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

                   For the fiscal year ended December 31, 2000

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                         Commission file No. 0-14119-NY

                        POLYMER RESEARCH CORP. OF AMERICA
                 (Name of small business issuer in its charter)

         NEW YORK                                            11-2023495
-------------------------------                  -------------------------------
(State or other jurisdiction of                 (IRS Employer Identification
incorporation or organization)                             Number)

    2186 Mill Avenue, Brooklyn, NY                           11234
---------------------------------------                    ---------
(Address of principal executive offices)                   (Zip Code)

Issuer's telephone number including area code: (718) 444-4300
                                              --------------

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

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

                           Common Stock $.01 par value

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act of 1934 during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
Yes     X      No
     -------       -------

Registrant's revenues for its most recent fiscal year - $5,071,241
                                                        -----------

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form  10-KSB.  _X_

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
Registrant at April 9, 2001 was approximately  $1,004,063 based on the last sale
price of such stock.

As of April 9,  2001,  the  Registrant  had  1,926,012  shares of  Common  Stock
outstanding.
                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE
                                       -1-

<PAGE>



ITEM 1 - DESCRIPTION OF BUSINESS

Polymer  Research Corp. of America ("the  Company") was  incorporated  under the
laws of New York  State in 1963.  It is  principally  engaged  in  research  and
development  in polymer  chemistry,  on a contract  basis,  particularly  in the
application of chemical "grafting," i.e., techniques for modification of organic
and  inorganic  substances.  The Company also  manufactures  and sells  products
arising from  research  activities  and textile  printing  inks.  The  Company's
principal place of business is located at 2186 Mill Avenue,  Brooklyn,  New York
11234. The Company's phone number at that address is (718) 444-4300.

During 2000,  research  revenues and products sales accounted for 87 percent and
13 percent of the Company's net revenues, respectively.

For a detailed breakdown of segments of the Company's revenues,  income, capital
expenditures  and  identifiable  assets,  see  Note  15 of  Notes  to  Financial
Statements.

RESEARCH AND DEVELOPMENT CONTRACT WORK

The  Company's  principal  business is that of  research  and  development  on a
contract basis for other companies in the field of polymer chemistry,  i.e., the
chemical creation and use of polymers.  "Polymers" are essentially  compounds of
high molecular weight, such as plastics and resins.

Polymers result from chemical reactions of compounds with low molecular weights,
called  "monomers," which react to form a polymer.  Generally,  a polymerization
reaction (i.e.,  the chemical  creation of a polymer) entails the application of
heat to a solution  containing the  appropriate  monomers,  in the presence of a
catalyst; the result of the reaction can include one or more kinds of polymers.

The Company  owns 10 current  patents for its  chemical  "grafting"  technology.
Chemical  "grafting"  refers to processes by which surfaces are bonded together,
or  a  coating  is  affixed  to  a  surface,   or  in  depth,   through  various
polymerization reactions.

Chemical  "grafting"  is done by treating a surface  with one or more  solutions
containing monomers,  polymers and/or other chemicals.  By using heat, catalysts
and/or other appropriate techniques,  small "whiskers" grow on the surface being
treated.  These  "whiskers"  are  generally  polymers,  which  include  in their
chemical  makeup  molecules that remain part of the surface being  treated.  The
"whiskers"  can  themselves  form a protective  coating on a surface or join the
"whiskers"  from  another  surface  thus  bonding  the  two  surfaces  together.
Alternately,  by suitable  methods,  grafting can take place in depth throughout
the body of the substrate, i.e. the product to be grafted.



                                       -2-


<PAGE>



By using  chemical  "grafting"  techniques,  the  Company  can form a  permanent
scratch and corrosion-resistant  protective coating on plastics, rubber, metals,
and other substances.  Based upon the Company's  research,  management  believes
that there are many other practical  applications of these  techniques that have
not yet been fully developed or discovered.

Research and development  contract work for specific application of its chemical
"grafting"   techniques   has  been  done  for   pharmaceutical   companies  and
manufacturers of industrial equipment,  tires, packaging material,  pipes, tubes
and plastic films, and other enterprises.

A majority of the Company's research and development work in chemical "grafting"
is done for customers in the private  sector.  The Company  markets its research
and  development  services by contacting  businesses  which might have a use for
chemical  "grafting."   Typically  the  Company  and  the  prospective  customer
determine the possible  application of chemical "grafting" in which the customer
has an  interest.  The  Company  then  submits  a  research  proposal  based  on
specifications  provided  by  the  prospective  customer.  If  the  proposal  is
accepted, or if an acceptable proposal is negotiated,  the Company enters into a
contract with the customer and commences the research that is required.

A majority of the Company's research and development contracts are for specified
periods  of time.  Most  such  contracts  extend  for a period  of three to four
months. The remainder of the Company's research and development contract work is
done either on a lump sum or month-to-month basis.

Research  revenue  earned  from  foreign  customers  outside  the United  States
aggregated  approximately $900,000 for 2000,  representing  approximately 20% of
total annual research revenues for 2000.

Almost all of the research and development contracts provide that if the Company
successfully  develops a patentable  new process  while working on the contract,
the Company  will assign  patent  rights to the  customer who then will have the
exclusive right to use that process.  This right generally extends only for uses
which  the  Company  was hired to do the  research,  and in some  instances,  is
dependent  upon the  customer  making  specified  payments to the  Company.  The
Company  believes that these  provisions in its contracts are necessary and have
not unreasonably  inhibited the Company's research and development  projects for
other customers.

As of December 31, 2000, the Company employed 9 in-house sales persons to market
its research and  development  contracts,  primarily  through bulk  mailings and
presence on the Internet to targeted potential customers.

To date,  all of the  Company's  research  and  development  services  have been
related to contracts for customers.

PRODUCTION

The Company manufactures formulations resulting from research work predominantly
as an accommodation for the companies for whom the research work was done.



                                       -3-

<PAGE>

PRODUCTION (continued)

The Company also has,  since its  inception,  produced and sold color inks,  and
components  thereof.  These  products  are used by  textile  businesses  for the
printing of textiles.

The manufacture of textile inks is essentially a process of mechanically  mixing
solvents,  resins,  emulsions,  gums, oils and pigments to produce a colored ink
which can be printed  onto  cloth.  The  Company  owns and  operates  the mixing
machinery for this manufacturing  process and acquires the required  ingredients
from a variety of  sources.  The  Company  is not  dependent  upon a  particular
supplier for the ingredients. Management believes the Company's textile inks are
solvent-free and non-polluting.

During 2000,  1999 and 1998,  no one customer of the Company  accounted for more
than 5% of its sales of formulation products or textile inks. The Company has no
long-term   contracts   with  its  customers  for  textile  inks  and  maintains
approximately  a one-month  supply of the  ingredients  for the textile  inks in
inventory.  The Company  fills 95% of all textile ink orders within two business
days after their receipt.

The Company's  sales of textile inks are dependent  upon the decision of textile
companies as to whether they will dye or print their fabrics. Such a decision is
primarily based on fashion trends,  with one-color  fabrics requiring dyeing and
multi-colored fabrics requiring printing.  However,  these trends have not had a
material  adverse  effect on the  Company's  revenues  because  the  Company has
maintained a reliable customer base in the United States.  The sales of printing
inks has not been a significant source of revenues or profits for the Company.

The Company markets its textile inks to the United States and foreign customers.
Foreign customers account for less than 5% of the Company's textile ink sales.

EMPLOYEES AND EMPLOYEE RELATIONS

As of December 31, 2000, the Company had 45 full-time  employees.  The President
and the 15 other scientists in the Company's Research  Department are engaged in
research and  development.  The  Production  Department  has 4 employees who are
engaged in the production of items arising from research and textile inks. There
are 10 employees in the sales and marketing departments.  In addition, there are
12 clerical employees and 3 maintenance employees.

The Company's  technical staff sign nondisclosure  agreements whereby they agree
to keep the technical information and processes of the Company confidential.  In
those agreements,  such technical personnel also agree to unconditionally assign
to the Company all techniques and inventions developed by them in furtherance of
or related to Company projects.

None of the Company's employees are members of a labor union. There have been no
strikes or work  stoppages and the Company  believes its employee  relations are
satisfactory.




                                       -4-

<PAGE>

COMPETITION

The fields in which the Company does business are highly competitive.

In its contract research and development business, the Company competes with the
in-house  research and  development  staffs of its customers  and  scientists at
educational  institutions  and foundations who will do private grant research on
processes to produce materials with  characteristics of the types desired by the
Company's customers.  The Company also faces potential competition from research
and development  companies which are substantially  larger than the Company, and
various private laboratories, although the Company believes that it is presently
the only Company doing contract  research and  development  work in the field of
chemical  "grafting" for other companies.  The Company's  "grafting"  techniques
include the use of innocuous or mild non-alkaline and non-acidic  chemicals.  In
addition,  the  Company's  method  of  grafting,  by use of  chemicals,  is less
expensive than other methods such as gamma ray grafting.

In its textile  ink  business,  the Company  faces  intense  competition  from a
variety  of  competitors,  many  of  whom  are  substantially  larger  and  have
significantly  greater resources,  reputations and marketing abilities than does
the Company, and the Company is not a significant factor in this business.

ENVIRONMENTAL CONSIDERATION

The Company  does not believe  that its  operations  are  adversely  affected by
existing  environmental  regulations.  The Company's  primary waste products are
non-toxic and  non-corrosive  such as wood, paper and cardboard and are disposed
of by a private  sanitation  company.  The small  amount of  chemicals  that the
Company disposes of are sealed in non-corrosive  containers and are removed from
the premises by a company that is licensed to dispose of corrosive waste.

PATENTS

The Company's President and other employees of the Company have assigned a total
of 20 United  States  patents  to the  Company,  10 of which have  expired.  The
assigned patents,  which cover the basic grafting  process,  were issued between
1968 and  1996.  Each  patent  is  effective  for 17 years  from the date of its
issuance.

Management  can give no  assurance  that any of the  patents,  which the Company
possesses  or  might  possess  in  the  future,   will  be  enforceable  or,  if
enforceable,  will  provide the Company or the holder  thereof with an advantage
over its competitors.

ITEM 2. DESCRIPTION OF PROPERTY

The Company's offices, research and development and manufacturing facilities are
located  in a 64,000  square  foot  three-story  building  at 2186 Mill  Avenue,
Brooklyn,  New York, which the Company has owned since 1990 (see Note 8 of Notes
to Financial Statements).  The Company had previously leased this facility under
the terms of a long-term operating lease.


                                       -5-

<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY (continued)


The Company  utilizes the space in the following  manner:  approximately  11,000
square  feet is devoted to office  space;  approximately  10,000  square feet is
devoted to  production  of items  resulting  from  research  and  textile  inks;
approximately   35,000  square  feet  is  devoted  to  research  and  laboratory
facilities and 8,000 square feet is devoted to warehousing inventory.

