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

                                   FORM 10-KSB


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

                      For the year ended September 30, 2001

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

                         Commission File Number 0-21279


                          THERMACELL TECHNOLOGIES, INC.
                          ----------------------------
             (Exact name of registrant as specified in its charter)

           FLORIDA                                            59-3223708
           -------                                            ----------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                           Identification No.)

    440 Fentress Blvd., Daytona Beach                           32115
    ---------------------------------                           -----
(Address of principal executive offices)                      (Zip Code)

     Registrant's telephone number, including area code: (904) 253-6262

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

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 no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  of  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 reporting period (Fiscal year) $0.
                                                                           ---

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant  at May 15, 2002 was $-0-.  The bid price of the common stock at that
date was $-0-.
          ---

DOCUMENTS INCORPORATED BY REFERENCE: None
                                     ----

<PAGE>

                          THERMACELL TECHNOLOGIES, INC.

                               FORM 10-KSB - Index
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001

PART I                                                                      Page
                                                                            ----
Item 1.   Business                                                           1.

Item 2.   Properties                                                         9.

Item 3.   Legal Proceedings                                                 10.

Item 4.   Submission of Matters to a Vote of Security Holders               10.

PART II

Item 5.   Market of the Registrant's Securities
           and Related Stockholder Matters                                  11.

Item 6    Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                             12.

Item 7.   Consolidated Financial Statements and Supplementary Data          18.

Item 8.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosures                                         18.

PART III

Item 9.  Directors and Executive Officers of the Registrant                 19.

Item 10. Executive Compensation                                             20.

Item 11. Security Ownership of Certain Beneficial Owners and Management     21.

Item 12. Certain Relationships and Related Transactions                     21.

Item 13. Exhibits, Consolidated Financial Statements, Schedules
          and Reports on Form 8-K                                           23.

Signatures                                                                  25.


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This Form 10-KSB  contains  forward  looking  statements,  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934,  regarding future events and the future performance of the
Company  involve risks and  uncertainties  which may cause the Company's  actual
results in future periods to be materially different from any future performance
suggested  herein.  The  words   "anticipated,"   "believe,"  "expect,"  "plan,"
"intend,"  "seek,"  "estimate,"  "project,"  "will,"  "could," "may" and similar
expressions  are  intended  to  identify   forward-looking   statements.   These
statements  include,  among others,  information  regarding  future  operations,
future capital  expenditures  and future net cash flow. Such statements  reflect
our current views with respect to future events and  financial  performance  and
involve risks and uncertainties, including, without limitation, general economic
and  business  conditions,  changes in foreign,  political,  social and economic
conditions, regulatory initiatives and compliance with governmental regulations,
the ability to achieve further market penetration and additional customers,  and
various other matters, many of which are beyond our control.  Should one or more
of these risks or uncertainties occur, or should underlying assumptions prove to
be  incorrect,  actual  results may vary  materially  and  adversely  from those
anticipated,  believed, estimated, or otherwise indicated,  consequently, all of
the  forward-looking  statements made in this Form 10-KSB are qualified by these
cautionary  statements  and there can be no assurance  of the actual  results or
developments.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

In November  2001,  the  Company  filed a voluntary  petition  for relief  under
Chapter 11 of the United States  Bankruptcy Code in the United States Bankruptcy
Court for the  Middle  District  of  Florida.  The  Company  is  operating  as a
debtor-in-possession  under  the  Code,  which  protects  it from its  creditors
pending  reorganization  under the  jurisdiction  of the  Bankruptcy  Court.  As
debtor-in-possession,  the Company is authorized to operate its business but may
not engage in  transactions  outside the  ordinary  course of  business  without
approval of the  Bankruptcy  Court.  As a result of the filing of the  voluntary
petition  under  Chapter  11  of  the  United  States  Bankruptcy  Code,  it  is
anticipated that claims will be asserted in excess of those amounts set forth in
the  Company's  books and  records,  and that the Company  will dispute and file
objections to certain of such claims.  The Company's  management  cannot express
any opinion as to the likelihood of an outcome respecting any claims asserted or
to be asserted  in the  Chapter 11 case,  including  claims  resulting  from the
assumption  or rejection of leases and  executory  contracts  and various  other
claims.

Background and History

We were  incorporated  in Florida in August 1993, for the purpose of developing,
manufacturing,  and marketing  insulating materials and coatings using partially
evacuated glass microspheres (sometimes referred to as "shells"). The process of
evacuation  removes air and other  gases from the sphere and  thereby  creates a
vacuum.  A shell is a very small glass sphere  (generally the size of a grain of
salt) made by crushing  glass  particles.  The  insertion of shells into various
materials  and  products  ("shell  technology")  can  substantially  improve the
thermal resistive  characteristics  of such materials and products  resulting in

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<PAGE>

improved insulation ("R") values. The more a shell is evacuated,  the higher the
thermal resistive characteristics of the product or material to which the shells
are  added.  Shells can also be used as filler  material  for  products  such as
bowling balls.

Our management's  long-term  business strategy is to (i) develop and manufacture
our own shells and (ii) use our shell  technology to improve the "R" values in a
number of applications that create new and improved products. These products may
include,  but are not limited to,  paints and coatings,  drywall,  gypsum board,
home siding materials and space foam  insulation.  Other markets in which we may
utilize our technology include refrigeration and cooling systems, automotive and
transportation  applications,  cups and thermoses. There is no assurance that we
will be successful in  penetrating  these  markets and  developing  commercially
viable  manufacturing  techniques for our shell  technology.  In our 1995 fiscal
year, we completed the  development  of our first product line that consisted of
paints and coatings  containing  shells in order to reduce heat transmission and
improve the  insulation  values of these  products.  The products  were marketed
under the  ThermaCool(TM)  label.  There have been limited sales of this product
since its introduction due to our financial limitations.

On November 30, 1995, we acquired the assets of C.F.  Darling Paint & Chemicals,
Inc.,  a paint  manufacturing  company,  located  in New  Port  Richey,  Florida
("Darling Paint") for approximately $250,000 in cash. This facility was acquired
to produce and develop paints and coatings for our  ThermaCool(TM)  product line
which  incorporates  our shell  technology.  This facility and  operations  were
closed during fiscal year 2000.

On July 28, 1997, we acquired all of the outstanding common stock,  representing
100%  ownership  of  Atlas  Chemical  Co.("Atlas"),  a  paint  manufacturer  and
distributor,  located in Miami,  Florida.  We acquired Atlas to provide a larger
manufacturing  facility for  production of our paints and coatings,  as well as,
obtaining an established marketing and distribution channel which included major
accounts such as Ace Hardware,  Lowes, and others.  This facility and operations
were closed on November  24, 2000  because of the lack of funds to maintain  the
operation. All personnel were terminated on that date.

We acquired T-Coast Pavers/Sealco  Systems,  Inc.("T-Coast") on December 1, 1998
for  300,000  shares  of its  common  stock,  then  valued  at  $300,000  and an
employment agreement with T-Coast's founder and key executive for the payment of
an additional  300,000 shares over a three year employment period which were not
issued.  This company  provided  paver  installation  and  driveway  sealant and
coating services primarily to contractors in Southeast Florida.  We entered into
a Stock Purchase Termination Agreement,  which is effective April 1, 2001, which
divests the purchase of this company.  Under this agreement,  the 300,000 shares
were  cancelled and the parties  entered into mutual general  releases.  Maurice
Malacarne,  the  shareholder  of  T-Coast  agreed  to  resign  from our board of
directors. We classified T-Coast as a discontinued operation as of April 1, 2001
and has been reflected as such in our financial statements.

On December 1, 1998, we acquired American Paints, Inc., a Pompano Beach, Florida
paint  manufacturer and distributor for 572,000 common shares.  American Paints'
operations were consolidated into the Company's Atlas manufacturing  facility to
reduce duplicate costs in April 2000.

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<PAGE>

We have not been able to generate  sufficient sales during our operating history
to fund our ongoing  operating  expenses or our continuing  product  development
activities.  We have sustained  significant operating losses since our inception
resulting in an accumulated deficit of $16,295,270 at September 30, 2001.

Due to the  financial  and  legal  problems  we are  experiencing,  our board of
directors  has  decided  to file for  protection  under  Chapter  11 of the U.S.
Bankruptcy Code. This filing occurred during November 2001. We have arranged for
debtor-in-possession  financing with our largest  shareholder.  Our intent is to
submit a plan of  reorganization,  which requests creditors to accept our shares
and to have the  debtor-in-possession  funding  source also accept our shares as
part of this reorganization.  Current shareholders will be substantially diluted
if the  reorganization  plan is  confirmed.  There is no assurance  our plans to
reorganize  will be successful or approved.  Management  believes that the shell
technology  is viable and that there are  substantial  markets for its products.
The organization  proceedings,  if successful,  will help ThermaCell achieve its
objectives and retain some shareholder value.

Business Strategy

Our  business  strategy is to develop and  commercialize  shell  technology  and
products  incorporating  shell technology.  An important element in the our past
strategy was to acquire paint  manufacturers  and  distributors to introduce our
technology into the paint and coating industry. That strategy has been abandoned
because  of  our  financial  constraints.  One of our  current  objectives  will
re-start our marketing of Vaxcells(TM)  incorporating our shell technology.  Our
restructuring strategy of developing a commercially viable manufacturing process
for shells and expansion  into markets for our shell  technology  will result in
incurring  additional  losses due to the costs associated with these strategies.
We expect to incur  losses until we are able produce  shells  consistently  on a
production-wide  basis and are able to market these shells to generate revenues.
The Company's business strategy is dependent upon the successful  implementation
of the following:


         (i)      Plan of Reorganization and Turnaround Business Strategy

                  ThermaCell  filed for  Chapter 11  protection  on  November 7,
                  2001.   ThermaCell  obtained  Bankruptcy  Court  authority  to
                  negotiate a senior secured  credit  facility from PAC Funding,
                  LLC ("PAC")  and has  continued  to operate its  business as a
                  debtor-in-possession.  PAC  is  a  Florida  limited  liability
                  company,  whose members are Augustine  Capital Fund,  L.P. and
                  Private  Capital Group.  PAC has committed  $500,000 in senior
                  secured lending.  As of May 15, 2002, PAC funded  $348,650.  A
                  committee of unsecured  creditors has not been appointed.  The
                  debtor-in-possession  funding  provided  by  PAC  has  allowed
                  ThermaCell  to  continue  operations  and  avoid  liquidation.
                  ThermaCell is not generating  sales  revenues from  operations
                  and is  dependent  upon PAC for funding  its  working  capital
                  requirements.


                                       3
<PAGE>


                  In order to be  confirmed,  the  Plan of  Reorganization  must
                  satisfy  certain   requirements   of  the  Bankruptcy   Court,
                  including  that each claim in a particular  class  receive the
                  same  treatment as each other claim in that class and that the
                  Company be adequately capitalized (upon through emergence from
                  Chapter 11) so that confirmation of the Plan of Reorganization
                  will not be followed by a liquidation  or the need for further
                  reorganization.



                  Under the Plan of  Reorganization  it is anticipated  that PAC
                  will  receive   approximately  50%  of  ThermaCell's   equity,
                  existing unsecured  creditors 40% of ThermaCell's  equity, and
                  existing  shareholders 10% of ThermaCell's  equity.  Pac would
                  convert it  existing  secured  credit into equity that upon of
                  emergence  from the Chapter 11  proceedings,  the only debt of
                  ThermaCell  would  be debt due to  professionals,  assessments
                  imposed  by  the  IRS,  which  will  be  contested  and  other
                  administrative  claims. It is anticipated that ThermaCell will
                  fund or  negotiate  these  claims  as part of the  Chapter  11
                  proceedings.



                  Management  believes  that the shell  technology is viable and
                  that  there are  substantial  markets  for its  products.  The
                  reorganization   proceedings,   if   successful,   will   help
                  ThermaCell  achieve its objectives and retain some shareholder
                  value.

         (ii)     Develop and manufacture the Company's own shells

                  The Company's  manufacturing process allows for the production
                  of insulating  shells in a manner to enable the  evacuation of
                  gases or the addition of low  conductive  gas into the shells.
                  Such evacuation  results in lower gas pressure or gases within
                  the  shells  that  can  reduce  thermal   conductivity,   thus
                  providing  improved  insulating  qualities.  The manufacturing
                  process  involves  the  formation of water vapor in the shells
                  and then the  subsequent  evacuation  of the shells by heating
                  the shells.  This process causes  out-permeation  of the water
                  vapor.

                  To the best of management's knowledge, no one has been able to
                  develop a  commercially  viable  process for the production of
                  fully  evacuated  glass shells,  due to, among other  factors,
                  manufacturing and technical restraints.  Currently,  there are
                  three large  multinational  companies that manufacture shells.
                  The essential difference between the manufacturing process for
                  partially  evacuated  shells,  as compared to substantially or
                  fully evacuated shells, is the technique  employed to evacuate
                  gases from the shells which  improve its thermal  conductivity
                  or insulating value. Our plans to market  non-evacuated shells
                  for several  uses will  compete  directly  with others in this
                  market. We plan to have non-evacuated shells available to sell
                  in the  general  market  because  not all  shells  during  the
                  manufacturing  process will be evacuated.  These non-evacuated
                  shells will be separated  and sold for general use as fillers,
                  but will be produced at a substantially reduced cost.

