1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES AND EXCHANGE ACT
     OF 1934 (Fee required)

     For  the fiscal year ended December 31, 2001

[ ]  TRANSITION  REPORT UNDER SECTION 13 OR  5(d) OF THE SECURITIES AND EXCHANGE
     ACT OF 1934 (No Fee Required)

     For the transition period from ______ to _______.

Commission File Number 000-21627


                 Safe Alternatives Corporation of America, Inc.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

            Florida                                            06-1413994
-------------------------------                            -------------------
(State or other jurisdiction of                              (I.R.S. Employer
Incorporation or organization)                              Identification No.)

                 440 Main Street, Ridgefield, Connecticut 06877
                 ----------------------------------------------
                (Current Principal Executive Offices) (Zip Code)

Issuer's Telephone Number: (203) 438-4918

Securities registered under Section 12(b) of the Exchange Act: None

Securities  registered  under Section  12(g) of the Exchange Act:  Common Stock,
$.0001 par value.

                                      Name of each exchange on which registered:
                                                 NASD OTC Bulletin Board

Page 1 of 30 Pages. Exhibits are indexed on page 27.


(Cover page continued on next page)



                                       1
<PAGE>

     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 report and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
                                                                  ---  ---

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

     State issuer's revenues for its most recent fiscal year: $88,286.

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference  to the price at which the stock sold,  or the average bid
and asked prices of such stock,  as of a specified  date within the past 60 days
(see  definition of affiliate in Rule 12b-2 of the Exchange Act): As of December
31, 2001, the aggregate market value of the  approximately  16,968,708 shares of
Common Stock held by non-affiliates of the Registrant was about $84,843.54.

     As of March 31, 2002,  there were 75,208,396  shares of Common Stock issued
and outstanding.


                   DOCUMENTS INCORPORATED BY REFERENCE: None.

Transitional Small Business Disclosure Format (check one): Yes   No X
                                                              ---  ---




                                       2
<PAGE>

               CAUTION: FORWARD-LOOKING STATEMENTS AND INFORMATION

     This  Form  10-KSB   contains   certain   forward-looking   statements  and
information  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended,
which are  intended  to be  covered by the safe  harbors  created  thereby?  The
forward-looking statements and related information are based upon the beliefs of
the Company or management at the time covered by this report.  When used in this
document, the words "anticipate",  "believe",  "estimate",  "expect",  "should",
"could", and "intend" and similar expressions,  as they relate to the Company or
its management, are intended to identify forward-looking  statements.  Investors
are cautioned that all forward-looking  statements and information involve known
and unknown risks,  uncertainties,  assumptions,  and other factors that reflect
the  view of the  Company's  management  regarding  future  events.  The  actual
results,  performance or achievements of the Company may be materially different
from the  views  expressed  or  implied  by the  forward-looking  statements  or
information should one or more of these risks or uncertainties  materialize,  or
should underlying assumptions prove incorrect. In each instance, forward-looking
information should be considered in light of this, and should not be regarded as
a representation by the Company or any other person that the objectives,  plans,
statements or information will be achieved.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS:

Business Development:
--------------------

     Safe  Alternatives   Corporation  of  America,  Inc.  (the  "Company")  was
organized  in 1976,  under  the name  Knight  Airlines,  Inc.,  to engage in the
commuter  airline  business.  In October 1978, the Company engaged in an initial
public  offering of its Common Stock in Florida,  pursuant to an exemption  from
registration under Regulation A promulgated under the Securities Act of 1933, as
amended (the  "Securities  Act"). To the Company's best knowledge,  there was no
market for trading of the Common  Stock  until the  Company's  Common  Stock was
included for trading on the NASD's Electronic  Bulletin Board in March 1997. The
Company  operated as a commuter  airline from its inception  through April 1983,
when it ceased  operations  and all of the  assets of the  Company  were sold to
satisfy all outstanding  indebtedness.  From April 1983, through September 1995,
the Company  was  dormant.  In May 1994,  the name of the Company was changed to
Portsmouth Corporation.

     On September 15, 1995, pursuant to the terms of an Asset Purchase Agreement
and Plan of Reorganization dated as of August 21, 1995 (the "Agreement") between
Safe  Alternatives   Corporation  of  America,   Inc.,  a  Delaware  corporation
("SAC-Delaware")  and the  Company,  the Company  purchased  the  business  (the
"Business"),  including,  without limitation, all of the assets of SAC-Delaware,
and assumed all of the liabilities of SAC-Delaware (the  "Reorganization"),  and
commenced operations. Prior to the Reorganization, the Company had no meaningful
operations.  On March 4, 1996, the Company changed its name to Safe Alternatives
Corporation of America, Inc. (a Florida corporation).