The  Company  also leases  approximately  4,500  square feet of office  space in
Phoenix,  Arizona which serves as its West Coast sales and marketing  office and
laboratory.

The Company  believes that its facilities are adequate for its current needs and
those of the foreseeable future.


ITEM 3. LEGAL PROCEEDINGS

The Company is a defendant in certain  lawsuits  that arose in the normal course
of the  Company's  business.  In the opinion of  management  the  allowance  the
Company has provided is sufficient  to cover the potential  damages and expenses
that may be  incurred in these  proceedings.  Accordingly,  management  does not
believe these proceedings will have a material adverse affect on the Company.

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

During the fourth  quarter of 2000,  no matters were  submitted to a vote of the
Company's security holders.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The  Company's  Common Stock trades on the National  Association  of  Securities
Dealers  Automated   Quotation  System  ("NASDAQ")  small  capital  market.  The
following table sets forth the high and low bid prices for the periods indicated
where the Common Stock is traded under the symbol PROA. The indicated prices are
interdealer  prices without retail markups,  markdowns or commissions and do not
necessarily  represent  actual sales.  The limited  amount of sales within these
ranges should not be interpreted to indicate that an established  trading market
exists  for  the  shares  of  Common  Stock,  nor do  these  prices  necessarily
accurately  reflect the true value of such shares. The prices indicated have not
been adjusted for stock dividends   referred to below.


                                                              Bid Prices
                                                         -------------------
       Quarter                                         LOW           HIGH
       -------                                         ---           ----
        2000
October - December                                      29/32        1-1/4
July - September                                        31/32        1-1/4
April - June                                           1-1/16        2
January - March                                        1-1/32        5


                                       -6-

<PAGE>

                                                              Bid Prices
                                                         -------------------
       Quarter                                         LOW           HIGH
       -------                                         ---           ----
       1999
October - December                                        3/4        1-1/4
July - September                                      1-14/64        1-27/32
April - June                                          1-9/16         2-1/4
January - March                                       2-1/8          3

DIVIDEND POLICY
The  Company  has  paid  no  cash  dividends  to  its  stockholders   since  its
incorporation and has no present intention to do so. The payment of dividends in
the future will be determined  by the Board of Directors  based on the Company's
earnings,  financial  condition,  capital  requirements and other factors at the
time.

On February 11, 1999 the Company declared a 5% stock dividend to shareholders at
March 19, 1999,  paid April 2, 1999. The  transaction  was valued based upon the
closing market price of the Company's stock on the day prior to declaration (See
Note 11 of Notes to Financial Statements).

On July 20, 1995 the Company adopted a Shareholders Rights Plan. The Rights Plan
provides for the issuance of one stock  right,  entitling  the holder to buy one
share of  common  stock  at a price of $25  (subject  to  adjustment),  for each
outstanding  share  of the  Company's  common  stock.  The  rights  will  become
exercisable  only if an "acquiring  party" (as defined)  acquires or announces a
tender offer to acquire 15% or more of the Company's  common  stock.  The rights
expire July 31, 2005 (See Note 12 of Notes to Financial Statements).

As of April 9, 2001, there were 1,926,012 shares outstanding, which were held by
approximately 1,000  shareholders,  350 shareholders of record and approximately
650 additional beneficial owners.

Sales of Unregistered Securities

On December 27, 2000, the Company issued as a bonus to certain officers, 100,000
restricted  shares of the  Company's  common  stock.  The  shares  have not been
registered  under the Securities Act of 1933 and sales of the shares are subject
to  restrictions  and  limitations.  The  issuance of the shares was exempt from
registration pursuant to Section 4(2) of the Securities Act as a transaction not
involving any public offering.

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

RESULTS OF OPERATIONS
Revenue Trend Analysis
                                     Year Ended December 31,
                                     -----------------------
                                                           Percentage
                                                               of
                    ($  In  Thousands)                   Total Revenues
                 ------------------------      ---------------------------
                 2000      1999      1998        2000      1999      1998
                 ----      ----      ----        ----      ----      ----

Research         $4,399   $3,814   $4,554       86.7%     78.9%     80.6%
Production          672    1,022    1,093       13.3%     21.1%     19.4%
                 ------   ------   ------      ------    ------    ------
Total Revenues   $5,071   $4,836   $5,647      100.0%    100.0%    100.0%
                 ======   ======   ======      ======    ======    ======
2000 V. 1999

Total revenues  increased $235,089 or 4.9% from $4,836,157 in 1999 to $5,071,241
in 2000. The increase in research  revenue was partially  offset by a decline in
production  revenue.   Research  revenue  increased  15.3%  or  $584,803,  while
production sales decreased 34.2% or $349,719 from 1999 to 2000.

                                       -7-

<PAGE>


2000 V. 1999 (continued)

The decrease in production  was primarily  attributable  to a decrease in demand
for product by research customers.  The increase in research sales was primarily
the result of increased  market demand for research  related to a strong economy
in 2000. The rate of inflation has not had a material impact upon the results of
operations.

1999 v. 1998

Total revenues  decreased  $811,000 or 14% from $5,647,000 in 1998 to $4,836,000
in 1999. The decrease in research  revenue  accounted for 91% of the decrease in
revenue as production revenue decreased $71,000 or 6.0% from 1998 to 1999.

The decrease in production was primarily  attributable to the decrease in demand
for research services, the results of which often lead to production orders.

The decrease in research sales was primarily the result of decreased  demand for
research  in part  caused by a  combination  of  internal  changes  in sales and
administrative staff and prolonged negotiations with certain potential clients.

The  rate of  inflation  has not had a  material  impact  upon  the  results  of
operations.

Cost of Revenue Trend Analysis

                                Year Ended December 31,
                               -----------------------

                                                         Percentage
                                                             of
                    ($  In  Thousands)                 Total Revenues
                 ------------------------      ---------------------------
                 2000      1999      1998        2000      1999      1998
                 ----      ----      ----        ----      ----      ----
Research         $1,065   $1,090   $1,048        21.7%     22.5%     18.6%
Production          609      574      789        12.5%     11.9%     14.0%
                 ------   ------   ------        ----      ----      ----
Total Revenues   $1,674    1,664   $1,837        34.2%     34.4%     32.6%
                 ======   ======   ======        ====      ====      ====
2000 V. 1999

Costs of  revenues  as a  percentage  of sales  remained  consistent  in 2000 as
compared to 1999.

1999 v.1998

The cost of revenues as a percentage  of sales  increased  from 32.6% in 1998 to
34.4% in 1999.  The  increase  in cost of  revenues  is  primarily  caused  by a
decrease in the  research  sales  without  corresponding  decreases  in research
salaries and related expenses.



                                        8

<PAGE>

Selling, General and Administrative Expenses Trend Analysis


                                  Year Ended December 31,
                                  -----------------------
                                                           Percentage
                                                               of
                    ($  In  Thousands)                   Total Revenues
                 ------------------------      ---------------------------
                   2000      1999      1998        2000      1999      1998
                   ----      ----      ----        ----      ----      ----

Selling,
general and
Administrative
expense           $3,498    $3,303    $3,310       71.4%     68.3%     58.6%
                   =====      =====    =====        =====    =====     ====
2000 V. 1999

Selling,  general  and  administrative  expenses,  as  a  percentage  of  sales,
increased to 71.4% in 2000,  as compared to 68.3%  during 1999.  The increase is
attributed to increased expenses related to the expansion of the Arizona office,
increased  utilities,  increased  insurance,  increased  legal  settlements  and
related professional expenses.

1999 v. 1998

Selling,  general  and  administrative  expenses,  as  a  percentage  of  sales,
increased to 68.3% in 1999,  as compared to 58.6%  during 1998.  The increase is
attributed to a similar level of expenses and a decrease in sales.  In addition,
during  1999,  the  Company  issued  shares  of stock  to  certain  officers  as
compensation   aggregating   $140,000   (see  Note  12  of  Notes  to  Financial
Statements).

Income taxes

2000 V. 1999

A total  income tax  provision of $53,973 was provided for income taxes for 2000
as compared to a benefit of $ 63,673 in 1999.  The provision for income taxes in
2000 and the  benefit in 1999 were  calculated  based on the  statutory  federal
income tax rates plus state and local taxes.

The company filed a quick carry back refund claim for approximately $90,000 that
has already been received.

1999 v. 1998

The Company reported a net loss  representing 2.8% of sales for 1999 compared to
net income of 4.3% of sales for 1998. The change is a result of the 14% decrease
in sales in 1999 combined with consistent  selling,  general and  administrative
expenses for the two years.

CAPITAL RESOURCES AND LIQUIDITY

Cash and  certificates  of deposit  have  decreased to $ 725,585 at December 31,
2000 from $ 1,392,024 at December 31, 1999. (See the statement of cash flows for
a more detailed  analysis of opening versus closing cash).  Cash is generated by
and used by the Company  through its  operations.  In June of 2000,  the Company
used  $1,398,330  of  cash  to  pay  the  remaining  unpaid  principal   payment
outstanding on the building mortgage.

                                        9
<PAGE>

CAPITAL RESOURCES AND LIQUIDITY (continued)

The payment to conclude  this  mortgage  obligation in June 2000 was paid from a
combination  of  corporate  funds  and  financing  obtained  from  a  bank.  The
respective  amounts of this payment  were  $898,000 of company cash and $500,000
from the proceeds of a long-term  loan received from a bank. The loan is a sixty
month term loan payable in equal monthly principal installments plus interest at
8.5%.  Additionally  the  Company  was  required  to  provide  $150,000  in cash
collateral. The collateral will be released proportionately over the term of the
loan as the principal is paid down. At December 31, 2000,  the balance due under
the loan was $441,667.

The Company does not anticipate any material capital expenditures in the next 12
months. The Company's cash position at December 31, 2000 is deemed sufficient to
cover any unforeseen sales downturn as it is equal to  approximately  2.5 months
of selling,  general and administrative  expenses.  Over both the long and short
term, liquidity will be the direct result of sales.

The ratio of current assets to current liabilities at December 31, 2000 was 1.96
to 1.0 as compared to 2.98 to 1.0 at December 31, 1999.

GENERAL DISCUSSION

Cash flow of the Company is a direct  result of net income and net cash provided
from  operating  activities.  Credit  extended  by the  Company  in the  form of
receivables and received in the form of payables has not had and will not have a
significant impact on cash flow.

Cash flow from  financing  and  investing  activities is not expected to have an
impact on cash flow in the next 12 months.  No significant  changes to operating
expenses are anticipated within the next 12 months.

SEGMENT DISCUSSION

The Company is primarily in the business of research sales.  The sale of textile
inks and chemical products is an accommodation to research  customers and is not
seen as a  segment  that  should  stand on its own as an  independent  business.
Availability of production of research  breakthroughs is an important  marketing
tool of the Company to its research customers.  No material capital expenditures
are foreseen in the next 12 months as necessary for the continued  production of
textile  inks and  chemical  products,  including  potential  increases  in such
production.

