UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

|X|   Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

      For the fiscal year ended December 31, 2002
or

|_|   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the transition period from _____ to _____

Commission File Number 000-26095

                              ENVIROKARE TECH, INC.
        (Exact Name of Small Business Issuer as Specified in its Charter)

            Nevada                                               88-0412549
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

5850 T. G. Lee Blvd., Suite  535, Orlando, FL                        32822
   (Address of Principal Executive Offices)                       (Zip Code)

Registrant's telephone number, including area code (407) 856-8882

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

   Title of each class               Name of each exchange on which registered
           None                                      Not Applicable

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

                          Common Stock, Par Value $.001
                                (Title of Class)

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

      Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|

      State issuer's revenues for its most recent fiscal year: The issuer is a
development stage company and has no revenues to report at this time.

      The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of March
4, 2003 is $4,257,355.

                         (ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS)

      Check whether the issuer has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. YES |_| NO |_|

                                 NOT APPLICABLE
                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

      The number of shares outstanding of the issuer's Common Stock, $.001 par
value, as of March 4, 2003 was 31,376,144

                       DOCUMENTS INCORPORATED BY REFERENCE
                                 NOT APPLICABLE

      Transitional Small Business Disclosure Format (check one): YES |_| NO |X|

<PAGE>

                                TABLE OF CONTENTS

Part I

Item 1.     Description of Business

Item 2.     Description of Property

Item 3.     Legal Proceedings

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

Part II

Item 5.     Market for Common Equity and Related Stockholder Matters

Item 6.     Plan of Operation

Item 7.     Financial Statements

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

Part III

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

Item 10.    Executive Compensation

Item 11.    Security Ownership of Certain Beneficial Owners and Management

Item 12.    Certain Relationships and Related Transactions

Item 13.    Exhibits and Reports on Form 8-K

Item 14.    Controls and Procedures

<PAGE>

                                     PART I

Item 1. Description of Business

      This Form 10-KSB contains some statements that the Company believes are
"forward-looking statements." Forward-looking statements include statements
about future business plans and strategies of the Company, statements about the
future of plastic processing technologies, statements about the future of the
materials handling industry, including the pallet industry, statements about
prospects for other products that may be developed by the Company or
sublicensees, and most other statements that are not historical in nature.
Because forward-looking statements involve risks and uncertainties, there are
factors, including those discussed below, that could cause actual results to be
materially different from any future results, performance or achievements
expressed or implied. The Company has attempted to identify the major factors
that could cause differences between actual and planned or expected results, but
there can be no assurance that the Company has identified all of those factors.
Accordingly, readers should not place undue reliance on forward-looking
statements. Also, the Company has no obligation to publicly update
forward-looking statements it makes in this Form 10-KSB.

      Development and Business of the Company

      Envirokare Tech, Inc., ("Envirokare" or the "Company") was
incorporated under the laws of the State of Nevada on June 15, 1998. The
executive offices of the Company are located at 5850 T. G. Lee Blvd., Suite
535, Orlando, FL 32822. The Company's telephone number is (407) 856-8882.
During the first quarter of 2001, the Company began leasing additional
office space at 2255 Glades Road, Suite 112E, Boca Raton, FL 33431. The
Company is currently in the process of searching for a subleasee for its
Boca Raton, FL office.

      The Company is currently in the development stage and has not yet
generated any operating revenues. The Company is a technology-based company
positioned to develop and market environmentally responsible products containing
recycled materials, polymers and fibers. The Company is currently developing
numerous industrial and commercial products on behalf of clients and in its own
behalf, through a licensing agreement with Thermoplastic Composite Designs, Inc.
("TCD") See " -- License and Merger Agreements with TCD," below. TCD, located in
Florida, has invented and developed a unique composite plastics processing
technology, the Thermoplastic Flowforming process (variously referred to herein
as "TPF Process", the "Process" or "TPF technology"), which is discussed under "
-- TPF Process," below. Principal products currently in development on behalf of
the Company and its clients are discussed below under " -- Products; Product
Development."

      The Company's license agreement with TCD enables the Company to
commercially exploit the TPF Process by marketing composite materials products
made through the TPF Process that are currently in development, developing and
marketing other products containing composite materials made through the TPF
Process within various market sectors and industries, and sublicensing the TPF
Process. Products developed by the Company will be manufactured by


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<PAGE>
the Company or by sublicensees. In November 1999, the Company engaged TCD to
design and supply a system to manufacture a pallet (the "Pallet", or sometimes
referred to herein as the "E Pallet") and other contemplated materials handling
products and to assist in making Pallet design modifications to meet product
specifications provided by the Company. As a result of the Company acquiring
licensing rights to the TPF Process during 2001, the Company expanded its
original business plan to focus on and include sublicensing the TPF Process to
numerous prospective clients that currently operate in a number of industries.
The Company also has engaged TCD to assist in the development of a number of
products and to manufacture product prototypes, in quantities required for
testing and analysis, on an as-needed basis, on behalf of the Company, its
product development clients and prospective sublicensees.

      On December 21, 2000, the Company, Electroship Acquisition Corp., a New
York corporation and a wholly-owned subsidiary of Envirokare ("EAC"), and
Electroship (N.Y.) Inc., a New York corporation ("Electroship") consummated the
merger of Electroship with and into EAC with EAC continuing as the surviving
corporation (the "Merger"). The consideration received by Electroship Partners,
the former shareholder of Electroship, in the Merger consisted of 2,500,000
shares of the common stock, par value $.001 per share of Envirokare. Electroship
Partners has since dissolved and distributed its assets, including such shares,
among its former partners. Electroship was engaged in the business of developing
wireless tracking technology for the shipping industry.

The primary asset that the Company acquired in this merger was a patent
application relating to wireless tracking capabilities that was provisionally
filed by Electroship with the United States Patent and Trade Office ("USPTO")
and that expired subsequent to consummation of the merger. The Company made
application to the USPTO to provisionally refile the patent during the third
quarter of 2002. The Company anticipates that patents that may be issued as
result of its provisional filing will provide the Company with, among other
potential wireless product developments, the ability to develop materials
handling products that will have wireless tracking capability.

      Anticipated Revenue Sources; Marketing and Distribution

      The Company's current operating strategy is based on developing products
to be manufactured through the TPF Process, as well as marketing the TPF
technology to potential sublicensees of the Company. This strategy is consistent
with the Company's focus on developing environmentally responsible products, for
the TPF Process, among other features, is capable of reusing its own production
scrap and does not result in the emission of volatile organic contaminants
("VOCs"). As products are developed and readied for market, the Company intends
to enter into arrangements to bring such products to market either through
production by sublicensees or by the Company's own production facilities, in
conjunction with TCD's production facility development assistance.

      The Company is actively engaged in marketing the TPF technology to
numerous potential clients. Management has entered into product/technology
development agreements with prospective clients to develop composite materials
products on behalf of such clients. Management anticipates additional
product/technology agreements will be developed with


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<PAGE>

prospective clients during 2003 and thereafter. Products co-developed by the
Company would have a specific application within a client's existing markets or
within new or expanded markets that may open as a result of opportunities
presented by such products. Upon the completion of the development of a specific
product, the Company anticipates that it would enter into product manufacturing
and marketing agreements with the client under which the client would be granted
a sublicense to produce the jointly developed product, or Envirokare would
produce the product in its own manufacturing facility for sale to the client.
Envirokare is currently holding discussions with prospective clients and
recently entered into its first product/technology development agreement with
Schaefer Systems International, Inc. ("SSI"). See " --Product Development and
Purchase Agreement with SSI," below. The Company also entered into a
product/technology development agreement with Aluma-Form, Inc. during January
2003.

      In addition to marketing the TPF technology in an effort to develop
products on behalf of potential clients, the Company continues to develop its
own products. The Company has developed a second generation Pallet, which
incorporates significant refinements in both design and composite construction,
relative to the first generation Pallet (see below for a discussion of the
Pallet development). A pallet is a portable platform for handling, storing, or
moving materials and packages and is used in, for example, warehouses, factories
and vehicles. The Company has also developed a first generation beam structure
(the "Beam") that is anticipated to have application within, among other
industries, the marine and modular housing industries. The Beam is capable of
carrying specific weight, or load, capacities and provides the basis for
interconnectivity between other components within a constructed system.

      The Company had originally planned to have licensees begin producing the
Pallet in 2000, but decided to conduct additional tests, which delayed the
production start date. The introduction of significantly improved substrate
technology, afforded by the TPF technology, caused the Company to rethink its
initial Pallet production start dates, as well as production and marketing
strategy. Consequently, the Pallet required additional product development and
testing specific to improving product substrate composition, prior to initiating
the launch of production operations by the Company or its sublicensees.

      The Company's testing program has included in-depth analysis of
substrate compounds and process modifications and has led to the refinement
of the initial prototypes of the Pallet. The Company expects to have
potential customer's evaluations some time during the last half of 2003.
Company management anticipates that the Company, or its sublicensees, will
commence commercial production of the Pallet or other products either in
development or contemplated for development, once appropriate production
facilities are acquired and commissioned for production, currently
anticipated to occur sometime in 2003.

      License and Merger Agreements with TCD

      On March 30, 2001, the Company, through its wholly-owned subsidiary,
Envirokare Composite Corp. ("ECC"), entered into a licensing agreement with TCD
that, subject to certain limitations, allows the Company to commercially exploit
the TPF Process for itself and on behalf


                                       3
<PAGE>

of Company licensees. The agreement provides the Company with the ability to
utilize the TPF technology to design, develop, manufacture, market, license and
sublicense a wide range of large structural parts, including the Company's
proprietary Pallet, manufactured through the joint efforts of the Company and
TCD, or the Company's sublicensees, for industries which may include
agriculture, aerospace, automotive, construction, marine, medical, military,
transportation and waste management. The Company paid TCD a one time license fee
of $525,000 under the agreement.

      Additionally, Envirokare and ECC also entered into a merger agreement with
TCD, which provides that TCD will merge with ECC if Envirokare's shares achieve
an average of the closing bid asked prices at or above five dollars per share at
any point in time during the thirty-month period following the agreement date,
with Envirokare paying merger consideration to TCD in the amount of 3,000,000
shares of its common stock. In the event that Envirokare's shares have not
traded at such specified level of five dollars per share by the end of the
thirty-month period, then ECC and Envirokare have the option to effect the
merger of TCD with ECC by Envirokare's paying to TCD's shareholders a
$15,000,000 consideration, either in shares of Envirokare or in a combination of
cash and shares, with the cash payment to be no greater than $7,500,000. The
date of such payment would be no later than March 30, 2004.

      Product Development and Purchase Agreement with Schaefer Systems
International, Inc.

      On August 6, 2002, the Company entered into a product development and
purchase agreement with SSI, pursuant to which the Company has been
contracted to develop a proprietary product for SSI. The agreement provides
for a development phase and a production phase. For the development phase,
the agreement specifies that the Company will design and develop the
product, including molds, and produce a quantity of prototypes for field
testing, field trials and related approvals. This new product is expected
to be significantly lighter and stronger than currently available
competitive products. Payments to the Company for successful completion of
product development will aggregate $185,500, with an additional $300,000 to
be payable if SSI elects to develop an additional, similar product with
different dimensions. The Company is to deliver product prototypes to SSI
no later than six months after the agreement date. An initial payment of
$61,215 was made by SSI to the Company to facilitate the development of the
proprietary product. During the fourth quarter of the fiscal year, this
Agreement expired without delivery by the Company. A new Product
Development Agreement was signed between the Company and SSI after the end
of the fiscal year on March 28, 2003. This Agreement provides for the
development the same products; for the credit of the previous payment to
the Company and for the payment of the balance of the development fee as
follows: 47% upon completion of first parts off of the product and
verification of performance and 20% within 30 days after Development
Completion. SSI continued its right to order additional development for an
additional payment of $300,000. This Agreement provides for 26 weeks from
the effective date within which to complete successful development or for
the initial payment to be returned.

      Letter Agreement with New Age Shelters Ltd.

      The Company and New Age Shelters Ltd. ("New Age") entered into a
non-binding letter of agreement, dated October 1, 2002, expressing the intent of
the parties to combine their businesses through a merger of New Age into a
wholly-owned subsidiary of the Company. New Age is a building systems
manufacturing company, which manufactures patented modular products that have a
variety of applications including use for warehousing, greenhouses, food
storage, residential, military field stations and camps, emergency shelters and
temporary schools and


                                       4
<PAGE>

hospitals. Terms of the letter agreement provide that, subject to conditions
including due diligence review, obtaining necessary approvals, and negotiation
and execution of a definitive merger agreement, New Age would merge with and
into a wholly-owned subsidiary of Envirokare, with the subsidiary to be the
surviving company in the merger and to continue the business of New Age. Merger
consideration would be in the form of Envirokare common stock issued to New Age
shareholders, with 1,000,000 shares to be issued upon completion of the merger,
and additional shares to be issued in 2006 based on net profits of New Age
during the 2003-2005 period. The Company filed a Form 8-K with the Commission,
dated October 18, 2002, containing a press release relating to this matter.

      TPF Process

      The TPF process is a proprietary process developed by TCD that enables the
manufacture of large structural parts using long-fiber reinforced thermoplastic
resins. The Process utilizes recycled or virgin resins and is designed to reuse
its own production scrap, thereby eliminating production waste by-products. TPF
Process patents are pending.