                                       3
<PAGE>


     In connection with the  Reorganization,  SAC-Delaware  was liquidated,  and
SAC-Delaware  distributed  to each  stockholder  0.2736  shares of the Company's
Common Stock for each share of SAC-Delaware that was owned. Consequently, all of
the share and per-share figures included herein reflect the Reorganization.  The
Agreement provided for the Company's purchase of all of SAC-Delaware's assets in
consideration   for,   among  other  things,   (i)  the  assumption  of  all  of
SAC-Delaware's  liabilities,  (ii) the issuance and delivery to  SAC-Delaware of
8,000,000 shares of the Common Stock, representing approximately 94% of the then
issued and outstanding shares of Common Stock as of the date of the Closing; and
(iii) a six percent royalty (the "Royalty") on the gross revenues of the Company
attributable to the assets acquired by the Company  pursuant to the terms of the
Agreement, payable on a pro rata basis to the stockholders of SAC-Delaware.  The
Royalty obligation has now expired.

     In January 1997, the Board  authorized an agreement with M & A Acquisitions
whereby M & A Acquisitions would receive a finder's fee of 3% of gross sales for
the Company  acquiring the  worldwide  manufacturing  and marketing  rights from
Natural  Cool,  Inc. The Company  acquired  Natural  Cool,  Inc. in its entirety
during the first half of 1998.

     On July 15, 1998, the Company entered into an agreement for the purchase of
the assets of Norfield  Corporation,  a Connecticut  corporation with offices in
Danbury, Connecticut ("Purchase Agreement").  Norfield Corporation had filed for
Chapter 11 Bankruptcy  Protection in June 1996,  and the Purchase  Agreement was
subject to the approval of the Bankruptcy Court, which was received on September
14,  1998.  On  September  18,  1998,  in order to obtain  financing  to acquire
Norfield's  assets,  the Company assigned the Norfield Purchase Agreement to the
Norfield  Investor  Group (which  consisted of Nicky Hunt and Sean McNamara) and
agreed to issue options to purchase  1,000,000  shares of the  Company's  Common
Stock at a price of ten cents ($.10) per share  exercisable for a period of five
(5) years from  September 18, 1998.  The Nor field  Investor Group agreed to pay
all amounts due under the Nor field Purchase Agreement at Closing, including the
sum of $235,000 and the Company received a license and lease ("Norfield  Lease")
of all the assets so acquired by the Norfield  Investor  Group.  Pursuant to the
terms  of the  Norfield  Lease,  the  Company  was to  have  made a  payment  of
approximately  $250,000 in December 1998. Because the Company was unable to make
that payment,  the Norfield Corporation declared a default on the Norfield Lease
and exercised its security  interest in the Lease held by the Company and all of
the assets that were subject to the Lease were returned to Norfield  Corporation
as of December 31, 1998. The Company did not receive any revenue or pay any sums
of money as a result of this transaction.

     During 2000 and 2001, the Company's business operations were conducted from
Derby, Vermont, and the Company greatly reduced overhead.

Principal Products and Their Markets:
------------------------------------

   The Company's products are primarily in the following areas:

     1.  AmeriStrip(TM)  -  Paint  Stripping  Chemicals   (world-wide  license).
AmeriStrip is currently  being marketed and sold in limited  sample  quantities.
The  Company's  paint  stripping  product is used to remove  lead-based  paints,
latex, alkyd,  varnish,  polyurethane,  and epoxy resin coatings from structural
metal, cement, fiberglass, wood, mica and plaster.


                                       4


<PAGE>

The  Company's  paint  stripping  product is applied using an airless spray gun,
paint brush or spatula.  For most applications,  the Company believes,  based on
its research and in-house testing,  that the stripper will remove  substantially
all of the  paint,  exposing  the bare  surface  within a  24-hour  period.  The
Company's line of paint strippers is biodegradable, water washable, non-caustic,
and ethylene chloride-free. See "Technologies".

     2. NaturalCool(TM) Systems - Ambient Air Exchanger (worldwide marketing and
manufacturing  rights). The NaturalCool system is a patented,  energy-saving air
circulation system,  designed to supplement existing  refrigeration  systems for
commercial refrigeration units such as walk-in and reach-in coolers. The systems
operate by taking in relatively cold ambient air from outside, filtering the air
to remove particulates, and introducing the cooler air into an operating cooler,
and  exhausting  mild air from within the cooler back out to the outdoors.  Each
system consists of a modular unit fabricated of  non-corrosive  stainless steel,
operates totally  independently of the cooler's  existing  compressor,  operates
without Freon or other environmental pollutants, meets all applicable electrical
codes,  and  has  received  UL  (Underwriters'   Laboratories)   approval.   See
"Technologies."

     3. Water-Based  Foams for Insulation  Material  (continental  United States
license).  The foam  product  was in the  final  stages of  development  and the
Company was evaluating the appropriate  mechanism for application of the product
onto its  intended  surface.  During 1998,  the Company  engaged in some limited
testing  of this  product  with  Underwriter's  Laboratories,  but was unable to
continue  to  commercialize  this  product  during  1998  because  it lacked the
financial  resources.  By the  end of  1998,  the  Company  determined  to  stop
attempting to market or sell the foam products.