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<PAGE>

                  Our present  Daytona  facilities  and equipment can be used to
                  manufacture  partially  evacuated  shells.   To-date  we  have
                  manufactured  pilot  plant  quantities  of shells but have not
                  produced commercial quantities.

         (iii)    Expand the shell technology to other products

                  We believe the potential exists to commercially  exploit other
                  markets  suitable for our shell  technologies.  These  include
                  filler materials for bowling balls, aroma therapy applications
                  and  construction  components  such as drywall,  gypsum board,
                  prefabricated cement products, home siding materials and space
                  foam insulation as potential markets.  Other potential markets
                  include  refrigeration  and cooling  systems,  automotive  and
                  transportation applications,  and cups and thermoses. There is
                  no  assurance  that we will be  able  to  attract  capital  to
                  manufacture  our  products or  successfully  penetrate  any of
                  these markets. We will only be able to implement this strategy
                  if we are able to economically manufacture highly or partially
                  evacuated shells.

Manufacturing Facilities and Techniques

Management has acquired machinery, tooling, a high temperature furnace and other
items to develop a pilot facility  necessary to manufacture  evacuated shells at
our Daytona, Florida location. Production of quantities of shells sufficient for
our  immediate  needs  is  now  anticipated  during  fiscal  year  2002.  A more
substantial  facility  will need to be built to  provide  shells  in  quantities
greater than 1.5 million pounds on an annual basis.

The basic process of manufacturing  glass shells involves heating glass and then
partially drying and crushing the glass  composition.  The glass  composition is
then size separated for specific applications.  Glass shells are then formed and
blown at high temperatures with the use of heat generated by a vertical furnace.
The completed  glass shells are then  separated  from the shell  residue.  Other
types of glass shells have also been developed by ThermaCell.

Management is aware of three other  companies that currently  manufacture  glass
shells.  These glass shells are primarily  used as filler  material for plastics
and ceramics.  The  non-evacuated  glass shells are used because they provide an
improved  "ball  bearing"  effect  for  better  flow,  and as a low cost  filler
material in compounding.  The manufacturing  techniques  proposed by us would be
similar to those currently utilized to manufacture these shells,  except that we
would also employ procedures which evacuate or substantially evacuate the shells
in the final stages of the production process.

Competition

Our  products  may compete in the special  purpose  coatings  market which is an
extremely   competitive  market  principally  composed  of  large  multinational
companies that have significantly greater assets, working capital, and marketing
personnel  than us.  Special  purpose  coatings  are  similar  to  architectural
coatings such as normal house paints, but differ in that they are formulated for
special applications or environmental conditions,  such as extreme temperatures,
chemicals, or corrosive conditions.

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<PAGE>

Major producers of special  purpose  coatings  include PPG  Industries,  DuPont,
Sherwin-Williams,  RPM, Inc., Inmont,  Courtaulds,  PLC, Glidden,  Azkon.V., and
Valspar  Corp.  The U.S.  Bureau of Census valued the special  purpose  coatings
market at approximately $3 billion in 1995. The roofing,  coating and industrial
construction  coating market segment  represents  approximately 15% of the total
"special purpose coatings" market, or 28 million gallons valued at approximately
$450  million.  We believe that the primary  competitive  factors in the special
coatings  product  segment  are  quality,   ease  of  use,  service,   warranty,
availability, and price.

Our current  supply  sources of shells could become our  competitors.  We expect
that if our products become  successful,  our competitors will be more likely to
develop  and   introduce   into  the  market  place   comparable   products  and
technologies.  There  is no  assurance  that we will be able to  compete  in the
special purpose coatings or other similar markets.

Product Liability Insurance and Warranties

The Company does not currently have product liability  insurance in force. These
policies lapsed for non-payment of premiums.

Employees

As of  September  30,  2001,  the  Company  had a total  of six  employees.  All
employees  are  located  at the  Daytona,  Florida  facility.  We  consider  our
relations with our employees to be good.

Risk Related to our Business

         1. No  Assurance of  Successful  Plan of  Reorganization.  In order for
ThermaCell  to  continue  in  existence,  its  Plan  of  Reorganization  must be
confirmed by the Bankruptcy  Court.  The  confirmation  hearing is scheduled for
early July,  2002. It is anticipated  that  ThermaCell will object to certain of
the claims of creditors.  Specifically,  ThermaCell intends to object to certain
of the claims  made by the IRS for  delinquent  payroll  taxes  relating  to the
discontinued  operations  of Atlas  Chemical  and claims  made by members of the
Williams family as such claims relate to the stayed litigation proceedings. Even
if the Plan of  Reorganization  is confirmed,  ThermaCell will be dependent upon
continue  funding  through  PAC.  There is no assurance  that PAC will  continue
funding  ThermaCell  after the Plan of  Reorganization  is  confirmed.  Although
management of ThermaCell is optimistic that it will be able to generate revenues
in the near future, there is no assurance that such revenues will be substantial
or allow the Company to continue its existence.

         2. Losses from  Operations;  Accumulated  Deficit;  Negative Net Worth;
Negative  Working Capital and Going Concern  Opinion.  The Company has sustained
significant  operating  losses since its inception  resulting in an  accumulated
deficit of  approximately  $16,295,270  at  September  30, 2001.  The  Company's
independent auditors in their report regarding the Company's financial statement
as of  September  30,  2001,  indicate  that since the  Company has a history of
recurring losses from operations and insufficient  cash resources to fund a plan

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<PAGE>

of operations,  substantial doubt exists as to the Company's ability to continue
as a going concern.  Management's  strategy of developing a commercially  viable
manufacturing  process for shells and  expansion  into new markets for its shell
technology will result in the Company  incurring  substantial  additional losses
due to the costs associated with these strategies.  The Company is not currently
generating   sufficient   revenues  from  its   operations  to  repay   existing
indebtedness or fund product development  activities.  The Company will continue
to incur  significant  losses  until the Company is able to increase  its sales,
expand its product line and increase its distribution  capabilities sufficiently
to offset ongoing operating and expansion costs.  There can be no assurance that
the  Company  will ever  generate  sufficient  revenues  to allow the Company to
achieve profitable operations.

         3.  Dependence on New Product  Development and Market  Acceptance.  The
Company's  continued  existence is dependent on increased consumer awareness and
acceptance  of the  Company's  existing  and  new  products  through  the use of
partially  evacuated shells. No assurances can be given that the Company will be
able to successfully develop new products,  that any new products developed will
meet with consumer acceptance in the marketplace.  The acceptance and demand for
the Company's products are based upon the need for, and technological acceptance
of, the Company's shell technology. No assurance can be given that the Company's
future  products  can be sold at  acceptable  gross  profit  levels  or that the
Company will be able to develop, manufacture and distribute new products at such
levels.

         4. Need for Additional  Financing.  The Company will require additional
financing in the future to support its  operations  and any expansion  plans may
result in additional  dilution to  shareholders.  There can be no assurance that
the Company's  operations  will supply the revenues  necessary for such purpose.
There can be no assurances  given that such  financing  will be available in the
amounts required or, if available,  that such financing may be obtained on terms
satisfactory to the Company.

         5. Loss  of  Key  Personnel. Although  the  Company  has an  employment
agreement with Mr.  Hagarman,  , the loss of the services of Mr.  Hagarman,  the
Company's Chief Executive  Officer,  could have a material adverse effect on the
Company. The Company does not maintain any key man life insurance on the life of
Mr.  Hagarman.  In addition,  there is no assurance  the Company will be able to
attract other  competent and qualified  employees on terms deemed  acceptable to
the Company to implement its expansion plans.

         6. Product  Liability  Claims.  The Company could be subject to product
liability  claims in connection with the use of the products that it proposes to
sell. There can be no assurance that the Company would have sufficient resources
to satisfy any liability  resulting  from the product claims or would be able to
have its customers indemnify or insure the Company against such claims. Although
the  Company  currently  carries  product  liability  insurance  there can be no
assurance  that such coverage will be adequate in terms and scope to protect the
Company  against  material  adverse effect in the event of a successful  product
liability claim.

         7. Future Acquisitions.  The Company may expand its business,  in part,
through the acquisition of compatible  products or businesses.  In attempting to
locate and consummate such acquisitions, the Company may be competing with other
prospective  purchasers  of the  acquisition  candidate,  many of which may have
greater  resources  than the Company.  There can be no assurance  that  suitable

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<PAGE>

acquisition  candidates can be identified and acquired on terms favorable to the
Company,  or that the acquired  product  lines or  operations  can be profitably
operated  or  integrated  into  the  Company's  operations.   In  addition,  any
internally  generated growth  experienced by the Company could place significant
demands  on the  Company's  management,  thereby  restricting  or  limiting  its
available time and opportunity to identify and evaluate  potential  acquisition,
candidates. The ability of the Company to consummate acquisitions will depend on
its ability, to obtain sufficient  financing on acceptable terms, of which there
can be no assurance.  To the extent  management  is  successful  in  identifying
suitable  companies or products lines for  acquisition,  the Company may deem it
necessary  or advisable  to finance  such  acquisitions  through the issuance of
Common Stock,  securities convertible into Common Stock, or debt financing, or a
combination  thereof. In such cases, the issuance of Common Stock or convertible
securities  could result in further  dilution to the  purchasers  at the time of
such issuance or conversion.  The issuance of debt to finance  acquisitions  may
result,  among other  things,  in the  encumbrance  of certain of the  Company's
assets, may impede the Company's ability to obtain bank financing,  decrease the
Company's  liquidity,  and adversely affect the Company's ability to declare and
pay dividends to its stockholders.

         8.  Limitation of Directors'  Liability.  The Company's  Certificate of
Incorporation contains a provision which, in substance,  eliminates the personal
liability  of the  directors  to the Company and its  stockholders  for monetary
damages  for  breaches of their  fiduciary  duties as  directors  to the fullest
extent  permitted by Florida  law. By virtue of this  provision,  under  current
Florida  law,  a  director  of the  Company  will not be  personally  liable for
monetary damages for breach of his fiduciary duty, except for liability for: (a)
breach of his duty of loyalty to the Company or to its stockholders; (b) acts or
omissions not in good faith or that involve intentional  misconduct or a knowing
violation of law; (c) dividends or stock  repurchases  or  redemptions  that are
unlawful under Florida laws; and (d) any  transaction  from which he receives an
improper personal benefit.  This provision  pertains only to breaches of duty by
directors and not in any other corporate capacity,  such as officers, and limits
liability only for breaches of fiduciary duties under Florida  corporate law and
not for  violations  of other laws such as the  federal  securities  laws.  As a
result of the inclusion of such provision, stockholders may be unable to recover
monetary  damages  against  directors for actions taken by them that  constitute
negligence  or gross  negligence  or that are in  violation  of their  fiduciary
duties,  although  it may be possible to obtain  injunctive  or other  equitable
relief with respect to such  actions.  The  inclusion  of this  provision in the
Company's  Certificate  of  Incorporation  may have the effect of  reducing  the
likelihood of derivative  litigation  against  directors,  and may discourage or
deter  stockholders or management from bringing a lawsuit against  directors for
breach of their duty of care, even though such an action,  if successful,  might
otherwise have benefited the Company and its stockholders. It is the position of
the Securities and Exchange Commission that, insofar as the foregoing provisions
may be invoked to disclaim  liability for damages  arising under the  Securities
Act, such  provisions  are against  public policy as expressed in the Securities
Act and are therefore unenforceable.

         9. No  Dividends  and None  Anticipated.  The payment by the Company of
dividends,  if any, in the future  rests within the  discretion  of its Board of
Directors and will depend, among other things, upon the Company's earnings,  its
capital  requirements  and its financial  condition,  as well as other  relevant
factors.  The  Company has not paid or declared  any  dividends  upon its Common
Stock since its inception and by reason of its present  financial status and its
contemplated  future financial  requirements  does not contemplate or anticipate
paying any dividends upon its Common Stock in the foreseeable future.

                                       8
<PAGE>

         10. Impairment of Patent and Trademark Rights.  The Company has certain
patent  rights   relating  to  the   manufacturing   processes  for   evacuating
microspheres  and the use of  microspheres  in paintings and  coatings.  Current
management uses different  manufacturing and processing  techniques to partially
evacuate  microspheres  then the  processes  described in the  Company's  patent
applications.  Furthermore,  the  Company has  discontinued  its  paintings  and
coatings  operations.  Therefore,  the future  value,  if any, of the  Company's
patent and  trademark  rights are  uncertain  resulting in the  write-off of the
intangible assets relating to patents and trademarks.