      Historically, advanced composite materials were utilized almost
exclusively by the military and aerospace industries where such usage was
normally restricted to the manufacture of small parts due to the inordinate cost
of hand application, i.e., the process of manually applying layers of composite
materials to a mold or shape. Management believes that the TPF Process provides
a cost-effective alternative for the in-line production of larger, long-fiber
reinforced plastic parts at very low processing costs. The Process has key
advantages over many manufacturing processes currently in use such as
compression molding, injection molding and rotational molding. One such
advantage is in the cost savings that may be realized in the reduced labor
required to create larger parts made using the TPF Process. The cost required to
assemble multiple smaller components to generate a complete larger part, which
often occurs in current production environments, is higher than with the TPF
Process. Material costs will typically also be lower when using the Process,
because of its use of recycled material, reuse of its own production scrap and
in-line compounding, which is the process of mixing raw material components as
an actual part of the production process.

      The TPF Process has potential application in a broad range of industries
including: agriculture, automotive, material handling, transportation, marine,
medical, waste management and aerospace. Management believes that TPF composite
products will be a natural choice to replace many wood, aluminum, steel, other
metal alloys, concrete, other plastic and fiberglass products, by providing
products that have corrosion resistance, are lighter and cost less to
manufacture. As a thermoplastic process, TPF also has an additional advantage in
that it does not emit any VOCs. The processing of thermoset composites, for
example, does emit VOCs.

      The Company believes that its specialization in the field of thermoplastic
composites will give it a competitive advantage in the future. Until recently,
thermoplastic composites were not considered commercially viable substitutes for
thermoset composites, wood, aluminum, steel, and other metal alloys. However,
the key TPF technology innovation of long-fiber reinforced thermoplastic
composites has dramatically improved the mechanical and physical properties of
this


                                       5
<PAGE>

category of composite products and has made such composites a viable commercial
alternative to traditional materials.

      During the second quarter of 2002, the Company engaged the Metis Design
Corporation, Inc. ("Metis Design"), formerly Horizon Defense and Aerospace
Solutions, Inc., to conduct a review of the TPF technology. Metis Design, based
in Cambridge, Massachusetts, is an advanced technology firm specializing in
composites consulting, damage monitoring and structural concept design and
analysis.

      In September 2002, Metis Design presented the Company's management with
final findings regarding the TPF technology. In its report, Metis Design noted
that, as the utilization of advanced thermoplastic composite materials has
extended into market segments such as military and aerospace, commercial
manufacturers are increasingly demanding lower cost, quicker and more flexible
reinforced thermoplastic processing techniques. Metis Design found that the TPF
Process has significant potential to address this need. In addition, Metis
Design reported that the TPF Process could represent a solution to a
long-standing need in the long-fiber reinforced composite manufacturing process
- the TPF Process enables manufacturers to mass-produce at high rates and labor
efficiencies compared to many current production techniques, while retaining
accuracy and the ability to utilize low molding pressures. The report also noted
that the TPF Process provides economic advantages over other thermoplastic
composite molding methods through reduced labor, material, tooling and machine
costs.

      Metis conducted narrow coupon tensile tests on composite material samples
produced from the TPF Process. These tests are the standard procedure for
determining certain mechanical properties of a material. The test results
demonstrated that the material properties exhibited in the product, as formed by
the TPF Process, are comparable to those from products formed through
traditional processes, and are similar to those properties published by
commercially available materials.

      Products; Product Development

      The Pallet

      The Company anticipates that one of its first products to be
commercialized will be the E Pallet, made through the TPF Process (as discussed
above). The E Pallet is comprised of long-fiber reinforced recycled material and
is 100% recyclable.

      Market comparisons and testing indicate that the E Pallet compares
favorably with available plastic pallets both on composition and design
criteria. The Pallet is manufactured from plastic, which presents a preferable
alternative to pallets made from wood and from non-wood materials such as metal
and wood derivatives. Plastic is becoming an increasing preferred pallet
manufacturing material because it is more durable than wood. Key advantages of
the Company's E Pallet include superior strength and durability, environmental
benefits (no lumber required, 100% recyclable, no fungicides/bacterial spraying
required, no land fill dumping, and less energy to manufacture), increased
safety (no splintering of wood or hazardous nails/bolts), ease of use


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(four way entry), longer life cycle, and lower cost per pallet-round-trip. The
Pallet is also designed to resist damage caused from use and to handle large
loads when evenly loaded.

      Since inception, the Company has been actively engaged in the development
of the Pallet. The Company entered the pallet manufacturing business in December
1998, with the acquisition of assets including equipment, early-stage rubber
mold technology and patent rights potentially applicable to the development of
rubber mold technology for creating a pallet made of recycled materials. The
Company substantially improved on this purchased technology and developed, after
more than two years of research and working with TCD, a molded Pallet composed
of thermoplastic composite. The Company believes that the acquired early-stage
rubber mold technology is of marginal commercial value. The Company is focusing
its efforts on further developing the Pallet and it believes that the finished
Pallet will meet the requirements of many end users.

      The Company has been involved in extensive testing and development of the
Pallet. The Company's development focus has been to ensure that the Pallet meets
or exceeds current market standards and that the Pallet will be superior in
performance and will be cost-effective to produce and sell. In particular, the
Company's development efforts have focused on the safety, structural integrity,
reliability, and cost-effectiveness of the Pallet, involving in-depth analysis
of compound variables and production methods.

      In 1999, the Company and TCD entered into a product/technology development
contract. TCD undertook to assist the Company in optimizing earlier versions of
the Pallet design. The contract required TCD to deliver a pallet that would meet
design specifications including specified size and weight requirements and a
customized composition matrix. The contract also provided that TCD would supply
an engineered mold for the Company's first production facility. The Company's
payments to TCD under this contract for the development of a first generation
Pallet mold totaled $50,800 in 1999 and $83,000 in 2000.

      Commencing in May 2000, additional Pallet testing and evaluation was
conducted by the Pallet and Container Research Laboratory of Virginia
Polytechnic Institute and State University, located in Blacksburg, Virginia.
This laboratory is recognized for its work in the area of testing and analysis
of products designed for use in the materials handling industry. Based on the
initial test results, the Company and its product design contractor, TCD, made
design adjustments to the Pallet. Further Pallet testing and evaluation through
2001 resulted in further design adjustments. As a result of the design
adjustments and modifications, the first generation mold was deemed to be of no
commercial value. The Company built a second generation mold during 2001, at a
cost of $43,000, incorporating design modifications based on technical
information derived from tests of the previous mold. Pallets produced from this
mold were tested and evaluated at the Pallet and Container Research Laboratory
during the second quarter of 2002. The study of the second mold evaluated the
strength, stiffness and durability of the Pallet as a general purpose pallet
with a 2,800 pound weight capacity set as the standard.

      The study findings included the following:

   o        The Pallet could safely support a 2,800 pound, uniformly distributed
            load in


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            warehouse storage racks as well as on conveyors;

   o        The Pallet was found to be highly resistant to damage caused by
            rough handling, based on the drop test protocol carried out, which
            involved dropping empty Pallets from various heights after the
            Pallets were chilled to a temperature of -13 degrees Fahrenheit; and

   o        Because the Pallet's performance was found to significantly exceed
            requirements for a 2,800-pound uniform load standard, the study
            recommended that the Company consider reducing the Pallet's glass
            loading (i.e. the percentage of glass fiber used in the composite),
            or refining its design, to further reduce Pallet weight and cost.

      Based on the results of testing conducted on the second generation E
Pallet, the Company commenced redesign of certain features of the Pallet during
the second quarter of 2002. The Company engaged Metis Design to optimize this
Pallet redesign. Through this engagement, design element modifications were
developed and proposed for certain aspects of the Pallet design. The Pallet
design modifications, as proposed by Metis Design, allow for a significant
weight reduction of the Pallet thus making the Pallet more cost-effective and
easier to handle, while structural features attributed to prior versions of the
Pallet are not anticipated to be materially affected. The Company is presently
negotiating product development agreements with prospective partners pursuant to
which the next generation Pallet prototypes will be produced. Following
appropriate testing approvals and due diligence on Pallet prototypes, the
Company will pursue a comprehensive production agreement for Pallet manufacture.

      Once redesign work is completed by Metis Design, the Company will conduct
further tests on the Pallet, with testing designed to provide information as to
the longevity of the Pallet, as compared to pallets made from non-TPF processes,
including pallets made from other materials. Information provided from this
additional engineering analysis will further the development of marketing
strategies for the Company. There can be no assurance that this additional
engineering will not delay the Company's plans for the commercialization of the
Pallet. The Company is presently negotiating with prospective clients who may
complete development of the Pallet in cooperation with the Company and make it
available for commercialization. The Company anticipates that the reengineered E
Pallet will be available for sale sometime in early 2004.

      In addition to the second-generation Pallet discussed above, the
Company is also evaluating pallets and other material handling devices
incorporating wireless tracking capabilities, based on technology acquired
in the Company's 2000 merger with Electroship (N.Y.) Inc., which is
discussed under "-- Development and Business of the Company," above. Design
work commenced on initial wireless Pallet prototypes during the first
quarter of 2001. The Company believes that initial Pallet designs that
incorporate wireless tracking capabilities will prove marketable to many
prospective customers. Company plans for additional development of this
wireless tracking technology are scheduled for late 2003.


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<PAGE>

      Schaefer Systems International, Inc. Components

      The Company is presently engaged in developing proprietary parts for
SSI - see "Product Development and Purchase Agreement with Schaefer Systems
International, Inc.", above. The Company is in the process of having molds
manufactured, which will produce part prototypes for SSI. Delivery of the
molds is anticipated to occur during the second quarter of 2003, and the
Company anticipates that prototype parts will be available for field
testing, field trials and related approvals during the second quarter of
2003.

      Competition

      The Company currently faces significant competition with respect
products it develops, including the Pallet, and this competition may
increase as new competitors enter the market. The Company's growth strategy
is substantially dependent upon its ability to develop, market and
distribute the TPF Technology and its products successfully, and on the
ability of its product development customers to successfully market and
distribute TPF products developed on their behalf. Other companies,
including those with substantially greater financial,


                                       9
<PAGE>

marketing and sales resources, compete with the Company, and, in contrast
with the Company, have the advantage of marketing existing established
products with existing production and distribution facilities. There can be
no assurance that the Company will be able to successfully develop and
market and distribute products on acceptable terms, or at all. Failure of
the Company to develop and market the TPF technology and its products
successfully could have a material adverse effect on the Company's
business, financial condition or results of operations.

      The Company's growth strategy may be substantially dependent upon its
ability to expand into new markets. Accordingly, the ability of the Company
to compete may be dependent upon the ability of the Company to continually
enhance and improve its technology and products. There can be no assurance
that competitors will not develop technologies or products that render the
products of the Company obsolete or less marketable. The Company may be
required to adapt to technological changes in the industry and develop
products to satisfy evolving industry or customer requirements, any of
which could require the expenditure of significant funds and resources, and
the Company might not have a source or commitment for any such funds and
resources. The Company might be required to refine and improve its products
or products developed on behalf of clients. Continued refinement and
improvement efforts remain subject to the risks inherent in product
development, including unanticipated technical or other problems, which
could result in material delays in product commercialization or
significantly increased costs.

      Compliance with Environmental Laws; Other Regulatory Compliance


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<PAGE>

      The TPF Process does not emit any VOCs, which are present in many
thermoset composites. The Company will not have expenditures related to the
cost of compliance with applicable environmental laws, rules or
regulations.

      Employees

      The Company currently has three employees. The Company's current policy is
to utilize consultants for marketing, accounting and engineering services on an
as-needed basis and these consultants accommodate the Company's current needs in
handling all aspects of its operations. The Company currently retains two
consultants in the areas of marketing and administration. Contracts are entered
into as required with respect to consultants who provide engineering and
technical support for Company products in development.

      Patents

      The Company has been assigned the rights to an invention for a Composite
Pallet design. Composite Pallet components include recycled plastics. A patent
application was filed on March 15, 2000 with the USPTO. The Company was assigned
the patent rights to the invention and this application (and any related rights)
during the second quarter of 2000. The application was abandoned during February
2002; the USPTO asserted patentability was barred by prior art pallet designs.
The Company is evaluating its patent filing options, which include refiling a
new, more


                                       11
<PAGE>

comprehensive patent application that would include both product design and
product manufacturing and processing specifics and more clearly distinguish
prior art.

      The Company also acquired rights in an invention and related provisional
patent application entitled Apparatus and Method for Facilitating Shipping and
Commerce, in connection with the merger with Electroship that was completed
December 21, 2000. This application expired. The Company refiled this
application provisionally during October 2002 and is presently evaluating
options to develop aspects of electronic technology as it relates to shipping
and commerce applications, as contemplated by the provisional filing.

      The Company's success will depend in part on its ability to obtain patent
protection for its products, both in the United States and abroad. There can be
no assurance that any particular patent will be granted or that patents issued
to the Company will provide the protection contemplated. Patents can be
challenged, invalidated or circumvented. It is also possible that competitors
will develop similar products simultaneously. The Company cannot be certain that
it is the first to make the inventions to be covered by the patent applications
it intends to file. Litigation, interference proceedings or other governmental
proceedings that the Company may become involved in with respect to its
proprietary technologies or the proprietary technology of others could result in
substantial cost to the Company and the Company may not have the required
resources to pursue such litigation or proceedings or to protect its patent
rights. An adverse outcome in litigation with respect to the validity of any of
the Company's patents could subject it to significant liabilities to third
parties, require disputed rights to be licensed from third parties or require
the Company to cease using a product or technology. The Company may not be able
to license any such patent rights on acceptable terms, successfully challenge
third party patent rights or meet its obligations under those licenses that it
does enter into.