     The marks, NaturalCool(TM) and AmeriStrip(TM),  are trademarks owned by the
Company.

Marketing, Sales and Methods of Distribution:
--------------------------------------------

     Marketing  Agreement.  In 1996 and  1997,  the  Company  believed  that its
marketing resources would most effectively be deployed by contracting an outside
vendor to market its products. Consequently, as of November 1, 1996, the Company
replaced  all of its  in-house  sales  force with an outside  vendor,  SSC.  The
Company terminated the SSC agreements as of March 15, 1998 because SSC's efforts
produced  aggregate  sales of less than $100 as of December 31, 1997. On May 29,
1998,  SSC filed an action  against the Company.  The Company  responded to this
suit and  brought  counterclaims  against  SSC.  The action was  settled and was
dismissed  in  September  1999.  The  Company  delivered  500,000  shares of its
restricted  Common  Stock  to  SSC's  designee  pursuant  to  the  terms  of the
settlement. See "Item 3-Legal Proceedings."

     The Company no longer out-sources its sales and marketing functions. During
2000 and 2001,  the sales and marketing were  generally  handled  through direct
sales from the Company's offices in Derby,  Vermont.  The Company  established a
small network of independent  distributorships  with commission sales persons to
sell the  NaturalCool  product.  The Company  continued  to sell the  Ameristrip
product over the internet  (www.AmeriStrip.com).  In addition,  in May 2001, the
Company  entered  into a strategic  alliance  with  Process  Solutions,  Inc. of
Wilbraham,   Massachusetts  for  the  manufacture  and  sale  of  the  Company's
Ameristrip product.


                                       5
<PAGE>

     Paint Stripping Chemicals - AmeriStrip.  AmeriStrip was the Company's first
product  to be  offered  in the  marketplace.  The  product  has  been  sold  to
contractors  for the New York  City  Housing  Authority,  to the New  York  Port
Authority, to Sherwin Williams retail stores, and to contractors working for the
school  construction  authority  in New York City to remove  lead paint from the
City's  public  schools,  as well as to other  customers.  The  Company's  sales
efforts to place its paint stripping  product with contractors using the product
to de-lead New York City public schools accounted for more than twenty one (21%)
of the Company's 2000 revenues and six percent (6%) of its 2001 revenues.

     NaturalCool.  The  Company's  in-house  sales  staff  targeted  a number of
industries for the NaturalCool  products,  initially  focusing  primarily on the
convenience  store market.  Other  potential  purchasers  include liquor stores,
grocery  chains,   florists  and  the  walk-in  cooler  industry.   The  Company
established relationships with refrigeration distributors and suppliers (but did
not enter into any formal distribution agreements) and with restaurant equipment
suppliers.  In some cases,  the  suppliers  purchase  units from the Company and
install  them in a new or renovated  restaurant  facility.  In these cases,  the
Company does not incur the installation  expenses associated with sales directly
to the end-user.

     The Company also marketed these products directly to the end-user customers
through  advertising and trade  association  membership  marketing.  The Company
began using utility  company  rebate  programs as a means of  generating  sales.
Under these programs, certain utility companies offer rebates to their customers
for installing  energy-saving  equipment.  Even where the utilities do not offer
rebates, some utility companies will recommend  energy-saving equipment to their
customers.  The Company is also offering the NaturalCool  products for sale over
the Internet at www.naturalcool.com.

     Other  Technologies.  During  1998,  the Company  stopped the  research and
development of other technologies due to its financial  condition.  For the same
reason,  management  stopped seeking the acquisition of other  technologies  for
commercial exploitation.

Competitive Position:
--------------------

     There are many other  companies that offer similar or competitive  products
to the products  offered by the  Company.  The  industries  in which the Company
markets and sells its  products are  characterized  by  substantial  and intense
competition.  Almost  all of  the  companies  offering  similar  or  competitive
products,   both  domestic  and  foreign,  are  substantially  larger  and  have
substantially greater resources,  distribution  capabilities and experience than
the  Company.  It is also  likely  that there will be other  competitors  in the
future.  The  following  is a list of  certain of the  companies  with which the
Company competes:  (1) Paint Stripping  Chemicals - Peel-A-Way Corp.,  Minnesota
Mining and  Manufacturing,  and Back to Nature; (2) NaturalCool - Cool Breeze as
well as several localized companies.