         11.  Control of the Company by PAC Funding and the Augustine  Fund. The
Augustine Fund currently owns  7,037,003  shares of  ThermaCell's  common stock,
which represents 55.5% of ThermaCell's  outstanding  Common Stock as of December
31, 2001.  Thus,  the Augustine  Fund is in a position to control the affairs of
ThermaCell. In addition, the Augustine Fund, through its beneficial ownership of
PAC Funding,  requires a substantial number of additional shares of ThermaCell's
common stock if the Plan of  Reorganization  is confirmed.  Thus,  the Augustine
Fund and its affiliates will be in a position to elect our directors,  accept or
reject  acquisition  or  divestiture  proposals,  and  control  the  affairs and
direction of ThermaCell's business and future operations.

         12. Lack of Public Trading Market.  ThermaCell's Common Stock currently
trades in the "pink sheets" and has limited  volume.  In order the  ThermaCell's
shares to commence trading on the OTC:BB electronic  bulletin board,  ThermaCell
will need to become  current in its  periodic  reporting  obligations  under the
Securities  Exchange  Act of 1934,  as  amended.  This Form  10-SB is filed on a
delinquent basis. ThermaCell anticipates filing the delinquent Form 10-QSB's for
the periods  ending  December  31,  2001 and March 31, 2002 in the near  future.
ThermaCell  will  not be able  to  commence  trading  on the  OTC:BB  electronic
bulletin board until the delinquent  Form 10-Q's are filed,  and all future Form
10-Q's are filed on a timely  basis.  There is no  assurance  that the NASD will
clear a Form 15c2-11 or that  ThermaCell will able to locate a market maker that
will initiate  quotations for ThermaCell's  securities on the OTC:BB  electronic
bulleting  board.  In addition,  the SEC and the NASD have adopted certain rules
effecting "penny stocks".  As a result of the rules  regulating  "penny stocks",
the market  liquidity  for  ThermaCell's  securities  is  adversely  affected by
limiting the ability of broker-dealers  to sell ThermaCell's  securities and the
ability of purchasers to sell their securities in the secondary market.

ITEM 2.  PROPERTIES.

We currently  lease and occupy  12,320 sq. ft. of space at 440  Fentress  Blvd.,
Daytona Beach,  Florida where we maintain our corporate  offices and development
of the initial  production  facilities for evacuated shells.  This lease expires
October 31, 2004. Lease payments are $5,713.40 monthly. The facility consists of
approximately  2,500 square feet of office space with the balance being used for
warehousing and  manufacturing.  In order to maintain occupancy of this facility
we will have to make rent payments.  Management is currently considering whether
to vacate this building and relocate in a smaller less expensive facility.

                                       9
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

We are subject to a number of lawsuits and claims  arising out of the conduct of
its business.  Management  believes that the probable resolution of such matters
may  materially  affect our  financial  position,  results of operations or cash
flows.

In November  2001, we filed a voluntary  petition for relief under Chapter 11 of
the United States  Bankruptcy Code in the United States Bankruptcy Court for the
Middle   District  of  Florida  in  Tampa,   Florida.   We  have   arranged  for
debtor-in-possession  financing with our largest  shareholder.  Our intent is to
have our plan of reorganization  approved in July 2002, which requests creditors
to accept our shares and to have the  debtor-in-possession  funding  source also
accept our shares as part of this  reorganization.  Current shareholders will be
substantially  diluted  if the  reorganization  plan is  confirmed.  There is no
assurance  our plans to reorganize  will be  successful or approved.  Management
believes  that the shell  technology  is viable and that  there are  substantial
markets for its products. The organization proceedings, if successful, will help
ThermaCell achieve its objectives and retain some shareholder value.

In light of the Chapter 11 filing the following lawsuits have been stayed:

On October 4, 2000, a judgment was rendered by the United States District Court,
Middle District of Florida, in a trial regarding claims by Mr. Russell Haraburda
and Eden Group, Inc. against John Pidorenko, the Company's former president, and
the Company for monies  purportedly due for arranging  financing for the Company
prior to its IPO in March 1997. The Plaintiffs, in the pretrial, claimed damages
in the amount of  approximately  $3.5 million.  The judgment  concluded  that no
monies or other  consideration was due Mr. Haraburda or the Eden Group, Inc. The
Company's  claims  regarding two promissory  notes of the Eden Group,  Inc., Mr.
Haraburda's firm, that were unpaid were also denied. Subsequently, Mr. Haraburda
and Eden Group, Inc. appealed the decision to the United States Court of Appeals
for the Eleventh Circuit.  The Company also appealed the decision  regarding the
obligations of Eden Group,  Inc. under the promissory notes. This court affirmed
the lower court's  decision and there has been no further  action by Mr. Russell
Haraburda and Eden Group, Inc.

The Company is involved in several  lawsuits for  outstanding  obligations  from
vendors,  leasing  companies,  and certain  professionals for services provided.
There are default  judgments that have been granted  because the Company did not
had the financial resources to appropriately defend itself as representation was
declined or withdrawn.

Generally,  legal  actions to  enforce  or  otherwise  effect  repayment  of all
pre-petition  liabilities as well as all pending  litigation  against ThermaCell
are stayed while we continue to operate our business as debtor-in-possession.

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

None


                                       10
<PAGE>

                                     PART II

ITEM 5.  COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

Our common  stock was listed  and traded on NASDAQ  under the symbol  VCLL until
February  23,  2000  at  which  time  it  was  de-listed   for   non-compliance.
Subsequently,  our securities  were listed on the NASD BB:OTC until February 23,
2001 at which time they were removed and  thereafter  listed in the Pink Sheets.
The following table sets forth, for the periods indicated, the range of high bid
and low bid closing quotations for our securities during the last two years. The
tables  reflect the 1 for 4 reverse  split that  occurred  in March 2000.  These
quotations are between dealers and do not include retail  mark-ups,  mark-downs,
or other fees or commissions, and may not represent actual trades.


                              Common                      Redeemable
                              Stock                        Warrants
--------------------------------------------------------------------------------
                               Bid                           Bid
     2001 Fiscal Year   High        Low    Closing     High        Low   Closing
--------------------------------------------------------------------------------

     First quarter     .937        .187     .187          -       -        -

     Second quarter    .375        .100     .140          -       -        -

     Third quarter     .190        .060     .060          -       -        -

     Fourth quarter    .120        .050     .080          -       -        -


                              Common                      Redeemable
                              Stock                        Warrants
--------------------------------------------------------------------------------
                               Bid                           Bid
     2001 Fiscal Year   High        Low    Closing     High        Low   Closing
--------------------------------------------------------------------------------


     First quarter     2 3/8       1 7/8    3 3/16     11/16      3/32     5/16

     Second quarter    5 3/4       1 5/8    1 5/8       9/16      1/8      5/16

     Third quarter     3             9/16   1 3/4       1/2       7/32     9/32

     Fourth quarter    1 3/4         5/8      5/8       1/4       1/32     5/32


As of September  30, 2001,  there were  approximately  135 holders of record for
common stock and 5 holders of record of the  warrants.  Our warrants  expired on
March 12, 2001, and no longer exist as a separate security.

There has been no recent trading market for the Company's Common Stock and there
can be no assurance that a public market for the Common Stock will develop or be
sustained. Until the Company has the NASD clear a Form 15c2-11, the Company does
not expect to be eligible for listing of its Common  Stock on the OTC:BB.  There
is no assurance the Company will ever have a Form 15c2-11 declared  effective by
the SEC or NASD.  The  Company is still  delinquent  in its  periodic  reporting
obligations  under the  Securities  Exchange  Act of 1934 and cannot  recommence
trading on the OTC:BB until all delinquent reports are filed.  Trading,  if any,

                                       11
<PAGE>

in the Company's  securities will be conducted by what are commonly  referred to
as the "pink  sheets." Such trading may cause the  Company's  Common Stock to be
significantly  less liquid than common stock or other  securities  listed on the
NASDAQ  National  Market  or  the  NASDAQ  Small  Cap  Market.  As a  result,  a
shareholder  may  find  it  difficult  to  dispose  of,  or to  obtain  accurate
quotations  as to the  price  of the  Company's  securities.  In  addition,  the
Company's securities may be subject to so-called "penny stock" rules that impose
additional sales practice and market making  requirements on broker-dealers  who
sell and/or make a market in such  securities.  This could affect the ability or
willingness  of  broker-dealers  to sell and/or  make a market in the  Company's
securities and the ability of holders of the Company's  securities to sell their
securities in the secondary market.

The market prices for securities of emerging  companies have  historically  been
highly volatile. Future announcements concerning the Company or its competitors'
results,  as well as investor perception of the Company and industry and general
economic and market conditions may have a significant impact on the market price
of the Company's securities.  In addition,  the stock market is subject to price
and volume  fluctuations that affect the market prices for companies in general,
and small  capitalization  companies in particular,  and are often  unrelated to
their operating performance.

The Company has not paid any  dividends  on its common stock and does not intend
to pay cash dividends on its common stock in the foreseeable future. The Company
intends  to  follow a policy of  retaining  earnings,  if any,  to  finance  the
development and expansion of its business.

Continental  Stock  Transfer & Trust  Company of New York,  New York acts as the
Company's Transfer Agent and Warrant Agent.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Form 10-KSB  contains  forward  looking  statements,  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934,  regarding future events and the future performance of the
Company  involve risks and  uncertainties  which may cause the Company's  actual
results in future periods to be materially different from any future performance
suggested  herein.  The  words   "anticipated,"   "believe,"  "expect,"  "plan,"
"intend,"  "seek,"  "estimate,"  "project,"  "will,"  "could," "may" and similar
expressions  are  intended  to  identify   forward-looking   statements.   These
statements  include,  among others,  information  regarding  future  operations,
future capital  expenditures  and future net cash flow. Such statements  reflect
our current views with respect to future events and  financial  performance  and
involve risks and uncertainties, including, without limitation, general economic
and  business  conditions,  changes in foreign,  political,  social and economic
conditions, regulatory initiatives and compliance with governmental regulations,
the ability to achieve further market penetration and additional customers,  and
various other matters, many of which are beyond our control.  Should one or more
of these risks or uncertainties occur, or should underlying assumptions prove to
be  incorrect,  actual  results may vary  materially  and  adversely  from those
anticipated,  believed, estimated, or otherwise indicated.  Consequently, all of
the  forward-looking  statements made in this Form 10-KSB are qualified by these
cautionary  statements  and there can be no assurance  of the actual  results or
developments.

                                       12
<PAGE>

General

We were a  developmental  stage  enterprise  during our  initial  three years of
operation  for  the  fiscal  years  through  September  30,  1997.  During  this
development stage period, we devoted the majority of our efforts on research and
development,   financing,  marketing  and  activities  related  to  starting  up
production  of our  proprietary  technology.  These  activities  were  funded by
investments from stockholders and borrowings from unrelated third parties. Since
fiscal year 1998,  we have been an  operating  stage  enterprise  based upon the
several acquisitions that were completed. With acquisitions,  particularly Atlas
Chemical,  we evolved from the development stage to an operating  enterprise and
our  principal  line of business was the sale of paints and coatings  within the
paint  industry.  With the closing of Atlas  Chemical  during  November 2000, we
discontinued our  manufacturing of all paint or coating  products.  Furthermore,
our ThermaCool(TM) coating is not presently being manufactured.

We have not been able to  generate  sufficient  revenues  during  our  operating
history  to fund  our  ongoing  operating  expenses  or our  continuing  product
development activities. The successful IPO completed in March 1997 allowed us to
repay our then outstanding  indebtedness and provided working capital. In fiscal
year 1994,  we completed  the  development  of our first  product  line. We have
sustained  significant  operating  losses  since our  inception  resulting in an
accumulated deficit of approximately $16,295,000 at September 30, 2001.

Chapter 11 Reorganization Proceeding

We have sustained significant operating losses since our inception. Management's
restructuring strategy of developing a commercially viable manufacturing process
for  microspheres  and the expansion  into markets for our shell  technology may
result in additional  losses due to the costs associated with these  strategies.
We expect to incur  losses until we are able to generate  sales of  microspheres
and develop our  distribution  capabilities  to a  sufficient  revenue  level to
offset ongoing operating and expansion costs.

Management's  previous strategies of expanding the ThermaCool(TM)  product line,
developing a commercially viable manufacturing process for shells, and expansion
into new markets for its shell  technology  would have  resulted in  substantial
additional losses due to the costs associated with these strategies.

In November  2001, we filed a voluntary  petition for relief under Chapter 11 of
the United States  Bankruptcy Code in the United States Bankruptcy Court for the
Middle District of Florida. We are operating as a debtor-in-possession under the
Code,  which  protects us from our creditors  pending  reorganization  under the
jurisdiction of the Bankruptcy Court. As debtor-in-possession, we are authorized
to operate our business but may not engage in transactions  outside the ordinary
course of business without approval of the Bankruptcy Court.