      The Company also relies upon trade secrets, proprietary know-how and
continuing technological innovation to remain competitive. Third parties may
independently develop such know-how or otherwise obtain access to the Company's
technology to the Company's disadvantage.

Item 2. Description of Property

      The Company leases corporate office space located at 5850 T. G. Lee Blvd.,
Suite 535, Orlando, FL 32822. The leased premises consists of 1600 square feet
and is insured under public liability insurance. The Company entered into a
36-month lease whose term began September 16, 2002, at an initial monthly rental
of $2,595. The Company's total lease payments for its Orlando office space for
the fiscal year ended December 31, 2002 was $9,755. The Company's total lease
payments for the fiscal years ending December 31, 2003 and 2004 and for the nine
and one-half month period ending September 15, 2005 will be $31,557, $32,819 and
$22,455, respectively.

      The Company leases corporate office space located at 2470 Chandler Avenue,
Suite 5, Las Vegas, Nevada 89120. The leased premises consists of 600 square
feet and is insured under public liability insurance. The Company entered into a
36-month lease


                                       12
<PAGE>

whose term began October 1, 1998, at an initial monthly rental of $700. The
lease period was extended for a three month period beginning October 1, 2001,
extended for a twelve month period beginning January 1, 2002 and further
extended for a four month period beginning January 1, 2003. The Company's total
lease payments for its Las Vegas office space for the fiscal years ended
December 31, 1999, 2000, 2001 and 2002 were $8,062, $9,276, $9600, and $10,056,
respectively. The Company's total lease payments for the fiscal period ending
April 30, 2003 will be $3,352. The lease for the Las Vegas office will not be
renewed by the Company and the lease will expire on April 30, 2003.

      The Company entered into a lease for office space in Boca Raton,
Florida on February 7, 2001 for sixty months. Lease payments are currently
$2,795 per month. A portion of this office space is being subleased,
although there is no written sublease agreement at this time. The Company
made lease payments for the Boca Raton, Florida office totaling $13,000
during the year ended December 31, 2002.

Item 3. Legal Proceedings

      The Company is a defendant in an action filed by Mr. Real Morel in the
Supreme Court of British Columbia, Canada under which the Company was served in
May 2000. Mr. Morel alleges non-payment by the Company of amounts due pursuant
to demand promissory notes made by the Company to Mr. Morel during 1998. The
amount claimed is approximately $69,600 including interest. After consultation
with British Columbia legal counsel and a review of the circumstances
surrounding the issuance of the notes, the Company has resolved to dispute
liability and to advance a set-off and counterclaim. Management of the Company
believes that the outcome will not have a material adverse effect on the
financial position of the Company. During the fiscal year ended December 31,
2002, no further action was taken with respect to this matter, by either the
Company or Mr. Morel. The status of this matter remains the same as discussed in
the 2001 Annual Report.

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

      The following matters were submitted to a vote of shareholders at the
Company's annual meeting of shareholders, held on December 14, 2002, with the
vote tabulations* as indicated below:

      Voters elected three incumbent directors for one-year terms. The vote
tabulation for individual directors was:


                                       13
<PAGE>

                  Directors         Shares For        Shares Withheld
                  ---------         ----------        ---------------

            Steve Pappas           15,533,400                --
            Jonathan Edelstein     15,533,400                --
            Leo Kapakos            15,533,400                --

      Voters approved the selection of Williams & Webster, P.S., as auditors for
the Company for the fiscal year ending December 31, 2002, by a vote of
15,533,400 for and 0 against. There were no abstentions or broker non-votes.

      * Numbers represent the aggregate voting power of all votes cast with
holder's of the Company's common stock casting one vote per share.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

      The Company's common shares trade from time to time, under the symbol
ENVK, on the OTC Bulletin Board Electronic Quotation System maintained by the
National Association of Securities Dealers, Inc. The Company's common shares
commenced trading on the OTC Bulletin Board on December 1, 1999. From January 1,
2002, to March 31, 2002 (the first quarter), the high closing price of the
Company's common stock was $0.18 and the low closing price was $0.10. From April
1, 2002 to June 30, 2002 (the second quarter), the high closing price of the
Company's common stock was $0.15 and the low closing price was $0.08. From July
1, 2002 to September 30, 2002 (the third quarter), the high closing price of the
Company's common stock was $0.32 and the low closing price was $0.09. From
October 1, 2002 to December 31, 2002 (the fourth quarter) the high closing price
of the Company's common stock was $0.31 and the low closing price was $0.17.
During the quarter commencing January 1, 2003, through February 28, 2003, the
high closing price was $0.25 and the low closing price was $0.16. These OTC
quotations reflect inter-dealer quotations, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.

      As of February 28, 2003, there were 92 holders of record of the Company's
common stock.

      There have been no cash dividends declared on the Company's common stock
in the last two fiscal years. Dividends are declared at the sole discretion of
the Company's Board of Directors.

      Unregistered Sales of Securities during the Last Three Fiscal Years

      There have been no sales of unregistered securities within the last three
fiscal years which would be required to be disclosed pursuant to Item 701 of
Regulation S-B and not previously reported, except for the following:


                                       14
<PAGE>

      During the first quarter of 2003, the Company completed a financing that
raised $198,000 from current warrant holders in connection with an offering to
amend outstanding warrants issued in equity private placement transactions
during 2001 and 2002. The offering was undertaken to improve the Company's cash
position on terms approximating those that would have been required for a new
equity private placement. The warrants, prior to the amended warrant offering,
had an exercise period of two years from the date of issue and exercise prices
of $0.50 per share (as to warrants issued on June 15, 2001; exercisable for
1,000,000 shares of common stock), $0.25 per share (as to warrants issued
between March 1 and June 27, 2002; exercisable for 3,000,000 shares of common
stock) and $0.50 per share (as to warrants issued between August 14 and November
26, 2002; exercisable for 2,000,000 shares of common stock). The warrant holders
were offered the opportunity to amend their currently outstanding warrants to
lower the exercise price to $0.15 per share, so long as such warrants were
exercised on or before February 14, 2003. Holders elected to amend warrants with
concurrent exercise as to an aggregate 1,320,000 shares of common stock,
generating $198,000 in cash for the Company. Those holders who elected to amend
their warrants were granted additional warrants, exercisable over a two year
period, for the same number of shares of Company common stock that were issued
on exercise of the amended warrants. Exercise prices for the new warrants were
$0.75 per share (as to warrants issued in a 2001 equity private placement;
exercisable for 720,000 shares of common stock) and $0.65 per share (as to
warrants issued in a 2002 equity private placement; exercisable for 600,000
shares of common stock).

      During the fourth quarter of 2002, the Company completed a private
placement of units priced at $0.15 per unit, each unit consisting of one share
of the Company's common stock and a warrant to purchase one share of the
Company's common stock, at an exercise price of $0.50 per share, exercisable for
two years from the date of subscription. The Company has raised $300,000 in this
offering. The securities are being offered and sold in reliance upon the
exemption from registration provided by Rule 506 promulgated under Section 4(2)
of the Securities Act of 1933 (the "Securities Act").

      During the first quarter of 2002, the Company granted options to purchase
100,000 shares of its common stock to consultants for services provided to the
Company. For accounting purposes, the common stock was valued at $12,173.

Item 6. Plan of Operation

      Overview

      The Company is currently in the development stage and has not yet
generated any operating revenues. The Company is a technology-based company
positioned to develop and market environmentally responsible products containing
recycled materials, polymers and fibers. The Company is currently developing
numerous industrial and commercial products, through a licensing agreement with
TCD See " -- License and Merger Agreements with TCD," above. TCD, located in
Florida, has invented and developed a unique composite plastics processing
technology, the TPF Process, and discussed under " -- TPF Process," above.
Principal products


                                       15
<PAGE>

currently in development on behalf of the Company and its clients are discussed
above under " -- Products; Product Development."

      The Company's license agreement with TCD enables the Company to
commercially exploit the TCD-developed TPF Process by marketing composite
materials products currently in development, developing and marketing other
products containing composite materials within various market sectors and
industries, and sublicensing the TPF Process. Products developed by the Company
will be manufactured by the Company or by sublicensees. The Company has engaged
TCD to produce products in development, on its own behalf and on behalf of its
clients who are engaged in product development programs with the Company. TCD
will manufacture prototype products in quantities required for testing and
analysis, on an as-needed basis.

      The Company is actively engaged in marketing the TPF technology to
numerous potential clients. Management anticipates that Envirokare will
enter into product/technology development agreements with prospective
clients to develop composite materials products on behalf of such clients.
Developed products would have a specific application within a client's
existing markets or within new or expanded market areas that may open as a
result of opportunities presented by products developed in conjunction with
the Company. Upon the completion of the development of a specific product,
the Company anticipates that it would enter into product manufacturing and
marketing agreements with the client or license the TPF technology under
which the client would be granted the right to produce the jointly
developed product, or Envirokare would produce the product in its own
manufacturing facility for sale to the client. Envirokare is currently
holding discussions with prospective clients and recently entered into its
first product/technology development agreement with SSI. See "Product
Development and Purchase Agreement with Schaefer Systems International,
Inc., and "Alumaform Company" above.

      In addition to marketing the TPF technology through developing of
products on behalf of potential clients, the Company continues to develop
products on its own behalf. The Company is continuing to develop its second
generation Pallet. Description of Business -- Products; Product
Development". In fiscal 2003, the Company will also continue to work on its
product development efforts under its agreement with SSI and Alumaform. See
" --Product Development and Purchase Agreement with Schaefer Systems
International, Inc.," above.

      The Company expects to have potential customers evaluate these
products through in-use testing some time during fiscal 2003. Company
management anticipates that the Company, or its sublicensees, will commence
commercial production of TPF products either in development or contemplated
for development, once appropriate production facilities are procured and
commissioned for production, currently anticipated to occur sometime in
2003.

       Liquidity and Capital Resources

      The Company is not yet generating revenues. For the year ended December
31, 2002, the Company had a net loss of $1,028,363. The Company's net loss
accumulated for the period from June 15, 1998 (inception) to December 31, 2002
was $3,789,361. The Company anticipates that


                                       16
<PAGE>

it will begin to generate revenue during 2003, from sublicensing of the TPF
technology and upon the anticipated start of commercial sales of its
products by the Company or its sublicensees. At December 31, 2002, the
Company had current assets of $9,506. During the period ended December 31,
2002, the Company's cash resources decreased by $43,967. At December 31,
2002, the Company had current liabilities of $1,464,467. At December 31,
2002, current liabilities exceeded current assets by $1,454,961. Other than
as discussed above, the Company is not aware of any trends, demands,
commitments or uncertainties, other than those affecting business and the
economy in general, that could result in the Company's liquidity decreasing
or increasing in a material way within the next 12 months.

      To date, the Company has raised capital through private placements of
common stock, convertible preferred stock and units consisting of promissory
notes and warrants. The Company has budgeted pre-production and other
production-related expenditures for the twelve months through December 31, 2004
at $720,000. Additionally, the Company has $1,025,000 in short term debt, which
comes due prior to December 31, 2004. The Company plans to raise additional
funds in the next several months to cover its proposed expenditures and the
repayment of its short term debt. These funds may be raised through additional
equity financings, as well as through borrowings, rescheduling of the
outstanding short term debt or other resources. There can be no assurances,
however, that the Company will be able to raise the required funds to meet its
budgeted expenditures and debt obligations.

      During 2002, the Company raised a total of $600,000 in two private
placement financings. See "Item 5. Market for Common Equity and Related
Stockholder Matters -- Unregistered Sales of Securities during the Last
Three Fiscal Years" for a discussion of the Company's recent securities
issuances. With the capital it has raised to date, and the additional funds
it plans to raise in the next several months, the Company believes that it
will be able to continue with its development and marketing plans and meet
its obligations including cash requirements for at least the next twelve
months, to December 31, 2004. During the twelve months ending December 31,
2004, the Company anticipates that it will continue its current research
and development activities, on selected products for which the TPF process
is particularly suited. If adequate funds are not available, the Company may
have to curtail operations significantly.

      The Company is currently assessing the merits and feasibility of
purchasing its own plant and equipment for production of products currently in
development. If this study indicates that a Company-acquired production facility
is warranted, the Company would anticipate developing a construction plan during
the first half of 2003. In the event that the Company decides to acquire its own
production facility, the Company will have to raise substantial funds in
addition to those funds already raised. There can be no assurance that
additional funding will be available to the Company under favorable terms.


                                       17
<PAGE>

Item 7. Financial Statements

                              ENVIROKARE TECH, INC.
                        Consolidated Financial Statements

                                December 31, 2002

                              WILLIAMS & WEBSTER PS

                          Certified Public Accountants
                        Bank of America Financial Center
                           W 601 Riverside, Suite 1940
                                Spokane, WA 99201
                                 (509) 838-5111


                                       18
<PAGE>

      Index to Consolidated Financial Statements

                              ENVIROKARE TECH, INC.