     The Company's objective is to sell environmentally-friendly  products which
would compete with the existing paint stripping,  foams and ambient air exchange
technologies  available  that are produced by  competitors  of the Company.  The
Company  cannot  provide any  assurances  that the  Company's  products  will be
competitive, that a market for such products will develop, that the Company will
be able to develop  marketing  or  distribution  channels,  or that  competitors
having  greater  financial and other  resources  will not, or have not,  devoted
those  resources  to the research and  development  of new or existing  products
which will compete with the Company's  products.  There can be no assurance that
the Company will be able to effectively compete against any competitor.


                                       6
<PAGE>



Sources and Availability of Raw Materials and Principal Suppliers:
-----------------------------------------------------------------

     NaturalCool.  All of the raw materials for manufacturing these products are
off-the-shelf and readily available to the Company from numerous suppliers.  The
Company does not anticipate any difficulty obtaining raw materials in quantities
and at  prices  acceptable  to the  Company.  The  units  are  assembled  at the
Company's Newport, Vermont facility.

     Paint  Stripping.  The  Company  uses  its own  formulation  for its  paint
stripper. The Company purchases the raw materials used in the formulation from a
number of suppliers.  The Company believes that there will be no shortage of raw
materials.  The Company uses  contract  blenders to blend the  formulation.  The
Company  believes  that there  exist  sufficient  contract  blenders  capable of
handling the Company's requirements.

Dependence on Major Customers:
-----------------------------

     As of the end of 2001, the Company had no major customers.

Intellectual Properties:
-----------------------

   Technologies/Licenses.

     NaturalCool: In February 1997, the Company sublicensed the right to market,
on a worldwide basis, the NaturalCool system products from Mr. Clement Royer who
had  previously  received a license to market such  products  from Natural Cool,
Inc., a Vermont corporation.  Natural Cool, Inc. holds a master license from the
inventors  to market and  manufacture  the  NaturalCool  products on a worldwide
basis.  In May 1998,  following the  Company's  termination  of Mr.  Royer,  the
Company  obtained a license to market and  manufacture  products  covered by the
NaturalCool  patent  directly  from the  inventors  and  holders of the  patent.
Subsequent  to Mr.  Royer's  termination  and  prior to May  1998,  the  license
required  the  Company  to pay a  royalty  of $200 per  unit,  as each  unit was
manufactured,  and the Company was obligated to  manufacture  at least 500 units
per year. A payment of $20,000 was made to the licensor to initiate the license.
In May 1998, the Company purchased the NaturalCool  name,  inventory and related
assets,  and entered  into a new  license,  which  expires in May 2008,  for the
technology  directly  with the  inventors.  Under the new license the Company is
obligated to pay a royalty of $100 for each NaturalCool unit sold,  subject to a
minimum annual payment of $30,000, to be applied against royalties.  The minimum
royalty of  $30,000  for the period  May 1998  through  April 30,  1999 has been
prepaid by the Company.  The Company did not pay any additional royalties during
2000 or 2001.


                                       7
<PAGE>

     Mrs.  Kathleen  Kennedy is the  successor-in-interest  to the estate of Mr.
Richard B.  Kennedy.  Each of the Kennedy  licenses has  substantially  the same
terms and conditions and each is valid until April 17, 2050,  unless the Company
fails to pay a royalty of four percent (4%) of the gross sales  derived from the
exploitation of the respective  technology,  with certain  limitations for sales
derived from  inter-company  transfers or transactions  with  subsidiaries.  The
Company  also  agreed  to pay all  maintenance  fees  and fees  for  filing  and
prosecuting patent applications  pending at the time the licenses were executed.
All rights under the licenses are freely assignable by the Company. The licenses
were amended on August 23, 1993 to collectively  provide for a required  minimum
monthly  payment of $5,000,  in the aggregate,  and a required weekly payment of
$1,200 to Mrs. Kathleen Kennedy during her lifetime in lieu of progressive sales
minimums due beginning in 1993. The royalty payments described above nonetheless
survive.  Failure to pay the minimum weekly and/or monthly  payments and failure
to pay  royalties may result in the Company's  loss of the  exclusivity  of such
licenses. The Company was out of compliance with the minimum payment provisions.
Mrs.  Kennedy  brought an action  against  the  Company  to obtain  the  minimum
payments under the licenses.  The action was arbitrated during 1999. The Company
lost the exclusivity of the license in the arbitration,  but was not required to
pay any sums of money to Mrs. Kennedy. See "Item 3. Legal Proceedings."

     Technologies/Proprietary Rights. Most of the Company's Technologies involve
trade secrets that are considered proprietary to the respective licensors of the
Technologies.   The  Company  takes  all  reasonable  measures  to  protect  the
Technologies,  including the timely update of patent-related  innovations to the
respective  processes.  Certain of the Technologies  are unpatented  proprietary
technologies and in certain cases, because (i) the Company's financial resources
are insufficient to adequately  protect and/or prosecute such patents,  and (ii)
the Company believes that information  which may become available to competitors
during the patent process could put the Company's  products at competitive risk,
neither the inventor nor the Company believes that seeking patent  protection is
prudent. The Company does not currently manufacture its paint stripping product.
In the case of the paint stripping  product,  the Company contracts with private
blenders to manufacture it. In the case of NaturalCool, the Company manufactures
the units at its Newport, Vermont facility. The Company intends to contract with
outside  manufacturers  to manufacture any additional  products derived from the
Technologies, as they are brought to market. Although the Company has identified
certain   companies  that  it  would  consider   engaging  for  the  purpose  of
manufacturing some of the Company's  intended products,  no such agreements have
been executed.