As part of the Chapter 11 reorganization  process,  the Company has attempted to
notify all known or potential creditors of the Chapter 11 Filing for the purpose
of identifying all pre-petition claims against the Company. Substantially all of
the Company's liabilities ("pre-petition liabilities") are subject to settlement
under  the plan of  reorganization.  Generally,  legal  actions  to  enforce  or

                                       13
<PAGE>

otherwise  effect  repayment  of all  pre-petition  liabilities  as  well as all
pending litigation against the Company are stayed while the Company continues to
operate  its  business  as  debtor-in-possession.   The  Company  can  only  pay
pre-petition  obligations with the approval of the Bankruptcy  Court.  Schedules
have been filed by the  Company  with the  Bankruptcy  Court  setting  forth its
assets and  liabilities  as of the filing  date as  reflected  in the  Company's
accounting records.  Differences between amounts reflected in such schedules and
claims filed by creditors will be investigated  and either mutually  resolved or
subsequently  adjudicated  before the Bankruptcy  Court. The ultimate amount and
settlement terms for such  liabilities are subject to a plan of  reorganization.
There can be no assurance that any reorganization  plan that is effected will be
successful.  Under  the Code,  the  Company  may elect to assume or reject  real
property  leases,  employment  contracts,   personal  property  leases,  service
contracts and other executory pre-petition  contracts,  subject to the review of
the  Bankruptcy  Court.  Parties  affected  by  any  such  rejections  may  file
pre-petition  claims with the  Bankruptcy  Court in accordance  with  bankruptcy
procedures.  The Company cannot presently  determine or reasonably  estimate the
ultimate  liability  that may result  from  rejecting  leases or from  filing of
claims for any  rejected  contracts,  and no  provisions  have been made for the
majority of these items.

Results of Operations
Fiscal Year 2001 Compared to Fiscal Year 2000

Revenues
--------
There were no revenues for the fiscal years ended  September  30, 2001 and 2000.
We are currently  developing our  microsphere  technology and have not generated
revenues from products associated with this technology during these periods.

Selling, General and Administrative Expenses
--------------------------------------------
For  the  year  ended   September  30,  2001,   total  selling,   general,   and
administrative  expenses  were  $1,492,464  as  compared to  $2,960,988  for the
previous fiscal year, a decrease of $1,468,524 or 50%. This decrease was largely
due a decrease in professional and consulting fees of  approximately  $1,084,000
paid with our common stock from the year ended  September  30, 2000 to 2001.  In
addition,  payroll and insurance expenses decreased  approximately $185,000 from
the year  ended  September  30,  2000 to 2001.  Amortization  expense  decreased
approximately  $200,000 from the year ended September 30, 2000 to 2001 which was
associated  with  our  goodwill  that was  written-off  during  the  year  ended
September 30, 2000.

Interest Expense
----------------
Interest expense  decreased 7%, or $24,141 to $301,663 for the fiscal year ended
September 30, 2001 from $325,804 in the previous fiscal year ended September 30,
2000.

Loss on Impairment of fixed assets and intangible assets
--------------------------------------------------------
During the fiscal year ended September 30, 2001, we had determined that pursuant
to FASB No. 121, our fixed assets,  patents and  trademarks  were  impaired.  In
performing our review of the  recoverability of these assets, we determined that
there will be no future cash flows from their use and consequently have recorded
a loss on  impairment  of fixed assets of $488,492 and a loss on  impairment  of
intangible assets of $560,004 during the fiscal year ended September 30, 2001.

                                       14
<PAGE>

Loss on discontinued operations
-------------------------------
During year ended September 30, 2000, we closed our Atlas Chemicals operation in
Miami, Florida because of the lack of working capital.  This closing resulted in
a charge of $2,848,852  during the fiscal year ended September 30, 2000.  During
the  fiscal  year  ended  September  30,  2001,  we  generated  a loss from this
discontinued division of $66,590.

We entered into a Stock Purchase Termination  Agreement effective April 1, 2001,
which divested the purchase of T-Coast Pavers. Under this agreement, the 300,000
shares were returned to us and the parties entered into mutual general releases.
During the fiscal year ended  September  30, 2001 and 2000,  T-Coast  Pavers was
recorded  as a  discontinued  operation  that  resulted  in a loss of $6,944 and
$24,234, respectively.

Net Loss
--------
The net loss and the net loss per share was $2,916,157 and $0.29,  respectively,
for the fiscal year ended  September 30, 2001, as compared to a net loss and net
loss per share of $6,459,774 and $1.69, respectively,  for the fiscal year ended
September  30, 2000.  The decrease in loss is, in part,  attributed to our lower
level of selling,  general and  administrative  costs over the prior fiscal year
and the charge for  discontinued  operations  in the prior fiscal year with a no
similar charge in the current period.  On a weighted  average basis,  there were
9,984,183  shares  outstanding  for fiscal  year  ended  September  30,  2001 as
compared to 3,830,448  shares  outstanding  for fiscal year ended  September 30,
2000.

Fiscal Year 2000 Compared to Fiscal Year 1999

Revenues
--------
There were no revenues for the fiscal years ended  September  30, 2001 and 2000.
We are currently  developing our  microsphere  technology and have not generated
revenues from products associated with this technology during these periods.

Selling, General and Administrative Expenses
--------------------------------------------
For the fiscal  year ended  September  30,  2000,  total  selling,  general  and
administrative  expenses were $2,960,988 as compared to $1,668,915 for the prior
fiscal  year,  a 77%  increase.  This  increase  was largely  due to  additional
expenses  for  professional  and  consulting  fees paid  during  the year  ended
September 30, 2000 which payments  included the issuance of common stock instead
of cash compensation.

                                       15
<PAGE>

Interest Expense
----------------
Interest expense increased 26%, or $68,238 to $325,804 for the fiscal year ended
September  30, 2000 from $257,566 in the previous  fiscal year ended 1999.  This
increase is attributed to the higher indebtness as we expanded our operations at
our new Daytona facility.

Loss on discontinued operations
-------------------------------
During  fiscal year ended  September  30,  2000,  we closed our Atlas  Chemicals
operation in Miami, Florida because of the lack of working capital. This closing
resulted in a charge of  $2,848,852.  There was a charge of $86,944 in the prior
fiscal year for the closing of a specific operation within the paint division.

Net Loss
--------
The net loss and the net loss per share were $6,459,744 and $1.69,  respectively
for the year ended  September  30, 2000,  as compared to a net loss and net loss
per share of  $3,677,068  and $1.85,  respectively,  for the fiscal  year ending
September 30, 1999.  The increase in loss is, in part,  attributed to our higher
level of selling,  general and administrative  costs over the prior year and the
charge for  discontinued  operations in the current year while,  in the previous
year, we benefited from deferred  income tax expense of $795,309.  On a weighted
average basis,  there were 3,830,448  shares  outstanding for fiscal year ending
September 30, 2000 as compared to 1,981,228  shares  outstanding for fiscal year
ended September 30, 1999, a 93% increase.

Liquidity and Capital Resources

To date,  we have  funded our  capital  requirements  and  business  operations,
including product development  activities with funds provided by the sale of our
securities and from borrowings. During the fiscal year ended September 30, 2001,
we received  $637,598  from various  investors.  We received  $530,471  from the
issuance of notes payable and $107,127 from common stock  subscriptions.  During
this period, only limited other capital, as discussed below, was received by the
company to conduct its  operations.  Consequently,  without the  availability of
adequate  funding the company  was forced to close most of its  operations  that
included  consolidating  the American Paints business into the Miami location of
Atlas Chemical, and thereafter closing the Atlas operation itself.

During March 2001,  conversion  of  $566,667,  a portion of the debt held by the
Augustine  Fund,  who holds all remaining  convertible  debt was completed  into
6,883,595  shares of common stock which  represents more than 50% voting control
of the  outstanding  common  stock of the  company.  With this  conversion,  the
principals of Augustine  Capital are in a position to control the affairs of the
company.  These  shares  were not issued as of  September  30,  2001.  Augustine
Capital has agreed,  subject to certain  additional  due  diligence,  to provide
additional capital to the company.

We continue to experience  operating losses.  Our net working capital deficiency
and  stockholders'  deficit  are  $3,587,446  and  $3,578,580,  respectively  at
September 30, 2001. We have not historically  generated sufficient revenues from
operations  to self-fund  our capital  requirements.  Management  is focusing on
raising  additional  capital  to fund it  present  development.  We do not  have
sufficient working capital to meet our immediate needs.

                                       16
<PAGE>

Due to the  financial  and  legal  problems  we are  experiencing,  our board of
directors  has  decided  to file for  protection  under  Chapter  11 of the U.S.
Bankruptcy Code. This filing occurred during November 2001. We have arranged for
debtor-in-possession  financing with our largest  shareholder.  Our intent is to
submit a plan of  reorganization,  which requests creditors to accept our shares
and to have the  debtor-in-possession  funding  source also accept our shares as
part of this reorganization.  Current shareholders will be substantially diluted
if the  reorganization  plan is  confirmed.  There is no assurance  our plans to
reorganize will be successful or approved.

We will not be able to meet our future cash requirements unless new financing is
obtained.  Moreover,  we will require substantial capital to execute our Plan of
Reorganization and the Plan of Reorganization must be approved in the short term
to remain a going  concern.  We will need short term  outside  investments  on a
continuing  basis to  finance  our  current  operations.  Our  revenues  for the
foreseeable future may not be sufficient to attain  profitability.  We expect to
continue to  experience  losses for the near  future.  If we do not obtain short
term  financing,  we may not be  able to  continue  as a going  concern  and the
Company  may have to  convert to a Chapter 7  bankruptcy.  We do not have a bank
line of credit  and there  can be no  assurance  that any  required  or  desired
financing will be available through bank borrowings,  debt, or equity offerings,
or  otherwise,  on  acceptable  terms.  If  future  financing  requirements  are
satisfied  through the issuance of equity  securities,  investors may experience
significant  dilution in the net book value per share of common  stock and there
is no guarantee that a market will exist for the sale of the Company's shares.

Inflation

Inflation has not proven to be a factor in our business  since our inception and
is not  expected to have a material  impact on our  business in the  foreseeable
future.

Critical Accounting Policies

The  Company's  most  critical  accounting  policies  mainly relate to the going
concerns  status assumed for the Company and the related use of estimates in the
valuation of certain assets and  liabilities.  In  particular,  at September 30,
2001  intangibles,  inventories,  receivables  and other assets  valuations  are
entirely dependent on the Company continuing to operate as a going concern.  The
value of these assets on a liquidation basis would likely be significantly  less
than their currently recorded net book values.

Going Concern Assumption

On November 7, 2001 the Company  filed a voluntary  petition for  reorganization
under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court. The
Company  experienced  a  dramatic  reduction  in sales  volume  and  incurred  a
significant  net loss during the year ended September 30, 2001. The Company also
experienced a significant  loss in 2000. These losses and other factors resulted
in most  of the  Company's  available  cash  resources  being  used  to  support
operating  activities.   In  addition,   the  Company  has  assumed  significant
commitments  and  obligations  as described in the financial  statements.  These
factors,  among others,  raise  substantial doubt about the Company's ability to
continue as a going concern.

                                       17
<PAGE>

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

Management  has  taken  certain  steps to revise  the  operating  and  financial
requirements  of the Company,  which it believes are  sufficient  to provide the
Company with the ability to continue in existence.  These steps and management's
plans  regarding  these matters  include the filing of a voluntary  petition for
reorganization  under  Chapter  11 of the U.S  Bankruptcy  Code  with  the  U.S.
Bankruptcy  Court. The first impact of the Chapter 11 filing was to stay certain
legal proceedings that had been instituted against the Company.  Management also
believes  that the Chapter 11 filing has allowed the Company to  reorganize  and
rethink its direction, and to obtain debtor-in-possession financing.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America  requires  management of the
Company to make  estimates and  assumptions  affecting  the reported  amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements,  as well as revenues and expenses  during
the reporting period. The amounts estimated could differ from actual results.

ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial  statements  to be provided  pursuant to this Item 7 begin on page
F-1 of this Report, following Part III hereof.

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

We appointed Pender Newkirk and Company, CPA's as our auditors on May 2, 2000.

                                       18
<PAGE>


                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The names, ages and respective positions of the Executive Officers and Directors
of the Company are as follows:

         Name                            Age              Position
         ----                            ---              --------
         James Hagarman                  57  Chief Executive Officer, President
                                             and Director

         Donald G. Huggins, Jr.          53  Director

         Kenneth Stiles                  45  Director

Executive  officers are elected by the Board of Directors  and serve until their
successors are duly elected and qualify, subject to earlier removal by the Board
of Directors.  Directors are elected at the annual  meeting of  shareholders  to
serve for their term and until their respective  successors are duly elected and
qualify, or until their earlier resignation,  removal from office, or death. The
remaining  directors  may fill any  vacancy  in the  Board of  Directors  for an
unexpired term.

In  anticipation of our  reorganization  proceeding  Gerald  Couture,  and Peter
Thomas  resigned as  directors  effective  September  20, 2001,  Peter  Leighton
subsequently  resigned on October 12, 2001.  James  Hagarman,  our current Chief
Executive  Officer and Don  Huggins,  who is the husband of the  shareholder  of
Private  Capital  Group,  one  of the  entities  which  will  be  providing  our
debtor-in-possession financing were appointed to fill vacancies created by these
resignations.  Maurice Malacarne  resigned as part of the Termination  Agreement
for T-Coast Pavers.  Our current board of directors  consists of James Hagarman,
Dr. James Stiles and Don Huggins.