                                December 31, 2002

                                TABLE OF CONTENTS

INDEPENDENT AUDITOR'S REPORT                                                  20

FINANCIAL STATEMENTS

      Consolidated Balance Sheets                                             21

      Consolidated Statements of Operations and Comprehensive Loss            22

      Consolidated Statement of Stockholders' Equity                          23

      Consolidated Statements of Cash Flows                                   25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                    26


                                       19
<PAGE>

Board of Directors
Envirokare Tech, Inc.
Las Vegas, Nevada

                          INDEPENDENT AUDITOR'S REPORT

We have audited the accompanying balance sheets of Envirokare Tech, Inc. (a
development stage company) as of December 31, 2002 and 2001, and the related
statements of operations and comprehensive income, stockholders' equity and cash
flows for the years then ended, and for the period from June 15, 1998
(inception) to December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Envirokare Tech, Inc. as of
December 31, 2002 and 2001, and the results of its operations and comprehensive
income, stockholders' equity and its cash flows for the years then ended, and
for the period from June 15, 1998 (inception) to December 31, 2002 in conformity
with accounting principles generally accepted in the United States of America.

As discussed in Note 2, the Company has been in the development stage since its
inception, has negative working capital and has no revenues. The Company's
continued viability is dependent upon the Company's ability to meet its future
financing requirements and the success of future operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans regarding those matters are described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
January 30, 2003


                                       20
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                      December 31,     December 31,
                                                                          2002             2001
                                                                     -------------    -------------
<S>                                                                  <C>              <C>
 ASSETS
     CURRENT ASSETS
        Cash                                                         $       9,506    $     118,927
        Deposits and retainers                                              53,942               --
                                                                     -------------    -------------
            TOTAL CURRENT ASSETS                                            63,448          118,927
                                                                     -------------    -------------
     PROPERTY AND EQUIPMENT
        Furniture and fixtures                                               8,144            1,893
        Office equipment                                                     9,009            7,999
        Molds                                                               59,000           43,000
            Less accumulated depreciation                                   (6,884)          (4,829)
                                                                     -------------    -------------
            TOTAL PROPERTY AND EQUIPMENT                                    69,269           48,063
                                                                     -------------    -------------
     OTHER ASSETS
        Deposits and retainers                                               8,412           22,223
        License agreement                                                  525,000          525,000
        Patent acquisition costs and technology rights                   1,958,939        1,968,459
                                                                     -------------    -------------
            TOTAL OTHER ASSETS                                           2,492,351        2,515,682
                                                                     -------------    -------------
        TOTAL ASSETS                                                 $   2,625,068    $   2,682,672
                                                                     =============    =============
LIABILITIES & STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES
        Accounts payable                                             $     114,145    $     100,759
        Accounts payable - related party                                        --           20,921
        Customer deposit                                                    61,215               --
        Notes payable                                                       61,965           61,965
        Accrued interest                                                    25,337           19,186
        Notes payable to stockholders                                    1,025,000               --
        Accrued interest to stockholders                                   183,802               --
                                                                     -------------    -------------
            TOTAL CURRENT LIABILITIES                                    1,471,464          202,831
                                                                     -------------    -------------
     LONG-TERM LIABILITIES
        Notes payable to stockholders                                           --        1,025,000
        Accrued interest to stockholders                                        --           30,051
                                                                     -------------    -------------
            TOTAL LONG-TERM LIABILITIES                                         --        1,055,051
                                                                     -------------    -------------
     COMMITMENTS AND CONTINGENCIES                                              --               --
                                                                     -------------    -------------
     STOCKHOLDERS' EQUITY
        Convertible preferred stock, 10,000,000 shares authorized,
            $0.001 par value; 0 shares issued and outstanding                   --               --
        Common stock, 200,000,000 shares authorized,
            $0.001 par value; 30,056,144 and 24,356,144 shares
            issued and outstanding, respectively                            30,056           24,356
        Additional paid-in capital                                       4,273,090        3,320,790
        Stock options and warrants                                         646,815          840,642
        Accumulated deficit during development stage                    (3,796,357)      (2,760,998)
                                                                     -------------    -------------
        TOTAL STOCKHOLDERS' EQUITY                                       1,153,604        1,424,790
                                                                     -------------    -------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $   2,625,068    $   2,682,672
                                                                     =============    =============
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       21
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                Period from
                                                                                June 15,1998
                                             Year Ended        Year Ended      (Inception) to
                                            December 31,      December 31,      December 31,
                                                2002              2001              2002
                                            ------------      ------------     --------------
<S>                                         <C>               <C>               <C>
REVENUES                                    $         --      $         --      $         --
                                            ------------      ------------      ------------

EXPENSES
     Consulting fees - related parties           152,000           267,752           794,455
     Other consulting fees                       305,773           220,500         1,045,438
     Financing costs                                  --           219,642           219,642
     Rent                                         32,851            26,913            82,859
     General and administrative                  157,356           121,961           505,420
     Depreciation                                  2,055             1,812             6,884
     Professional fees                           176,169           217,068           556,881
     Research and development                     46,005            82,269           226,943
     Wages, salaries, and payroll taxes               --            14,377           131,879
                                            ------------      ------------      ------------
        TOTAL EXPENSES                           872,208         1,172,294         3,570,401
                                            ------------      ------------      ------------

LOSS FROM OPERATIONS                            (872,208)       (1,172,294)       (3,570,401)

OTHER EXPENSE
     Interest expense                           (163,151)          (49,775)         (225,956)
                                            ------------      ------------      ------------
        TOTAL OTHER EXPENSE                     (163,151)          (49,775)         (225,956)
                                            ------------      ------------      ------------

LOSS BEFORE INCOME TAXES                      (1,035,359)       (1,222,069)       (3,796,357)

INCOME TAXES                                          --                --                --
                                            ------------      ------------      ------------

NET LOSS                                      (1,035,359)       (1,222,069)       (3,796,357)

OTHER COMPREHENSIVE INCOME
     Foreign currency translation gain                --             4,048                --
                                            ------------      ------------      ------------

COMPREHENSIVE LOSS                          $ (1,035,359)     $ (1,218,021)     $ (3,796,357)
                                            ============      ============      ============

     BASIC AND DILUTED NET LOSS
     PER COMMON SHARE                       $      (0.04)     $      (0.08)
                                            ============      ============

     WEIGHTED AVERAGE NUMBER
     OF BASIC AND DILUTED COMMON
     STOCK SHARES OUTSTANDING                 27,337,240        15,756,510
                                            ============      ============
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       22
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                               Preferred Stock                Common Stock
                                                          --------------------------    -------------------------      Additional
                                                             Number                        Number                       Paid-in
                                                           of Shares        Amount       of Shares       Amount         Capital
                                                          -----------    -----------    -----------    -----------    -----------
<S>                                                       <C>            <C>             <C>           <C>            <C>
Issuance of common stock in June, 1998
     for cash at $0.001 per share                                  --    $        --     10,000,000    $    10,000    $        --
Net loss for period ended December 31, 1998                        --             --             --             --             --
                                                          -----------    -----------    -----------    -----------    -----------
Balance, December 31, 1998                                         --             --     10,000,000         10,000             --

Issuance of common stock at an average of $0.45
     per share for cash                                            --             --        746,140            746        334,053

Issuance of preferred stock at $0.50 per share
     for cash                                                 500,000            500             --             --        249,500

Issuance of stock options for services                             --             --             --             --             --

Contribution of capital by shareholders in the form
     of foregone payment of accounts payable                       --             --             --             --          1,847

Net loss for year ended December 31, 1999                          --             --             --             --             --

Foreign currency translation loss                                  --             --             --             --             --
                                                          -----------    -----------    -----------    -----------    -----------

Balance, December 31, 1999                                    500,000            500     10,746,140         10,746        585,400

Cash received for subscriptions receivable                         --             --             --             --             --

Issuance of common stock at an average of $0.66
     per share for cash                                            --             --        543,338            543        356,957

Expiration of stock options                                        --             --             --             --        120,000

Issuance of stock options for services                             --             --             --             --             --

Stock options exercised at $0.58 per share                         --             --        100,000            100         81,400

Stock issued for acquisition of Electroship Acquisition
     Corporation, a wholly-owned subsidiary, at
      $0.77 per share                                              --             --      2,500,000          2,500      1,922,500

Net loss for the year ended December 31, 2000                      --             --             --             --             --

Foreign currency translation loss                                  --             --             --             --             --
                                                          -----------    -----------    -----------    -----------    -----------

Balance, December 31, 2000                                    500,000            500     13,889,478         13,889      3,066,257

Expiration of stock options                                        --             --             --             --        132,000

Issuance of stock options for services                             --             --             --             --             --

Issuance of common stock at $0.14 per share for cash
     with attached warrants at $0.06 per share for cash            --             --      1,000,000          1,000        139,000

Conversion of preferred stock into common stock              (500,000)          (500)    10,000,000         10,000         (9,500)

Common stock repurchase at $0.02 per share                         --             --       (533,334)          (533)        (6,967)

Warrants issued for financing expense                              --             --             --             --             --

Foreign currency translation gain                                  --             --             --             --             --

Net loss for the year ended December 31, 2001                      --             --             --             --             --
                                                          -----------    -----------    -----------    -----------    -----------
Balance, December 31, 2001                                         --    $        --     24,356,144    $    24,356    $ 3,320,790

<CAPTION>
                                                         Stock Options                                     Other          Total
                                                             and        Subscriptions   Accumulated   Comprehensive  Stockholders'
                                                           Warrants      Receivable       Deficit         Income         Equity
                                                         -------------  -------------   -----------   -------------  -------------
<S>                                                       <C>            <C>            <C>            <C>            <C>
Issuance of common stock in June, 1998
     for cash at $0.001 per share                         $        --    $        --    $        --    $        --    $    10,000

Net loss for period ended December 31, 1998                        --             --        (34,427)            --        (34,427)
                                                          -----------    -----------    -----------    -----------    -----------

Balance, December 31, 1998                                         --             --        (34,427)            --        (24,427)

Issuance of common stock at an average of $0.45
     per share for cash                                            --       (105,000)            --             --        229,799

Issuance of preferred stock at $0.50 per share
     for cash                                                      --             --             --             --        250,000

Issuance of stock options for services                        552,000             --             --             --        552,000

Contribution of capital by shareholders in the form
     of foregone payment of accounts payable                       --             --             --             --          1,847

Net loss for year ended December 31, 1999                          --             --       (893,173)            --       (893,173)

Foreign currency translation loss                                  --             --             --         (1,202)        (1,202)
                                                          -----------    -----------    -----------    -----------    -----------

Balance, December 31, 1999                                    552,000       (105,000)      (927,600)        (1,202)       114,844

Cash received for subscriptions receivable                         --        105,000             --             --        105,000

Issuance of common stock at an average of $0.66
     per share for cash                                            --             --             --             --        357,500

Expiration of stock options                                  (120,000)            --             --             --             --

Issuance of stock options for services                        121,000             --             --             --        121,000

Stock options exercised at $0.58 per share                    (24,000)            --             --             --         57,500

Stock issued for acquisition of Electroship Acquisition
     Corporation, a wholly-owned subsidiary, at
      $0.77 per share                                              --             --             --             --      1,925,000

Net loss for the year ended December 31, 2000                      --             --       (611,329)            --       (611,329)

Foreign currency translation loss                                  --             --             --         (2,846)        (2,846)
                                                          -----------    -----------    -----------    -----------    -----------

Balance, December 31, 2000                                    529,000             --     (1,538,929)        (4,048)     2,066,669

Expiration of stock options                                  (132,000)            --             --             --             --

Issuance of stock options for services                        164,000             --             --             --        164,000

Issuance of common stock at $0.14 per share for cash
     with attached warrants at $0.06 per share for cash        60,000             --             --             --        200,000

Conversion of preferred stock into common stock                    --             --             --             --             --

Common stock repurchase at $0.02 per share                         --             --             --             --         (7,500)

Warrants issued for financing expense                         219,642             --             --             --        219,642

Foreign currency translation gain                                  --             --             --          4,048          4,048
Net loss for the year ended December 31, 2001                      --             --     (1,222,069)                   (1,222,069)
                                                          -----------    -----------    -----------    -----------    -----------
Balance, December 31, 2001                                $   840,642    $        --    $(2,760,998)   $        --    $ 1,424,790
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       23
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                              Common Stock
                                                                        -------------------------   Additional   Stock Options
                                                                          Number                      Paid-in         and
                                                                         of Shares      Amount        Capital      Warrants
                                                                        -----------   -----------   -----------  -------------
<S>                                                                      <C>          <C>           <C>           <C>
Balance, December 31, 2001                                               24,356,144   $    24,356   $ 3,320,790   $   840,642

Issuance of common stock for services                                       700,000           700       111,300            --

Issuance of common stock at an average of $0.06 per share for
cash with attached warrants at an average of $0.04 per share for cash     3,000,000         3,000       168,950       128,050

Issuance of common stock at an average of $0.10 per share for
cash with attached warrants at an average of $0.05 per share for cash     2,000,000         2,000       196,050       101,950

Issuance of stock options for services                                           --            --            --        52,173

Expiration of stock options                                                      --            --       476,000      (476,000)

Net loss for the year ended December 31, 2002                                    --            --            --            --

                                                                        -----------   -----------   -----------   -----------
Balance, December 31, 2002                                               30,056,144   $    30,056   $ 4,273,090   $   646,815
                                                                        ===========   ===========   ===========   ===========

<CAPTION>
                                                                                           Total
                                                                        Accumulated   Stockholders'
                                                                          Deficit         Equity
                                                                        -----------   -------------
<S>                                                                     <C>            <C>
Balance, December 31, 2001                                              $(2,760,998)   $ 1,424,790

