehouse and office space.

     C.   Financial Condition, Liquidity and Capital Resources.

          In the latter part of 2001 the Company continued its attempts to raise
     needed capital and as of December 31, 2001,  only a small amount of capital
     had been  raised.  In April,  2002,  the  Company  raised  $315,000  in net
     proceeds from the sale of a convertible note (see below).

          Additional   capital  will  be  needed  to  continue   the   Company's
     operations.  The Company expects to obtain  additional  capital through the
     private sale of the Company's  securities or from  borrowings  from private
     lenders and/or financial  institutions.  There can be no assurance that the
     Company will be successful in obtaining any additional capital which may be
     needed.

     D.   Plan of Operations

          The  Company  is  currently  seeking  another  acquisition  or in  the
     alternative,  raising  additional  funds  necessary to commence  retail and
     manufacturing operations.

     E.   Subsequent Events.

          During  April  2002,  the  Company  entered  into a  convertible  debt
     financing  agreement with Stonestreet  Limited Partnership for an aggregate
     of  $350,000.  The  stated  interest  rate is 7% per annum  and the  unpaid
     principal  and  interest  balance  is due in full by April  23,  2004.  Net
     proceeds to the Company amounted to approximately $315,000, which is net of
     debt  issue  costs.  The  Company  issued  3,500,000  warrants  to  acquire
     3,500,000  shares of the  Company's  common  stock at an exercise  price of
     $.042.

          On May 2, 2002, Jack Young Associates, Inc., a wholly owned subsidiary
     of the Registrant,  purchased the assets of Pocono Knits, Inc, a New Jersey
     corporation.  Pocono Knits is a manufacturer  of sweaters for the military,
     police,  postal,  fire and  security  companies.  The  Company  has been in
     business for over 40 years and services the same  customer  base as Armitec
     intends to  service.  The sale was  consummated  pursuant  to the terms and
     conditions of an Asset Purchase  Agreement,  dated as of March 15, 2002, as
     amended by a First Amendment to Asset Purchase  Agreement dated May 2, 2002
     (the "Asset Purchase Agreement").

<PAGE>


          Pursuant  to the terms of the Asset  Purchase  Agreement,  Jack  Young
     Associates,  Inc.  assumed all of the obligations of Pocono Knits,  Inc. in
     the aggregate  amount of approximately  $1,900,000.  In connection with the
     Asset  Purchase  Agreement,  the  Registrant  entered  into a Stock  Pledge
     Agreement whereby the Registrant  pledged all of the issued and outstanding
     shares of Jack Young  Associates,  Inc. to Jack Young as  security  for the
     performance of certain obligations of the Registrant, including the payment
     of all amounts now due or coming due at any time  thereafter  in connection
     with such obligations.

          The purchase  price paid in  connection  with the sale was  determined
     through  arms-length  negotiations  among the parties to the Asset Purchase
     Agreement.  The  foregoing  description  is  qualified  in its  entirety by
     reference to the Asset Purchase Agreement, as amended, and the Stock Pledge
     Agreement, copies of which are attached as exhibits hereto and incorporated
     by reference herein.

          The Company will file the required pro forma financial  information as
     soon as is practicable, but not later than 60 days after the date that this
     report is required to be filed.

          In addition,  the Registrant entered into a Consulting  Agreement with
     the former  president of Pocono Knits,  which pays the consultant  $127,200
     per year  and  2,000,000  shares  of the  Registrant's  common  stock.  The
     2,000,000  shares of common stock subject to a Put  Agreement  whereby upon
     the five year anniversary of the Put Agreement,  the consultant may put the
     shares back to the  Registrant  for the sum of $550,000.  At any time after
     the two year anniversary of the Put Agreement,  the Registrant may call the
     2,000,000 shares for the sum of $550,000.  If the consultant rejects a call
     from the  Registrant,  the  consultant's  put option  will  terminate.  The
     Registrant  also entered into an Employment  Agreement with the former Vice
     President  of Pocono Knits with  compensation  in the amount of $96,180 per
     year.

     F.   Certain Risk Factors.

          An  investment  in our  common  stock is  speculative  in  nature  and
     involves a high degree of risk. You should carefully consider the following
     risks and the other  information  contained in this report before investing
     in our common stock. The price of our common stock could decline due to any
     of these risks, and you could lose all or part of your investment. You also
     should refer to the other  information  included in this report,  including
     the financial statements and related notes.

          If any of the  events  described  below were to occur,  our  business,
     prospects,  financial condition or results of operations or cash flow could
     be materially adversely affected.  When we say that something could or will
     have a  material  adverse  effect on it, we mean that it could or will have
     one or more of these effects.

<PAGE>



WE ARE A NEW BUSINESS WITH NO OPERATING HISTORY

     The share exchange with Armitec.com  resulted in a change of control of the
Registrant  and a  change  in our  management.  Our  profitability  will  depend
primarily  upon our  operations  and  there is no  assurance  that we will  ever
operate  profitably.  Because  of the  substantial  start-up  costs that must be
incurred  by a new  company,  we expect to incur  significant  operating  losses
during our  initial  years of  operations.  No  assurance  can be given that our
future operations will be successful.  Any investment in our common stock should
be considered a high risk  investment  because you will be placing funds at risk
in an unseasoned start-up company with unforeseen costs,  expenses,  competition
and other  problems to which start-up  ventures are often  subject.  As we are a
development  stage  company,  our  prospects  must be considered in light of the
risks,  expenses and difficulties  encountered in establishing a new business in
any  industry.  WE MAY BE UNABLE TO RAISE  ADDITIONAL  FUNDING  TO  OPERATE  OUR
BUSINESS AND PURSUE OUR  STRATEGIES AND AS A RESULT OUR RECENT  ACQUISITION  AND
BUSINESS MAY FAIL

     We will need additional  funds to continue our operations.  On May 2, 2002,
our wholly-owned subsidiary, Jack Young Associates, Inc. purchased the assets of
Pocono Knits,  Inc, a New Jersey  corporation.  The acquisition of the assets of
Pocono  Knits  significantly  increased  the amount of and the  immediacy of our
needs for additional working capital. In addition,  in connection with the asset
purchase,  we entered into a stock pledge agreement whereby all of the shares of
Jack Young  Associates,  Inc. were pledged to the former  shareholder  of Pocono
Knits to  guarantee  the payment of certain  obligation  contained  therein.  We
expect to raise  additional  capital through a combination of new debt issuances
and equity  sales,  from private as well as public  sources  and/or by obtaining
financing through a bank or other entity. Implementation of our strategy and our
business plan is contingent upon the  availability of such funding  sources.  No
assurance can be given that we will be able to raise debt or equity capital,  on
acceptable terms, or at all, in order to fund our operations as set forth above.
Any future  offering of securities may not be successful.  We may not be able to
continue  to  operate  and/or  we may  forfeit  all of the  stock of Jack  Young
Associates, Inc. if we are unable to obtain additional capital when needed.