Business Experience of Executive Officers and Directors

Mr.  Hagarman has been our Chief  Executive  Officer since June 2000. He holds a
PhD in inorganic  chemistry.  Prior to joining  ThermaCell,  Mr.  Hagarman was a
technical director at ECCM in Canton, Massachusetts for approximately 18 months.
From 1984  through  1999,  Mr.  Hagarman  was  employed  in  various  management
capabilities  involving hollow  microspheres  production with PQ Corp. in Valley
Forge, Pennsylvania.

Mr. Donald G. Huggins,  Jr.,  Director.  Mr.  Huggins is currently  President of
Private Capital Group Inc., Clearwater, Florida. Mr. Huggins has served over the
past several  years as Chief  Operating  Officer,  Chief  Financial  Officer and
Director of Business  Development and Strategic Alliances for Innova Pure Water,
Inc. a publicly  traded,  water  filtration  technology  enterprise,  located in
Clearwater, Florida. Prior to his Innova tenure, Mr. Huggins' career was focused
on organizing and acquiring premium real estate development projects,  through a
rollup strategy, for his privately held development company.

                                       19
<PAGE>

Kendall B. Stiles, M. D. has been a director of the Company since April 4, 1996.
Dr.  Stiles has been employed as an emergency  room  physician for the last five
years in the State of Virginia and is the office,  director and sole shareholder
of American Medical Emergency Services, Inc., located in Virginia. Dr. Stiles is
the brother-in-law of John Pidorenko, the former founder of the Company.

Election

Our Bylaws fix the size of the Board of  Directors at no fewer than three and no
more than nine members,  to be elected annually by a plurality of the votes cast
by the holders of Common  Stock,  and to serve until the next annual  meeting of
stockholders and until their successors have been elected or until their earlier
resignation or removal. Currently there are four directors.

ITEM 10. EXECUTIVE COMPENSATION

Executive Compensation

The following  table shows the  compensation  paid or accrued by us for the year
ended  September  30, 2001 and 2000,  to or for the account of our officers that
exceed $100,000.  No other executive  officer or director  received  benefits or
annual  salary  and  bonus  of  $100,000  or  more  during  the  stated  period.
Accordingly,  the summary  compensation  table does not include  compensation of
those other executive officers.

<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE

                                    Annual Compensation                Long-Term Compensation Awards

                                                                   Restricted
                                                   Other   Annual  Stock        Options/    LTIP        All Other
Name & Principal              Salary     Bonus     Compensation    Award(s)     SARs        Payouts     Compensation
Position              Year        ($)        ($)           ($)          ($)        (#)          ($)              ($)

<S>                 <C>      <C>          <C>          <C>        <C>          <C>          <C>          <C>
James Hagarman
President, CEO        2001    $130,000      --          --            --          --         --           --

                      2000    $32,500       --          --            --          --         --           --

</TABLE>

------------------------

Employment and Other Agreements

In June 2000, we entered into an employment  agreement with James Hagarman,  our
President.  This  agreement  became  effective on July 5, 2000 and has a term of
three (3) years.  Under this  agreement,  Mr.  Hagarman is entitled to an annual
base salary of  $130,000  during the term of the  agreement.  In  addition,  Mr.
Hagarman  was issued  500,000  shares of our Common  Stock that vests over a two
year period. As of September 30, 2001,  375,000 shares have vested. Mr. Hagarman
is  entitled to bonus  compensation  as  determined  by the  Company's  board of
directors.  Such  bonuses  may be paid in cash or issued in shares of our Common
Stock on such terms as  approved  by our board of  directors.  Mr.  Hagarman  is
entitled to  reimbursement  for  ordinary,  necessary  and  reasonable  business

                                       20
<PAGE>

expenses in connection with his services.  He may participate in any retirement,
medical,  dental, welfare and stock options plans, life and disability insurance
coverages  and  other  benefits  afforded  our  employees.  If Mr.  Hagarman  is
terminated  with  cause or we  elect  not to renew  this  agreement,  then he is
entitled his unpaid salary through the employment termination date. Mr. Hagarman
has agreed not to compete  with us during the term of this  agreement  and for a
period of one (1) year after termination of this agreement.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The  following  table  sets  forth  certain  information  with  respect  to  the
beneficial ownership known to Company of shares of ThermaCell Technologies, Inc.
Common  Stock  owned  as of May 1,  2002  beneficially  by (i) each  person  who
beneficially owns more than 5% of the outstanding Common Stock, (ii) each of our
directors,  (iii)  the  Officers  of  ThermaCell  Technologies,  Inc.,  and (iv)
directors and executive officers of ThermaCell Technologies, Inc. as a group:

<TABLE>
<CAPTION>

                                                       Shares of                       Percent of
      Name of Beneficial Owner (3)                  Common Stock (1)                   Class (2)
-----------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                                <C>
James Hagarman                                          500,000                            4%
Donald G. Huggins (4)(5)                                  -0-                             -0-
Kenneth Stiles                                           17,863                           .1%

Augustine Fund, LP (4)                                7,037,003                         55.5%

All directors and executive
officers as a group (4 persons)                         517,863                          4.1%

</TABLE>

(1)  Represents sole voting and investment power unless otherwise indicated.

(2)  Based on 12,690,704 common shares outstanding as of December 31, 2001.

(3)  The address of each individual is in ThermaCell's care.

(4)  The above table excludes  shares of our Common Stock,  which will be issued
     to Pac Funding,  LLC, our secured credit facility provider,  if our Plan of
     Reorganization is confirmed. Augustine Fund, L.P. and Private Capital Group
     are the members of Pac  Funding,  LLC.  The wife of Donald G.  Huggins owns
     Private Capital Group. Mr. Huggins  disclaims  ownership of Private Capital
     Group, Inc.

(5)  The table excludes  620,000 common  shares,  which are due Private  Capital
     Group, Inc. for pre- bankruptcy petition fundings.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our  former  vice  president  owns the real  estate in which we had our  T-Coast
Pavers  offices.  Rental expense for the years ended September 30, 2001 and 2000
were $17,898 and $16,692, respectively.

We have a consulting agreement with a stockholder that expired on March 1, 2002.
Monthly payments under the agreement were $10,000.  For the year ended September
30, 2001, we owed $190,000 in consulting fees.

                                       21
<PAGE>

We have a consulting  agreement  with a company owned by our former  Chairman of
the Board of Directors.  This agreement  expires on March 1, 2002 and requires a
monthly  payment  of  $10,000.  As of  September  30,  2001  and  2000,  we owed
approximately  $221,000  and  $101,000  in unpaid fees in  connection  with this
agreement, respectively.

The above  transactions are not necessarily  indicative of the transactions that
would have been entered into had comparable  transactions been entered into with
independent parties.

During March,  2001, the Augustine  Capital Fund,  L.C. (the  "Augustine  Fund")
converted  $566,667 of our  convertible  notes into  6,833,595  shares of Common
Stock.  With this  conversion  the  principals  of  Augustine  Capital  are in a
position  to control  the affairs of  ThermaCell  because the  issuance of these
shares upon  conversion  represents more than 50% voting control of ThermaCell's
outstanding Common Stock. These shares were not issued as of September 30, 2001.
The Augustine Fund still owns approximately $1,351,000 of our convertible notes.
Furthermore,  the Augustine Fund, or its affiliates,  have supported our working
capital  requirements  prior to our November 7, 2001  Chapter 11  reorganization
filing through working capital advances.  The Augustine Fund, or its affiliates,
are a significant source of our debtor-in-possession financing.

Prior to the filing of the  Chapter 11  reorganization  proceeding,  the Company
entered into a Stock Purchase  Termination  Agreement,  effective as of April 1,
2001  (the  "Termination  Agreement"),   by  and  among,  the  Company,  T-Coast
Paveis/Ssealco   Systems,  Inc.  ("T-Coast")  and  Maurice  Malacarne  and  Judy
Malacarne, the shareholders of T-Coast.

On December 1, 1998 the Company  acquired  all of the stock of T-Coast  from the
Malacarnes and entered into an Employment Agreement with Mr. Malacarne.

On several  occasions,  including  formal  letters from T-Coast's  counsel,  the
Company was informed by T-Coast and Mr. Malacarne that it was in material breach
of the above  referenced  Stock  Purchase  Agreement  and  Employment  Agreement
entered  into in December,  1998.  Specifically,  the Company  failed to pay Mr.
Malacarne  $300,000  as per  the  terms  of the  December  1998  Stock  Purchase
Agreement  and $30,000  owing to Mr.  Malacarne  per his  Employment  Agreement.
Therefore,  in July, 2001, Mr. Malacarne  notified the Company he was exercising
his right to rescind the December  1998 Stock  Purchase  Agreement and reacquire
ownership of T-Coast.

The Company does not dispute, that as a factual matter, it has failed to pay the
$300,000 and $30,000 required under the Stock Purchase  Agreement and Employment
Agreement,  respectively.  As opposed to litigating  or contesting  the dispute,
which would be expensive and protracted,  and in light of the Company's  failure
to tender the  consideration  required  under the Stock  Purchase  Agreement and
Employment Agreement, the parties agreed to mutually unwind the T-Coast purchase
by entering into the  Termination  Agreement  which  provides for mutual general
releases  and that  effective  on April 1, 2001,  the Company  relinquished  all
right, title and interest in T-Coast.

On November 7, 2001,  the Company filed for  protection  under Chapter 11 in the
Federal  Bankruptcy  Court  for  the  Middle  District  of  Florida,   Case  No.
01-20854-862.  The Company anticipates its interim working capital needs will be
satisfied  through  debtor-in-possession  financing  provided  by certain of its
current significant shareholders.

                                       22
<PAGE>

ITEM 13. EXHIBITS,  CONSOLIDATED FINANCIAL STATEMENTS,  SCHEDULES AND REPORTS ON
FORM 8-K.

(a)      The following documents are filed as part of this report:

         (1)(2)  CONSOLIDATED   FINANCIAL  STATEMENTS  AND  FINANCIAL  STATEMENT
         SCHEDULES.  A list of the  Consolidated  Financial  Statements filed as
         part of this  Report is set forth in Item 7 and  appears at Page F-1 of
         this  Report;  which  list is  incorporated  herein by  reference.  The
         Financial Statement Schedules and the Report of Independent Auditors as
         to Schedules follow the Exhibits.

(a)(3)   EXHIBITS.

         1.4      [Reserved]
         1.5      [Reserved]
         3.1      Certificate of Incorporation and Amendment to Certificate  of
                  Incorporation  of the  Company*
         3.1(a)   Certificate  of  Amendment  to Certificate of Incorporation to
                  reflect 1 for 10 reverse stock split*
         3.1(b)   Form of  Certificate  of  Amendment to  Certificate of Rights,
                  Designation and Preferences of Series A Preferred Stock*

         3.1(c)   Certificate of Amendment to Certificate  of  Incorporation  to
                  reflect 1 for 4reverse stock split .

         3.2      Bylaws of the Company*
         3.3      Amendment to Bylaws*
         4.1      Specimen of Common Stock Certificate*
         4.2      Specimen of Warrant Certificate*
         10.0(c)  Trademark Registration for ThermaCool(TM)*
         10.0(d)  Published International Patent Application*
         10.0(e)  Stock Option Plan*

         10.0(f)  Asset  Purchase  Agreement  for  Darling  Paint  and  Coatings
                  effective November, 1995*

         10.0(k)  Stock Purchase  Agreement  between the  stockholders  of Atlas
                  Chemical Co. and the Issuer effective August 1, 1997**

         10.0(l)  Lease for Daytona Offices*
         10.0(m)  Consulting agreement of J. Pidorenko*
         10.0(n)  Stock  Purchase  Agreement  between PAMG,  LLC and the Issuer,
                  dated May 30, 2000.*
         10.0(o)  Consulting agreement of CFM Management, Inc.*
         10.0(p)  Consulting agreement of Couture & Company, Inc.*
         10.0(r)  Employment Agreement of J. Hagarman.*
         10.0(s)  Form of Augustine Fund, LP convertible note and related
                   documentation.*


--------------------------
*        Previously filed

                                       23
<PAGE>


Reports on Form 8-K

The Company filed a Current  Report on Form 8-K dated  November 7, 2001 with the
Securities and Exchange Commission in connection with a change in control of the
Company,  entering  into a Stock  Purchase  Termination  Agreement  with T-Coast
Pavers/Sealco  Systems,  and filing for protection  under Chapter 11 of the U.S.
Bankruptcy Code.