Issuance of common stock for services                                            --        112,000

Issuance of common stock at an average of $0.06 per share for
cash with attached warrants at an average of $0.04 per share for cash            --        300,000

Issuance of common stock at an average of $0.10 per share for
cash with attached warrants at an average of $0.05 per share for cash            --        300,000

Issuance of stock options for services                                           --         52,173

Expiration of stock options                                                      --             --

Net loss for the year ended December 31, 2002                            (1,035,359)    (1,035,359)

                                                                        -----------    -----------
Balance, December 31, 2002                                              $(3,796,357)   $ 1,153,604
                                                                        ===========    ===========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       24
<PAGE>

                           ENVIROKARE TECH, INC.
                       (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                    Period from
                                                                                                    June 15,1998
                                                                     Year Ended      Year Ended    (Inception) to
                                                                    December 31,    December 31,    December 31,
                                                                         2002            2001            2002
                                                                    ------------    ------------   --------------
<S>                                                                 <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net loss                                                     $ (1,035,359)   $ (1,222,069)   $ (3,796,357)
       Adjustments to reconcile net loss
            to net cash used by operating activities:
       Depreciation                                                        2,055           1,812           6,884
       Intangible asset expensed                                           9,520              --           9,520
       Impairment of molds                                                    --          27,000          27,000
       Stock options issued for consulting fees                           52,173         164,000         889,173
       Common stock issued for consulting fees                           112,000              --         112,000
       Warrants issued for financing expense                                  --         219,642         219,642
       Consulting fees due to related party applied to receivable             --           6,438              --
       Customer deposit                                                   61,215              --          61,215
       Increase (decrease) in accounts payable                            (7,536)        121,680         114,145
       Increase in accrued interest payable                              159,902          36,248         209,139
                                                                    ------------    ------------    ------------
       Net cash used by operating activities                            (646,031)       (645,249)     (2,147,639)
                                                                    ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Deposits and retainers                                            (40,129)         59,337         (62,353)
       Purchase of molds                                                 (16,000)             --         (86,000)
       Payments of license agreement                                          --        (525,000)       (525,000)
       Patent costs                                                           --          (1,733)        (10,129)
       Purchase of equipment                                              (7,262)         (1,338)        (15,307)
                                                                    ------------    ------------    ------------
       Net cash used in investing activities                             (63,391)       (468,734)       (698,789)
                                                                    ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from sale of preferred stock                                  --              --         250,000
       Proceeds from sale of common stock units                          600,000         200,000       1,559,799
       Repurchase of common stock                                             --          (7,500)         (7,500)
       Proceeds from issuance of notes payable to related parties             --       1,025,000       1,053,635
                                                                    ------------    ------------    ------------
       Net cash provided by financing activities                         600,000       1,217,500       2,855,934
                                                                    ------------    ------------    ------------
Increase (decrease) in cash                                             (109,421)        103,517           9,506
Foreign currency translation adjustment                                       --           4,048              --
Cash, beginning of period                                                118,927          11,362              --
                                                                    ------------    ------------    ------------
Cash, end of period                                                 $      9,506    $    118,927    $      9,506
                                                                    ============    ============    ============
SUPPLEMENTAL CASH FLOW INFORMATION:
       Interest paid                                                $      3,249    $     13,413    $     14,989
                                                                    ============    ============    ============
       Income taxes paid                                            $         --    $         --    $         --
                                                                    ============    ============    ============
NON-CASH TRANSACTIONS:
       Common stock issued for acquisition of subsidiary            $         --    $         --    $  1,925,000
       Note issued for purchase of property, equipment,
             and operating expenses                                 $         --    $         --    $      3,635
       Note issued for pending patent to related party              $         --    $         --    $     33,330
       Note issued for deposit for stock                            $         --    $         --    $    100,000
       Warrants issued for financing activities                     $         --    $    219,642    $    219,642
       Stock options issued for consulting fees                     $     52,173    $    164,000    $    889,173
       Common stock issued for consulting fees                      $    112,000    $         --    $    112,000
       Stockholder's contribution for equipment                     $         --    $         --    $      1,847
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       25
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Envirokare Tech, Inc. (hereinafter, "the Company" or "Envirokare") was
incorporated in June 1998 under the laws of the State of Nevada. In December
1998, the Company acquired assets of a business engaged in developing a rubber
mold technology and patent rights potentially applicable to future development
of a pallet made of recycled materials. The Company believes the early-stage
rubber mold technology to be of marginal commercial value.

During 2001, the Company acquired, via license agreement, extensive rights to a
proprietary thermoplastic processing technology, the Thermoplastic Flowforming
process (variously referred to herein as "TPF Process", the "Process" or "TPF
technology"). See Note 3. The licensing agreement provides the Company with the
ability to utilize the TPF technology to design, develop, manufacture, market,
license and sublicense a wide range of large structural parts, including the
Company's proprietary pallet. The pallet is now composed of long-fiber
reinforced thermoplastic composite and will be manufactured using the acquired
TPF technology.

The Company's current operating strategy is based on developing products to be
manufactured by the TPF Process, as well as marketing the TPF technology to
potential sublicensees of the Company. The Company maintains offices in Orlando,
Florida and Las Vegas, Nevada. The Company has elected a fiscal year-end of
December 31.

The Company includes the assets and investment in Electroship Acquisition
Corporation and Envirokare Composite Corp., wholly-owned non-operating
subsidiaries, in these financial statements. See Notes 3 and 6.

The Company is in the development stage and, as of December 31, 2002, had
realized no revenues from its planned operations.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Envirokare is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the United States of
America and have been consistently applied in the preparation of the financial
statements.

Going Concern

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.


                                       26
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Going Concern (continued)

As shown in the accompanying financial statements, the Company has incurred an
accumulated deficit of $3,796,357, which includes a net loss of $1,035,359 for
the year ended December 31, 2002, and has a working capital deficit and no
revenues. The Company, being a development stage enterprise, is currently
marketing the TPF technology which will, if successful, mitigate these factors
which raise substantial doubt about the Company's ability to continue as a going
concern. Management plans to fund operations from sales of its debt and equity
in the near-term and from product sales, product development agreements and
proceeds realized from licensing the TPF technology on an ongoing basis.

The Company has historically raised equity capital through the sale of its
common and preferred stock. The Company has also raised debt capital through
private placement offerings. Management has proceeded as planned in the ongoing
development of numerous products, including a proprietary pallet composed of
long-fiber reinforced thermoplastic composite. Management is also marketing the
TPF technology to various potential clients with the intent of establishing
product development agreements, with the agreements to include provisions for
manufacturing and marketing successfully developed products. The Company
received a deposit for product development during the second half of 2002 and
management anticipates that the Company will realize licensing fee revenues in
the near future. See Note 10.

The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in its present form.

Accounting Method

The Company's financial statements are prepared using the accrual method of
accounting.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.

Compensated Absences

Employees of the Company are entitled to paid vacation, paid sick days and
personal days off depending on job classification, length of service, and other
factors. The Company's policy is to recognize the cost of compensated absences
when actually paid to employees. If this accrual amount could be currently
estimated, it would not be recognized, as the amount would be deemed immaterial
at this time.


                                       27
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Development Stage Activities (Continued)

The Company has been in the development stage since its formation in June 1998.
It is primarily engaged in the marketing of the TPF technology.

Derivative Instruments

The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No.
133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities", which is effective for the Company as of January 1,
2001. These statements establish accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. They require that an entity
recognize all derivatives as either assets or liabilities in the consolidated
balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.

Historically, the Company has not entered into derivative contracts to hedge
existing risks or for speculative purposes. At December 31, 2002, the Company
has not engaged in any transactions that would be considered derivative
instruments or hedging activities.

Fair Value of Financial Instruments

The carrying amounts for cash, accounts payable, notes payable and accrued
liabilities approximate their fair value.

Loss Per Share

Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Basic and diluted shares
outstanding are the same, as the inclusion of common stock equivalents would be
anti-dilutive. As of December 31, 2002, the Company had stock options and
warrants outstanding, equivalent to 9,775,000 common stock shares, which are
considered to be anti-dilutive.


                                       28
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Principles of Consolidation

The Company's financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All material intercompany transactions and accounts
have been eliminated in the financial statements.

Provision for Taxes

Income taxes are provided based upon the liability method of accounting pursuant
to SFAS No. 109 "Accounting for Income Taxes" ("SFAS No. 109"). Under this
approach, deferred income taxes are recorded to reflect the tax consequences in
future years of differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year end. A valuation allowance is
recorded against deferred tax assets if management does not believe the Company
has met the "more likely than not" standard imposed by SFAS No. 109 to allow
recognition of such an asset.

At December 31, 2002, the Company had net deferred tax assets of approximately
$525,000 principally arising from net operating loss carryforwards for income
tax purposes. As management of the Company cannot determine that it is more
likely than not that the Company will realize the benefit of the net deferred
tax asset, a valuation allowance equal to the net deferred tax asset has been
established at December 31, 2002.

At December 31, 2002, the Company has net operating loss carryforwards of
approximately $2,600,000, which expire in the years 2018 through 2022. The net
operating loss carryforwards do not include expenses that are not deductible for
tax purposes, such as compensation expense, in the amount of approximately
$1,200,000 attributable to options, warrants and restricted stock issued to
employees and consultants.

Advertising

The Company expenses advertising costs as incurred.

Comprehensive Income and Loss

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). SFAS 130 establishes standards for reporting and displaying
comprehensive income, its components and accumulated balances. The adoption of
SFAS 130, related to comprehensive income, is disclosed in the accompanying
financial statements.

Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," ("SFAS No. 148"). SFAS 148 amends
SFAS No. 123, "Accounting


                                       29
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Pronouncements (Continued)

for Stock-Based Compensation," to provide alternative methods of transition for
an entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation. In addition, it also amends the
disclosure provisions of SFAS 123 to require prominent disclosure about the
effects on reported results of an entity's accounting policy decisions with
respect to stock-based employee compensation. The provisions of the statement
are effective for financial statements for fiscal years ending after December
15, 2002. Prior to the issuance of SFAS No. 148, the Company adopted the fair
value based method of accounting for stock-based employee compensation. Thus,
the Company's financial reporting will not be significantly effected by SFAS
148.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees" ("FIN 45") which elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee. FIN 45 does
not prescribe a specific approach for subsequently measuring the guarantor's
recognized liability over the term of the related guarantee. It also
incorporates, without change, the guidance in FASB Interpretation No. 34,
Disclosure of Indirect Guarantees of Indebtedness of Others, which is being
superseded. FIN 45 has had no impact on the Company's financial position or
results of operations as the Company has not entered into any of the
aforementioned transactions.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS No. 146"). SFAS No. 146 addresses
significant issues regarding the recognition, measurement, and reporting of
costs associated with exit and disposal activities, including restructuring
activities. SFAS No. 146 also addresses recognition of certain costs related to
terminating a contract that is not a capital lease, costs to consolidate
facilities or relocate employees, and termination benefits provided to employees
that are involuntarily terminated under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS No. 146 was issued in June 2002 and its
adoption has had no impact on the Company's financial position or results of
operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS Statements No.
4, and 64, Amendment of SFAS No. 13, and Technical Corrections" ("SFAS No.
145"), which updates, clarifies and simplifies existing accounting
pronouncements. SFAS No. 44, which required all gains and losses from the
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related tax effect was rescinded, and as a result,
SFAS No. 64, which


                                       30
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Pronouncements (Continued)

amended SFAS No. 44, was rescinded as it was no longer necessary. SFAS No. 145
amended SFAS No. 13 to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications which have economic effects similar to those of
sale-leaseback transactions. The pronouncement will not affect the Company as it
has not entered into any of the aforementioned transactions.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"), which replaces SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This standard establishes a single accounting model for
long-lived assets to be disposed of by sale, including discontinued operations.
SFAS No. 144 requires that these long-lived assets be measured at the lower of
carrying amount or fair value less cost to sell, whether reported in continuing
operations or discontinued operations. This statement is effective beginning for
fiscal years after December 15, 2001, with earlier application encouraged. The
Company adopted SFAS No. 144 and does not believe any adjustments are needed to
the carrying value of its assets at December 31, 2002.

In October 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 establishes guidelines related to
the retirement of tangible long-lived assets of the Company and the associated
retirement costs. This statement requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived assets. This statement is effective for financial statements issued
for the fiscal years beginning after June 15, 2002 and with earlier application
encouraged. The Company adopted SFAS No. 143 and does not believe that the
adoption will have an impact on the financial statements of the Company at
December 31, 2002.

Research and Development Costs

Costs of research and development are expensed as incurred.

Use of Estimates

The process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements.


                                       31
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration of Risk

The Company maintains its cash account in one commercial bank in the United
States. At times, the Company's cash balance is above the Federal Deposit
Insurance Corporation's (FDIC) limit of insurability.

NOTE 3 - INTANGIBLE ASSETS

On March 30, 2001, the Company completed a license agreement with Thermoplastic
Composite Designs, Inc. ("TCD") and received a license that provides the Company
with the ability to utilize the TPF technology to design, develop, manufacture,
market, license and sublicense a wide range of large structural parts, including
the Company's proprietary E Pallet. The license fee is a one-time fee of
$525,000 that was paid during the year ended December 31, 2001.