ANALYTIC REVIEW OF QUARTERLY RESULTS

Sales,  gross profits and net income for the fourth  quarter  decreased from the
average of the prior three quarters.  This is a result a drop in revenue without
a corresponding decrease in costs.

Sales for the  fourth  quarter  decreased  although  several  customers  prepaid
research fees  aggregating  $290,000 toward research to be recognized as revenue
in early 2001.



                                       10

<PAGE>

ANALYTIC REVIEW OF QUARTERLY RESULTS (continued)

Selling,  general, and administrative  expenses were significantly higher in the
fourth quarter  principally as a result of legal  settlements  and related legal
fees  recognized  aggregating  $410,000  for  2000,  $190,000  of which had been
recognized  in S,G,& A  expenses  in the  first  three  quarters.  Additionally,
certain  officers  received a year-end bonus of a total of 100,000 shares of the
Company's common stock valued at $105,250.

Management  elected not to make a profit sharing  contribution in 1998, or 1999,
or 2000.

<TABLE>
<CAPTION>

                                                       3/31/00            6/30/00            9/30/00            12/31/00
                                                       -------            -------            -------            --------


<S>                                                  <C>                <C>                <C>                <C>
Total Revenue                                        $ 1,476,981        $1,433,166         $1,138,618         $1,022,476
Cost of Revenue                                          411,851           474,543            407,898            380,393
Gross Profit                                           1,065,130           958,623            730,720            642,083
SG&A Expenses                                            807,572           941,096            582,246          1,166,758
Income from operations                                   257,558            17,527            148,474           (524,675)
Other income (expense)                                  (22,354)          (20,831)             (4,929)           (17,706)
Pre-tax income                                           235,204           (3,304)            143,545           (542,381)
Income Tax (Expense)  Benefit                           (100,000)           5,000             (63,950)           104,977
Net Income                                               135,204            1,696              79,595           (437,404)
</TABLE>

ITEM 7. FINANCIAL STATEMENTS

         The response to this item  follows Item 13, and is hereby  incorporated
herein.

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

            On February 26, 2001,  the Company  engaged  Goldstein & Ganz,  P.C.
            ("GG")  as  the  Company's  independent  accountants  to  audit  its
            December  31,  2000  financial   statements,   replacing  Castellano
            Korenberg  & Co.  (the  "Former  Accountants")  as the  Company's
            independent  auditors.  The Former Accountants were dismissed by the
            Company as of  February  26,  2001.  The change was  approved by the
            Company's board of directors.



                  The  Former  Accountants'  report on the  Company's  financial
            statements  for each of the  past  two  years  did not  contain  any
            adverse  opinion or disclaimer of opinon and was not qualified as to
            uncertainty, audit scope or accounting principles.

                  During the  Company's  two most  recent  fiscal  years and any
            subsequent interim period through the date of termination: (x) there
            were  no  disagreements   between  the  Company  and  the  Former
            Accountants  on any matter of  accounting  principles  or practices,
            financial statement disclosures or auditing scope or procedures, (y)
            there  were  no  "Reportable  Events"  within  the  meaning  of Item
            304(a)(1)(iv) of Regulation S-K, and (z) GG was not consulted on any
            matter specified in Item 304(a)(2) of Regulation S-K.




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

The directors and executive officers of the Company as of December 31, 2000
are as follows:

NAME                       AGE             POSITION
----                       ---             --------
Carl Horowitz              77              President and Director

Irene Horowitz             77              Senior Vice President and Director

John M. Ryan               45              Director, Executive Vice
                                           President, Corporate Research

                                       11
<PAGE>

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

NAME                         AGE             POSITION
----                         ---             --------

Alice J. Horowitz           41               Director and Vice President of
                                             Polymer West Coast branch

Boris Jody                  81               Director

Jascha J. Gurevitz          82               Director

Anna Dichter                87               Secretary, Treasurer

Terry J. Wolfgang           39               Director

Dr. Mohan Sanduja           65               Vice President, R & D
                                             Director

Clare Chamow                66               Vice President, Office Management

Harriet Finger              58               Controller

Carl  Horowitz  founded the Company and has devoted his full time and efforts to
the affairs of the Company, as its President and as a Director,  since 1963. Mr.
Horowitz received a B.S. in Chemical  Engineering at Columbia  University in New
York in  1950,  and a  Master  of  Science  degree  in  Polymer  Chemistry  from
Polytechnic  Institute of Brooklyn in 1961. Mr. Horowitz is the husband of Irene
Horowitz and the father of Alice J. Horowitz and Terry J. Wolfgang.

Irene  Horowitz has been a Director  and a Senior Vice  President of the Company
since 1980.  Mrs.  Horowitz  devotes her full time and efforts to the affairs of
the  Company,  and her primary  responsibility  as Senior Vice  President  is to
oversee  the  operations  of the  Company.  Mrs.  Horowitz  is the  wife of Carl
Horowitz and the sister of Anna Dichter and the mother of Alice J.  Horowitz and
Terry J. Wolfgang.

John M.  Ryan has been a  Director  since  September,  1984.  Mr.  Ryan has been
employed by the Company  since 1981 as a technical  director of Special  Product
Development  and has been the  Executive  Vice  President of Corporate  Research
since 1985.

Alice J. Horowitz was a Senior Vice  President.  In 1987, she became a Director.
During 1995 Ms. Horowitz  relocated outside of New York and now operates a sales
office of Polymer  Research  Corp.  of America in Arizona.  Ms.  Horowitz is the
daughter of Carl and Irene Horowitz.

Boris Jody was elected a Director of the Company in 1984.  Mr. Jody is currently
retired.  Mr. Jody previously was with Standard Motor Products,  Inc.,  where he
had been Vice President of Corporate Affairs.

                                       12

<PAGE>

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

Jascha J. Gurevitz was elected as a Director of the Company in 2000.  Currently,
Mr. Gurevitz is retired. Previously, Mr. Gurevitz worked for Central News Agency
of  Johannesburg,  South  Africa from 1958  through 1990 as manager of their New
York office.

Anna  Dichter  joined  the  Company  in 1968  as  Controller.  She  was  elected
Secretary/Treasurer  of the Company in 1977. Mrs. Dichter,  who devotes her full
time and efforts to the affairs of the Company,  is in charge of maintaining the
Company's books on a day-to-day basis. She is the sister of Irene Horowitz.

Terry J.  Wolfgang has been a Director of the Company  since 1989.  She has been
engaged in the  private  practice of law in New York City.  Ms.  Wolfgang is the
daughter of Carl and Irene  Horowitz.  Ms. Wolfgang has  occasionally  performed
legal services for the Company.

Dr.  Mohan  Sanduja,  PHD joined the  Company in 1979 as  Assistant  Director of
Research. In 1982, he became a Director of Research and Development. In 1987, he
became a Director of the Company and Vice President of Research and Development.

Clare Chamow joined the Company in 1982. She became a Vice President in March of
1996 and is  responsible  for office  management.  She is a graduate of Brooklyn
College with a B.A. Degree in Education.

Harriet  Finger joined the Company in 1991 as a  bookkeeper.  She was later made
controller  and devotes full time to  overseeing  the day to day finances of the
Company.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16(a)  of  the  Securities   Exchange  Act  of  1934  requires
directors,  executive  officers and holders of more than 10% of Polymer's Common
Stock ot file with the  Securities  and Exchange  Commission  reports  regarding
their  ownership  and changes in  ownership  of  Polymer's  securities.  Polymer
believes  that,  during  2000,  its  directors,   executive   officers  and  10%
shareowners complied with all Section 16(a) filing requirements.  In making this
statement, Polymer has relied upon examination of the copies of Forms 3, 4 and 5
provided to Polymer and the written representations of its directors,  executive
officers and stockholders.


                                       13


<PAGE>



ITEM 10. EXECUTIVE COMPENSATION

The  following  table sets forth the  compensation  paid  during the years ended
December 31, 2000, 1999 and 1998 to the chief executive  officer and those three
executive  officers of the Company who earned in excess of $100,000 for the year
ended December 31, 2000.
<TABLE>
<CAPTION>

                                               SUMMARY COMPENSATION TABLE


                                                                                             LONG TERM COMPENSATION
                                                                                             ----------------------

                       ANNUAL COMPENSATION                                          AWARDS                PAYOUTS
                ---------------------------------------------------------     ---------------------
  (a)                      (b)           (c)       (d)             (e)             (f)          (g)       (h)           (i)
NAME                                                               OTHER       RESTRICTED ECURITIES
AND                                                               ANNUAL         STOCK     UNDERLYING     LTIP       ALL OTHER
PRINCIPAL                                                         COMPEN-        AWARDS     OPTIONS/     PAYOUTS     COMPEN-
POSITION                  YEAR       SALARY ($)   BONUS($)       SATION($)         ($)       SAR'S(#)       ($)      SATION ($)
                                                                   (1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>        <C>         <C>                <C>      <C>           <C>        <C>        <C>
CARL HOROWITZ             2000       $180,440    $      -0-           -0-       $53,125      -0-        $  -0-       $    -0-
CEO, PRESIDENT            1999        174,414           -0-         12,812       50,000      -0-           -0-            -0-
                          1998        170,000           -0-         13,233         -0-       -0-           -0-            -0-

IRENE HOROWITZ            2000        141,388           -0-           -0-        53,125      -0-           -0-            -0-
SENIOR VICE               1999        164,873           -0-           -0-        50,000      -0-           -0-            -0-
PRESIDENT                 1998        180,703           -0-           -0-          -0-       -0-           -0-            -0-

JOHN M. RYAN              2000         247,178          -0-           -0-          -0-       -0-           -0-            -0-
EXECUTIVE VICE            1999         272,486          -0-           -0-        20,000      -0-           -0-            -0-
PRESIDENT                 1998         276,984        12,324          -0-          -0-       -0-           -0-            -0-

MOHAN SANDUJA             2000         128,180          -0-           -0-          -0-       -0-           -0-            -0-
VICE PRESIDENT            1999         126,897          -0-           -0-          -0-       -0-           -0-            -0-
RESEARCH AND              1998         125,367         1,500          -0-          -0-       -0-           -0-            -0-
DEVELOMENT
</TABLE>

(1)  Represents  premiums  on  officer's  life  insurance  policy  in which  Mr.
     Horowitz had the right to designate the beneficiary.

                                      -14-


<PAGE>


ITEM 10. EXECUTIVE COMPENSATION (continued)

STOCK OPTIONS

No executive officer owns any stock options.