WE CURRENTLY HAVE NEGATIVE  WORKING  CAPITAL,  LIMITED  SOURCES OF LIQUIDITY,  A
DEFICIT NET WORTH AND SUBSTANTIAL LOSSES TO DATE.

     We  require  substantial  capital  to pursue  our  operating  strategy  and
currently  have  limited  cash  for  operations.  Until we can  obtain  revenues
sufficient to fund working  capital  needs,  we will be dependent  upon external
sources  of  financing  which may not be  available.  To date,  we have  limited
internal sources of liquidity and expect limited

<PAGE>


internal cash flow in the immediate  future.  We do not have any  commitments to
raise  additional  capital and there is no assurance that any  additional  funds
needed will be available on favorable  terms, if at all. We require  substantial
working  capital to  continue  the  funding of our  business.  The Company has a
deficit net worth and substantial losses. Should the Company be unable to obtain
the necessary working capital to continue and the Company be forced to liquidate
its assets, investors will likely lose their entire investment.


OUR CURRENT AND POTENTIAL  COMPETITORS,  SOME OF WHOM HAVE GREATER RESOURCES AND
EXPERIENCE  THAN WE DO, MAY DEVELOP  PRODUCTS THAT MAY CAUSE DEMAND FOR, AND THE
PRICES OF, OUR PRODUCTS TO DECLINE.

     We believe that our ability to compete  depends on many factors both within
and beyond our control. Some of our competitors have longer operating histories,
larger client bases,  longer  relationships with clients,  greater brand or name
recognition and significantly greater financial, technical, marketing and public
relations  resources than we have. Existing or future competitors may develop or
offer products that are  comparable or superior to ours at a lower price,  which
could  materially  harm  our  business,  results  of  operations  and  financial
condition.

THE  SHARES  THAT MAY BE ISSUED  UPON  CONVERSION  OF OUR  CONVERTIBLE  NOTE AND
WARRANT MAY RESULT IN A CHANGE IN OUR CONTROL

     On April 23, 2002,  we entered  into a  Convertible  Note in the  principal
amount of $350,000  that is  convertible  into our common stock at the lesser of
$0.07 or 70% of our average per share  market  value (as defined  therein),  and
entered into a Warrant to acquire 3,500,000 shares of the Company's common stock
at an exercise price of $.042.  Because of the floorless  conversion  feature in
the  Convertible  Note, we cannot predict at this time the number of shares that
will be issued in connection with any  conversions of the Convertible  Note. Our
current  management  beneficially owns 17,640,785 shares of our common stock. As
such,  if the  Convertible  Note and Warrant are  converted  and  exercised  the
holders of such shares may own more shares than current management.

WE MAY, IN THE FUTURE,  ISSUE ADDITIONAL  SHARES OF OUR COMMON STOCK WHICH WOULD
REDUCE INVESTORS PERCENTAGE OF OWNERSHIP AND MAY DILUTE OUR SHARE VALUE.

     Our  certificate  of  incorporation  authorizes  the issuance of 50,000,000
shares of common stock, par value $.00167 per share. However, on April 23, 2002,
our shareholders, by written consent, authorized an amendment to our certificate
of incorporation that will increase our authorized shares to 300,000,000,  which
will become  effective upon the  effectiveness  of an  Information  Statement on
Schedule  14C that we  intend to file.  On April 23,  2002,  we  entered  into a
Convertible  Note in the principal  amount of $350,000 that is convertible  into
our common  stock at the lesser of $0.07 or 70% of our average per share  market

<PAGE>



value (as  defined  therein),  and entered  into a Warrant to acquire  3,500,000
shares  of the  Company's  common  stock  at an  exercise  price  of  $.042.  In
connection  with  the  Convertible  Note  and the  Warrant,  we  entered  into a
Registration  Rights  Agreement  in which  we  agreed  to  register  the  shares
underlying  the  Convertible  Note and the  Warrant.  Because  of the  floorless
conversion  feature in the Convertible  Note, we cannot predict at this time the
number of shares that will be issued in connection  with any  conversions of the
Convertible  Note. We also have warrants  outstanding  to purchase an additional
1,950,000 shares at an exercise price of $0.15.

     The conversion or all or part of the  above-mentioned  Convertible  Note or
the  exercise  of any of the  above-mentioned  warrants,  and any  other  future
issuance of all or part of our remaining  authorized  common stock may result in
substantial  dilution  in the  percentage  of our common  stock held by our then
existing stockholders.  We may value any common stock issued in the future on an
arbitrary   basis.   The  issuance  of  common  stock  for  future  services  or
acquisitions  or other  corporate  actions may have the effect of  diluting  the
value of the shares held by our  investors,  and might have an adverse effect on
any trading market for our common stock.


THE SHARES THAT WILL BE AVAILABLE FOR RESALE UPON  CONVERSION OF OUR CONVERTIBLE
NOTE AND WARRANTS AND THE ISSUANCE OF  ADDITIONAL  SHARES OF COMMON STOCK IN THE
FUTURE MAY REDUCE THE MARKET PRICE OF OUR COMMON STOCK.

     On April 23, 2002,  we entered  into a  Convertible  Note in the  principal
amount of $350,000  that is  convertible  into our common stock at the lesser of
$0.07 or 70% of our average per share  market  value (as defined  therein),  and
entered into a Warrant to acquire 3,500,000 shares of the Company's common stock
at an exercise price of $.042. In connection  with the Convertible  Note and the
Warrant,  we entered into a Registration  Rights Agreement in which we agreed to
register the shares underlying the Convertible Note and the Warrant.  Because of
the floorless  conversion  feature in the Convertible Note, we cannot predict at
this  time the  number of shares  that  will be  issued in  connection  with any
conversions  of the  Convertible  Note.  We also have  warrants  outstanding  to
purchase an additional 1,950,000 shares at an exercise price of $0.15.

     The market price of our common stock could drop if  substantial  amounts of
shares are sold in the public market or if the market perceives that those sales
could occur.  A drop in the market price could  adversely  affect holders of our
common  stock and could  also harm our  ability to raise  additional  capital by
selling equity securities.  In addition, after a one-year holding period, shares
held by our  non-affiliates  will become eligible for trading,  pursuant to Rule
144 of  the  General  Rules  and  Regulations  of the  Securities  and  Exchange
Commission,  without  any  additional  payment  to us or  any  increase  in  our
capitalization.

OUR COMMON  STOCK IS TRADED ON THE OVER THE  COUNTER  BULLETIN  BOARD AND,  AS A
RESULT,  THERE MAY BE LIMITED  TRADING VOLUME IN THE STOCK, AS WELL AS A GREATER
SPREAD BETWEEN "BID" AND "ASKED" PRICES.

<PAGE>

     Our common stock is traded on the Electronic  Bulletin  Board,  on the over
the counter market (the "OTC Bulletin  Board").  While a public market currently
exists for our common  stock,  trading of  relatively  small blocks of stock can
have a  significant  impact  on the  price at which  the  stock  is  traded.  In
addition,  the over  the  counter  market  has  experienced,  and is  likely  to
experience in the future,  significant price and volume fluctuations which could
adversely  affect the market  price of the common  stock  without  regard to our
operating performance.