On December 1, 2000, the Company through its wholly-owned subsidiary,
Electroship Acquisition Corporation, acquired technology rights in exchange for
shares of the Company's common stock. See Note 6. The acquired technology rights
relate to an application-stage patent for an invention that is expected to
facilitate shipping commerce and/or for processing information regarding
shipping services in a network environment. The assets acquired were valued
using the trading price of the Company's common stock at the date of
acquisition.

The Company intends to amortize the aforementioned intangible assets once the
assets' useful lives begin.

In December 1998, the Company acquired technology rights from Mr. Real Morel and
his affiliated companies of International Pallet Control Systems Inc. and The
Pallet Company. During the years ended December 31, 2001, and 2000, attorney
fees of $1,733, and $7,787, respectively, were added to patent costs. The
Company was unsuccessful in obtaining patents, with respect to patent filings
made pursuant to the acquired early-stage rubber mold technology and the Company
believes the technology rights acquired from Mr. Morel and his affiliated
companies to be of marginal commercial value. Accordingly, the Company charged
these patent costs to operations during the quarter ended June 30, 2002.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided using the
straight line method over the estimated useful lives of the assets, which range
from five to seven years. The following is a summary of property, equipment and
accumulated depreciation.


                                       32
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 4 - PROPERTY AND EQUIPMENT (Continued)

                                        December 31,   December 31,
                                            2002           2001
                                        ------------   ------------
             Furniture and Fixtures     $      8,144   $      1,893
             Less: Accumulated                 1,358            899
             Depreciation
                                        ------------   ------------
             Net Furniture & Fixtures   $      6,786   $        994
                                        ============   ============

             Office Equipment           $      9,009   $      7,999
             Less:  Accumulated                5,526          3,930
             Depreciation
                                        ------------   ------------
             Net Office Equipment       $      3,483   $      4,069
                                        ============   ============

             Molds                      $     59,000   $     43,000
                                        ============   ============

The Company, in the development of its pallet product, has acquired two sets of
molds. The first generation mold, developed at a cost of $70,000, was determined
to be of no commercial value and was expensed to research and development on
September 30, 2001. The second generation molds, acquired at a cost of $43,000,
are currently used by the Company for research and development. When completed
and placed in service, the molds will be depreciated over their expected useful
lives. In the event that the second generation molds are deemed to be of no
commercial value, their carrying cost will be expensed to research and
development at the time in which that determination may be made.

The Company, in the development of prototype construction products, has acquired
a mold at a cost of $16,000 that will produce a Beam. This mold is currently
carried at cost as the Company is continuing its research and development using
this mold. When completed and placed in service, the mold will be depreciated
over its expected useful life.

NOTE 5 - SHORT-TERM DEBT

Notes Payable

During 2001, shareholders loaned the Company $1,025,000. All of the notes bear
interest at 15% per annum, are unsecured, mature two years from the dates of
issuance and have three common stock warrants attached to each dollar of debt
with an exercise price of $0.195 per share. See Note 8. Other notes payable in
the amount of $61,965, which consist of unsecured notes bearing interest at 10%
per annum, originated between August 18, 1998 and December 16, 1998, are payable
to Mr. Real Morel and due on demand.

The Company is a named defendant in an action filed by Mr. Real Morel in May
2000 in the Supreme Court of British Columbia, Canada. In this action, Mr. Morel
alleges non-payment by


                                       33
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 5 - SHORT-TERM DEBT (Continued)

the Company of amounts due pursuant to the aforementioned demand promissory
notes. After consultation with British Columbia legal counsel and a review of
the circumstances surrounding the issuance of the notes, the Company has
resolved to dispute this liability. Management of the Company believes that the
outcome will not have a material adverse effect on the financial position of the
Company.

NOTE 6 - COMMON STOCK

During the second two quarters of 2002, the Company sold 2,000,000 "units" for
aggregate cash consideration of $300,000. The units, which consisted of
2,000,000 shares of common stock with one warrant attached to each common share,
were issued at $0.15 per unit. Each warrant is exercisable at $0.50 per share
for two years from the dates of issuance. See Note 8.

During the first two quarters of 2002, the Company sold 3,000,000 "units" for
aggregate cash consideration of $300,000. The units, which consisted of
3,000,000 shares of common stock with one warrant attached to each common share,
were issued at $0.10 per unit. Each warrant is exercisable at $0.25 per share
for two years from the dates of issuance. See Note 8.

During the first quarter of 2002, the Company issued 700,000 shares of its
common stock, with an aggregate value of $112,000, as payment for services
provided by consultants.

During June 2001, 1,000,000 units of the Company, consisting of 1,000,000 shares
of common stock with one warrant attached to each common share, were issued at
$0.20 per unit. Each warrant is exercisable at $0.50 per share until June 30,
2003. See Note 8.

On December 1, 2000, Electroship Acquisition Corporation, a wholly-owned
subsidiary of the Company, acquired Electroship (N.Y.) Inc. in exchange for
2,500,000 common stock shares of Envirokare. These shares were valued at $0.77
per share, which was fair market value on the date of the acquisition agreement.
See Note 3. Electroship Acquisition Corporation acquired the intellectual
property previously held by Electroship (N.Y.) Inc., whose predecessor
organization was a partnership created to hold the intellectual property rights.
Neither Electroship (N.Y.) Inc. nor its predecessor partnership were considered
operating entities. Neither entity had material transactions during 2000.

During December 2000, 100,000 stock options were exercised at $0.575 per common
stock share. These stock options were granted under the Envirokare Tech, Inc.
1999 Stock Option Plan. See Note 8.

During September 2000, 200,000 shares of common stock were issued at $0.50 per
share.


                                       34
<PAGE>

                             ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 6 - COMMON STOCK (continued)

During the month of February 2000, 343,338 shares of common stock were issued at
$0.75 per share. The Company's common stock was split 2-for-1 in March 2000. The
split was effected as a 100% stock dividend payable March 6, 2000 to holders of
record at March 1, 2000. All references in the accompanying financial statements
to the number of common shares and per share amounts for the year ended December
31, 2000 have been restated to reflect the stock split.

During the year ended December 31, 1999, 746,140 shares of common stock were
issued for cash. At December 31, 1999, the balance of stock subscriptions was
$105,000. Stock subscriptions were paid and stock issued February 16, 2000 for
these common stock shares.

On February 22, 1999, the Company's board of directors authorized a 1-for-2
reverse stock split of the Company's $0.001 par value common stock.

Upon incorporation on September 15, 1998, 10,000,000 shares of common stock were
issued at $0.001 per share. At December 31, 1998, this common stock was held by
30 shareholders, none of whom held in excess of ten percent of the total.

NOTE 7 - PREFERRED STOCK

During the year ended December 31, 1999, 500,000 shares of preferred stock were
issued for $250,000 cash. The preferred stock has no dividend rights, but is
convertible to common stock at the rate of ten shares of common for each
preferred share. This conversion feature was modified to twenty shares to one by
the stock split effective March 1, 2000. The preferred shareholders elected to
exercise the conversion feature attached to the preferred stock and,
accordingly, 10,000,000 shares of Company's common stock were issued on November
9, 2001 to the preferred stockholders of record on that date.

NOTE 8 - STOCK OPTIONS AND WARRANTS

Accounting for Stock Options and Warrants Granted to Employees and Nonemployees
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (hereinafter "SFAS No. 123"), defines a fair value-based method of
accounting for stock options and other equity instruments. The Company has
adopted this method, which measures compensation costs based on the estimated
fair value of the award and recognizes that cost over the service period.

In accordance with SFAS No. 123, the fair value of stock options and warrants
granted are estimated using the Black-Scholes Option Price Calculation. The
following assumptions were made to value the stock options and warrants for 2001
and 2002: risk-free interest rate of 4%, volatility of 91.25%.


                                       35
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 8 - STOCK OPTIONS AND WARRANTS (continued)

Warrants

During October and November 2002, 1,200,000 shares of common stock with one
warrant attached to each common stock share were issued. Each warrant is
exercisable at $0.50 per share until October and November 2004. These warrants
were valued at an average price of $0.04 per share, for a total of $41,950. See
Note 6.

During August and September 2002, 800,000 shares of common stock with one
warrant attached to each common stock share were issued. Each warrant is
exercisable at $0.50 per share until August and September 2004. These warrants
were valued at an average price of $0.08 per share, for a total of $60,000. See
Note 6.

During June 2002, 1,500,000 shares of common stock with one warrant attached to
each common stock share were issued. Each warrant is exercisable at $0.25 per
share until late June 2004. These warrants were valued at an average price of
$0.03 per share, for a total of $42,000. See Note 6.

During April 2002, 1,000,000 shares of common stock with one warrant attached to
each common stock share were issued. Each warrant is exercisable at $0.25 per
share until April 3, 2004. These warrants were valued at an average price of
$0.06 per share, for a total of $55,000. See Note 6.

During March 2002, 500,000 shares of common stock with one warrant attached to
each common stock share were issued. Each warrant is exercisable at $0.25 per
share until March 12, 2004. These warrants were valued at an average price of
$0.06 per share, for a total of $31,050. See Note 6.

During June 2001, 1,000,000 shares of common stock with one warrant attached to
each common stock share were issued. Each warrant is exercisable at $0.50 per
share until June 30, 2003. These warrants were valued at $0.06 per share, for a
total of $60,000. See Note 6.

During 2001, $1,025,000 was raised in a private debt offering. Three warrants
are attached to each dollar of debt, with an exercise price of $0.195 per share.
These warrants are fully exercisable for up to two years from the dates of
issuance. These warrants were valued at $0.07 per share, for a total of
$219,642. See Note 5.

Stock Options

In September 1999, the board of directors of the Company adopted the Envirokare
Tech, Inc. 1999 Stock Option Plan (the "Plan") for the purpose of attracting,
retaining and motivating employees, directors and consultants of the Company.
The shareholders approved the Plan at


                                       36
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 8 - STOCK OPTIONS AND WARRANTS (continued)

their annual meeting in May 2000. As adopted, the Plan provides for
authorization of 2,000,000 shares of common stock for issuance pursuant to
awards under the Plan. In September 1999, the board of directors had approved
the granting of non-qualified options under the Plan to purchase an aggregate
1,150,000 shares of common stock. In June 2000, the board of directors voted to
adjust the number of shares of common stock authorized for issuance under the
Plan from 2,000,000 to 4,000,000, pursuant to the anti-dilution provisions of
the Plan, to reflect the 2-for-1 split of the Company's common stock effected in
March 2000. The board of directors also voted to make corresponding adjustments
to the number of shares subject to previous option grants and to the exercise
prices for such options.

All of the options granted by the Company are exercisable upon issuance. The
Plan restricts sales for shares received upon exercise of non-qualified options,
limiting each optionee to sales in any year of option shares equal to 25% of the
total number of shares received under the optionee's grant. The Plan requires
early exercising of the stock options for various reasons, including employment
termination, separation from services, and cancellation or completion of
consulting contracts.

The Company filed a Form S-8 under the Securities Act with the Securities and
Exchange Commission in March 2000 to register 1,150,000 shares (2,300,000 as
adjusted for the stock split) of common stock authorized for issuance under the
Plan. In September 2000, the Company filed Post-Effective Amendment No. 1 to the
Form S-8, to register the remaining 1,700,000 shares under the Securities Act.
For the year ended December 31, 1999, the Company recorded $552,000 ($0.24 per
option) in consulting fees for the value of these options. These stock options
will expire September 29, 2009. See Note 9.

During 2002, the Company issued 350,000 stock options valued at $52,173, and
2,300,000 stock options expired, which were valued at $476,000.

During 2001, the Company issued 1,000,000 stock options valued at $164,000, and
550,000 stock options expired, which were valued at $132,000.


                                       37
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 8 - STOCK OPTIONS AND WARRANTS (continued)

Stock Options (continued)
                                                                     Weighted
                                                                     Average
                                                                     Exercise
                                                        Shares        Price
                                                      ----------    ----------
  Outstanding at January 1, 2001                       2,200,000
  Expired                                               (550,000)   $     0.58
  Granted                                                100,000          0.60
  Granted                                                900,000          0.30
                                                      ----------    ----------
  Outstanding  and exercisable at December 31, 2001    2,650,000    $     0.47
                                                      ==========    ==========

  Outstanding at January 1, 2002                       2,650,000    $     0.47
  Granted                                                350,000          0.37
  Expired                                             (2,300,000)         0.44
                                                      ----------    ----------
  Outstanding  and exercisable at December 31, 2002      700,000    $     0.43
                                                      ==========    ==========

  Weighted average fair value of options
  granted during the year ended December 31, 2002                   $     0.15
                                                                    ==========

                                Shares Issuable       Weighted
   Equity Compensation         Upon Exercise of       Average        Available
   Plans Approved by             Outstanding         Exercise          for
      Shareholders                  Options            Price         Issuance
---------------------------   -------------------  -------------   -----------
1999 Equity Incentive Plan              700,000           $0.43      3,300,000
                              -------------------                  -----------
Total                                   700,000                      3,300,000
                              ===================                  ===========

NOTE 9 - RELATED PARTIES

On November 5, 2002, the Company granted 250,000 stock options enabling the
option holder to purchase an equivalent number of common stock shares to Mr.
Jonathan Edelstein, a director of the Company. See Note 10.

Mr. Steve Pappas, who was appointed president, secretary, and director of the
Company on March 26, 2001, received $54,500 and $82,000 in cash from the Company
for consulting services rendered during the years ended December 31, 2001 and
2002, respectively.