     Paint Stripping  Chemicals - AmeriStrip.  Because the Company developed its
own paint  stripping  compound,  the Company  does not intend to avail itself of
that certain supply agreement with Samaz  Enterprises,  Inc. The Company's paint
stripping  products are proprietary in nature.  These products are not patented,
but are covered by trade secrets.  It has been determined by the Company and the
manufacturer that it is preferable not to seek patent protection,  but rather to
protect this  technology  through trade  secrets.  In 2000,  the majority of the
Company's sales of this product were to contractors in the lead abatement field.
The Company  believes  that the sales  effort of the  Company has been  severely
limited by the insufficient working capital position of the Company.


                                       8
<PAGE>


     Irradiation  Technology.  Many years ago, the Company developed irradiation
technology  on a  theoretical  basis for the  treatment of medical waste that is
proprietary in nature. The Company has not completed the development and has not
marketed this technology.

Government Regulation:
---------------------

     The manufacture and sale of paint stripping  chemicals,  carbohydrate  foam
and ambient air exchanger  equipment is subject, to varying degrees, to federal,
state and local regulation. The predominance of the regulatory burden however is
imposed upon the manufacturer,  such as the inventor/supplier,  of the Company's
paint  stripping  product  and not the  Company.  The  Company  must comply with
federal labeling  requirements for the Company's paint stripping product,  which
require a description of the various  chemicals  included in the product and the
hazards attendant to the use thereof.  The foam, for construction  purposes,  is
regulated by state and local building codes. Failure to properly comply with all
regulations  applicable  to the Company's  products  could result in the Company
incurring  substantial costs to comply or cease the manufacture of the offending
products and the possible imposition of civil and criminal penalties.

Research and Development:
------------------------

     During the years  ended  December  31,  2001 and 2000,  the  Company  spent
approximately  $0 and $0,  respectively,  in  connection  with its  research and
development  efforts.  The Company did not complete its research and development
on any potential products,  other than the paint stripping product, derived from
the Technologies,  and therefore, there can be no assurances that such potential
products will be developed or that they will perform as intended.

     All of the Company's research and development efforts were conducted at the
Company's   laboratory   facility   in   Brookfield,   Connecticut.   See  "Item
2.Properties."  In February 1998,  the Company  closed its research  facility in
Brookfield, Connecticut. The closing of the facility may have a material adverse
effect on the Company's  ability to perform research and development on products
other than the paint stripper or NaturalCool.

Employees:
---------

     As of December 31, 2001, the Company had one (1) paid employees and two (2)
non-paid employee,  including two (2) Officers. As of such date, the Company did
not have any  consultants.  None of the Company's  employees is represented by a
labor organization, and the Company considers its relationship with employees to
be satisfactory.

Reports Filed with the SEC:
---------------------------

     The Company is a reporting company. The public may read and copy the Annual
Report (Form 10-KSB) and any other  materials  filed by the Company at the SEC'S
Public  Reference Room at 450 Fifth Street N.W.,  Washington,  D.C.  20549.  The
public may obtain  information on the operation of the Public  Reference Room by
call the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains
reports,  proxy and  information  statements,  and other  information  regarding
issues at http://www.sec.gov.


                                       9
<PAGE>


ITEM 2.  PROPERTIES:

Principal Plants:
----------------

     The Company does not own any real property.  In September 1998, the Company
moved its corporate offices to 440 Main Street,  Ridgefield  Connecticut  06877,
which is Mr. Fricke's law office.  Mr. Fricke has provided space to the Company,
without charge, since that time.

     As of January 1, 2000, the Company was leasing,  on a month to month basis,
3,530  square  feet of space for $1,275 per month at P.O.  Box 625,  Derby Road,
Newport,  Vermont  05855.  On July 1, 2000,  the square  footage  was reduced to
approximately 1,500 square feet at $600 per month.

     The Company  believes  its  facilities  are  suitable  and adequate for its
existing  operations  and those  reasonably  expected in the next twelve months.
With the exception of the NaturalCool  units, which are manufactured in Newport,
Vermont,  and the fulfillment of Internet sales and samples which is carried out
in Newport, Vermont, the Company's facilities are not suitable for manufacturing
and  distributing  products in significant  quantities.  Therefore,  the Company
intends to rely on outside manufacturers to manufacture its products as they are
developed and marketed.  The Company  currently does not possess the capacity to
manufacture  any of its products in anything  more than sample  quantities  in a
laboratory facility. Although the Company has identified certain companies which
it  would  consider  engaging  for  the  purpose  of  manufacturing  some of the
Company's  intended  products,  no such  agreements have been entered into as of
this date.  The AmeriStrip  product is being  manufactured  on a  batch-by-batch
basis.