                                       24
<PAGE>


SIGNATURES

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



Date:    June 7, 2002                        By:      /s/ James Hagarman
                                                      -----------------------
                                                      James Hagarman, President

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


SIGNATURE                                   TITLE                  DATE
---------                                   -----                  ----

/s/ James Hagarman                          President          June 7, 2002
----------------------------
James Hagarman


                                       25
<PAGE>






                        Consolidated Financial Statements

                 ThermaCell Technologies, Inc. and Subsidiaries

                     Years Ended September 30, 2001 and 2000
                          Independent Auditors' Report





<PAGE>



                 ThermaCell Technologies, Inc. and Subsidiaries

                        Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000






                                    Contents


Independent Auditors' Report on Consolidated Financial Statements...........F-1

Consolidated Financial Statements:

    Consolidated Balance Sheet..............................................F-2
    Consolidated Statements of Operations...................................F-3
    Consolidated Statements of Changes in Stockholders' Deficit.............F-4
    Consolidated Statements of Cash Flows...................................F-5
    Notes to Consolidated Financial Statements.......................F-6 - F-17



<PAGE>


                          Independent Auditors' Report



Board of Directors
ThermaCell Technologies, Inc. and Subsidiaries
Daytona Beach, Florida


We have  audited  the  accompanying  consolidated  balance  sheet of  ThermaCell
Technologies,  Inc. and  Subsidiaries  as of September  30, 2001 and the related
consolidated  statements of operations,  changes in stockholders'  deficit,  and
cash flows for the years ended September 30, 2001 and 2000.  These  consolidated
financial  statements  are the  responsibility  of the  management of ThermaCell
Technologies, Inc. and Subsidiaries. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  ThermaCell
Technologies,   Inc.  and   Subsidiaries  as  of  September  30,  2001  and  the
consolidated  results of its  operations  and its cash flows for the years ended
September 30, 2001 and 2000 in conformity with accounting  principles  generally
accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that ThermaCell  Technologies,  Inc. and  Subsidiaries  will continue as a going
concern. As discussed in Note 2. to the consolidated  financial  statements,  in
November 2001 the Company filed a voluntary  petition for  reorganization  under
Chapter  11 of the U.  S.  Bankruptcy  Code  with  the  U.S.  Bankruptcy  Court.
ThermaCell  Technologies,  Inc. and Subsidiaries  has suffered  recurring losses
from  operations,  negative  working  capital,  and  negative  cash  flows  from
operations. In addition, the Company has certain default judgments against them,
as further  discussed  in Note 13 and as  discussed in Note 7, the Company is in
default of  approximately  $1,500,000 in long-term debt.  These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans  regarding  those matters are also  described in Note 2. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.




Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
May 31, 2002



                                      F-1
<PAGE>



                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet

                               September 30, 2001
<TABLE>

<S>                                                                           <C>
Assets
Current assets:
    Cash                                                                        $                6,097
    Prepaid expenses and other                                                                  41,325
                                                                                   --------------------
Total current assets                                                                            47,422
                                                                                   --------------------

Other assets:
    Deposits                                                                                     8,866
                                                                                   --------------------

                                                                                $               56,288
                                                                                   ====================


Liabilities and Stockholders' Deficit
Current liabilities:
    Accounts payable                                                            $              252,933
    Accrued expenses including related party payables of $411,000                            1,049,665
    Accrued payroll                                                                            113,620
    Current maturities of long-term debt:
      Notes payable                                                                          1,505,813
      Capital leases                                                                           130,191
    Net liabilities of discontinued operations                                                 582,646
                                                                                    --------------------
Total current liabilities                                                                    3,634,868
                                                                                    --------------------


Stockholders' deficit:
    Preferred stock, Series A; $.0001 par value; 5,000,000 shares authorized;
      0 shares issued and outstanding
    Preferred stock,  Series B convertible;  $1,000 stated value; 8.0% dividend;
      1,500 shares authorized; 0 shares issued and outstanding
    Common stock; $.0001 par value; 20,000,000 shares authorized;
      5,847,109 shares issued; 5,807,109 shares outstanding                                        585
    Additional paid-in capital                                                              11,712,394
    Common stock payable                                                                     1,079,961
    Common stock receivable                                                                    (21,250)
    Accumulated deficit                                                                    (16,295,270)
    Treasury stock; 40,000 common shares                                                       (55,000)
                                                                                     --------------------
Total stockholders' deficit                                                                 (3,578,580)
                                                                                     --------------------

                                                                                $               56,288
                                                                                     ====================

</TABLE>

The  accompanying  notes are an  intregral  part of the  consolidated  financial
statements.

                                      F-2
<PAGE>



                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                          Year Ended September 30,
                                                                   ---------------------------------------
                                                                        2001                    2000
                                                                   ----------------        ---------------

<S>                                                              <C>                     <C>
Sales                                                            $               -       $              -
                                                                   ----------------        ---------------

Selling, general and administrative
      expenses                                                           1,492,464              2,960,988
                                                                   ----------------        ---------------

Other expense:
      Interest expense                                                    (301,663)              (325,804)
      Loss on impairment of fixed assets                                  (488,492)                     -
      Loss on impairment of intangible assets                             (560,004)                     -
                                                                   ----------------        ---------------
                                                                        (1,350,159)              (325,804)
                                                                   ----------------        ---------------

Loss from continuing operations                                         (2,842,623)            (3,286,792)
                                                                   ----------------        ---------------

Discontinued operations:
      Loss from operations of
           discontinued divisions                                          (73,534)              (324,130)
      Loss on disposal of divisions                                              -             (2,848,852)
                                                                   ----------------        ---------------
                                                                           (73,534)            (3,172,982)
                                                                   ----------------        ---------------

Net loss                                                         $      (2,916,157)      $     (6,459,774)
                                                                   ================        ===============

Loss per share:
      Basic loss per share from
           continuing operations                                 $           (0.28)      $          (0.86)
      Basic loss per share from
           discontinued operations                                           (0.01)                 (0.83)
                                                                   ----------------        ---------------

Net loss per share                                               $           (0.29)      $          (1.69)
                                                                   ================        ===============

Weighted average number of
      common shares outstanding                                          9,984,183              3,830,448
                                                                   ================        ===============

</TABLE>

The  accompanying  notes are an  intregral  part of the  consolidated  financial
statements.

                                      F-3
<PAGE>


                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Deficit

                     Years Ended September 30, 2001 and 2000

<TABLE>
<CAPTION>


                                         Common Stock                  Note Receivable
                                     --------------------   Additional Associated with Common
                                      Number of              Paid-in   Stockholder     Stock
                                       Shares      Amount    Capital   Payable         Payable
                                     ----------  ---------  ----------  ----------  ----------
<S>                                <C>           <C>      <C>          <C>        <C>
Balance September 30, 1999           2,358,413    $  236   $9,519,875   $(147,035)  $       -

Issuance of stock for payment
 of services                           560,288        57    1,128,497           -           -

Issuance of stock for acquisition       75,000         7      299,993           -           -

Issuance of stock in connection with
 conversion of promissory
 notes payable                         153,408        15      153,393           -           -

Common stock paid for, not issued            -         -            -           -     105,500

Prepaid stock incentives               500,000        50      119,950           -           -

Issuance of stock for cash, net of
 offering costs of $62,417           2,500,000       250      437,333           -           -

Payments associated with
 stockholder loan, net                       -         -            -     147,035           -

Net loss for the period                     -         -            -           -           -
                                     ----------  ---------  ----------  ----------  ----------
Balance, September 30, 2000          6,147,109       615   11,659,041           -     105,500


Common stock paid for, not issued            -         -            -           -     107,127

Issuance of common stock in
 connection with conversion of
 promissory notes payable                    -         -            -           -     867,334

Common stock cancelled per stock
purchase termination agreement
and cancellation of treasury stock    (300,000)      (30)      53,353           -           -

Amortization of prepaid
 stock incentives                            -         -            -           -           -

Net loss for the period                      -         -            -           -           -
                                     ----------  ---------  ----------  ----------  ----------

Balance, September 30, 2001          5,847,109    $  585  $11,712,394     $     -  $1,079,961
                                     ==========  ========  ===========  ==========  ==========
</TABLE>

<TABLE>
<CAPTION>

       Common
       Stock       Accumulated  Treasury
     Receivable     Deficit      Stock        Total
    ------------  -----------  ----------   ----------
<S>             <C>          <C>          <C>
 $            -  $(6,919,339) $  (55,000)  $2,398,737


              -            -           -    1,128,554

              -            -           -      300,000


              -            -           -      153,408

              -            -           -      105,500

        (72,500)           -           -       47,500


              -            -           -      437,583


              -            -           -      147,035

              -   (6,459,774)          -   (6,459,774)
    ------------  -----------  ----------   ----------

        (72,500) (13,379,113)    (55,000)  (1,741,457)


              -            -           -      107,127


              -            -           -      867,334



              -            -           -       53,323

         51,250            -           -       51,250

              -   (2,916,157)          -   (2,916,157)
    ------------  -----------  ----------   ----------

  $     (21,250) $(16,295,270)  $(55,000) $(3,578,580)
    ============  ===========  ==========   ==========
</TABLE>

The  accompanying  notes are an  intregral  part of the  consolidated  financial
statements.

                                      F-4
<PAGE>

<TABLE>
<CAPTION>


                       THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                            Consolidated Statements of Cash Flows


                                                                    Year Ended September 30,
                                                                   ---------------------------
                                                                      2001           2000
                                                                   ------------   ------------

<S>                                                               <C>            <C>
Operating activities
      Net loss                                                     $ (2,916,157)  $ (6,459,774)
                                                                   ------------   ------------

      Adjustments to reconcile net loss to net cash
       used by operating activities:
           Depreciation and amortization                               169,668        330,159
           Loss on discontinued operations                                   -      2,848,852
           Bad debt                                                          -         17,240
           Penalties on note conversion
            paid with common stock                                     200,203         43,274
           Amortization of discount on notes payable                   153,889              -
           Loss on impairment of fixed assets                          488,492              -
           Loss on impairment of intangible assets                     560,004              -
           Common stock issued to employees                                  -         47,500
           Common stock issued for services                             51,250      1,128,554
           Decrease in:
            Accounts receivable and notes receivable                    83,671        111,933
            Inventory                                                        -        316,471
            Officer advance                                              6,900        149,334
            Prepaid and other assets                                    98,289        105,630
           Increase (decrease) in:
            Accounts payable                                           (68,242)      (184,806)
            Accrued expenses                                           536,594        766,250
                                                                   ------------   ------------
        Total adjustments                                            2,280,718      5,680,391
                                                                   ------------   ------------

                                                                   ------------   ------------
        Net cash used by operating activities                         (635,439)      (779,383)
                                                                   ------------   ------------

Investing activities
      Purchase of property and equipment                               (22,351)      (197,842)
      Decrease (increase) in trust account                              27,500        (27,500)
                                                                   ------------   ------------
      Net cash provided (used) by investing activities                   5,149       (225,342)
                                                                   ------------   ------------

Financing activities
      Proceeds from issuance of notes payable and capital leases       530,471        304,275
      Proceeds from collection of common stock subscription            107,127        605,500
      Offering costs paid                                                    -        (62,417)
      Reduction of capital leases and notes payable                    (14,090)       (36,962)
      Proceeds from payments on stockholder loan                             -        147,035
                                                                   ------------   ------------
      Net cash provided by financing activities                        623,508        957,431
                                                                   ------------   ------------

      Net increase (decrease) in cash                                   (6,782)       (47,294)

      Cash at beginning of period                                       12,879         60,173
                                                                   ------------   ------------

      Cash at end of period                                            $ 6,097       $ 12,879
                                                                   ============   ============


Supplemental disclosure of cash flow information:
      Cash paid for interest                                             $ 450      $ 198,272
                                                                   ============   ============
</TABLE>

      During the year ended September 30, 2001, the Company  converted  $566,667
      of notes payable,  plus $100,464 accrued interest into 6,883,595 shares of
      common stock that had not been issued as of September 30, 2001.

      During the year ended September 30, 2001, the Company divested Sealco in a
      non- cash  transaction  with a net effect on assets of $53,353 recorded as
      an increase to additional paid-in capital.

The  accompanying  notes are an  intregral  part of the  consolidated  financial
statements.


                                      F-5
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

1.      Background Information

ThermaCell Technologies,  Inc. (the "Company") is a Florida corporation that was
incorporated  on August 12, 1993.  The Company has one wholly owned  subsidiary,
Atlas Chemical Co. ("Atlas"),  which is reflected as a discontinued operation in
the financial statements.  Atlas is a manufacturer and distributor of paints and
coatings,  which  was  acquired  in  July  1997.  The  Atlas  Chemical  facility
operations  were closed on November 24, 2000. In addition,  Sealco  Corporation,
doing business as T-Coast Pavers ("T-Coast"), which was incorporated in December
1998 and was  operated as a wholly  owned  subsidiary  until April 1, 2001.  The
Company  entered  into a Stock  Purchase  Termination  Agreement  divesting  the
purchase  of Sealco  Systems,  Inc.  Sealco  Systems,  Inc.  is  reflected  as a
discontinued  operation  as of April 1, 2001 and has been  reflected  as such in
these  financial  statements.  The Company is currently  developing  microscopic
evacuated  glass  microspheres,  however,  there  have  been no  sales  of these
products to date.