     Issuers  whose  securities  are  traded  on  the  OTC  Bulletin  Board  may
experience  a greater  spread  between  the "bid"  and  "asked"  prices of their
securities  compared with securities traded on a national securities exchange or
Nasdaq, and a limited liquidity in their securities. In addition, many investors
have  policies  against  the  purchase  or holding of  securities  traded in the
over-the-counter  markets.  Trading in an  over-the-counter  market  such as OTC
Bulletin Board has, and will continue to, affect both the trading volume and the
market value of our common stock for the foreseeable future.


WE DO NOT  ANTICIPATE  PAYING  DIVIDENDS ON OUR COMMON STOCK IN THE  FORESEEABLE
FUTURE

     We intend to retain all future  earnings for use in the  development of its
business.  We have never paid and do not  currently  anticipate  paying any cash
dividends on our Common Stock in the foreseeable future.

VII. Financial Statements.

The following documents are filed as part of this report:

    (1)   Independent Auditor's Report.......................................F-1

    (2)   Financial statements:

         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 Financial Statements.......................................F-6

All other  schedules are omitted because they are not applicable or the required
information is shown in the financial statements or other notes herein.


<PAGE>


VIII.    Disagreements On Accounting And Financial Matters.

     On April 12, 2001, the registrant engaged Braverman & Company,  P.C. as its
principal accountant to replace its former principal accountant,  Moore Stephens
Tiller LLC. The decision to dismiss  Moore  Stephens  Tiller LLC was approved by
the Board of  Directors  of  registrant.  Neither  of the  reports of the former
principal  accountants  on the financial  statements  for the fiscal year ending
August 31, 1999, or for the  four-months  ending December 31, 1999, for Armitec,
Inc.  (formerly  Family Health  Systems,  Inc.)  contained an adverse opinion or
disclaimer of opinion,  nor was either  qualified or modified as to uncertainty,
audit scope, or accounting principles.  During the two most recent fiscal years,
the audited period ending August 31, 1999, the subsequent audited interim period
through  December 31, 1999,  and the  subsequent  interim  period  preceding the
dismissal,  there  were no  disagreement(s)  with the former  accountant  on any
matter of accounting principles or practices, financial statement disclosure, or
auditing  scope  or  procedure,  which  disagreements,  if not  resolved  to the
satisfaction  of the former  account,  would have caused it to make reference to
the subject matter or the disagreement(s) in connection with its reports. During
the audited  period  ending  August 31, 1999,  and the subject  audited  interim
period,  the registrant has not consulted Moore Stephens  Tiller LLC,  regarding
any matter  requiring  disclosure  under  Regulation 8-K, Item 304(a)(2).  Moore
Stephens Tiller LLC furnish the Registrant  with a letter  addressed to the U.S.
Securities  and  Exchange  Commission  dated  May 16,  2001,  which was filed as
Exhibit No. 1 to the Registrant's report on Form 8-K/A filed on May 18, 2001.


                                    PART III

IX.  Directors And Executive Officers Of The Registrant.

     A.   Directors, Executive Officers, Promoters and Control Persons

     The following  table sets forth all the directors,  executive  officers and
significant employees of the Registrant as of December 31, 2001.

Name                Age     Position

Bruce R. Davis      66      President, CEO, and Chairman of the Board
Sandra Davis        63      Secretary and Director

     Bruce R. Davis, Chairman,  President and Chief Executive Officer. Mr. Davis
became  Chairman,  President and Chief  Executive  Officer of the  Registrant on
December  29,  2000  pursuant  to the terms of the Share  Exchange  between  the
Company and  Armitec.com.  Mr. Davis is a CPA by profession and was president of
S.W.S. Garment, Inc., a manufacturer of uniforms,  from 1997 until sold in 1999.
From 1991 until 1995, Mr. Davis served as President and Chief Executive  Officer

<PAGE>


of  Disposal  Specialists,  Ltd.,  a company  engaged  in the  waste  management
industry.  From 1995  until  the  present  time,  Mr.  Davis  has  served as the
President and Chief  Executive  Officer of Galt Capital  Corporation in Atlanta,
Georgia,  a real estate development and consulting  company.  Mr. Davis has also
served as President,  Treasurer and as a director of Armitec.com  from July 2000
to the present time.  Mr. Davis obtained his Bachelor of Science degree from New
York University in 1956. Mr. Davis is the husband of Sandra Davis, the Secretary
and a director of the Registrant.

     Sandra Davis,  Secretary and  Director.  Ms. Davis became  Secretary of the
Registrant  on  December  29, 2000  pursuant to the terms of the Share  Exchange
between the Company and Armitec.com. From 1995 until the present time, Ms. Davis
has served as the Secretary of Golf Capital  Corporation in Atlanta,  Georgia, a
real estate  development  and consulting  company.  Ms. Davis has also served as
Secretary and as a director of  Armitec.com  from July 2000 to the present time.
Ms. Davis  attended New York  University.  Ms. Davis is the wife of Bruce Davis,
President, Chief Executive Officer and a director of the Registrant

     Directors  hold office until the next annual meeting of  shareholders.  The
Board of Directors does not have a Compensation,  Audit or Nominating Committee,
and the usual  functions of such committees are performed by the entire Board of
Directors.

     Officers are elected by the Board of Directors following the annual meeting
of stockholders.

     B.   Compliance with Section 16(a) of the Exchange Act

     The members of Armitec's  Board of  Directors,  the  executive  officers of
Armitec and persons who hold more than 10% of Armitec's outstanding Common Stock
are subject to the reporting  requirements  of Section  16(a) of the  Securities
Exchange  Act of 1934,  as amended,  which  require  them to file  reports  with
respect to their ownership of Armitec's  Common Stock and their  transactions in
such  Common  Stock.  Based upon (1) the copies of Section  16(a)  reports  that
Armitec  received  from such  persons for  transactions  in the Common Stock and
their Common Stock holdings for the fiscal year ended December 31, 2001, and (2)
the written  representations  received  from one or more of such persons that no
annual Form 5 reports were required to be filed by them for such period, Armitec
believes  that all  reporting  requirements  under Section 16(a) for such period
were met in a timely manner by its executive officers, Board members and greater
than ten-percent stockholders, except as described herein.

     Galt Capital Corporation  inadvertently failed to timely file a Form 4 with
the  Commission to report the private  transfer of shares to two  individuals in
January 2001.  Galt Capital  Corporation  inadvertently  failed to timely file a
Form 5 with the  Commission to report the  acquisition of shares of common stock
of the  Registrant in November  2001. The Company has taken steps to ensure that
its  officers,   directors  and  ten  percent  shareholders  are  aware  of  the
requirements for the filing of these reports.

<PAGE>


X.   Executive Compensation.

     Cash compensation. Our Chief Executive Officer has received no compensation
for the last three fiscal  years,  and no other  executive  officer  received in
excess of $100,000 during any of the last three fiscal years.