EMPLOYMENT AGREEMENTS

On May 17, 1998,  the Company  amended Mr.  Horowitz's  employment  agreement to
extend it through May 16, 2003.  Additionally,  Mr. Horowitz's base salary under
the new  agreement  was  $170,000  for 1998 with  annual  increases  of  $10,000
thereafter  until  December  31,  2002.  In the final  period  of the  agreement
(January 1, 2003 through May 16, 2003) Mr.  Horowitz will receive  salary at the
annual rate of $240,000.

On July  26,  1994 the  Company  entered  into  retirement  agreements  with the
Company's President and Senior Vice President. The agreements set a compensation
rate of 60% of the average annual  compensation  for the five preceding  year's,
payable for the remainder of the  individuals'  life. In addition the Company is
to maintain the individuals' medical benefits.

Directors  who are not  employees of the Company  receive a fee of $500 for each
regular meeting of the Board of Directors that they attend.

Effective  January 1, 1990,  the  Company  adopted a  qualified  noncontributory
profit sharing plan.  Eligible  employees must meet two  requirements  to become
participants;  attainment  of age 21 and  completion of one year of service with
the Company.  Employer  contributions,  if any, are  determined  at the Board of
Directors'  discretion.  A percentage  of the benefits vest after three years of
qualifying service. The Company elected not to make any contributions for 2000.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth certain  information,  as of April 9, 2001, with
respect to each person known to the Company to be the  beneficial  owner of more
than 5% of the  Company's  Common  Stock,  each  executive  officer named on the
Summary Compensation table, and by all officers and directors as a group:
<TABLE>
<CAPTION>

                                                               AMOUNT
                              NAME AND ADDRESS OF         BENEFICIALLY                PERCENTAGE
                              -------------------         ------------                ----------
TITLE OF CLASS                BENEFICIAL OWNER                 OWNED                  OF CLASS
--------------               -------------------              -----                  ----------

<S>                            <C>                             <C>                     <C>
Common stock                  Carl Horowitz                    698,593 (1)             36.3%(1)
$.01 par value                2719 Whitman Drive
                              Brooklyn, NY  11234




                                       15

<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                 AND MANAGEMENT (continued)

                                                               AMOUNT
                              NAME AND ADDRESS OF         BENEFICIALLY                PERCENTAGE
                              -------------------         ------------                ----------
TITLE OF CLASS                BENEFICIAL OWNER                 OWNED                  OF CLASS
--------------               -------------------              -----                  ----------


                              Irene Horowitz                   412,548 (1)              21.4%(1)
                              2719 Whitman Drive
                              Brooklyn, NY  11234

                              John M. Ryan                      49,069                   2.5%
                              3035 Lonni Lane
                              Merrick, N.Y.  11566

                              Alice J. Horowitz                 21,602                   1.1%
                              3046 West Tonopah Drive
                              Phoenix, Arizona  85027

                              Boris Jody                           -0-                  -0-%
                              4301 N. Ocean Blvd.
                              Boca Raton, Fl.

                              Jaschsa J. Gurevitz                  -0-                  -0-%
                              155 East 93rd Street, Apt 3A
                              New York, NY 10028

                              Anna Dichter                       1,800                   .1%
                              1757 E. 54th Street
                              Brooklyn, N.Y.

                              Terry J. Wolfgang                  3,700                   .2%
                              440 West End Avenue
                              New York, N.Y.  10750

                              Dr. Mohan Sanduja                  1,000                   .1%
                              144-90 91st Avenue
                              Flushing, N.Y.

                              Clare Chamow                         400                  -0-%
                              5613 Fillmore Avenue
                              Brooklyn, N.Y. 11234

                              Harriet Finger                       420                  -0-%
                              3310 Nostrand Avenue
                              Brooklyn, N.Y. 11229


                                       16

<PAGE>

                              All executive officers and
                              Directors as a group (10
                               in number)                      960,563                 49.9%
</TABLE>

     (1)  Includes  228,569 share jointly held by Carl and Irene  Horowitz,  but
          excludes shares individually held by the other.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                                      NONE

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

       Exhibit   Description

          (3.1)   Registrant's  Certificate of  Incorporation,  as amended,  and
                  By-Laws,  as amended  (incorporated by reference as previously
                  filed  with  the  United   States   Securities   and  Exchange
                  Commission  on January 7, 1986 on Form 10).  Amendment  to the
                  Certificate   of   Incorporation    dated   July   23,   1988,
                  (incorporated by reference as previously filed with the United
                  States  Security  and Exchange  Commission  in March 1991 with
                  Form 10K)

          (3.2)   By Laws, as amended  (incorporated  by reference as previously
                  filed  with  the  United   States   Securities   and  Exchange
                  Commission on January 7, 1986 on Form 10K)

         (10.1)   Employment Contract of Carl Horowitz, the Company's President,
                  dated March 17, 1998 (filed with 1998 Form 10K).*

         (10.3)   Retirement  benefits  agreement  between  the Company and Carl
                  Horowitz,  dated July 26, 1994  (incorporated  by reference as
                  previously  filed with the United States Security and Exchange
                  Commission in March, 1995 with Form 10K).*

         (10.4)   Retirement  benefits  agreement  between the Company and Irene
                  Horowitz,  dated July 26, 1994  (incorporated  by reference as
                  previously  filed with the United States Security and Exchange
                  Commission in March, 1995 with Form 10K).*


         (10.5)   Term Loan and revolving credit  facility   documents     dated
                  March  20,  2000  between  registrant  and Dime  Savings  Bank
                  (incorporated by reference as previously filed with the United
                  States  Security  and Exchange  Commission on May 8, 2000 with
                  Form 10-QSB).

         (16.1)   Former  Accountants'  letter the Commission  (incorporated  by
                  reference as previously  filed with the United States Security
                  and Exchange Commission on Febrary 26, 2001 with Form 8-K).
__________________________
*      Management Contract

         (b)      Reports of Form 8-K.

                        NONE


                                       17

<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                  Page

<S>                                                                                          <C>
Report of Independent Accountants                                                            F-2 - F-3

Balance Sheets at December 31, 2000 and 1999                                                 F-4 - F-5

Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998                                                                   F-6

Statements of Comprehensive Income for the Years
Ended December 31, 2000, 1999 and 1998                                                             F-7

Statements of Stockholders' Equity for the Years Ended
December 31, 2000, 1999 and 1998                                                                   F-8

Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998                                                             F-9 -F-10

Notes to Financial Statements                                                               F-11- F-22

Financial Statement Schedules
For the Years Ended December 31, 2000, 1999 and 1998:

Report of Independent Accountants on Financial Statement Schedules                                F-23

VIII     Valuation and Qualifying Accounts and Reserves                                           F-24

   X     Supplementary Income Statement Information                                               F-25

  XI     Property, Equipment and Accumulated Depreciation                                         F-26

         All other schedules have been omitted because the required  information
         is included in the financial statements or the notes thereto or because
         they are not required.

</TABLE>
                                       F-1

<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To The Stockholders and Board of Directors
Polymer Research Corp. of America
Brooklyn, New York


We have audited the  accompanying  balance  sheet of Polymer  Research  Corp. of
America  at  December  31,  2000,  and the  related  statements  of  operations,
comprehensive  (loss) income,  stockholders'  equity and cash flows for the year
then ended.  These financial  statements are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  The financial  statements  of Polymer  Research
Corp.  of America at December 31, 1999,  were  audited by other  auditors  whose
report  dated  February  16, 2000,  expressed  an  unqualified  opinion on those
statements.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Polymer  Research  Corp. of
America at  December  31, 2000 and the  results of its  operations  and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.




                            GOLDSTEIN & GANZ, CPA's, P.C.

Great Neck, New York
April 3, 2001



                                       F-2

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To The Stockholders and Board of Directors
Polymer Research Corp. of America
Brooklyn, New York


We have audited the  accompanying  balance  sheets of Polymer  Research Corp. of
America  at  December  31,  1999  and  the  related  statements  of  operations,
comprehensive  loss,  stockholders'  equity and cash  flows for the years  ended
December 31, 1999 and 1998. These financial statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. 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 financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Polymer  Research  Corp. of
America at  December  31, 1999 and the  results of its  operations  and its cash
flows  for the years  ended  December  31,  1999 and 1998,  in  conformity  with
generally accepted accounting principles.




                             CASTELLANO, KORENBERG & CO. CPAs, P.C.

Hicksville, New York
February 16, 2000



                                       F-3
<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                                 BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>


                                                               ASSETS

                                                                                    2000            1999
                                                                                    ----            ----
<S>                                                                              <C>                <C>
CURRENT ASSETS:
    Cash and cash equivalents                                                    $    695,585       $1,156,778
    Cash - restricted                                                                  30,000              -0-
    Certificates of deposit                                                              -0-           235,246

    Investment securities available
     for sale                                                                             -0-          292,396
    Accounts receivable, less allowance for
     doubtful accounts of $-0- for 2000 and 1999                                     281,661           306,429

    Inventories                                                                      124,719          116,028

    Deferred tax charge                                                                33,600          127,500
    Prepaid and refundable income taxes                                               203,405          188,578
    Prepaid expenses and other current assets                                             -0-           37,605
                                                                                  -----------      -----------

         Total Current Assets                                                       1,368,970        2,460,560
                                                                                  -----------      -----------

PROPERTY AND EQUIPMENT, net of
     accumulated depreciation of $1,107,628 and
     $1,022,917, respectively                                                       2,673,779        2,740,195
                                                                                 ------------      -----------

OTHER ASSETS:
    Cash - restricted, non-current                                                    120,000              -0-
    Deferred financing costs, less accumulated
       amortization of $10,723 and $3,819, respectively                                   -0-           10,723
    Security deposits                                                                   1,195            1,195
                                                                               --------------    -------------

                                                                                   $4,163,944       $5,212,673
                                                                               ==============    =============

</TABLE>






                       See Notes to Financial Statements.
                                       F-4
<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                                 BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999


                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                                   2000              1999
                                                                                   ----              ----
<S>                                                                           <C>            <C>
CURRENT LIABILITIES:
    Note payable - bank                                                       $      50,000  $           -0-
    Current maturities of term loan                                                 100,000              -0-
    Current maturities of long-term debt                                                613            6,960

    Current maturities of mortgage payable                                              -0-          967,082
    Accounts payable                                                                 19,991           81,696

    Deferred revenue                                                                290,000          206,332

    Accrued expenses and other current
     liabilities                                                                    234,574          272,364
                                                                              -------------     ------------

         Total Current Liabilities                                                  695,178        1,534,434
                                                                              -------------      -----------

LONG-TERM LIABILITIES:
    Mortgage payable, less current maturities                                           -0-          450,000
    Term loan, less current maturities                                              341,667              -0-
    Long-term debt, less current maturities                                             -0-              609
                                                                              -------------     -------------

         Total Liabilities                                                        1,036,845         1,985,043
                                                                              -------------     -------------