2.      Bankruptcy Filing and Going Concern Considerations

In November  2001,  the Company  filed a voluntary  petition for  reorganization
under Chapter 11 of the U. S. Bankruptcy Code with the U.S. Bankruptcy Court. As
a result of the filing of the voluntary  petition under Chapter 11 of the United
States Bankruptcy Code, it is anticipated that claims will be asserted in excess
of those  amounts set forth in the  Company's  books and  records,  and that the
Company  will  dispute  and file  objections  to  certain  of such  claims.  The
Company's  management  cannot  express  any opinion as to the  likelihood  of an
outcome respecting any claims asserted or to be asserted in the Chapter 11 case,
including  claims  resulting  from the  assumption  or  rejection  of leases and
executory  contracts  and various other claims.  The  accompanying  consolidated
financial   statements  have  been  prepared  on  a  going  concern  basis  that
contemplates the realization of assets and  liabilities.  In the ordinary course
of business,  operating  losses have been  incurred  each year since  inception,
resulting in an accumulated  deficit of $16,295,270 and negative working capital
of $3,587,446 as of September 30, 2001, and total  liabilities  exceeding  total
assets by  $3,578,580  as of September  30, 2001.  In addition,  the Company has
certain default  judgments  against them, as further discussed in Note 13 and as
discussed in Note 7, the Company is in default of  approximately  $1,500,000  in
long-term debt. Currently,  management is soliciting additional equity investors
to fund these losses.  However,  these conditions raise  substantial doubt about
the Company's ability to continue as a going concern. The consolidated financial
statements  of the  Company  do not  include  any  adjustments  relating  to the
recoverability  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going concern.

3.      Significant Accounting Policies

The significant accounting policies followed are:

        The accompanying  consolidated financial statements include the accounts
        of the  Company  and its  subsidiaries,  Atlas for the full  year  ended
        September  30,  2001  and  T-Coast  from  October  1,  2000 to  April 1,
        2001(date of divesture),  after  elimination of material,  inter-company
        accounts, and transactions.

                                      F-6
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

3.       Significant Accounting Policies (continued)

          The  preparation of  consolidated  financial  statements in conformity
          with accounting  principles generally accepted in the United States of
          America  requires  management to make estimates and  assumptions  that
          affect the reported  amounts of assets and  liabilities and disclosure
          of contingent  assets and liabilities at the date of the  consolidated
          financial statements and the reported amounts of revenues and expenses
          during the reporting  period.  Actual  results could differ from those
          estimates.  The estimated fair value of the Company's cash,  accounts,
          and notes receivable and payable  approximated their carrying value at
          year-end.

          Basic  loss per  common  share  (EPS) is  computed  by  dividing  loss
          available to common  stockholders  by the weighted  average  number of
          shares of common stock  outstanding for the year.  Diluted EPS reflect
          the  potential  dilution from the exercise or conversion of securities
          into  common  stock.  Diluted  EPS  is  not  presented  because  it is
          anti-dilutive.

          Offering costs  associated  with the sale of stock are capitalized and
          offset  against  the  proceeds  of the  offering  or  expensed  if the
          offering is unsuccessful.

          The Company issues stock in lieu of cash for certain transactions. The
          fair value of the stock,  which is based on comparable  cash purchases
          or the value of services,  whichever is more readily determinable,  is
          used to value the transaction.

          The Company  issued  common  stock prior to receiving  services.  This
          amount is recorded as a common stock  receivable  in the  consolidated
          financial statements and is being amortized over the service period.

          The Company  records the receipt of payment for common  stock that has
          not been issued to the  stockholder  as a common stock  payable in the
          consolidated financial statements.

          Advertising  costs (except for costs  associated  with direct response
          advertising)  are charged to  operations  when the  advertising  takes
          place.  The cost of direct  response  advertising is  capitalized  and
          amortized over the period during which future benefits are expected to
          be received. At September 30, 2001 and 2000, the Company had no direct
          response  advertising  costs.  Advertising  expense amounted to $0 and
          $34,332 for the years ended September 30, 2001 and 2000, respectively.

          Property  and  equipment  are  recorded  at  cost,  less   accumulated
          depreciation.  Depreciation  is computed using the  straight-line  and
          accelerated  methods  over the  estimated  useful lives of the assets,
          ranging  5 to  10  years.  Maintenance  and  repairs  are  charged  to
          operations when incurred.  Betterments  and renewals are  capitalized.
          When


                                      F-7
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

3.       Significant Accounting Policies (continued)

          property and  equipment  are sold or otherwise  disposed of, the asset
          account and related accumulated depreciation account are realized, and
          any gain or loss is included in operations.

          Intangible  assets  subject to  amortization  include  trademarks  and
          patents.  Trademarks are being amortized on a straight-line basis over
          10 years. Amounts attributable to patents are being amortized over the
          useful life of the patent,  but not more than 20 years,  beginning the
          month the patent becomes effective.

          The Company follows Financial Accounting Standards Board Statement No.
          121 (FASB No.  121),  "Accounting  for the  Impairment  of  Long-Lived
          Assets  and for  Long-Lived  Assets to be  Disposed  Of." FASB No. 121
          requires that long-lived assets and certain  identifiable  intangibles
          to be held and used by an entity be reviewed for  impairment  whenever
          events or changes in  circumstances  indicate that the carrying amount
          of these assets may not be  recoverable.  In performing  the review of
          recoverability,  the Company  estimates the future cash flows that are
          expected  to result  from the use of the  assets  and  their  eventual
          disposition.  Because events and circumstances frequently do not occur
          as expected,  there will usually be differences  between the estimated
          and actual future cash flows, and these differences may be material.

          Deferred tax assets and  liabilities  are recognized for the estimated
          future  tax  consequences  attributable  to  differences  between  the
          financial   statements   carrying   amounts  of  existing  assets  and
          liabilities and their respective income tax bases. Deferred tax assets
          and liabilities are measured using enacted tax rates expected to apply
          to taxable  income in the years in which those  temporary  differences
          are expected to be  recovered  or settled.  The effect on deferred tax
          assets  and  liabilities  of a change  in tax rates is  recognized  as
          income in the period that included the enactment date.

          Certain   minor   reclassifications   have   been  made  to  the  2000
          consolidated  financial  statements to conform to the  classifications
          used in 2001.

4.      Property and Equipment

Pursuant to the Financial Accounting Standards Board Statement No. 121 (FASB No.
121),  "Accounting  for the  Impairment of Long-Lived  Assets and for Long-Lived
Assets to be Disposed  Of." FASB No. 121  requires  that  long-lived  assets and
certain  identifiable  intangibles  to be held and used by an entity be reviewed
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying amount of these assets may not be recoverable. In performing the review
of recoverability, the Company estimated the future cash flows that are expected
to result from the use of the assets and their eventual disposition. The Company
has determined that there will be no

                                      F-8
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

4.      Property and Equipment(continued)

future  cash  flows  from  the  use of the  assets  and has  recorded  a loss on
impairment of fixed assets of $488,492 during the year ended September 30, 2001.

Depreciation expense was $104,000 and $171,280 for the years ended September 30,
2001 and 2000, respectively.

During  the year  ended  September  30,  2000,  the  Company  adopted  a plan to
discontinue the operations of the paint division and to abandon the property and
equipment associated with this segment. In connection with the plan, the Company
recorded a loss of $238,443 for the net book value of those assets.  The loss is
included in the loss on disposal of division.

5.      Related Party Transactions

The Company  incurred  expenses of $32,616 and $28,683 for legal services during
2001 and 2000,  respectively,  from a law firm,  which was a stockholder  of the
Company.

The Company's  former vice  president  owns the real estate in which the Company
has its offices.  Rental expense for the years ended September 30, 2001 and 2000
were $17,898 and $16,692, respectively.

The Company has a consulting  agreement with a stockholder that expires on March
1, 2002.  Monthly payments under the agreement are $10,000.  As of September 30,
2001, the Company owed $190,000 in consulting fees.

The  Company  has a  consulting  agreement  with a company  owned by its  former
Chairman of the Board of Directors.  This agreement expires on March 1, 2002 and
requires a monthly  payment of $10,000.  As of September 30, 2001 and 2000,  the
Company owes  approximately  $221,000 and $101,000 in unpaid fees in  connection
with this agreement, respectively.

The above  transactions are not necessarily  indicative of the transactions that
would have been entered into had comparable  transactions been entered into with
independent parties.

6.      Capital Leases

The Company leases vehicles, computers, and plant equipment under the provisions
of long-term leases. For financial  reporting  purposes,  minimum lease payments
relating to this  equipment  have been  capitalized.  The Company has determined
that there will be no future cash flows from the leased  property  under capital
leases as of September 30, 2001 and  accordingly  has expensed them as a loss on
impairment  of fixed assets.  The Company has defaulted on the monthly  payments
associated with these leases and, therefore, the entire liability is recorded as
current in the consolidated financial statements.

                                      F-9
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000


6.      Capital Leases(continued)

The  approximate  future minimum lease payments under the capital leases and the
net present value of the future minimum lease payments at September 30, 2001 are
as follows:

        Total minimum lease payments                          $    205,000
        Less amount representing interest                           26,000
                                                              ------------
        Present value of net minimum lease payments                179,000
        Less current maturities                                    179,000
                                                              ------------
                                                              $          0
                                                              ============

7.      Long-Term Debt

Long-term debt at September 30, 2001 consists of:
<TABLE>

<S>                                                                               <C>
        Redeemable  convertible  promissory note due July 2002;
           interest payable quarterly  at stated rate of 9.0%;
           face amount of  $666,667;  net of unamortized discount of
           $54,351; unsecured                                                                $     612,316
        Various notes payable on vehicles with interest ranging
           from 7.3% to 10.35%; payments from $236 to $794
           per month; due on demand                                                                 48,027
        Note payable with interest at 12%, due on demand; unsecured                                 19,481
        Redeemable convertible promissory notes; due on demand;
           interest payable quarterly at stated rate of 12.0%;
           face amount of $75,000; unsecured                                                        75,000
        Redeemable convertible promissory notes; due
           April 2003; interest payable quarterly at stated rate
           of 8.0%; face amount of $66,500; unsecured                                               66,500
        Redeemable convertible promissory note; due
           October 2002; interest payable quarterly at stated
           rate of 9.0%; face amount of $315,000; unsecured                                        315,000
        Redeemable convertible promissory note; due
           April 2003; interest payable quarterly at stated
           rate of 8.0%; face amount of $369,489; unsecured                                        369,489
                                                                                             -------------
                                                                                                 1,505,813
        Less current maturities                                                                  1,505,813
                                                                                             -------------
                                                                                             $           0
                                                                                             =============
</TABLE>

The redeemable  convertible  promissory  notes are  convertible at a rate of 105
percent of the average  bid price for the three days  preceding  the  conversion
date at the  option of the  lender.  The  Company  is in  default  on all of its
long-term debt and,  therefore,  the entire  liability is recorded as current in
the accompanying consolidated financial statements.

                                      F-10
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

7.      Long-Term Debt(continued)

During the year ended  September 30, 2000,  $100,000 of  redeemable  convertible
promissory  notes plus interest and penalties were converted into 153,408 shares
of common stock.

During the year ended  September 30, 2001,  $566,667 of  redeemable  convertible
promissory  notes  including  $100,464  of  accrued  interest  and  $200,203  in
penalties,  were converted into 6,883,595  shares of common stock which have not
been issued and are included in common stock payable.


8.      Operating Leases

The Company leases a building and office space under  operating  leases expiring
in various years through 2004. Rental expense under these leases was $63,542 and
$126,354  for 2001 and 2000,  respectively.  The  following is a schedule of the
approximate  minimum  rental  payments  under the above lease  agreements  as of
September 30, 2001:

        2002                                               $70,000
                                                           =======
        2003                                               $70,000
                                                           =======
        2004                                               $70,000
                                                           =======
        2005                                              $  6,000
                                                           =======

9.      Income Taxes

The Company has net operating loss  carryforwards  of $15,385,554,  at September
30, 2001. Annual  utilization of the Company's net operating loss  carryforwards
will be limited due to a change in  ownership  control of the  company's  common
stock which took place in 2001.  Under federal tax law, this change in ownership
of the  Company  will  significantly  restrict  future  utilization  of the  net
operating  loss  carryforwards.  Other than the net operating  losses which have
been limited  because of the change in ownership as described  above,  any other
net operating losses will expire in 2009 through 2021.