     Compensation of Directors:

     During the Registrant's fiscal year ended December 31, 1987, the Registrant
passed a resolution that all officers and directors who attended meetings of the
Board of  Directors  or  Shareholders  and who were  not on  other  salary  with
Armitec,  would receive restricted shares of stock of Armitec, equal to $500 per
day. The number of shares to be  determined by the bid price of the stock on the
meeting date.  Directors were not paid any stock under the foregoing  resolution
during the previous fiscal year.

XI.  Security Ownership Of Certain Beneficial Owner And Management.

     The  following  table sets forth  information  regarding  ownership  of the
Registrant's  common stock by all persons who are known by the Registrant to own
more than 5% of the total  outstanding  shares and by all officers and directors
of the Company as of April 23, 2002. Except as otherwise indicated in the table,
the address of the stockholders  listed below is that of the Company's principal
executive office.  Directors not included in the table below do not hold Company
securities.

                                            Shares Beneficially Owned
                                              As of April 23, 2002

Name and Address                         Number                     Percent

Bruce R. Davis                         17,640,785(1)                 59.2%
Sandra Davis                           17,640,785(2)                 59.2%
Galt Capital Corporation               17,640,785                    59.2%
1295 West Garmon Road
Atlanta, Georgia 30327

(1)  Based  on  17,640,785   shares  of  common  stock  owned  by  Galt  Capital
     Corporation.  One  hundred  percent of the  Capital  Stock of Galt  Capital
     Corporation is owned by Sandra P. Davis, the wife of Bruce R. Davis.

(2)  Based  on  17,640,785   shares  of  common  stock  owned  by  Galt  Capital
     Corporation.  One  hundred  percent of the  Capital  Stock of Galt  Capital
     Corporation is owned by Sandra P. Davis

         Changes in Control.

     On April 23, 2002,  we entered  into a  Convertible  Note in the  principal
amount of $350,000  that is  convertible  into our common stock at the lesser of
$0.07 or 70% of our average per share  market  value (as defined  therein),  and
entered into a Warrant to acquire 3,500,000 shares of the Company's common stock
at an exercise price of $.042.  Because of the floorless  conversion  feature in
the  Convertible  Note, we cannot predict at this time the number of shares that

<PAGE>



will be issued in connection with any  conversions of the Convertible  Note. Our
current  management  beneficially owns 17,640,785 shares of our common stock. As
such,  if the  Convertible  Note and Warrant are  converted  and  exercised  the
holders of such shares may own more shares than current management.

XII. Certain Relationships And Related Transactions.

     During  2001,  Galt Capital  Corporation  ("Galt")  advanced an  additional
$68,015 to the Registrant. In addition, a management fee for the services of the
president  of the  Registrant  payable  to Galt of  $170,000  for the  year  was
recorded  for a  total  balance  outstanding  to Galt at  December  31,  2001 of
$346,702.  The  Registrant's  president  and  his  wife's  affiliated  companies
advanced  an  additional  $41,192  to the  Registrant  during  the  year  and no
principal  reduction  occurred during 2001. None of these  non-interest  bearing
advances are  collateralized.  Two  shareholders had advanced $25,000 during the
year, which remains outstanding at the end of the year.

In addition,  Galt was issued 5,750,000 shares common stock valued at par, for a
total of  $9,200  in  partial  consideration  for  arranging  financing  for the
Registrant's working capital through related parties.

The following is a summary of related party obligations at December 31, 2001:

       Colonial Corporation                        $ 75,000
       Galt Capital Corporation                     346,702
       President and wife's affiliated companies     41,192
       Shareholder advances                          25,000
                                                   --------

       Total related party obligations             $487,894
                                                   ========

<PAGE>

XIII.     Other.

          A.   Exhibits

         2.1   Plan and  Agreement to Exchange  Stock by and among  Armitec.com,
               Inc., the Armitec.com shareholders, and Armitec, Inc. (2)

         2.2   Asset Purchase  Agreement among Jack Young,  Inc.,  Pocono Knits,
               Inc. and the Shareholders of Pocono Knits, Inc. (1)

         2.3   First Amendment to Asset Purchase Agreement (1)

         3.1   Articles of Incorporation (3)

         3.2   Amended and Restated Bylaws (1)

         3.3   Amendment to Articles of Incorporation (4)

         4.1   Specimen Certificate of Common Stock (1)

         10.1  Consulting Agreement with Robert P. Atwell (5)

         10.2  Warrant issued to Bruce Barren (5)

         10.3  Consulting Agreement with Michael Price (6)

         10.4  Consulting Agreement with Donald C. Carman (6)

         10.5  Warrant issued to Michael Price (6)

         10.6  Consulting Agreement with Michael Price (7)

         10.7  Consulting Agreement with Alberto De Jesus Rendon (7)

         10.8  Lease Agreement with Feldberg Properties I, LLC (1)

         10.9  Lease Agreement with Sargent Realty (1)

         10.10 Convertible  Note  Purchase  Agreement  among  Armitec,  Inc. and
               Stonestreet Limited Partnership (1)

<PAGE>


         10.11 Secured  Convertible  Promissory  Note with  Stonestreet  Limited
               Partnership (1)

         10.12 Warrant Agreement with Stonestreet Limited Partnership (1)

         10.13 Registration    Rights   Agreement   with   Stonestreet   Limited
               Partnership (1)

         10.14 Security  Agreement  among  Armitec,  Inc.,  Stonestreet  Limited
               Partnership, and Galt Capital Corporation (1)

         10.15 Stock  Pledge  Agreement  by and between  Armitec,  Inc. and Jack
               Young (1)

         10.16 Escrow  Agreement  by and among  Armitec,  Inc.,  Jack  Young and
               Escrow Agent (1)

         10.17 Employment Agreement with Tony Anzovino (1)

         10.18 Consulting Agreement with Jack Young (1)

         10.19 Put Agreement by and between Jack Young Associates, Inc. and Jack
               Young (1)

         21.1  Subsidiaries of Resident

         23.1  Consent of Braverman & Company, P.C. (1)


          (1)  Filed herewith.

          (2)  Incorporated by reference to the Form 8-K filed by the Registrant
               on January 16, 2001.

          (3)  Incorporated  by  reference  to  the  Registrant's   registration
               statement  on Form S- 18 filed with the  Securities  and Exchange
               Commission in August 1983.

          (4)  Incorporated  by  reference  to the  Form  8-K  report  filed  by
               Registrant on September 22, 2000.

          (5)  Incorporated by reference to the  Registration  Statement on Form
               S-8 filed by the Registrant on November 9, 2001.

          (6)  Incorporated by reference to the  Registration  Statement on Form
               S-8 filed by the Registrant on February 14, 2002.

          (7)  Incorporated by reference to the  Registration  Statement on Form
               S-8 filed by the Registrant on March 6, 2002.

          B.   Reports on Form 8-K

          The Registrant  filed no reports on Form 8-K during the fourth quarter
          of 2001.