STOCKHOLDERS' EQUITY:
    Common stock - $.01 par value;  4,000,000 shares
     authorized;  1,925,784 and
     1,825,784 shares issued at December 31, 2000 and
     1999, respectively                                                              19,257           18,257
    Capital in excess of par value                                                3,504,978        3,399,728

    Accumulated deficit                                                            (379,375)         (158,466)

    Accumulated other comprehensive loss                                                -0-           (24,389)
                                                                              -------------     -------------
                                                                                  3,144,860         3,235,130

Less:  Treasury stock, at cost - 22,140 and
         12,140 shares in 2000 and 1999, respectively                                17,761             7,500
                                                                              -------------     -------------

         Total Stockholders' Equity                                               3,127,099         3,227,630
                                                                              -------------     -------------

                                                                                 $4,163,944        $5,212,673
                                                                              ==============    =============

</TABLE>


                       See Notes to Financial Statements.
                                       F-5

<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>

                                                     2000        1999               1998
                                                     ----        ----               ----
<S>                                           <C>            <C>             <C>
NET REVENUES:
         Research                             $ 4,398,948    $ 3,814,145     $ 4,554,400
         Production                               672,293      1,022,012       1,092,789
                                              -----------    -----------     -----------
                                                5,071,241      4,836,157       5,647,189
                                              -----------    -----------     -----------
COST OF REVENUES:
         Research                               1,065,046       1,090,261      1,048,560
         Production                               609,639        573,862         789,915
                                              -----------    -----------     -----------
                                                1,674,685      1,664,123       1,838,475
                                              -----------    -----------     -----------

GROSS PROFIT                                    3,396,556      3,172,034       3,808,714

SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES                                       3,497,672      3,303,995       3,310,032
                                              -----------    -----------     -----------

(LOSS) INCOME FROM OPERATIONS                    (101,116)      (131,961)        498,682
                                              -----------    -----------     -----------

OTHER INCOME (EXPENSE):
         Interest income                           41,664         85,652          92,687
         Interest expense                         (96,440)      (152,321)       (154,241)
         Realized (loss) gain on investment
          in marketable securities                (11,044)        (1,088)          7,037
                                              -----------    -----------     -----------

                  Total Other Expense             (65,820)       (67,757)        (54,517)
                                              -----------    -----------     -----------

(LOSS) INCOME BEFORE (BENEFIT FROM)
 PROVISION FOR INCOME TAXES                      (166,936)      (199,718)        444,165

(BENEFIT FROM) PROVISION FOR INCOME
 TAXES                                             53,973        (63,673)        201,845
                                              -----------    -----------     -----------

NET (LOSS) INCOME                             $  (220,909)   $  (136,045)    $   242,320
                                              ===========    ===========     ===========

BASIC (LOSS) EARNINGS PER SHARE               $      (.12)   $      (.08)    $       .15*
                                              ===========    ===========     ===========

WEIGHTED AVERAGE NUMBER OF SHARES
 OUTSTANDING                                    1,814,151      1,774,904      1,665,965*
                                              ===========    ===========     ===========

* Restated for 1999 5% stock dividend.
</TABLE>

                       See Notes to Financial Statements.
                                       F-6

<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                    STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                2000       1999         1998
                                                                ----       ----         ----

<S>                                                        <C>          <C>          <C>
NET (LOSS) INCOME                                          $(220,909)    $(136,045)   $ 242,320
                                                           ---------    ---------    ---------

OTHER COMPREHENSIVE (LOSS) INCOME,
 NET OF TAX:
         Unrealized (loss) gain during the period                -0-      (55,359)      10,543
         Reclassification adjustment for losses (gains),
          included in net income                              49,489        1,088       (3,525)
                                                           ---------    ---------    ---------


                Other Comprehensive (Loss) Income,
                 Before Tax                                  (49,489)     (54,271)       7,018

         Deferred Tax Expense (Benefit)                       25,100      (25,100)         -0-
                                                           ---------    ---------    ---------

OTHER COMPREHENSIVE INCOME (LOSS),
 NET OF TAX                                                   24,389      (29,171)       7,018
                                                           ---------    ---------    ---------

COMPREHENSIVE (LOSS) INCOME                                $(196,520)   $(165,216)   $ 249,338
                                                           =========    =========    =========

</TABLE>




                       See Notes to Financial Statements.
                                       F-7


<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                       STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>



                                                                         Common Stock, $.01
                                                                                  Par Value
                                                               4,000,000 Shares Authorized            Capital            Retainerd
                                                             -----------------------------          in Excess             Earnings
                                                             Shares Issued          Amount            of Par             Deficit)
                                                             -------------       -------------     ------------     ---------------
<S>                                                         <C>                 <C>               <C>              <C>
Balance, December 31, 1997                                    1,580,548           $    15,805       $2,850,332       $     111,029

Net Income                                                          -0-                   -0-              -0-             242,320

Stock Bonus Issued                                               30,800                   308           85,007                 -0-

Stock Dividend                                                   74,436                   744          185,346           (186,090)

Other Comprehensive Income, Net of Tax                              -0-                   -0-              -0-                 -0-
                                                             -------------       -------------     ------------     ---------------
Balance, December 31, 1998                                    1,685,784                16,857        3,120,685             167,259
                                                             -------------       -------------     ------------     ---------------
Net Loss                                                            -0-                   -0-              -0-           (136,045)

Stock Bonus Issued                                              140,000                 1,400          138,600                 -0-

Stock Dividend                                                      -0-                   -0-          140,443           (189,680)

Other Comprehensive Loss, Net of Tax                                -0-                   -0-              -0-                 -0-
                                                             -------------       -------------     ------------     ---------------
Balance, December 31, 1999                                    1,825,784                18,257        3,399,728           (158,466)
                                                             -------------       -------------     ------------     ---------------
Net Loss                                                            -0-                   -0-              -0-           (220,909)

Stock Bonus Issued                                              100,000                 1,000          105,250                 -0-
Acquisition of Treasury Stock                                       -0-                   -0-              -0-                 -0-

Other Comprehensive Income, Net of Tax                              -0-                   -0-              -0-                 -0-
                                                             -------------       -------------     ------------     ---------------
Balance, December 31, 2000                                    1,925,784          $     19,257       $3,504,978       $   (379,375)
                  === ====                                   =============      =============      ==========       ==============








                                                                  Accumulated
                                                                        Other       Treasury Stock - At Cost
                                                                Comprehensive       ------------------------
                                                                (Loss) Income       Shares           Amount
                                                              ----------------      ---------     -------------
Balance, December 31, 1997                                     $      (2,236)        91,837        $   (56,737)

Net Income                                                                -0-           -0-                 -0-

Stock Bonus Issued                                                        -0-           -0-                 -0-

Stock Dividend                                                            -0-           -0-                 -0-

Other Comprehensive Income, Net of Tax                                  7,018            -0                 -0-
                                                              ----------------      ---------     -------------
Balance, December 31, 1998                                              4,782        91,837            (56,737)
                                                              ----------------      ---------     -------------
Net Loss                                                                  -0-           -0-                 -0-

Stock Bonus Issued                                                        -0-           -0-                 -0-

Stock Dividend                                                            -0-      (79,697)              49,237

Other Comprehensive Loss, Net of Tax                                 (29,171)           -0-                 -0-
                                                              ----------------      ---------     -------------
Balance, December 31, 1999                                           (24,389)        12,140             (7,500)
                                                              ----------------      ---------     -------------
Net Loss                                                                  -0-           -0-                 -0-

Stock Bonus Issued                                                        -0-           -0-                 -0-
Acquisition of Treasury Stock                                             -0-        10,000            (10,261)

Other Comprehensive Income, Net of Tax                                 24,389           -0-                 -0-

Balance, December 31, 2000                                      $         -0-        22,140          $ (17,761)
                  === ====                                      ========== =         ======          =========
</TABLE>


                       See Notes to Financial Statements.


                                       F-8

<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>

                                                                               2000                  1999                 1998
                                                                               ----                  ----                 ----
<S>                                                                           <C>                  <C>                   <C>
    CASH FLOWS FROM OPERATING ACTIVITIES:
     Cash received from customers                                             $5,119,242           $4,484,959            $5,779,942
     Interest received                                                            41,664               85,652                92,687
                                                                           -------------        -------------          ------------
         Cash Provided By Operating Activities                                 5,160,906            4,570,611             5,872,629
                                                                             -----------          -----------            ----------

     Cash paid for merchandise                                                 (1,692,984)          (1,615,653)          (1,790,321)
     Cash paid to suppliers and employees                                     (3,287,836)           (3,255,865)          (3,298,625)
     Interest paid                                                               (96,440)             (152,321)            (154,241)
     Income taxes paid                                                               -0-              (139,350)            (207,514)
                                                                         ---------------           -----------          -----------
         Cash Disbursed For Operating Activities                               (5,077,260)          (5,163,189)          (5,450,701)
                                                                               ----------          ----------            ----------

                      NET CASH PROVIDED BY (USED IN)
                  OPERATING ACTIVITIES                                            83,646              (592,578)             421,928
                                                                           -------------           -----------          -----------


    CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from maturity of certificates of deposit                           235,246              932,000                  -0-
Proceeds from sale of marketable securities                                      330,841              276,108               95,610
                                                                            ------------          -----------         ------------
         Cash Provided By Investing Activities                                   566,087            1,208,108               95,610
                                                                            ------------           ----------         ------------

     Purchase of certificates of deposit                                             -0-                  -0-              (553,223)
     Purchase of marketable securities                                               -0-             (241,447)              (10,956)
     Purchase of property and equipment                                           (18,295)                -0-               (37,095)
                                                                             ------------     ---------------          ------------
         Cash Disbursed For Investing Activities                                  (18,295)           (241,447)             (601,274)
                                                                             ------------          -----------          -----------

                  NET CASH PROVIDED BY (USED IN)
                  INVESTING ACTIVITIES                                           547,792              966,661              (505,664)
                                                                            ------------          -----------          ------------

    CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from note payable - bank                                            50,000                  -0-                  -0-
                                                                           -------------      ---------------     ----------------
         Cash Provided By Investing Activities                                    50,000                  -0-                  -0-
                                                                           -------------      ---------------     ----------------

     Principal payments on mortgage payable                                      (917,082)            (34,688)             (31,244)
     Principal payments on long-term borrowings                                   (65,288)             (5,855)                 -0-
     Purchase of treasury stock                                                   (10,261)                -0-                  -0-
                                                                            -------------     ---------------     ----------------
         Cash Disbursed For Financing Activities                                 (992,631)             (40,543)             (31,244)
                                                                             ------------         ------------         ------------

                  NET CASH (USED IN) FINANCING
                  ACTIVITIES                                                     (942,631)             (40,543)             (31,244)
                                                                             ------------          -----------          -----------

                  NET (DECREASE) INCREASE IN CASH                                (311,193)            333,540              (114,980)