ITEM 3.  LEGAL PROCEEDINGS:

     On May  29,  1998,  SSC  Marketing,  Inc.  ("SSC")  filed  an  action  (SSC
Marketing,  Inc. v. Safe  Alternatives)  against the Company in federal court in
the  Southern  District  of New York.  By  agreement,  the suit was moved to the
District of  Connecticut  (D. Conn.  File No. 3:  98cv1312  JBA).  The complaint
contained four counts, each requesting a judgment for $180,880 plus interest and
attorney's fees. The suit alleged breach of contract,  misrepresentation  by the
Company,  unjust  enrichment,  and quantum meruit.  The Company responded to the
complaint and brought  various  counterclaims  against SSC. This action  settled
and, in  September  1999,  was  dismissed.  The Company  subsequently  delivered
500,000 shares of its restricted  Common Stock to SSC's designee pursuant to the
settlement agreement.

     An adversary  proceeding  was brought  against the Company in July 1997, in
U.S. Bankruptcy Court for the District of Connecticut,  by Richard Coan, Trustee
for the Bankruptcy Estate of Samuel E. Bernstein (U.S.  Bankruptcy Court,  Dist.
Conn.  Adversary  Proceedings File No.  97-5078).  The suit sought a judgment to
recover accrued but unpaid wages totaling approximately $100,000 for 1995, which
the  Company  contended  that Mr.  Bernstein  had waived  his right to  receive.
Judgment  against  the  Company  and in favor of the Trustee was entered in this
matter on or about April 5, 2000 in the amount of $140,000.  On or about October
23,  2001,  the  Bankruptcy  Court  approved a  settlement  agreement  whereby a
Satisfaction  of  Judgment  will be entered in this  matter  upon the  Trustee's
receipt of $10,000 to be paid on behalf of the Company.  The settlement payments
to the  Bankruptcy  Trustee were  completed on behalf of the Company on or about
March 27, 2002 and the Satisfaction of Judgment was filed on April 2, 2002.


                                       10
<PAGE>


     Ms. Kathleen Kennedy,  the licensor under certain technology  licenses with
the Company, brought an arbitration action in 1999 against the Company, claiming
past due minimum royalty payments of approximately $145,000. The arbitrator held
that although the Company did not owe any money or damages to Ms.  Kennedy,  the
licenses  are now  non-exclusive  because  of the  Company's  failure to pay the
licensing fees.

     The Company  commenced  an action  against Mr.  Clement  Royer,  the former
President of the Company's  Natural Cool Division,  in November 1997,  which was
settled in June 1998. The complaint sought the return of corporate records, test
data and the like, as well as  compensatory  damages and  attorney's  fees.  The
terms of the settlement  involved Mr. Royer's returning all corporate  documents
and disclaiming any rights to the NaturalCool product.

     In October 2000,  Seaco  Insurance  Company filed an action  entitled Seaco
Insurance Company v. Safe Alternatives o f America, Inc. (Vermont Orleans County
Court Docket No.  274-10-000SCV)  alleging  non-payment  of insurance  premiums.
Default  judgment  was entered  against the Company on November  21, 2000 in the
total amount of $10,792.36.  Interest shall accrue on this judgment at a rate of
12% per annum and was in the amount of  approximately  $1,295 as of December 31,
2001.

     Other than as set forth herein,  there are no legal actions pending against
the  Company  nor to the  knowledge  of the  Company  are any  such  proceedings
contemplated.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year ending December 31, 2001.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
              MATTERS:

Market Price of Common Stock:
----------------------------

     There has not been an active market for the Company's securities.  On March
6, 1997,  the Company's  Common Stock was accepted for trading on the Electronic
Bulletin  Board of the NASD under the symbol  SACA.  The Common  Stock traded in
very  limited  volumes,  and the  Company has not been able to obtain any quoted
prices for the stock prior to June 24, 1997.  The limited  market has caused the
securities to be subject to significant price fluctuations.

     On March 27, 2002,  the Company's  Common Stock was accepted for trading on
the NASD Over the Counter Bulletin Board.


                                       11
<PAGE>

     The range of high and low bid and asked quotations for the Company's Common
Stock for fiscal years 2000 and 2001 are not  available to the Company as of the
date of filing this report due to the Company's lack of funds.  After reasonable
inquiry,  the  Company  was not able to find  the  requested  information  at an
economically feasible cost.