<PAGE>



                                   SIGNATURES

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



      Date:  May 10, 2002                /s/ Bruce R. Davis
                                        --------------------------------------
                                        Chairman of the Board, President,
                                        Chief Executive Officer,
                                        Chief Financial and Accounting Officer,
                                        Treasurer





     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.



      Date:  May 10, 2002                /s/ Bruce R. Davis
                                        --------------------------------------
                                        Chairman of the Board, President,
                                        Chief Executive Officer,
                                        Chief Financial and Accounting Officer,
                                        Treasurer, and Director



     Date:  May 10, 2002                 /s/ Sandra Davis
                                        --------------------------------------
                                        Secretary and Director




<PAGE>

                                  ARMITEC, INC.


                              FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


<PAGE>



                                TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----




INDEPENDENT AUDITOR'S REPORT                                                 F-1
--------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET                                                   F-2
--------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF OPERATIONS                                        F-3
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN
     STOCKHOLDERS' EQUITY                                                    F-4
 -------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS                                        F-5
--------------------------------------------------------------------------------


NOTES TO FINANCIAL STATEMENTS                                                F-6
--------------------------------------------------------------------------------



<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Armitec, Inc.
Smyrna, Georgia

We have audited the accompanying consolidated balance sheet of Armitec, Inc. and
subsidiary as of December 31, 2001, and the related  consolidated  statements of
operations,  cash flows, and changes in  stockholders'  equity for the year then
ended. We also audited the consolidated statements of operations, cash flows and
changes in stockholders'  equity for the period from July 24, 2000 (inception of
development  stage),  to December 31, 2000.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial  position of Armitec,  Inc. and
subsidiary as of December 31, 2001,  and the results of its  operations  and its
cash  flows  for the year  then  ended,  and from July 24,  2000  (inception  of
development   stage)  to  December  31,  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 1 to the
financial  statements,  the  Company is  dependent  upon its  ability to develop
additional  sources of capital,  and/or  achieve  profitable  operations.  These
conditions  raise  substantial  doubt  about its  ability to continue as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of these uncertainties.





Braverman & Company, P.C.
Prescott, Arizona
April 23 , 2002, except for Note 7, as to
 which the date is May 5, 2002




                                       F-1
<PAGE>

                                  ARMITEC, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED CONDENSED BALANCE SHEET




                                     ASSETS
                                     ------

    CURRENT ASSETS
           Cash                                                       $   7,557
           Finished goods Inventory                                      71,189
           Prepaid rent                                                   7,775
                                                                      ---------

           Total current assets                                          86,521
                                                                      ---------

    Furniture, fixtures and equipment, at cost                           66,120
                                                                      ---------

    OTHER ASSETS
          Lease deposit                                                  15,500
                                                                      ---------

           Total other assets                                            15,500
                                                                      ---------

                                                                      $ 168,141
                                                                      =========


                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------


    CURRENT LIABILITIES

           Accounts payable                                           $ 138,918
           Related party obligations                                    479,600
                                                                      ---------

           Total Current Liabilities                                    618,518
                                                                      ---------

    COMMITMENTS AND CONTINGENCIES

    STOCKHOLDERS' EQUITY (DEFICIT)

        Common stock, par value $.00167; 50,000,000
           shares authorized; 30,513,629 shares outstanding              50,958
        Paid-in capital                                                 170,322
        (Deficit) accumulated during the development stage             (671,657)
                                                                      ---------


           Total Stockholders' Equity (Deficit)                        (450,377)
                                                                      ---------

                                                                      $ 168,141
                                                                      =========



                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-3
<PAGE>
<TABLE>
<CAPTION>

                                  ARMITEC, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                         Cummulative
                                                                                             from
                                                                                            July 24,
                                                                                             2000
                                                                                        (commencement
                                                                                               of
                                                                                         development
                                                                                            stage)
                                                                                              to
                                                      2001                 2000       December 31, 2001
                                            -----------------    -----------------    -----------------
<S>                                         <C>                  <C>                  <C>

REVENUE                                     $            --      $            --      $            --
                                            -----------------    -----------------    -----------------

OPERATING EXPENSES
  General and adminstrative                           410,599              220,798              631,398
  Interest expense                                      3,344                1,948                5,292
                                            -----------------    -----------------    -----------------

    TOTAL EXPENSES                                    413,944              222,746              636,690
                                            -----------------    -----------------    -----------------

NET(LOSS) FROM OPERATIONS                   $        (413,944)   $        (222,746)   $        (636,690)
                                            -----------------    -----------------    =================

BASIC AND DILUTED (LOSS) PER COMMON SHARE   $           (0.02)   $           (0.01)
                                            =================    =================

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                 26,804,765           16,716,683
                                            =================    =================
</TABLE>




                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       F-3
<PAGE>
<TABLE>
<CAPTION>

                                  ARMITEC, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY


                                                                                                         (Deficit)
                                                                                                        Accumulated
                                                                   Common Stock                           During
                                                            --------------------------      Paid-in     Development
                                                               Shares         Amount        Capital        Stage          Total
                                                            -----------    -----------    -----------   -----------    -----------
<S>                                                         <C>            <C>            <C>           <C>            <C>
Balances, at inception                                       15,947,542    $    25,516    $      --     $   (34,967)   $    (9,451)
 Shares issued for compensation
    to employees @ $.01 per share, June 10, 2000              1,027,100          1,643          8,628                       10,271
 Shares issued to settle debt at $.01 per share, June 10,        18,000             29            151                          180
 Shares issued for consulting
   services @ $.01 per share                                  1,815,990          2,906         15,254        18,160
 Net (loss) for the period                                                                                 (222,746)      (222,746)
                                                            -----------    -----------    -----------   -----------    -----------

Balances, December 31, 2000                                  18,808,632         30,094         24,033      (257,713)      (203,586)
 Issuance of common stock February 12, 2001,
  net of offering costs of $21,251, at $.15 per share           849,997          1,360        105,381                      106,741
 Issuance of common stock for consulting services
   on April 10, 2001, at par                                    720,000          1,152                                       1,152
 Proceeds from sale of common stock, July 15, 2001
  at $.15 per share                                              35,000             56          4,944                        5,000
Common stock issued for consulting
 services July 1, 2001, at par                                7,350,000         11,760                                      11,760
Common stock issued for consulting
 services November 8, 2001, at $.01 per share                 2,500,000          4,000         21,000                       25,000
Proceeds from sale of common stock
 November 8, 2001, at $.15 per share                             50,000             80          7,420                        7,500
Proceeds from exercise of stock purchase warrants
 on December 27, 2001, at $.05 per share                        200,000            320          9,680                       10,000
Change in par value to .00167 per share                                          2,136         (2,136)                        --
 Net (loss) for the year                                                                                   (413,944)      (413,944)
                                                            -----------    -----------    -----------   -----------    -----------

Balances, December 31, 2001,                                 30,513,629    $    50,958    $   170,322   $  (671,657)   $  (450,377)
                                                            ===========    ===========    ===========   ===========    ===========
</TABLE>



               SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       F-4



<PAGE>
<TABLE>
<CAPTION>

                                  ARMITEC, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                        Cummulative
                                                                                                            from
                                                                                                          July 24,
                                                                                                            2000
                                                                                                       commencement
                                                                                                            of
                                                                                                         development
                                                                                                           stage)
                                                                                                            to
                                                                    2001                 2000       December 31, 2001
                                                          -----------------    -----------------    -----------------
<S>                                                       <C>                  <C>                  <C>

 OPERATING ACTIVITIES
         Net (loss) from operations                       $        (413,944)   $        (222,746)   $        (636,690)
         Adjustments to reconcile net (loss) to net
            cash used by operating activities:
        Issuance of common stock for services                        37,912               18,160               56,072
        Changes in-
          Inventories                                               (71,189)             (71,189)
          Prepaid rent                                               (7,775)              (7,775)
          Accounts payable                                           87,668               51,250              138,918
          Related party obligations                                 305,913              173,687              479,600
                                                          -----------------    -----------------    -----------------

        Net Cash Flows (To) Operating Activities                    (61,415)              20,351              (41,064)
                                                          -----------------    -----------------    -----------------

 INVESTING ACTIVITIES
          Deferred offering costs                                   (21,251)             (21,251)
          Increase in furniture, fixtures and equipment             (66,120)             (66,120)
          Increase in lease deposit                                 (15,500)             (15,500)
                                                          -----------------    -----------------    -----------------

        Net Cash Flows From (To) Investing Activities               (81,620)             (21,251)            (102,871)
                                                          -----------------    -----------------    -----------------

 FINANCING ACTIVITIES
         Proceeds from sale of common stock                         150,492                1,000              151,492
                                                          -----------------    -----------------    -----------------

        NET CASH FROM FINANCING ACTIVITIES                          150,492                1,000              151,492
                                                          -----------------    -----------------    -----------------

        NET INCREASE (DECREASE) IN CASH                               7,457                  100                7,557
                                                          -----------------    -----------------    -----------------

        CASH BEGINNING OF PERIOD                                        100                 --                   --
                                                          -----------------    -----------------    -----------------

        CASH END OF PERIOD                                $           7,557    $             100    $           7,557
                                                          =================    =================    =================



SUPPLEMENTAL INFORMATION
          Interest paid                                   $           3,344    $           1,948    $           5,292
                                                          =================    =================    =================
</TABLE>


                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS


                                       F-5
<PAGE>

                          ARMITEC, INC. AND SUBSIDIARY
                          (a Development Stage Company)
                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Background
------------------

Armitec, Inc. (the Company or AI), a Delaware corporation formed January 1983 to
provide comprehensive administrative, marketing and consulting services to group
dental and medical  practices,  became inactive in October 1987,  except for the
management of a limited portfolio of securities. On August 31, 2000, the Company
transferred  all of its net assets as part of the  consideration  to be paid for
having a related  corporation assume all of the obligations to be incurred for a
pending merger as more fully described below. It had a fiscal year-end of August
31 until it changed to December 31 in 1999.

AI became a development stage company as defined in FASB No.7 since its business
ceased on August 31, 2000 as a result of the  distribution  of its net assets at
that date as further described below.

Principles of Consolidation
---------------------------

The Company's consolidated financial statements include the financial statements
of the Company and its wholly  owned  subsidiary,  Armitec.Com,  Inc.  (ACI),  a
Georgia  corporation  acquired in a reverse  merger on December  29,  2000.  All
significant intercompany accounts and transactions have been eliminated.

Financial Statement Presentation and Operations
-----------------------------------------------

Year 2000
---------

The Company  issued  13,940,785  shares of its $.00167 par value common stock in
exchange  for all of the shares of common  stock  outstanding  of ACI.  ACI is a
development stage company, wholly owned by a corporation owned and controlled by
the president of ACI. An additional  13,525,928  shares of the Company's  common
stock were set aside for  private  placement  and  services  to be  subsequently
incurred in connection  with the business plan of the Company.  Shares unsold at
the end of the  private  placement  offering  period  are to be issued to the AI
shareholder at nominal value.

The  historical  transactions  of ACI  have  been  carried  forward  since it is
considered  the  acquirer  for  accounting  purposes,  its  shareholders  having
received  more shares of AI's common  stock than were  outstanding  prior to the
exchange.  ACI  has a  fiscal  year-end  of  December  31.  As a  result  of the
disposition  of the net  assets of AI in August  2000,  AI became a  development
stage  company as of  September  1, 2000,  whereas,  the  operations  of ACI are
reflected as development  stage  activities since July 24, 2000, the date of its
formation.  All  operations  prior  to the  development  stage  of AI have  been
eliminated in the  accompanying  consolidated  statements of operations and cash
flows. Unless otherwise indicated,  all references to the Company include AI and
ACI.

Year 2001
---------

An  unsuccessful  attempt was made to assist an Atlanta,  Georgia  based  retail
uniform  distributor in salvaging its existing business for the potential future
benefit  of the  Company  during the first  half of the 2001.  The  latter  half
involved several attempts to find additional sources of financing and to acquire
an existing  business  with which to further  the  Company's  business  plan and
objectives.  No revenues  were earned  during 2001. In December 2001 the Company
moved to a permanent location in Smyrna, Georgia.

                                      F-6
<PAGE>

                          ARMITEC, INC. AND SUBSIDIARY
                         (a Development Stage Company)
                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of Estimates and Assumptions
--------------------------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates and assumptions that affect the reported amounts and the disclosure of
contingent  amounts in the Company's  financial  statements and the accompanying
notes.  Actual  results  could differ from those  estimates.  Certain prior year
amounts have been reclassified to conform to the current year presentations.

Cash Equivalents
----------------

The Company considers all highly liquid investments with the original maturities
of three months or less to be cash equivalents. To date the Company has had none
of these.

Fair Value of Financial Instruments
-----------------------------------

Statement of Financial  Accounting  Standards  No. 107,  Disclosures  about fair
value of financial instruments, defines the fair value of a financial instrument
as  the  amount  at  which  the  instrument  could  be  exchanged  in a  current
transaction  between  willing  parties.  The  carrying  values of the  Company's
financial instruments, which include cash, accounts receivable, accounts payable
and  accruals,  approximate  fair  values  due to the short  maturities  of such
instruments.

Inventory
---------

The inventory as of December 31, 2001, is stated at the lower of cost (first-in,
first-out), or market, and consists mainly of ready to wear uniforms and related
components  thereof,  which are worn primarily by various  police,  security and
fire protection  personnel  throughout the United States.  The Company offers to
embroider or sew insignias  using its own equipment and personnel.  The majority
of the inventory was acquired  during  2001from a managed  company whose similar
business  failed during the year. As of December 31, 2001,  none of the acquired
inventory was sold.