                  CASH, BEGINNING OF YEAR                                      1,156,778              823,238               938,218
                                                                             -----------          -----------           -----------

                  CASH, END OF YEAR                                          $   845,585           $1,156,778            $  823,238
                                                                             ===========           ==========            ==========
</TABLE>

                       See Notes to Financial Statements.
                                       F-9

<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>

                                                                                       2000               1999                1998
                                                                                       ----               ----                ----
<S>                                                                                  <C>               <C>                <C>
 RECONCILIATION OF NET (LOSS) INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
  ACTIVITIES:
-----------------------------------------------------------------------------
    NET (LOSS) INCOME                                                                $  (220,909)      $ (136,045)        $242,320
                                                                                     -----------       ----------         --------


    ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO NET CASH PROVIDED BY (USED IN)
    OPERATING ACTIVITIES:

       Bonus paid through issuance of stock                                             106,250           140,000           85,315
       Depreciation and amortization                                                     95,434            88,103           86,363
       Bad debt expense                                                                  60,435               120            3,605
       Realized loss (gain) on investment
        in marketable securities                                                         11,044             1,088           (7,037)

    Changes in assets (increase) decrease:
       Accounts receivable                                                              (35,667)          (60,880)        (111,447)
       Inventories                                                                       (8,691)          (12,898)          (3,476)
       Deferred tax charge                                                               68,800           (63,400)         (39,000)
       Prepaid and refundable income taxes                                              (14,827)          (188,578)            -0-
       Prepaid expenses and other current assets                                         37,605           (24,427)           4,326
       Security deposits                                                                    -0-               -0-           (1,195)

    Changes in liabilities increase (decrease):
       Accounts payable                                                                 (61,705)            7,408           (1,260)
       Deferred revenue                                                                  83,668          (290,318)         244,200
       Income taxes payable                                                                 -0-           (89,431)          33,331
       Accrued expenses and other current liabilities                                    (37,791)          36,680         (114,117)
                                                                                   -------------    -------------     ------------

                 Total Adjustments                                                      304,555          (456,533)         179,608
                                                                                   ------------       -----------     ------------

                      NET CASH PROVIDED BY (USED IN)
                      OPERATING ACTIVITIES                                         $     83,646        $ (592,578)     $   421,928
                                                                                   ============        ==========      ===========

    SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
    -------------------------------------------------------

             Stock dividend paid                                                $           -0-        $  189,680      $   186,090
                                                                                ===============        ==========      ===========

             Other comprehensive income (loss), net of tax                      $        24,389        $  (29,171)     $     7,018
                                                                                ===============        ==========      ===========

             Equipment acquired under long-term financing                       $           -0-        $   13,424      $      -0-
                                                                                ===============       ===========   ==============

             Stock bonus paid                                                   $       106,250        $  140,000      $    85,315
                                                                                ===============        ==========      ===========

</TABLE>


                       See Notes to Financial Statements.
                                      F-10


<PAGE>


                                         POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS

Note 1 -        Summary of Significant Accounting Policies

                Business Activity

                Polymer   Research   Corp.   of  America   ("the   Company")  is
                predominately  engaged in the  research and  development  of the
                applications   of  chemical   grafting  for  both  domestic  and
                international  companies.  The Company  also  produces and sells
                products  arising from research  activities and textile printing
                inks.  Revenue  from  research  and  production  is derived from
                various customers throughout the United States and worldwide.

                Credit Risk

                Financial  instruments that  potentially  subject the Company to
                credit risk include investments in United States Treasury bills,
                notes and other  certificates of deposit,  government  agencies'
                securities  and U.S.  Government  and New York State mutual bond
                funds.  Future  changes  in  economic  conditions  may  make the
                investments less valuable.

                In addition,  financial instruments that potentially subject the
                Company  to  credit  risk  also  include  accounts   receivable.
                Accounts receivable are not collateralized.

                The Company  maintains  deposits with financial  institutions in
                excess of amounts insured by the FDIC.

                Pervasiveness of Estimates

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

                Revenue Recognition

                Revenue from research  contracts is recognized upon satisfaction
                of  the  following  two  criteria:  first,  client  approval  of
                performance of a specific stage of the contract and second, when
                collection  of the  resulting  revenue is assured.  Revenue from
                production is recognized when the product is shipped for sale to
                customers.



                                      F-11

<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS

Note 1 -        Summary of Significant Accounting Policies (continued).
                -----------------------------------------------------

                Cash Equivalents

                The Company considers securities with maturities of three months
                or less, when purchased, to be cash equivalents.

                Investment Securities

                The  Company   determines  the  appropriate   classification  of
                securities  at the  time of  purchase.  If the  Company  has the
                intent  and  the  ability  at  the  time  of  purchase  to  hold
                securities  until  maturity  or on a long-term  basis,  they are
                classified  as  investment  securities  and carried at amortized
                historical cost. Securities to be held for indefinite periods of
                time and not  intended  to be held to maturity or on a long-term
                basis are  classified  as available for sale and carried at fair
                value.  Securities  held for indefinite  periods of time include
                securities that  management  intends to use as part of its asset
                and  liability  management  strategy  and  that  may be  sold in
                response to changes in interest rates, resultant prepayment risk
                and  other  factors  related  to  interest  rate  and  resultant
                prepayment risk changes.

                Realized gains and losses on  dispositions  are based on the net
                proceeds and the  adjusted  book value of the  securities  sold,
                using the specific  identification method.  Unrealized gains and
                losses on investment  securities available for sale are based on
                the  difference  between  book  value  and  fair  value  of each
                security.  These  gains and  losses are  credited  or charged to
                other  comprehensive  income,  whereas realized gains and losses
                flow through the Company's yearly operations.

                Inventories

                Inventories,  which consists of raw materials and finished goods
                are valued at the lower of cost or market,  with cost determined
                using the first-in,  first-out method and with market defined as
                the lower of replacement cost or realizable value.

                Property and Equipment

                Property and equipment is stated at cost. The costs of additions
                and betterments are capitalized and expenditures for repairs and
                maintenance are expensed in the period  incurred.  When items of
                property and  equipment  are sold or retired,  the related costs
                and accumulated  depreciation  are removed from the accounts and
                any gain or loss is included in income.

                The Company  capitalizes  leased equipment when the terms of the
                lease result in the transfer to the Company of substantially all
                of the benefits and risks of ownership of the equipment.

                                                      F-12

<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS

Note 1 -        Summary of Significant Accounting Policies (continued).
                -----------------------------------------------------

                Property and Equipment (continued).
                ---------------------------------

                Depreciation  and  amortization  of property  and  equipment  is
                provided   utilizing  both  the  straight-line  and  accelerated
                methods over the estimated useful lives of the respective assets
                as follows:

                Land improvements                                 20 years
                Building and building improvements                40 years
                Transportation equipment                      3 to 5 years
                Machinery and equipment                            5 years
                Furniture and fixtures                       5 to 10 years
                Office equipment                                   5 years

                Deferred Financing Costs

                Costs  incurred in obtaining  the  mortgage  used to finance the
                purchase of buildings  were  capitalized  and amortized over the
                term  of the  related  obligation  utilizing  the  straight-line
                method.

                Deferred Revenue

                The Company records as deferred  revenue  payments  received for
                research  contracts  prior  to the  culmination  of the  revenue
                process.

                Income Taxes

                The Company accounts for its income taxes utilizing Statement of
                Financial  Accounting Standards ("SFAS") No. 109 "Accounting for
                Income  Taxes"  which  requires  that  the  Company  follow  the
                liability  method of accounting for income taxes.  The liability
                method  provides  that deferred tax assets and  liabilities  are
                recorded based on the difference between the tax bases of assets
                and  liabilities  and  their  carrying   amounts  for  financial
                reporting purposes, referred to as "temporary differences."

                Profit Sharing Plan

                The Company maintains a qualified noncontributory profit sharing
                plan. The plan provides all eligible  employees with a source of
                retirement income, as well as assistance in other  circumstances
                such as death or  disability.  Eligible  employees must meet two
                requirements  to become  participants;  attainment of age 21 and
                completion  of one year of service  with the  Company.  Employer
                contributions  are  determined  by an annual  resolution  of the
                Board of  Directors.  A percentage  of the  benefits  vest after
                three years of qualifying service.

                                      F-13

<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS

Note 1 -        Summary of Significant Accounting Policies (continued).
                -----------------------------------------------------

                Earnings Per Share
                In 1997, the Financial  Accounting Standards Board (FASB) issued
                SFAS 128, "Earnings Per Share." SFAS 128 replaced the previously
                reported primary and fully diluted earnings per share with basic
                and diluted  earnings  per share.  Basic  earnings  per share is
                computed  using the weighted  average  number of common  shares.
                Diluted  earnings  per share  are  computed  using the  weighted
                average number of common shares and potentially  dilutive common
                shares  outstanding  during  the  period.  Potentially  dilutive
                common  shares  consist of employee  stock  options,  restricted
                stock, warrants and convertible  securities.  Basic earnings per
                share amounts for all periods have been presented.

                Comprehensive Income
                In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive
                Income." This statement  establishes standards for the reporting
                and display of comprehensive income and its components. SFAS 130
                was adopted by the Company, effective January 1, 1998.

                Reclassifications
                Certain   accounts   relating  to  the  prior  years  have  been
                reclassified  to conform  to the  current  year's  presentation.
                These  reclassifications  have no effect on previously  reported
                income.

Note 2 -        Investment Securities

                At December 31, 2000,  the Company had liquidated its investment
                in securities  in connection  with the repayment of the building
                mortgage.

                At December 31, 1999,  the investment  securities  portfolio was
                comprised of  securities  classified  as available  for sale, in
                conjunction  with FASB 115,  resulting in investment  securities
                available for sale being carried at market value.