A valuation  allowance  is required by FASB  Statement  No. 109 if, based on the
weight of  available  evidence,  it is more likely than not that some portion or
all of the deferred tax assets will not be realized.  The need for the valuation
allowance is evaluated periodically by management.  Based on available evidence,
management  concluded that valuation allowances of 100 percent for September 30,
2001 and 2000  were  necessary.  Significant  components  of the  Company's  net
deferred tax assets are as follows:

<TABLE>
<CAPTION>
                                                                              2001               2000
                                                                         ---------------------------------
<S>                                                                      <C>                <C>
        Tax benefit of net operating loss                                $   6,154,000      $    5,403,000
        Less valuation allowance                                             6,154,000           5,403,000
                                                                         ---------------------------------
                                                                         $           0      $            0
                                                                         =================================
</TABLE>

                                      F-11
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

9.      Income Taxes (continued)

The Company's deferred income tax provisions include the following components:
<TABLE>
<CAPTION>

                                                                              2001               2000
                                                                         ---------------------------------
<S>                                                                      <C>                <C>
        Future net operating loss deductions                             $     742,000      $    2,603,000
        Change in allowance valuation for tax
           benefit of net operating loss                                      (742,000)         (2,603,000)
                                                                         ---------------------------------
                                                                         $           0      $            0
                                                                         =================================
</TABLE>

A  reconciliation  of the income tax benefit  computed at the federal  statutory
rate and the Company's effective rate are as follows:

<TABLE>
<CAPTION>

                                                                       2001                    2000
                                                            -----------------------   -----------------------
<S>                                                         <C>            <C>     <C>              <C>
        Federal statutory rate                              $     639,000     34%     $   2,240,000     34%
        Adjustments, primarily state
           income taxes                                           103,000    5.5            363,000    5.5
        Change in allowance valuation for
           tax benefit of net operating loss                     (742,000) (39.5)        (2,603,000) (39.5)
                                                            -----------------------   -----------------------
                                                            $           0      0%     $           0      0%
                                                            =======================   =======================
</TABLE>

The Company's  effective income tax rate is lower than what would be expected if
the federal  statutory  rate were applied to income from  continuing  operations
primarily because of expenses deducted for financial reporting purposes that are
not deductible for tax purposes and the effects of using the surtax exemption.

10.     Segment and Discontinued Operations

The Company operated in two primary business segments that were identified based
on products and services.

The  Company,  through its wholly owned  subsidiary,  T-Coast,  installed  brick
pavers in driveways and sidewalks. On November 7, 2001, the Company entered into
a Stock  Purchase  Termination  Agreement that is effective as of April 1, 2001,
which  divests the  purchase of T-Coast.  T-Coast was treated as a  discontinued
operation during the year ended September 30, 2001.

The  Company,  through its wholly  owned  subsidiary,  Atlas,  manufactured  and
distributed paints and coatings.  The paint division was discontinued during the
year ended September 30, 2000.

The Company is preparing to manufacture  and sell  microscopic  evacuated  glass
spheres  (microspheres)  in the next fiscal year.  During the current year,  the
Company incurred  expenses in developing the  manufacturing  process.  Corporate
general and administrative  expenses are included in this division. This segment
is identified as ThermaCell Technologies.


                                      F-12
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

10.     Segment and Discontinued Operations (continued)

The following table presents  information about the results of operations of the
Company's business segments for the year ended September 30, 2001:
<TABLE>
<CAPTION>

                                                       ThermaCell        Paint           Paver
                                                       Technologies     Division       Division   Consolidated
                                                       ------------------------------------------------------

<S>                                                   <C>             <C>            <C>         <C>
    Sales                                                                                                  $0
                                                       -------------------------------------------------------

    Selling, general and administrative                 $1,492,464                                  1,492,464
                                                       ------------------------------------------------------

    Other expenses:
        Interest expense                                  (301,663)                                  (301,663)
        Loss on impairment of fixed assets                (488,492)                                  (488,492)
        Loss on impairment of intangible assets           (560,004)                                  (560,004)
                                                       ------------------------------------------------------

    Loss from continuing operations before
        income taxes                                    (2,842,623)                                (2,842,623)

    Loss from discontinued operations                  $         0        (66,590)   $   (6,944)      (73,534)
                                                       -------------------------------------------------------

    Net income (loss)                                  $(2,842,623)   $   (66,590)   $   (6,944)  $(2,916,157)
                                                       =======================================================
</TABLE>

The following table presents  information about the results of operations of the
Company's business segments for the year ended September 30, 2000:
<TABLE>
<CAPTION>

                                                ThermaCell          Paint          Paver
                                               Technologies      Division       Division      Consolidated
                                               -----------------------------------------------------------

<S>                                            <C>            <C>            <C>            <C>
        Sales                                                                                           $0
                                               -----------------------------------------------------------

        Selling, general and administrative
           expenses                            $ 2,960,988                                       2,960,988
                                               -----------------------------------------------------------

        Other income (expenses):
           Interest expense                       (325,804)                                       (325,804)
                                               ------------------------------------------------------------

        Loss from continuing operations
           before income taxes                  (3,286,792)                                     (3,286,792)

        Income (loss) from discontinued
           operations                                          $(3,148,748)      (24,234)       (3,172,982)
                                               ------------------------------------------------------------

        Net loss                               $(3,286,792)    $(3,148,748)   $  (24,234)     $ (6,459,774)
                                               ============================================================

</TABLE>

                                      F-13
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

10.     Segment and Discontinued Operations (continued)

The Company adopted a plan to abandon or dispose of 100 percent of the assets of
its paint division  during the year ended September 30, 2000.  Accordingly,  the
results of  operations  of the paint  division  for the  periods  presented  are
reported as a component of  discontinued  operations.  The estimated loss on the
disposal of  discontinued  operations of  approximately  $2,850,000 was recorded
during the year ended  September 30, 2000 and  represents  the estimated loss on
the  disposition of the segment assets and operations  through the disposal date
of November 24, 2000.

Summarized  results of the paint  division  are as follows  for the years  ended
September 30,:

<TABLE>
<CAPTION>

                                                                               2001               2000
                                                                       -----------------------------------
<S>                                                                    <C>                  <C>
        Net sales                                                      $      158,356       $    2,283,817
                                                                       ===================================
        Operating loss                                                 $      (66,590)      $     (301,570)
                                                                       ===================================
        Loss from discontinued operations                              $      (66,590)      $     (301,570)
                                                                       ===================================
</TABLE>

The  Company  entered  into a  Stock  Purchase  Termination  Agreement  that  is
effective  as of April 1, 2001,  which  divests the  purchase  of  T-Coast,  the
Company's paver division in exchange for 300,000 shares of the Company's  common
stock which was then retired.  The results of  operations of the paver  division
for  the  periods   presented  are  reported  as  a  component  of  discontinued
operations,  with the prior  year  similarly  reclassified  in the  consolidated
statements of operations.  The net book value of this division,  adjusted by the
Company's  investment in it has been recorded as additional  paid-in  capital at
the disposal date of April 1, 2001.

Summarized results of the paver division are as follows:

<TABLE>
<CAPTION>

                                                                       Period from
                                                                     October 1, 2000 to         Year ended
                                                                      April 1, 2001        September 30, 2000
                                                                      ---------------------------------------
<S>                                                                  <C>                  <C>
        Net sales                                                    $  1,004,657                $1,832,017
                                                                     =======================================
        Operating loss                                               $     (6,944)               $  (24,234)
                                                                     =======================================
        Loss from discontinued operations                            $     (6,944)               $  (24,234)
                                                                     =======================================
</TABLE>

There are no remaining assets and liabilities of the paver division at September
30, 2001.


11.     Stockholders' Equity

On April 14, 2000,  the Board of Directors  authorized a 1-for-4  reverse  stock
split of the  Company's  $.0001 par value common  stock.  All  references in the
accompanying  consolidated  financial  statements to the number of common shares
and per share amounts have been restated to reflect the stock split.


                                      F-14
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000

11.     Stockholders' Equity(continued)

During June 2000,  the Company issued 235,283 shares of common stock in exchange
for services  rendered.  The cost of the services has been charged to operations
and capital has been increased by $263,489 representing the fair market value of
the common stock issued.

As of September 30, 2001 and 2000, the Company recorded $1,079,961 and $105,500,
respectively of common stock payables to investors who had not been issued their
respective shares.

During March 2001, $566,667 of the Company's redeemable  convertible  promissory
notes,  including  $100,464 of accrued interest and $200,203 in penalties,  were
converted into 6,883,595  shares of common stock which  represents more than 50%
voting control of the outstanding common stock of the Company. These shares were
not issued as of September 30, 2001.

The  Company  entered  into a Stock  Purchase  Termination  Agreement,  which is
effective  April 1, 2001,  which  divests the purchase of T-Coast  Pavers/Sealco
Systems, Inc. Under this agreement, 300,000 shares of the Company's common stock
were returned to treasury and the parties entered into mutual general releases.

During  August  1999,  the  Board  of  Directors   waived  certain   performance
requirements that allowed the conversion of preferred stock by the president and
chairman, John Pidorenko,  and authorized that this preferred stock be converted
into .25  shares of common  stock,  which was  consistent  with its  established
conversion  terms.  The  conversion  permitted the holder to use common stock to
raise  funding for the benefit of the  Company.  A total of $453,695  was funded
through September 30, 2000 as a result of this action.

In  connection  with  a  public  offering  in  1997,  the  Company  sold  to the
underwriter  options to  purchase  34,375  post-split  units  (the  "underwriter
warrants") of the Company's securities,  identical to the units publicly sold at
an exercise price of 165 percent of the public offering price. The underwriter's
units  were  exercisable  at a price  per unit of  $24.00,  subject  to  certain
adjustments, until March 12, 2001, when they expired.

The   underwriter's   warrants   contained  certain   registration   rights  and
anti-dilution  provisions.  The  holders of the  underwriter's  warrants  had no
voting, dividend, or other rights as stockholders of the Company with respect to
the shares underlying the warrants.

                                      F-15
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000


12.     Stock Options

Prior to September 30, 1999,  the Company made awards of incentive  common stock
options to corporate  officers and  authorized  the allocation of 150,000 common
shares  (post-split)  for a compensatory  Section 422A plan for officers and key
employees.  Awards  outstanding  as of  September  30,  2001 are  summarized  as
follows:

<TABLE>
<CAPTION>

                                                                             Exercise           Year of
                                                                Shares          Price         Expiration
                                                              --------------------------------------------
<S>                                                          <C>              <C>             <C>
        Incentive awards to corporate officers:
           1997                                                  175,000         $2.00             2002
           1998                                                   18,750         $2.00             2003
           1999                                                   18,750         $2.00             2004

        Section 422A plan awards:
           Corporate officer                                      71,250         $2.00             2008
           Key employees                                          42,500         $2.00             2008
                                                              ----------

        Total awards                                             326,250
                                                              ==========
</TABLE>

Authorized  common  shares have been  reserved  for the  specific  1997 and 1998
awards and the plan allocation.

The  exercise  prices for the stock  options  exceeded  the market  price of the
common stock on the date of award. Accordingly, no related compensation cost has
been charged to  operations.  Due to the limited  public  market  history of the
Company's  common stock,  management is unable to estimate the fair value of the
options  awarded;   however,   management  believes  such  fair  value  was  not
significant as of date of award.


13.     Contingent Liabilities

On October 4, 2000, a judgment was rendered by the United States District Court,
Middle  District of Florida,  in a trial  regarding  claims made by Mr.  Russell
Haraburda and Eden Group,  Inc.  against John  Pidorenko,  the Company's  former
president,  and the Company for monies  purportedly due for arranging  financing
for the  Company  prior  to its IPO in  March  1997.  The  Plaintiffs,  in their
pre-trial  statement,  claimed  damages  in the  amount  of  approximately  $3.5
million.  The judgment  concluded that no monies or other  consideration was due
Mr.  Haraburda  or the Eden Group,  Inc.  The  Company's  claims  regarding  two
promissory notes of the Eden Group,  Inc., Mr. Haraburda's firm, that are unpaid
were also denied. Subsequently,  Mr. Haraburda and Eden Group, Inc. appealed the
decision to the United  States  Court of Appeals for the Eleventh  Circuit.  The
Company also appealed the decision regarding the obligations of Eden Group, Inc.
under the promissory  notes.  This court affirmed the lower court's decision and
there has been no further action by Mr. Russell Haraburda and Eden Group, Inc.

                                      F-16
<PAGE>


                 ThermaCell Technologies, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                     Years Ended September 30, 2001 and 2000


13.     Contingent Liabilities(continued)

The Company is involved in several  lawsuits for  outstanding  obligations  from
vendors,  leasing  companies,  and certain  professionals for services provided.
There are default  judgments that have been granted  because the Company has not
had the financial resources to appropriately defend itself as representation was
declined or withdrawn.  It is uncertain  whether the Company will be able to pay
these  obligations  in the future.  Due to the financial and legal  problems the
Company  is  experiencing,  the  Board  of  Directors  has  decided  to file for
protection  under Chapter 11 of the U.S.  Bankruptcy  Code. This filing occurred
during  November  2001.  The  Company  has  arranged  for   debtor-in-possession
financing with its largest stockholder. The Company's intent is to submit a plan
of reorganization  that requests  creditors to accept its shares and to have the
debtor-in-possession  funding source also accept the Company's shares as part of
this reorganization.  Current stockholders will be substantially  diluted if the
reorganization plan is confirmed. There is no assurance that the Company's plans
to reorganize will be successful or approved.


14.      Commitments

On May 30, 2000,  the Company  entered into a stock  purchase  agreement  for an
aggregate of 5,000,000  shares of common stock at $.20 per share.  The agreement
contains  certain buyer's rights that allow the buyer to obligate the Company to
purchase all or a portion of the shares issued at a per share price equal to the
latest 10-day average price if certain requirements,  conditions,  and approvals
contained  within the  agreement  are not met. As of  September  30,  2001,  the
Company has issued 2,500,000 shares of common stock under this agreement.


                                      F-17
<PAGE>