     A range of high and low  quotations  for the  Company's  Common  Stock  for
fiscal years 1999 and 2000 are listed below.  The  information was obtained from
the NASDAQ web site (www.nasdaq.com).  The prices reported may not be indicative
of the value of the Common Stock or the existence of an active  trading  market.
The Company does not know whether these quotations reflect  inter-dealer  prices
without  retail  mark-up,  markdown or  commissions.  These  quotations  may not
represent actual transactions.

                                      2000                        2001

                                 Low          High         Low          High

       First Quarter         $    0.011   $    0.185   $    0.006   $    0.015
       Second Quarter        $    0.010   $    0.050   $    0.006   $    0.009
       Third Quarter         $    0.005   $    0.015   $    0.006   $    0.007
       Fourth Quarter        $    0.005   $    0.030   $    0.005   $    0.006

Holders:
-------

     The Company had  approximately  1,355 holders of record of its Common Stock
as of December 31, 2001.

Dividend Policy:
---------------

     It is the policy of the Board of Directors to retain earnings,  if any, for
use in the maintenance and expansion of the Company's business.  The Company has
not declared any cash dividends to the holders of its capital stock and does not
anticipate declaring or paying dividends in the foreseeable future.

Recent Sales of Unregistered Securities:
---------------------------------------

     During 1997 and the first half of 1998, Messrs.  Sean McNamara,  Nicky Hunt
and  Richard  Hill  (hereinafter   "the  Investor   Group"),   who  are  current
shareholders  and who were  Directors  of the Company for part of 1997 and 1998,
advanced working capital loans and committed to make loans to the Company in the
aggregate  amount of  approximately  $1.0  million.  During the first quarter of
1998,  in  consideration  for,  among  other  things,  not  demanding  immediate
repayment of the loans,  the Company and the  Investor  Group agreed to exchange
all of such  outstanding  indebtedness  for a convertible  promissory  note (the
"Investor Note"),  2,000,000 shares of the Company's Common Stock with piggyback
registrations  rights (but which may not be traded until the $1,300,000  note is
converted) and stock options.  The Investor Note was in the aggregate  principal
amount of $1.3 million, and accrued interest at a rate of 8% per annum beginning
January 1, 1998.The Board authorized the issuance of warrants in connection with
the  Investor  Note that are  exercisable  for a period of five years to acquire


                                       12
<PAGE>


1,500,000  shares of Common  Stock at $.25 per  share  and  1,500,000  shares of
Common  Stock at $.50 per share.  In  connection  with the  Investor  Note,  the
Company  also issued  options to acquire  Common  Stock as  follows:  options to
purchase 2.6 million shares at an exercise price of $.01 per share, 1.95 million
shares at an exercise  price of $.25 per share,  and 1.95  million  shares at an
exercise price of $.50,  all of which were  exercisable at any time between June
30, 1999 and June 30, 2003,  the  expiration  date of the options.  The Investor
Note was repayable as follows:  $433,333 in principal amount, plus interest, was
due and  payable on or before  September  9, 1998;  an  additional  $433,333  in
principal amount,  plus interest,  was due on or before January 9, 1999; and any
unpaid principal balance, plus interest,  was due on or before March 9, 1999. In
addition to any other  remedies they may have if the Company  failed to make the
principal payment on the shareholder loans on September 9, 1998, the Company was
obligated to issue to the lender options to acquire an additional  75,000 shares
of Common Stock, exercisable at a price of $.01 per share, for each 30 days that
the  principal  payments  are in  default.  The  Company did not make any of the
payments required under these Investor Notes and was in default.

On May 29,  1999,  in  exchange  for the  issuance  of  1,000,000  shares of the
Company's  restricted  Common Stock,  Nicky Hunt released the Company from:  (1)
paying any sums due to him,  including  amounts  due to him under the  foregoing
$1.3 million Note; (2) issuing any additional  stock then due or becoming due to
him; and (3) any and all rights he had,  including any right under any option or
warrant, to receive any additional Common Stock from the Company that arose as a
result of his association with the Company.  Messrs.  McNamara and Hill released
the same  obligations  in October 2001 in exchange for the issuance of 4,000,000
shares of the Company's restricted Common Stock.

In March and April,  1998,  the  Company  issued its 6%  Convertible  Notes (the
"Notes") in the aggregate  principal  amount of $726,500 in a private  placement
under Rule 505 of Regulation D. Interest on the Notes is payable  semi-annually.
The principal amount of the Notes, together with unpaid interest thereon, is due
and  payable,  if not  earlier  converted,  on  March 3,  1999.  The  Notes  are
convertible  into shares of Common Stock at the option of the holder at any time
following  the  earlier  of (i) 90  days  after  the  filing  of a  registration
statement  with the SEC covering the shares to be received  upon  conversion  or
(ii)  the date the SEC  declares  such  registration  statement  effective.  The
conversion  price per share is the lesser of (i) 70% of the average  closing bid
price  per  share  of  Common  Stock  for the  five  trading  days  prior to the
conversion date or (ii) $0.25. Upon conversion,  any accrued and unpaid interest
is waived by the holder. The Company has the option to repurchase the Notes from
the holder prior to  registration  of the underlying  shares at a premium of 10%
over the purchase  price of the Notes.  The Company  agreed to file with the SEC
not later than June 3, 1998, and use its best efforts to have declared effective
not later than July 3, 1998, a  registration  statement  registering  for resale
them shares that would be issued upon  conversion of the Notes.  The Company has
made no payments on these notes;  has not  repurchased  these  Notes,  and is in
default with regard to its registration obligation.