                The  amortized  cost and fair  values of  investment  securities
                available for sale at December 31, 1999 were:

<TABLE>
<CAPTION>

                                                                      Gross           Gross
                                                     Amortized      Unrealized     Unrealized Fair
                                                       Cost             Gains           Losses           Value
                                                 ---------------   -------------   ---------------- ------------
<S>                                                <C>            <C>            <C>               <C>
                U.S. Treasury securities             $  35,131    $         -0-   $   (1,056)       $    34,075
                Obligations of other U.S.
                 government agencies                   207,952              -0-       (8,223)           199,729
                 Other  securities                      97,110              -0-      (38,518)            58,592
                                                     ---------    --------------   -----------      ------------

                                                     $ 340,193    $         -0-    $ (47,797)        $  292,396
                                                     =========    =============    ===========       ===========

</TABLE>


                                      F-14

<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS

Note 3 -        Inventories

                Inventories  at December 31, 2000 and 1999 was  comprised of the
                following:
<TABLE>
<CAPTION>

                                                           2000              1999
                                                           ----              ----

<S>                                                      <C>              <C>
                Raw materials                            $   122,007      $   107,883
                Finished goods                                 2,712            8,145
                                                        ------------   --------------

                                                         $   124,719      $   116,028
                                                         ===========      ===========

Note 4 -        Property and Equipment

                Property  and  equipment  at  December  31,  2000  and  1999 was
                comprised of the following:


                                                           2000              1999
                                                           ----              ----

                Land                                     $   450,000      $   450,000
                Land improvements                             80,211           80,211
                Building                                   2,550,000        2,550,000
                Building improvements                        301,880          289,505
                Machinery and equipment                      243,404          238,904
                Furniture and fixtures                       113,268          108,965
                Office equipment                              42,644           45,527
                                                        ------------    -------------
                                                           3,781,407        3,763,112
                Less:  Accumulated depreciation
                           and amortization                1,107,628        1,022,917
                                                         -----------      -----------

                                                          $2,673,779       $2,740,195
                                                          ==========       ==========
</TABLE>

                Depreciation  and  amortization  expense related to property and
                equipment amounted to $84,711, $87,740 and $86,000 for the years
                ended December 31, 2000, 1999 and 1998, respectively.

Note 5 -        Note Payable - Bank
                -------------------

                The Company has been provided a $250,000  revolving bank line of
                credit. Interest is payable monthly at 1% above the bank's prime
                rate. At December 31, 2000, the Company had $50,000  outstanding
                on the line of credit.  The  lending  arrangement  is secured by
                substantially all assets of the Company and expires March 2001.




                                      F-15

<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS

Note 6 -        Term Loan Payable

                On  March  20,  2000,  the  Company  entered  into  a  borrowing
                arrangement  with a bank  whereby  the bank  agreed  to extend a
                $500,000  term loan  facility to the  Company.  The Company drew
                down the entire term loan facility on June 2, 2000 in connection
                with the balloon payment due on the building mortgage.  The term
                loan is payable in sixty equal monthly principal installments of
                $8,333 plus  interest at 8.5% per annum through May 31, 2005. At
                December  31,  2000,   the  balance  due  under  the  term  loan
                aggregated $441,667.  The Company was required to place $150,000
                into a money market account to collateralize  the loan. The bank
                has  agreed  to  release   annually  an  equal  portion  of  the
                collateral over the five year term of the agreement. The lending
                arrangement is also secured by  substantially  all assets of the
                Company.  In  addition,  the lending  arrangement  requires  the
                Company  to  maintain  certain  financial   covenants  including
                minimum  tangible  net worth and annual cash flow  minimums.  At
                December 31, 2000 the Company was not in compliance with certain
                of these covenants.

                Aggregate maturities of the term loan payable are as follows:

                Year Ending December 31:
                -----------------------
                        2001                       $    100,000
                        2002                            100,000
                        2003                            100,000
                        2004                            100,000
                        2005                             41,667
                                                  -------------

                                                    $   441,667

Note 7 -        Long - Term Debt
                ----------------

                Long - term debt at December 31, 2000 and 1999 was  comprised of
                the following:
<TABLE>
<CAPTION>

                                                                                    2000             1999
                                                                                    ----             ----
<S>                                                                              <C>               <C>
                Installment loan payable - in equal monthly installments of $613
                with interest at 9% per annum through January, 2001,

                secured by all related equipment.                                $        613    $     7,972

                Less: Unamortized discount                                                -0-            403
                                                                                 ------------    -----------
                                                                                          613          7,569

                Less: Current maturities                                                  613          6,960
                                                                                 ------------    -----------

                                                                                 $       -0-      $      609
                                                                                 ============    ===========
</TABLE>

                                      F-16

<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS

Note 8 - Mortgage Payable

                 During June, 2000, the Company repaid,  in a balloon payment of
                 $1,398,330,  the outstanding  balance on the building mortgage.
                 To fund this  repayment  the Company  sold  certain  investment
                 securities  (see Note 2),  drew down on the term loan (see Note
                 6) and utilized available cash.

Note 9 -        Deferred Revenue

                At  December  31, 2000 and 1999 the  Company  received  research
                contract  payments  not  yet  earned  aggregating  $290,000  and
                $206,332, respectively.

Note 10 -       Commitments and Contingencies

                Litigation
                At December  31,  2000,  the  Company is a defendant  in various
                lawsuits,  which arose, in the ordinary  course of business.  At
                December  31,  2000,  the Company  recorded  $125,500 in current
                liabilities  as a provision  for legal  expenses  and  potential
                unfavorable   rulings  in  certain   of  these   cases.   It  is
                management's  opinion that the outcome from such  lawsuits  will
                not have a material effect on the Company's financial position.

                Retirement Agreements
                On July 26, 1994 the Company entered into retirement  agreements
                with the  Company's  President  and Senior Vice  President.  The
                agreements set a compensation  rate of 60% of the average annual
                compensation  for the five  preceding  year's,  payable  for the
                remainder of the  individuals'  life. In addition the Company is
                to maintain the individuals' medical benefits.

                 On May 17, 1998, the Company amended Mr. Horowitz's  employment
                agreement to extend it through May 16, 2003.  Additionally,  Mr.
                Horowitz's  base salary under the new agreement was $170,000 for
                1998 with annual increases of $10,000  thereafter until December
                31, 2002. In the final period of the agreement  (January 1, 2003
                through May 16, 2003) Mr.  Horowitz  will receive  salary at the
                annual rate of $240,000.

                Leases
                The Company has entered  into various  noncancellable  operating
                leases requiring future minimum lease payments as follows:

                       Years Ending December 31:
                       ------------------------
                                  2001                        $     53,202
                                  2002                              39,761
                                  2003                              20,263
                                                             -------------
                                                              $    113,226



                                      F-17

<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS


                Lease expense charged to operations for the years ended December
                31, 2000 and 1999 amounted to $56,088 and $43,997, respectively.

                During 2000, the Company  entered into a new lease for an office
                and research facility in Phoenix, Arizona under a noncancellable
                operating lease  requiring  minimum rental payments for the year
                ending  December  31, 2001 of $26,100.  In  addition,  the lease
                provides  for  escalation  clauses for  increases in real estate
                taxes and building maintenance.

                Rent expense  charged to operations for the years ended December
                31, 2000 and 1999 amounted to $22,681 and $10,832, respectively.

Note 11 -       Stock Dividends

                On February 11, 1999,  the Company  declared a 5% stock dividend
                to stockholders of record at March 19, 1999, paid April 2, 1999.
                The  transaction  was valued based upon the closing market price
                of the Company's stock on February 10, 1999, which was $2.38 per
                share. Retained earnings was charged for $189,680 as a result of
                the issuance of 79,697 treasury shares.

                On March 2, 1998,  the Company  declared a 5% stock  dividend to
                stockholders  of record at March 23,  1998,  paid April 2, 1998.
                The  transaction  was valued based upon the closing market price
                of the Company's stock on February 27, 1998, which was $2.50 per
                share. Retained earnings was charged for $186,090 as a result of
                the issuance of 74,436 shares.

                Per share data have been  restated  for the  effects of the 1999
                and 1998 stock dividends.

Note 12 -       Shareholders Rights Plan

                On July 20,  1995,  the Company  adopted a  Shareholders  Rights
                Plan.  The  Company  adopted  the plan to  protect  shareholders
                against unsolicited  attempts to acquire control of the Company.
                The rights  were  issued to  shareholders  of record on July 31,
                1995 and will expire on July 31, 2005.  The Rights Plan provides
                for the issuance of one stock right for each  outstanding  share
                of  the  Company's   common   stock.   The  rights  will  become
                exercisable  only if an  "acquiring  party"  (as  defined in the
                rights plan) acquires 15% or more of the Company's  common stock
                or  announces a tender  offer that would  result in ownership of
                15% or more of the Company's common stock.

                Each  right will  entitle  the holder to buy one share of common
                stock at an exercise price of $25, subject to adjustment.


                                      F-18
<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS

Note 12 -       Shareholders Rights Plan (continued)

                Upon the  occurrence  of certain  events,  holders of the rights
                will be  entitled  to  purchase  either the  Company's  stock or
                shares in an  "Acquiring  Entity" at 50% of those shares  market
                value.  The  Company  will  generally  be entitled to redeem all
                rights  for $.01 per  right at any time  prior to the  tenth day
                following the acquisition of 15% or more of the Company's common
                stock by a person or group.

Note 13 -       Stock Bonuses

                On December 27, 2000,  the Company  issued as a bonus to certain
                officers,  100,000 restricted shares of the Company's stock. The
                shares have not been registered under the Securities Act of 1933
                and  sales  of  the  shares  are  subject  to  restrictions  and
                limitations. The Company valued the shares issued at $1.0625 per
                share aggregating $106,250.

                On April 12,  1999,  the  Company  issued as a bonus to  certain
                officers,  140,000 restricted shares of the Company's stock. The
                shares have not been registered under the Securities Act of 1933
                and  sales  of  the  shares  are  subject  to  restrictions  and
                limitations.  The Company  valued the shares issued at $1.00 per
                share aggregating $140,000.

                On  April 2,  1998,  subsequent  to the  1998 5% stock  dividend
                record date,  the Company's  Board of Directors  authorized  the
                issuance of 30,800 shares of the Company's stock to employees of
                the  Company.  The  shares  have not been  registered  under the
                Securities  Act of 1933 and sales of the shares  are  subject to
                restrictions  and  limitations.  The  Company  valued the shares
                issued at $2.77 per share aggregating $85,315.

Note 14 -       Provision For (Benefit From) Income Taxes

                The provision  for (benefit  from) income taxes is summarized as
                follows:
<TABLE>
<CAPTION>

                                                 2000             1999           1998
                                                 ----             ----           ----
<S>                                           <C>               <C>            <C>
                Current:
                -------
                 Federal                      $       -0-       $  (24,159)    $   154,381
                 State and local                   (14,827)         23,886          86,464
                                              -------------    -----------    ------------
                                                   (14,827)          (273)         240,845
                                              -------------    -----------    ------------
                Deferred:
                --------
                 Federal                           68,800          (39,400)       (23,900)
                 State and local                     -0-           (24,000)       (15,100)
                                              -------------    -----------    ------------
                                                   68,800          (63,400)       (39,000)
                                              -------------    -----------    ------------
                                               $    53,973       $ (63,673)    $  201,845
                                              =============    ===========    -===========
</TABLE>


                                      F-19

<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS


Note 14 -       Provision For (Benefit From) Income Taxes (continued)
                -----------------------------------------------------

                The  reconciliation  between  the maximum  effective  income tax
                rates  with  federal  statutory  tax  rates  for the year  ended
                December 31, 2000 and the rates  reflected  in the  accompanying
                financial statements is as follows:

                Income tax (benefit) at U.S. statutory rates      $   (56,758)
                Increase (decrease) in federal income
                      tax expense resulting from:
                Federal tax arising from non-deductible
                      financial statement expenses                    102,400

                State and local taxes                                   8,331
                                                                  ------------

                Provision for  Income Taxes                       $    53,973
                                                                  ===========

Note 15 -       Industry Segments

                The Company's  operations are classified  into the following two
                industry  segments:  Research -  Providing  laboratory  research
                services in the area of polymer  chemistry,  and Production -the
                Manufacturing   and  sale  of  products  arising  from  research
                activities   and  the  sale  of   textile   printing   inks  and
                accessories.