Income Taxes
------------

Income  taxes are  provided  for using the  liability  method of  accounting  in
accordance with Statement of Financial  Accounting Standards No. 109 "Accounting
for Income  Taxes".  A  deferred  tax asset or  liability  is  recorded  for all
temporary  difference  between financial and tax reporting of which depreciation
is the most  significant.  Deferred tax expense  (benefit)  results from the net
change  during  the year of  deferred  tax  assets  and  liabilities.  Valuation
allowances are  established  when necessary to reduce deferred tax assets to the
amount  expected to more likely than not be realized in future tax returns.  Tax
law and rate  changes are  reflected  in income in the period  such  changes are
enacted.

Prior to the  merger,  the AI  sustained  net  operating  losses  for income tax
purposes  of  approximately  $1,350,000,  which  expires  under  current tax law
through  2013.  However,  the  Company did not meet the  continuity  of business
requirements  of Section 382 (c) of the Internal  Revenue Code,  therefore  such
pre-merger losses are not deductible.

                                      F-7
<PAGE>

                          ARMITEC, INC. AND SUBSIDIARY
                          (a Development Stage Company)
                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Year 2000
---------

For financial reporting purposes,  the Company has sustained a consolidated loss
for the  development  stage period  commencing July 24, 2000 and ending December
31.  2000,  of  approximately  $222,000  of which  approximately  $  122,000  is
considered  start-up  costs,  deferred for income tax purposes until the Company
commences  operations.  The  balance  of  $100,000  is  considered  a  permanent
non-deductible difference. The Company's future utilization of such deferred tax
benefit cannot be currently ascertained.  Accordingly,  a valuation allowance of
approximately  $37,000 has been provided  equal to the value of the deferred tax
asset of $122,000.  Start-up costs are not deductible  until the business of the
Company  commences,  at which time they may be amortized over a 60-month period,
unless  permanently  capitalized.  Therefore,  at December 31, 2000, there is no
significant net operating loss for income tax purposes.

Year 2001
---------

The Company  maintained its development  stage status through  December 31, 2001
and incurred a net  operating  loss of $414,000,  substantially  all of which is
considered  start-up  costs for income tax  purposes  and will be  amortized  or
permanently  capitalized  when its  business  commences  as  stated  above.  The
deferred  tax  benefit of the 2001 net  operating  loss is  $144,000.  Since the
Company is not able to determine its ability to utilize the  accumulated  losses
to date of $535,000  for income tax  purposes at the present  time,  a valuation
allowance has been provided totaling $181,000 of which $144,000 is for 2001. The
Company has 20 years from the commencement of the amortization of start-up costs
to fully utilize them.

Depreciation
------------

The following is an analysis of the cost of furniture,  fixtures and  equipment.
Depreciation expense will begin upon the commencement of operations estimated to
occur in April 2002. The Company  expects to depreciate the cost of these assets
utilizing the straight-line method over estimated useful lives of 2 to 7 years.


            Embroidery Equipment             $48,800
            Displays and fixtures              4,000
            Computer systems                   6,020
            Office furniture and equipment     7,300
                                             -------

            Total                            $66,120
                                             =======


Loss Per Share
--------------

Net loss per  share is  provided  in  accordance  with  Statement  of  Financial
Accounting  Standards No. 128 (SFAS No.128) "Earnings Per Share". Basic loss per
share is computed by dividing net loss available to common  stockholders  by the
weighted  average  number of common shares  outstanding  during the period.  The
shares issued to effect the merger have been  considered  outstanding  since the
beginning of the period.

Basis of  Presentation  and  Management's  Actions  to  Overcome  Operating  and
--------------------------------------------------------------------------------
Liquidity Problems
------------------

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.

                                      F-8
<PAGE>

                          ARMITEC, INC. AND SUBSIDIARY
                          (a Development Stage Company)
                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The  Company's  ability to continue in  existence is dependent on its ability to
develop additional sources of capital, and/or achieve profitable operations. The
accompanying  financial  statements  do not include any  adjustments  that might
result from the outcome of these  uncertainties.  Management's  plan is to raise
additional debt or equity  financing and to begin  operations in May 2002, which
are  anticipated to be sufficient to provide the necessary cash flow to meet the
Company's expectations.


NOTE 2 - RELATED PARTY TRANSACTIONS AND OBLIGATIONS

Year 2000

In connection  with the merger in 2000, ACI agreed to pay on an unsecured  basis
without interest, $75,000 to a company owned by the majority shareholders of AI,
Colonial  Corporation,  for legal,  auditing,  and other expenses in addition to
$25,000, which had been paid to them for such costs as of December 31, 2000. The
president  of  the  Company  guaranteed  this  unsecured  obligation,  which  is
evidenced by a promissory  note due March 29, 2001. The note became past due and
no principal  has been paid to date.  The creditor has taken no action,  nor has
the guarantor made any repayment of this past due amount.

As of December 31, 2000,  Galt Capital  Corporation  (Galt),  paid or incurred a
total of $98,687 of costs and  expenses  on behalf of the Company  through  that
date,  including  a  management  fee for the  services of the  president  of the
Company of $25,000.

Year 2001

During  2001,  the parent  company of ACI  advanced or  incurred  an  additional
$69,721 to or on behalf of the Company.  In addition,  a management  fee for the
services of the  president  of the Company  payable to Galt of $170,000  for the
year was recorded for a total balance  outstanding  to Galt at December 31, 2001
of  $338,408.  The  Company's  president  and his  wife's  affiliated  companies
advanced an additional  $41,192 to the Company  during the year and no principal
reduction to them  occurred  during  2001.  None of these  non-interest  bearing
advances are collateralized.  Two shareholders had advanced,  without collateral
or interest,  $25,000 during the year,  which remains  outstanding at the end of
the year.

Galt was issued  5,750,000  shares of common stock valued at par, for a total of
$9,200 in  partial  consideration  for  arranging  financing  for the  Company's
working capital through related parties and others.

The following is a summary of related party obligations at December 31, 2001:

           Colonial Corporation                        $ 75,000
           Galt Capital Corporation                     338,408
           President and wife's affiliated companies     41,192
           Shareholder advances                          25,000
                                                       --------

           Total related party obligations             $479,600
                                                       ========

                                      F-9
<PAGE>

                          ARMITEC, INC. AND SUBSIDIARY
                          (a Development Stage Company)
                   Notes to Consolidated Financial Statements


NOTE 3 - TERMINATION OF MANAGEMENT AGREEMENT

In December 2000, the Company  agreed to acquire all of the  outstanding  common
stock of a Georgia  company (target  company)  engaged in the business of retail
distribution  and sales of uniforms,  principally  to  governmental  agencies in
Georgia. Upon the completion of conditions precedent, the acquisition would have
resulted in the Georgia company retaining the 7,500,000 shares originally issued
to them in a contemplated purchase transaction during 2000.