                                       38
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 9 - RELATED PARTIES (continued)

Mr. George Kazantzis, who was appointed executive vice president of the Company
on July 15, 2002, received $35,000 in cash for consulting fees during the year
ended December 31, 2002.

On March 14, 2001, the Company granted 100,000 stock options enabling the option
holder to purchase an equivalent number of common stock shares to Mr. Charles
Stein, then president of the Company. See Note 8. Effective May 1, 2001, Mr.
Stein resigned as president of the Company and remained a member of the board of
directors of the Company until November 27, 2001. The options granted to Mr.
Stein expired unexercised on May 27, 2002.

On March 14, 2001, the Company granted 300,000 stock options enabling the option
holder to purchase an equivalent number of common stock shares each to Mr.
Gerald Breslauer, the vice president of administration of the Company, and Mr.
Mark Kallan, the executive vice president of the Company. Mr. Breslauer and Mr.
Kallan resigned their respective positions with the Company on November 28,
2001. The options granted to Messrs. Breslauer and Kallan expired unexercised on
May 28, 2002.

On January 16, 2001, the Company granted 100,000 stock options enabling the
option holder to purchase an equivalent number of common stock shares to Mr.
Trevor Bedford, who was a member of the board of directors of the Company.
Effective September 13, 2001, Mr. Bedford resigned as a member of the board of
directors of the Company. The options granted to Mr. Bedford expired unexercised
on March 13, 2002.

Stock options of 2,300,000 were issued enabling the option holder to purchase an
equivalent number of common stock shares during the year ended December 31,
1999. Of these stock options, 1,000,000 were issued to related parties. Of these
related party stock options, 500,000 expired unexercised during September 2000
and 500,000 expired unexercised during June 2002. See Note 8. During the year
ended December 31, 2000, the Company granted 200,000 stock options enabling the
option holder to purchase an equivalent number of common stock shares to the
then president of the Company. See Note 8. On December 11, 2000, the president
of the Company resigned and remained a member of the board of directors of the
Company until December 8, 2001. The stock options that were granted to this
former president of the Company expired unexercised during June 2002.

See Note 5 for related party notes payable.


                                       39
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Consulting Agreement

In July 2001, the Company entered into a consulting agreement with Mr. Erwin
Pruefer who performs marketing and sales services for the Company and is
compensated on a commission basis. Upon reaching certain sales targets, the
consultant may receive stock options in lieu of additional commissions payable,
with a maximum of 500,000 options so available.

Lease Agreements

The Company entered into a lease for office space in Orlando, Florida on
September 16, 2002 for a period of 36 months. Lease payments are currently
$2,595 per month, with additional charges for common area. A security deposit
was paid in the amount of $2,600. Total payments for 2002 were $9,755.

The Company entered into a lease for office space in Boca Raton, Florida on
February 7, 2001 for sixty months. Lease payments are currently $2,795 per
month, with additional charges for common area. A security deposit and last
month's rent were paid in the amount of $8,412. A portion of this office space
is being subleased with the sub-lessee reimbursing the Company $3,000 of the
security deposit and last month's rent. There is no written sublease agreement
at this time. The Company made lease payments for the Boca Raton, Florida office
totaling $13,000 during the year ended December 31, 2002, but is no longer
occupying this Florida office. Pursuant to a letter of understanding between Mr.
Gerald Breslauer and the Company, dated November 28, 2001, Mr. Breslauer will be
compensated by the Company in the amount of $15,000 should he be successful in
locating a suitable tenant to sublease the remainder of the Company's Boca
Raton, Florida office space.

The Company has a lease for office space in Las Vegas, Nevada thru April 30,
2003. Monthly payments are currently $838 per month, including $40 for
utilities. Total payments for 2002 were $10,096.

Future annual minimum lease payments for the term of the Orlando, Boca Raton and
Las Vegas lease agreements as of December 31, 2002 are as follows for the years
ending December 31:

             Orlando Office     Boca Raton Office   Las Vegas Office
             --------------     -----------------   ----------------
 2003          $   31,557          $   34,876          $    3,352
 2004          $   32,819          $   36,272          $       --
 2005          $   22,455          $   37,725          $       --
 2006          $       --          $    3,270          $       --


                                       40
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)

Litigation

For information on the Company's litigation, see Note 5.

Merger Agreement with Thermoplastic Composite Designs, Inc.

The Company and Thermoplastic Composite Designs, Inc. ("TCD") entered into a
merger agreement dated March 30, 2001, which provides that TCD will merge with
Envirokare's wholly-owned subsidiary, Envirokare Composite Corp., upon certain
specific terms and conditions. This merger, if consummated, will require the
Company to issue 3,000,000 shares of common stock in exchange for all of the
outstanding stock of TCD, if the Company's common stock trades in a nationally
recognized securities market, such as the NYSE, NASDAQ (or OTCBB), or AMEX, at a
minimum five dollar ($5.00) value for thirty days during the thirty month period
immediately following March 30, 2001. At the end of the thirty month period
following March 30, 2001, if the market value for 3,000,000 shares of the
Company's common stock is less than $15,000,000, the Company may elect to
provide additional shares of common stock or cash to the TCD stockholders to
meet the required $15,000,000 purchase price. Any payment of cash in connection
with the transaction purchase price shall not exceed $7,500,000. The Company has
the sole authority to determine the amounts of additional stock or cash that
would be paid.

Agreement with Schaefer Systems International, Inc.

The Company and Schaefer Systems International, Inc. ("SSI") entered into a
product development and production agreement dated August 6, 2002, which
provides that the Company, with technical design and product development
support provided by TCD, will develop a part on behalf of SSI, with part
prototypes being deliverable to SSI no later than six months after the
agreement date. During the fourth quarter of the fiscal year, this
Agreement expired without delivery by the Company. A new Product
Development Agreement was signed between the Company and SSI after the end
of the fiscal year on March 28, 2003. This Agreement provides for the
development the same products; for the credit of the previous payment to
the Company and for the payment of the balance of the development fee as
follows: 47% upon completion of first parts off of the product and
verification of performance and 20% within 30 days after Development
Completion. SSI continued its right to order additional development for an
additional payment of $300,000. This Agreement provides for 26 weeks from
the effective date within which to complete successful development or for
the initial payment to be returned.

The initial payment, in the amount of $61,215, was made by SSI to the
Company to facilitate development of the part. The Company currently
recognizes the value of the initial payment made by SSI to the Company as a
deposit for product development.

The Company will recognize the deposited amount as revenue upon approval by
SSI of initial product prototypes, which is expected to occur during the
second quarter of 2003.


                                       41
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                December 31, 2002

NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)

Letter Agreement with New Age Shelters Ltd.

The Company and New Age Shelters Ltd. ("New Age"), a building systems
manufacturing company, entered into a non-binding letter agreement, dated
October 1, 2002, expressing the intent of the parties to combine their
businesses through a merger of New Age into a wholly-owned subsidiary of the
Company. Terms of the letter agreement provide that, subject to conditions
including due diligence review, obtaining necessary approvals, and negotiation
and execution of a definitive merger agreement, New Age would merge with and
into a wholly-owned subsidiary of Envirokare, with the subsidiary to be the
surviving company in the merger and continue the business of New Age. Merger
consideration would be in the form of Envirokare common stock issued to New Age
shareholders, with 1,000,000 shares to be issued upon completion of the merger,
and additional shares to be issued in 2006 based on net profits of New Age
during the 2003-2005 periods.

NOTE 11 - SUBSEQUENT EVENTS

Common Stock Issuances

In January 2003, existing warrant holders were offered a reduction in their
respective warrant exercise prices to $0.15 per share if exercised on or before
February 14, 2003. This offer resulted in the Company raising $198,000 in cash
and issuing 1,320,000 shares of common stock. Participants were issued
replacement warrants, exercisable over a two year period, for the same number of
shares of the Company's common stock as issued on exercise of the amended
warrants. Exercise prices for the new warrants are $0.75 per share (as to
warrants issued in a 2001 equity private placement) and $0.65 per share (as to
warrants issued in a 2002 equity private placement).

Changes in Company's Management

Mr. Steve Pappas, President of the Company as of the Balance Sheet date,
relinquished his duties as President and has been elected Chairman of the Board
of Directors, effective March 5, 2003. Mr. George Kazantzis, Executive Vice
President of the Company as of the Balance Sheet date, relinquished his duties
as Executive Vice President and has been elected President and interim Chief
Executive Officer of the Company, effective March 5, 2003.


                                       42
<PAGE>

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

      None.
                                      PART III

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

Directors and Executive Officers

      The following list identifies the members of the Company's Board of
Directors as of December 31, 2002, as well as the Company's current executive
officers and sets forth certain information regarding each person. Each director
serves in office until the next annual meeting of shareholders; the Company's
President and Executive Vice President serve as such at the pleasure of the
Board of Directors.

         Name                 Age                  Position
         ----                 ---                  --------
Steve Pappas                  58         Chairman of the Board of
                                         Directors, Secretary

Jonathan Edelstein            59         Treasurer, Director

Leo G. Kapakos                43         Director

George Kazantzis              52         President, Interim Chief
                                         Executive Officer,
                                         Assistant Treasurer

      Steve Pappas was appointed Chairman of the Board of Directors, effective
March 5, 2003. On March 26, 2001, Steve Pappas was elected as President and a
director of the Company and served in that capacity until his resignation on
March 5, 2003. Mr. Pappas has over thirty years of entrepreneurial, corporate
executive, real estate management and development experience, most recently,
from July 1988 to the present, as Managing General Partner of SPL Associates
("SPL") based in Brooklyn, New York. SPL has acquired and manages numerous
large-scale residential and commercial real estate holdings in New York. Mr.
Pappas was the founder and President of Servco Leasing Corporation from 1970 to
1980, during which time it became the largest third party leasing company for
Xerox equipment.

      Jonathan Edelstein became a Director of the Company in 2001 and was
appointed Treasurer by the Board of Directors as of December 14, 2002. Mr.
Edelstein resigned his position as Treasurer and was appointed Secretary as of
March 26, 2003. Mr. Edelstein has over twenty-five years experience in
investment banking, finance and mergers and acquisitions, in both senior
management and board-level positions. His responsibilities have included the
acquisition, restructuring and management of small and mid-sized companies,
major takeovers, dispositions,


                                       43
<PAGE>

real estate development and financing. Mr. Edelstein is a Senior Advisor to the
WestSphere Group, a private equity and fund manager focused in Latin America.
Prior to his association with WestSphere, he was in partnership with Merrill
Lynch Inter-Funding Inc. , from 1988 to 1993, where he was involved in the
acquisition and merger of a number of companies to create Pacific Outlook, Inc..

      Leo Kapakos was elected as a director of the Company on October 23, 2002.
Mr. Kapakos has sixteen years banking experience, including over fifteen years
with Westdeutsche Landesbank AG, NY, where he is currently Associate Director in
the Credit Department - Financial Institutions Group. During his tenure at
Westdeutsche Landesbank, Mr. Kapakos has been responsible for providing various
management services, with focus in the areas of transaction risk analysis and
credit analysis with respect to a broad range of financial services products.

      George Kazantzis was appointed President and Interim Chief Executive
Officer of the Company, effective March 5, 2003. Mr. Kazantzis was
appointed Executive Vice President of Envirokare on July 1, 2002 and served
in that capacity until his resignation on March 5, 2003. Mr. Kazantzis was
also appointed Assistant Treasurer by the Board of Directors as of December
14, 2002 and resigned in that capacity to become Treasurer of the Company
as of March 26, 2003. Mr. Kazantzis joined the Company bringing over
twenty-five years of executive management and consulting experience in
marketing, corporate structuring, finance, mergers and acquisitions. His
marketing background includes the creation and launch of a successful
license-merchandising program under the Team Gear USA(R) brand, in
conjunction with Time Warner Sports Merchandising, World Cup USA and US
Soccer Federation, from 1990 to 1994. Subsequently in 1998, Mr. Kazantzis,
in a joint venture in conjunction with Merrill Lynch Inter-Funding Inc.,
facilitated a complex merger and acquisition transaction involving several
Southern California clothing companies and brands to create Pacific
Outlook, Inc., a U.S. sportswear manufacturer. At Pacific Outlook he was
responsible for product licensing, trademarks and registrations, in
addition to handling sales and marketing both domestically and
internationally. Previously, he managed several successful corporate
restructurings, most recently as a managing director of SLC Leasing Co.
Ltd., working with the law firm of Tilleke & Gibbins, the accounting firm
of Grant Thornton Thailand and CPA Ltd., Thailand, where he oversaw the
restructuring of an automotive finance company with 42 offices and 400
employees. Mr. Kazantzis restructured, financed and successfully completed
the transition of "good company" from "bad company". In 1999 he transferred
all assets of the new company to a group of creditors and investors in a
litigation proof structure. Mr. Kazantzis resigned his position as
Executive Vice President of the Company and was appointed President and
interim Chief Executive Officer of the Company, effective March 5, 2003.

      None of the persons specified above share any familial relationship. Other
than the persons specified above, there are currently no significant employees
expected by the Company to make a significant contribution to the business of
the Company.

      Section 16(a) Beneficial Ownership Reporting Compliance

      To the company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2002, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with.