                Selected  financial  information  on industry  segments  for the
                years ended December 31, 2000, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                                                        2000                   1999               1998
                                                                        ----                   ----               -----
<S>                                                                 <C>                     <C>                 <C>
NET REVENUES:
         Research                                                   $4,398,948            $ 3,814,145         $ 4,554,400
         Production                                                    672,293              1,022,012           1,092,789
                                                                    -----------          ------------         ------------

                  Total Net Revenues                                $5,071,241            $ 4,836,157         $ 5,647,189
                                                                    ==========           ============         ============

GROSS PROFIT:
         Research                                                   $3,333,902            $ 2,723,884         $ 3,505,840
         Production                                                     62,654                448,150             302,874
                                                                    -----------          ------------         ------------
                  Total Gross Profit                                 3,396,556              3,172,034           3,808,714

SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES                                                            3,497,672              3,303,995           3,310,032
                                                                    -----------          ------------         ------------

(LOSS) INCOME FROM OPERATIONS                                       $ (101,116)           $  (131,961)        $   498,682
                                                                    ===========           ============        ============
</TABLE>

                                      F-20

<PAGE>

                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS


Note 15 -       Industry Segments (continued)
<TABLE>
<CAPTION>

                                                                        2000                   1999               1998
                                                                        ----                   ----               -----
<S>                                                              <C>                    <C>                  <C>
CAPITAL EXPENDITURES:
         Research                                                  $     7,592          $       5,571         $      8,901
         Production                                                      3,659                  2,685                4,289
         Corporate                                                       7,044                  5,168               23,905
                                                                  ------------         --------------        -------------

                  Total                                            $    18,295           $     13,424         $     37,095
                                                                  ============           ============         ============

DEPRECIATION AND AMORTIZATION:
         Research                                                  $      35,155         $     36,412         $     35,690
         Production                                                       16,942               17,548               17,200
         Corporate                                                        43,337               33,780               33,110
                                                                  --------------        -------------        -------------

                  Total                                            $      95,434         $     87,740         $     86,000
                                                                   =============         ============         ============

IDENTIFIABLE ASSETS:
                                                                                         December 31,
                                                                           ------------------------------
                                                                           2000                       1999
                                                                           ----                       ----
         Research                                                     $1,089,693                   $1,225,237
         Production                                                      931,553                      849,921
         Corporate                                                     2,142,698                    3,137,515

                  Total                                               $4,163,944                   $5,212,673
                                                                       ==========                  ==========
</TABLE>

Net income from operations represents net sales less operating expenses for each
segment and  corporate  expenses,  which are not  directly  attributable  to any
segment.  Segment identifiable assets include accounts  receivable,  inventories
and  property  and  equipment  for use in,  or  directly  attributable  to,  the
individual  segments.  Corporate  identifiable assets include cash, property and
equipment  and  other  assets,  which  are  not  directly  attributable  to  any
individual segment.

There was no individual  customer from which the Company  derived 10% or more of
its revenues during the periods presented.








                                      F-21

<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                          NOTES TO FINANCIAL STATEMENTS


Note 16 -        Accrued Expenses and Other Current Liabilities

Accrued  expenses and other  current  liabilities  at December 31, 2000 and 1999
were comprised of the following:
<TABLE>
<CAPTION>

                                                                                     2000             1999
                                                                                     ----             ----

<S>                                                                               <C>               <C>
                 Accrued provision for legal proceedings                          $   125,500       $  162,500
                 Accrued vacation                                                      43,728           27,689
                 Accrued professional fees                                             35,000           36,000
                 Other accruals                                                        30,346           46,175
                                                                                -------------     ------------

                                                                                  $   234,574       $  272,364
                                                                                  ===========       ==========
</TABLE>

Note 17 -        Profit Sharing Plan

Profit sharing expense under the Company's  noncontributory  profit sharing plan
charged to  operations  amounted to $4,446 for the year ended  December 31, 2000
and $-0- for the years ended December 31, 1999 and 1998.



                                      F-22

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS
                        ON FINANCIAL STATEMENT SCHEDULES


To The Stockholders and Board of Directors
Polymer Research Corp. of America
Brooklyn, New York


Our report on the audit of the basic  financial  statements of Polymer  Research
Corp. of America for the year 2000, appears on page F-2. That audit was made for
the purpose of forming an opinion on the basic financial  statements  taken as a
whole.  The  supplementary  information  for 1999 and 1998 was  audited by other
auditors  whose report dated February 16, 2000 appears on page F-3 and expressed
an unqualified opinion on that information.

The  accompanying  supplementary  information  is  presented  for the purpose of
additional  analysis  and  is  not  a  required  part  of  the  basic  financial
statements.  Such  information  has been  subjected to the  auditing  procedures
applied  in the audit of the basic  financial  statements  for 2000 and,  in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
financial statements taken as a whole.







                                                  Goldstein & Ganz, CPA's, P.C..



Great Neck, New York
April 3, 2001



                                      F-23


<PAGE>

<TABLE>
<CAPTION>

                                         POLYMER RESEARCH CORP. OF AMERICA
                          SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


Column A                                Column B    Column C                    Column D       Column E
--------                                --------    --------                    --------       --------
                                                    Additions
                                                    ----------------------
                                        Balance at  Charged to    Charged
                                        Beginning   Costs and     to Other                     Balance at
                                        Of Year     Expenses      Accounts      Deductions     End of Year
                                        -------     --------      --------      ----------     -----------

Allowance for Doubtful Accounts:
-------------------------------

<S>                                   <C>          <C>           <C>           <C>                <C>
Year ended  December 31, 2000          $ -0-        $ 60,435      $ -0-         $ 60,435           $ -0-
                                       -----        --------      ----          --------           -----
Year ended  December 31, 1999          $ -0-        $ 120         $ -0-         $ 120              $ -0-
                                       -----        --------      -----         --------           -----
Year ended  December 31, 1998          $ -0-        $ 3,605       $ -0-         $ 3,605            $ -0-
                                       -----        --------      -----         --------           -----

Reserve for Sales Credits:
-------------------------

Year ended  December 31, 2000          $ -0-        $ -0-         $ -0-         $ -0-             $ -0-
                                       -----        --------      ----          --------           -----
Year ended  December 31, 1999          $ -0-        $ -0-         $ -0-         $ -0-             $ -0-
                                       -----        --------      ----          --------           -----
Year ended  December 31, 1998          $ -0-        $ -0-         $ -0-         $ -0-             $ -0-
                                       -----        --------      ----          --------           -----

</TABLE>





                                      F-24


<PAGE>


                        POLYMER RESEARCH CORP. OF AMERICA
                        SCHEDULE X - SUPPLEMENTARY INCOME
                              STATEMENT INFORMATION

<TABLE>
<CAPTION>

                                                             Charged To Costs and Expenses
                                                             -----------------------------
                                                                     December 31,
                                                                     ------------
                                                       2000              1999               1998
                                                       ----              ----               ----


<S>                                                <C>             <C>                 <C>
1. MAINTENANCE AND REPAIR                          $   81,152      $     *             $  61,832
                                                   ----------      ------------         ---------

2. DEPRECIATION                                     $   84,711      $   87,740          $  86,000
                                                    ----------      ----------          ---------

3. TAXES, OTHER THAN PAYROLL
    AND INCOME TAXES                                      *                 *                 *

4. ROYALTIES                                              *                 *                 *

5. ADVERTISING COSTS                                      *                 *                 *
</TABLE>

Note:  * Less than 1% of revenue.




                                                                F-25

<PAGE>



                        POLYMER RESEARCH CORP. OF AMERICA
         SCHEDULE XI - PROPERTY, EQUIPMENT AND ACCUMULATED DEPRECIATION
                          YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>



                       Initial Cost to  Company               Gross Amount At Which Carried
                                                                     At Close of Period
                                                          --------------------------------------







                              Land                         Land
                              Building and                 Building and
                              Improvements                 Improvements                                Accumulated    Date
Description     Encumbrances                Equipment                     Equipment       Total       Depreciation   Acquired
-----------     ----------    -----------  ---------       ------------  ---------       -----       ------------   --------
<S>                 <C>        <C>          <C>            <C>          <C>         <C>           <C>                <C>
Land,
Building, and

Improvements        $ -0-      3,382,091    $     -0-       3,382,091    $     -0-     $3,382,091    $   756,326   June 4, 1990

Equipment             613           -0-        399,316            -0-       399,316       399,316        351,302     Various
                    -----      ---------     ---------     ----------    ----------    ---------      -----------

                    $ 613      $3,382,091    $ 399,316     $3,382,091    $  399,316    $3,781,407     $1,107,628
                    =====      ==========    =========     ==========    ==========    ==========     ==========






Life On Which
 Depreciation
    In Latest
     Income
     Statement
  is Computed



   20-40 Years

  3-10 Years


</TABLE>


                                      F-26
<PAGE>





                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                              POLYMER RESEARCH CORP. OF AMERICA


                                              /s/ Carl Horowitz
                                              --------------------------------
                                              CARL HOROWITZ, President and
                                              Chief Executive Officer

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.

/s/Carl Horowitz                                        April 13, 2001
----------------------------           President        ----------------------
Carl Horowitz                          CEO & Director   Date

/s/ Irene Horowitz                                      April 13, 2001
----------------------------           Senior V.P       ----------------------
Irene Horowitz                         & Director       Date

/s/  John M. Ryan                                       April 13, 2001
----------------------------           Exec V.P         ----------------------
John M. Ryan                           & Director       Date

/s/ Alice J. Horowitz                                   April 13, 2001
----------------------------           V.P. of Polymer  ----------------------
Alice J. Horowitz                      W.Coast Director Date

/s/ Jascha J. Gurevitz                                  April 13, 2001
----------------------------           Director         ----------------------
Jascha J. Gurevitz

/s/ Boris Jody                                          April 13, 2001
----------------------------           Director         ----------------------
Boris Jody                                              Date

/s/ Dr. Mohan Sanduja, PhD                              April 13, 2001
----------------------------           V.P.,R&D         ----------------------
Dr. Mohan Sanduja, PhD                 & Director       Date

/s/ Terry Wolfgang                                      April 13, 2001
----------------------------           Director         ----------------------
Terry Wolfgang                                          Date