In early  2001,  the  Company  filed a Form 8-K  reporting  the  transaction  as
completed,  subject to the  furnishing  of audited  financial  statements of the
acquired company. In March 2001, a report of the accounts receivable status by a
Special  Master for the acquired  company was presented to the Superior Court of
Fulton County,  pursuant to a request by the acquired  company's bank.  Based on
this report and the subsequent events resulting therefrom,  the acquired company
was unable to finance its current assets as it had done  formerly.  Accordingly,
the Company  rescinded the acquisition and entered into a management  agreement.
The proposed  management  agreement  provided  that the Company  would allow the
issued  shares  of its  common  stock  to be  retained  if the  liquidation  was
beneficial to the Company.

In  June  2001,  the  financial   condition  of  the  managed   company  further
deteriorated  and the  Company  decided  to abandon  its  interest  therein  and
relocate its offices. The Company incurred approximately $320,000 in pursing the
potential  business  opportunities  originally  presented by the target company,
exclusive of accrued  management  fees for the services of the  president of the
Company.  The  Company  was able to recover  merchandise  inventory,  furniture,
fixtures and equipment from the target company, valued at approximately $137,000
as a partial  offset  against  advances and expenses paid and/or  incurred.  The
7,500,000 share certificates were not returned to the Company as agreed upon, as
the holder has  claimed all three  certificates  were lost.  Accordingly,  those
shares are considered issued but not outstanding as of December 31, 2001.


NOTE 4 - PRIVATE PLACEMENT MEMORANDUM

As a result of the private  placement of the  Company's  common stock  effective
December  14,  2000,  the  Company  received  gross  proceeds  of $127,992 as of
February 12, 2001.


NOTE 5 - REGISTRATION STATEMENT

During 2001, the Company filed a registration  statement with the Securities and
Exchange  Commission  on Form S-8 in  connection  with the  issuance of 2,000,00
warrants to purchase an equivalent  number of shares,  and issuance of 2,500,000
shares of the Company's  common stock.  All 4,500,000  shares were issued during
2001,  however,  1,750,000  shares are  considered  not  outstanding as they are
subject to warrant  exercise.  The warrant  holder  exercised  250,000  warrants
during 2001 of which  200,000  shares were  exercised  at an agreed upon reduced
price of $.05 per share and the balance at the originally  stated exercise price
of $.15 per share,  leaving  1,750,000  unexercised  warrants as of December 31,
2001. Each warrant is convertible  into one share of the Company's  common stock
at a price of $.15 per share through the expiration date of October 26, 2004.

                                      F-10
<PAGE>

                          ARMITEC, INC. AND SUBSIDIARY
                          (a Development Stage Company)
                   Notes to Consolidated Financial Statements

NOTE 6 - COMMITMENTS and CONTINGENCIES

Operating Lease Agreement
-------------------------

In December 2001, the Company  entered into a 5 year lease agreement for office,
showroom,  and warehouse  facilities in Smyrna,  Georgia commencing February 15,
2002. The Company is obligated to pay the tenant  construction  cost of $12,800.
The lease is  guaranteed by the  President of the Company.  The lease  agreement
provides  for a 5 year  renewal  option with  continuing  base  monthly  rentals
increasing annually for a 5 year total aggregating $574,254 .

Base rentals are in addition to the facility's operating expenses, which include
among other things,  repairs and maintenance,  cleaning and janitorial,  utility
costs and expenses, wages, salaries, and fringe benefits of security, operation,
maintenance and repair personnel,  insurance  carried by the landlord,  and real
estate and personal  property taxes.  The following is a schedule of base annual
lease rentals payable monthly for each of the next 5 years  commencing  February
15, 2002:


                           2002   $ 81,638
                           2003     96,099
                           2004     98,982
                           2005    101,952
                           2006    105,012
                                  --------

                           Total   483,683
                                  ========


Consulting Expenses
-------------------

In connection with the registration of shares on Form S-8, the Company agreed to
reimburse  expenses  during the term of two of the three  consulting  agreements
involved.  One agreement  terminates in early 2002, and the other on November 4,
2002.

Warrants
--------

In addition to the 1,750,000 warrants outstanding above, the Company also issued
in November 2001, to an individual,  500,000 stock  purchase  warrants,  half of
which are  exercisable at $.15 per share and the balance at $.25 per share.  All
of the warrants  were  exercised in March 2002,  at a reduced price of $.075 per
share, for a total of $37,500.


NOTE  7- SUBSEQUENT EVENTS

Financing for General Working Capital
-------------------------------------

In order to obtain general working  capital,  in April 2002, the Company entered
into  a  7%  convertible  debt  arrangement   which  provided  net  proceeds  of
approximately  $315,000. The Company issued warrants to the note holder enabling
it to acquire 3,500,000 shares of the Company's common stock at $.042 per share.

                                      F-11
<PAGE>

                          ARMITEC, INC. AND SUBSIDIARY
                          (a Development Stage Company)
                   Notes to Consolidated Financial Statements

NOTE  7- SUBSEQUENT EVENTS (continued)

Purchase of the Net Assets of a Business and Commencement of Operations
-----------------------------------------------------------------------

In May 2002, the Company finalized an agreement to acquire  substantially all of
the assets and assume the general  business  liabilities of an existing  sweater
manufacturer located in Hazelton,  Pennsylvania. The Company assumed obligations
of  approximately  $1,900,000  of the seller and assigned a value of $550,000 to
the net assets acquired. No goodwill was involved in the acquisition.

To facilitate the acquisition, a wholly owned subsidiary, Jack Young Associates,
Inc. (JYAI) was formed.  JYAI has agreed to a 5-year  consulting  agreement with
Jack Young for annual  compensation  of $127,200 in addition to the  issuance of
2,000,000  shares of the common stock of Armitec,  Inc. and the  assumption of a
personal obligation of the consultant of $130,000.  The consultant may "put" the
stock to the Company for $550,000 on the 5th anniversary  date of the agreement,
and for 30 days thereafter. The Company has the right to "call" these shares for
$550,000  any time  after the  second  anniversary  date of the  agreement.  The
Company  will  treat the  securities  issued as  equity in  accordance  the with
Financial Accounting Standards Board,  Emerging Issues Task Force abstract issue
number 84-5,  based on the probability  that the stock will be converted  during
the 5 year  conversion  period.  All of the  shares of JYAI were  pledged  to an
escrow agent to secure certain  obligations of Armitec,  Inc. to the seller, and
will  remain  pledged  until  all of the  obligations  to the  seller  have been
satisfied at which time the pledged  shares will be released and returned to the
Company.  In the event of any uncured default by the Company, as provided in the
pledge agreement, the pledged shares shall be delivered to the seller.

JYAI entered into a new 5-year  operating lease for the existing  Hazelton plant
and office  facilities.  The terms of the lease  included a one-time  payment of
$40,000,  monthly lease  rentals of $14,000 for the first 24 months,  and $9,000
per month thereafter,  for a total of $700,000 for the 5-year period,  averaging
$11,667 per month.

To enable the acquired  business to continue in existence,  the Company requires
additional debt or equity financing. Additional financing is being sought.

In  accordance  with  FASB  #7 the  Company  will  no  longer  be  reporting  as
development  stage company,  as a result of having acquired an existing business
with ongoing operations.

                                      F-12