                                       44
<PAGE>

Item 10. Executive Compensation

      Executive Compensation

      The Company is required to set out particulars of compensation paid for
each of the last three (3) completed fiscal years, or for such shorter period
since the Company's inception, to the following persons (the "Named Executive
Officers"):

      (a) All persons serving as the Company's chief executive officer during
the most recently completed fiscal year;

      (b) Each of the Company's four most highly compensated executive officers
who were serving as executive officers at the end of the most recently completed
fiscal year and whose total salary and bonus exceeds $100,000 per year; and

      (c) Up to two additional individuals for whom disclosure would have been
provided under (b), except that the individual was not serving as an executive
officer of the Company at the end of the most recently completed fiscal year.

      Steve Pappas was elected President of the Company, effective March 26,
2001, and served the Company in that capacity until March 5, 2003. Mr. Pappas
resigned from the position of President of the Company and was elected Chairman
of the Board of Directors of the Company, effective March 5, 2003. George
Kazantzis resigned from the position as Executive Vice President of the Company
and was elected President and interim Chief Executive Officer of the Company,
effective March 5, 2003. No other persons fall within the above-listed
categories (a), (b) or (c).

      Summary of Compensation

      The following table (the "Summary Compensation Table") sets forth certain
information regarding compensation paid to each of the Company's Named Executive
Officers.

<TABLE>
<CAPTION>
 --------------------------------------------------------------------------------------------
                   Annual Compensation       Long Term Compensation
 --------------------------------------------------------------------------------------------
                                             Awards                    Payouts
 --------------------------------------------------------------------------------------------
                                             Securities   Restricted
                                   Other     Under        Shares or              All
 Name and                          Annual    Options/     Restricte    LTIP      Other
 Principal         Salary   Bonus  Compen-   SARs         Share        Payouts   Compen-
 Position    Year  ($)      ($)    sation($) Granted(#)   Units ($)    ($)       sation ($)
 --------------------------------------------------------------------------------------------
<S>          <C>   <C>      <C>    <C>       <C>          <C>          <C>       <C>
 Steve
 Pappas,     2001  54,500   0      0         0            0            0         0
 President   2002  82,000   0      0         0            0            0         0
 --------------------------------------------------------------------------------------------
</TABLE>


                                       45
<PAGE>

      Options and Stock Appreciation Rights Granted During the Most Recently
          Completed Fiscal Year

      The Company did not grant options or stock appreciation rights to Named
Executive Officers during the most recently completed Fiscal Year.

      Long-Term Incentive Plans -- Awards in Most Recently Completed Fiscal Year

      The Company has no long-term incentive plan in place. A "Long-Term
Incentive Plan" is a plan under which awards are made based on performance over
a period longer than one fiscal year. It is different from a plan for options,
stock appreciation rights, or restricted share compensation.

      Options Exercised During the Most Recently Completed Fiscal Year and
          Fiscal Year End Option Values

      During the most recently completed Fiscal Year, none of the Named
Executive Officers held or exercised options or stock appreciation rights.

      Compensation of Directors and Remuneration of Senior Officers

      The Company granted as compensation to Jonathan Edelstein, a director of
the Company, an option to acquire 250,000 shares of the Company's Common Stock
as consideration for services provided as a director during Fiscal 2002. For
accounting purposes the Company valued the stock option granted to Mr. Edelstein
at $40,000. The Company made no other payments to any director for services
provided as a director during Fiscal 2002.

      The Company has no standard arrangement to compensate directors for their
services in their capacity as directors, except for the granting from time to
time of stock options in accordance with the Company's 1999 Stock Plan. All
existing stock options, including those granted to Mr. Edelstein, are
immediately exercisable, non-transferable and terminate on the earlier of the
expiration date of the Plan or the end of the six-month period after the date on
which the director, officer or employee, as the case may be, terminates his or
her position at the Company. The outstanding options will be adjusted if the
Company consolidates, subdivides or similarly changes its share capital.

      Other than as discussed above, in respect of a payment made to Jonathan
Edelstein, there has been no arrangement pursuant to which Directors were
compensated by the Company in their capacity as Directors or for services
rendered as consultants or experts during Fiscal 2002.

      Employment Contracts and Termination of Employment and Change-in-Control
          Arrangements

      The Company did not enter into employment agreements or contracts with any
of its Names Executive Officers during Fiscal 2002.


                                       46
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

      To the knowledge of the Company's management, as of February 28, 2003, no
person beneficially owned more than five percent of any class of the Company's
voting securities other than as set forth below. The following table sets forth
the total amount of any class of the Company's voting securities owned by each
of its executive officers, directors and director nominees and by its executive
officers, directors and director nominees, as a group, as of February 28, 2003.

                                      Amount and Nature of         Percentage
 Name and Address (1)               Beneficial Ownership (2)        of Class
 --------------------               ------------------------       ----------

 James Pappas                             3,300,000 (3)                10.5%
 Vanessa Houiris                          3,300,000 (3)                10.5%
 Adrian Alexandru                         3,930,000 (4)                12.0%

 Steve Pappas                             8,933,400 (5)                26.2%
 Jonathan Edelstein                         250,000 (6)                 0.1%
 Leo G. Kapakos                             170,000 (7)                 0.1%
 George Kazantzis                         1,420,000 (8)                 4.4%

 All executive officers and              10,773,400 (2)                30.8%(2)
 directors as a group (4 persons)

(1)   The address for each of the persons listed is 5850 T. G. Lee Blvd., Suite
      535, Orlando, FL 32822.

(2)   Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission. In computing the number of shares
      owned by a person and the percentage ownership of that person, shares of
      common stock subject to options and warrants held by that person that are
      currently exercisable or exercisable within 60 days of February 28, 2003,
      are deemed outstanding. Such shares, however, are not deemed outstanding
      for the purposes of computing the percentage ownership of any other
      person.

(3)   Includes a warrant to purchase 100,000 shares of Common Stock of the
      Company exercisable immediately and until February 10, 2005.

(4)   Includes warrants to purchase 1,450,000 shares of Common Stock of the
      Company exercisable immediately and until varying dates up to February 17,
      2005.

(5)   Includes warrants to purchase 2,775,000 shares of Common Stock of the
      Company exercisable immediately and until varying dates up to February 13,
      2005. Includes 250,000 shares of Common Stock of the Company owned by the
      reporting person's wife, to which the reporting person disclaims
      beneficial ownership.

(6)   Includes an option to purchase up to 250,000 shares of Common Stock of the
      Company immediately exercisable.

(7)   Includes 170,000 shares of Common Stock of the Company owned by the
      reporting person's wife, to which the reporting person disclaims
      beneficial ownership.

(8)   Includes warrants to purchase 700,000 shares of Common Stock of the
      Company exercisable immediately and until varying dates up to October 10,
      2004.


                                       47
<PAGE>

      The Company's management is not aware of any arrangements which may result
in "changes in control" as that term is defined by the provisions of Item 403(c)
of Regulation S-B, other than those changes detailed as follows:

Item 12. Certain Relationships and Related Transactions

      On April 3, 2002, Steve Pappas invested $100,000 in a private offering of
Company units at a price of $0.10 per unit. Each unit is comprised of one share
of Company Common Stock and a warrant to purchase one share of Company Common
Stock at a price of $0.25 per share, with the warrant exercisable at any time up
to April 2, 2004. On June 27, 2002, the same shareholder invested $50,000 in a
private offering of Company units at a price of $0.10 per unit. Each unit is
comprised of one share of Company Common Stock and a warrant to purchase one
share of Company Common Stock at a price of $0.25 per share, with the warrant
exercisable at any time up to June 26, 2004. During November, 2002, the same
shareholder invested $60,000 in a private offering of Company units at a price
of $0.15 per unit. Each unit is comprised of one share of Company Common Stock
and a warrant to purchase one share of Company Common Stock at a price of $0.50
per share, with the warrant exercisable at any time up to November, 2004. On
February 14, 2003, the same shareholder invested $82,500 by participating in an
amended warrant offering by the Company to current warrant holders of equity
private placement transactions conducted by the Company during 2001 and 2002.
The shareholder acquired 550,000 shares of Company common stock at a price of
$0.15 per share. The shareholder acquired new warrants, exercisable at any time
up to February 13, 2005, at a price of $0.65 (as to warrants issued in this
offering to purchase up to 150,000 shares) and $0.75 (as to warrants issued in
this offering to purchase up to 400,000 shares).

      On March 3, 2002, George Kazantzis, Executive Vice President of the
Company, invested $50,000 in a private offering of Company units at a price of
$0.10 per unit. Each unit is comprised of one share of Company Common Stock and
a warrant to purchase one share of Company Common Stock at a price of $0.25 per
share, with the warrant exercisable at any time up to March 2, 2004. On October
10, 2002, the same shareholder invested $30,000 in a private offering of Company
units at a price of $0.15 per unit. Each unit is comprised of one share of
Company Common Stock and a warrant to purchase one share of Company Common Stock
at a price of $0.50 per share, with the warrant exercisable at any time up to
October 9, 2004.


                                       48
<PAGE>

Item 13. Exhibits and Reports on Form 8-K

      (a) Exhibits

Exhibit
Number    Description of Document
------    -----------------------
3.1       Company's Articles of Incorporation, as amended October 12, 1999   (1)

3.2       Company's By-laws as amended and restated December 11, 2000        (2)

10.1      Merger Agreement by and among the Company, Electroship             (3)
          Acquisition Corp., Electroship (N.Y.) Inc., Electroship Partners,
          John Gremmo, John A. Notarianni,
          Leo J. Mangan, Raymond Anthony Joao and Richard Reichler, dated
          as of December 1, 2000

10.2      Assignment of Patent Application from Electroship Partners to      (3)
          Electroship (N.Y.) Inc. and Defined Field of Use License
          Agreement between Electroship Partners and Electroship (N.Y.)
          Inc. dated as of September 20, 2000

10.3      License Agreement between Envirokare Composite Corp. and           (2)
          Thermoplastic Composite Designs, Inc., dated March 30, 2001

10.4      Merger Agreement by and among the Company, Envirokare Composite    (2)
          Corp., Thermoplastic Composite Designs, Inc., Dale Polk, Sr. and
          Dale Polk, Jr., dated March 30, 2001

10.5      Letter Agreement between the Company and Charles H. Stein, dated   (4)
          May 8, 2001

10.6      Agreement and General Release between the Company and Charles H.   (5)
          Stein, dated November 27, 2001

10.7      New Age Shelters Letter Agreement, dated October 1, 2002

21        Subsidiaries of the Company (incorporated herein by reference to
          Exhibit 21 to the Company's Annual Report on Form 10-KSB for the
          year ended December 31, 2000, filed with the Commission on April
          16, 2001)

99.1      Officer's Certificate, dated March 28, 2003


(1)   Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
      year ended December 31, 1999, filed with the Commission on April 7, 2000,
      and incorporated herein by reference.

(2)   Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
      year ended December 31, 2000, filed with the Commission on April 16, 2001,
      and incorporated herein by reference.

(3)   Filed as an exhibit to the Company's Current Report on Form 8-K, filed
      with the Commission on January 3, 2001, and incorporated herein by
      reference.

(4)   Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
      the period ended March 31, 2001, filed with the Commission on June 15,
      2001, and incorporated herein by reference.

(5)   Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
      year ended December 31, 2001, filed with the Commission on March 28, 2002,
      and incorporated herein by reference.

      (b) Reports on Form 8-K

      A report on Form 8-K regarding Item 5 was filed by the Company on October
      17, 2002.

      A report on Form 8-K regarding Item 5 was filed by the Company on November
      26, 2002.


                                    49
<PAGE>

Item 14. Controls and Procedures

      Within the 90 days prior to the filing date of this Annual Report, we
carried out an evaluation, under the supervision and with the participation of
our Principal Executive Officer and Principal Accounting Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rule 13a-14 of the Securities Exchange Act of 1934.
Based upon that evaluation, the Principal Executive Officer and the Principal
Accounting Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relating to us
(including our consolidated subsidiaries) required to be included in this Annual
Report. There have been no significant changes in our internal controls or in
other factors, which could significantly affect such internal controls,
subsequent to the date we carried out our evaluation.


                                    50
<PAGE>

                                     SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on April 14, 2003.

                              ENVIROKARE TECH, INC.
                              Registrant

                              By: /s/ GEORGE KAZANTZIS
                                 --------------------------------
                                 Name: George Kazantzis
                                 Title: President, Interim Chief Executive
                                        Officer and Treasurer

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

         Signature                       Title                   Date
         ---------                       -----                   ----

/s/ GEORGE KAZANTZIS               President, Interim       April 14, 2003
------------------------           Chief Executive
George Kazantzis                   Officer and Treasurer
                                   (Principal Executive
                                   Officer and Principal
                                   Financial and Accounting
                                   Officer)


/s/ STEVE PAPPAS                   Chairman of the          April 14, 2003
------------------------           Board of Directors
Steve Pappas

/s/ JONATHAN EDELSTEIN             Secretary, Director      April 14, 2003
------------------------
Jonathan Edelstein

/s/ LEO KAPAKOS                    Director                 April 14, 2003
------------------------
Leo Kapakos


                                    51
<PAGE>

                                 CERTIFICATIONS

      I, George Kazantzis, certify that:

      1. I have reviewed this annual report on Form 10-KSB of Envirokare
Tech, Inc.;

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

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

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

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

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

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

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

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

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

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

      Date: April 14, 2003

                                          /s/    GEORGE KAZANTZIS
                                          -------------------------------------
                                          Name: George Kazantzis
                                          Title: President, Interim Chief
                                                 Executive Officer and
                                                 Treasurer (Principal
                                                 Executive Officer and Principal
                                                 Financial Officer)


                                    52