     In November  2001,  one of the holders of the foregoing  Convertible  Notes
released all obligations to it under or as a result of the Convertible  Notes in
exchange for the issuance of 4,00,000 shares of the Company's  restricted Common
Stock.  As of February 11, 2002, a total of six (6) holders  released all of the
obligations to them under or as a result of the Convertible Notes,  representing
a total of $450,000 in principal and not including interest, in exchange for the
issuance of a total of  16,624,236  shares of the  Company's  restricted  Common
Stock. In addition,  as of December 31, 2002, the Company had been informed that
two (2) additional holders, representing a total of $50,000 in principal and not
including interest, have written off their interests in the Convertible Notes.


                                       13
<PAGE>

     As compensation to the placement agent, Alexander,  Wescott & Co, Inc., the
Company paid cash fees of 10% of the gross proceeds from the Investor  Notes. In
addition,  the  Company  paid a 3%  nonaccountable  expense  reimbursement,  and
certain other  out-of-pocket  expenses of the agent.  The Company also issued to
the agent  Warrants  exercisable  for  284,600  shares of  Common  Stock,  at an
exercise  price of $.30 per share,  expiring  June 28, 2003.  As of December 31,
2001, none of these warrants had been exercised.

     In lieu of cash  payments  for their  service  as  members  of the Board of
Directors  and  committee  members,  The Company  agreed to issue  stock  and/or
options to the members of the Board of Directors.  .In 1997,  the Company agreed
to issue to each of Messrs.  Sean  McNamara and Richard  Hill 200,000  shares of
restricted  Common Stock for their services.  On January 16, 1998 and in lieu of
monetary  compensation,  the Board of Directors authorized:  (1) the issuance of
stock options to the members of the Management Committee (Messrs. McNamara, Hunt
and Hill) to purchase 100,000 shares of the companies restricted Common Stock at
a price of $.01 per share and  exercisable  for a period of five years;  (2) the
issuance  of  stock  options  to the  members  of the  Management  Committee  to
purchase,  at $.01 per share,  $2,500  worth of stock (with the number of shares
being  determined by the last per share sales price of the month) for each month
and  exercisable  for a period  of five  years;  and (3) the  issuance  of stock
options to each member of the Board of Directors (Messrs.  McNamara,  Hunt, Hill
and Fricke) to  purchase,  at $.01 per share,  $500.00  worth of stock (with the
number of shares  being  determined  by the last per  share  sales  price of the
month) for each board meeting and  exercisable  for a period of five years.  The
Company's obligation to issue these options was released by Mr. Hunt in May 1999
and by Messrs. McNamara and Hill in October 2001.

     On June 1, 1998,  Nicky Hunt was  granted  options to purchase up to 40,000
shares of the Company's restricted Common Stock at a price of $.01 per share for
doing the due  diligence  in  connection  with  Norfield  Corporation.  Mr. Hunt
released the Company's obligation to issue these options in May 1999.

     During  1998,  the Company  issued its  restricted  Common Stock to pay for
services to the Company,  as follows:  Sam Armato,  Jr., 50,000 shares;  Chester
Greenwood,  50,000 shares;  Kenneth  Hodgdon,  10,000  shares;  and Neil Rogers,
100,000  shares.   In  addition,   the  Company   authorized  the  following  as
compensation  and incentive pay:  100,000  shares of restricted  Common Stock to
Robert Berger  (authorized but not issued until 1999);  and (2) 25,000 shares of
restricted  Common Stock  (authorized but not issued until 1999) plus options to
purchase 234,000 shares of restricted Common Stock exercisable for a period of 5
years at a price of $.01 per share to Robert  Percheski.  In 1999,  the  Company
issued 50,000 shares of its restricted Common Stock to Scott Purvis for services
he rendered to the Company. During the first quarter of 2001, the Company issued
250,000 shares of the Company's  restricted Common Stock to Michael Mareneck for
services render to the Company.


                                       14
<PAGE>




     Certain  actual  and  threatened  litigation  was  settled  in  1998 by the
issuance  of the  Company's  Common  Stock,  as follows:  500,000  shares to SSC
Marketing, Inc. and 110,000 shares to Melvin Kanan.

     On December  21,  1998,  the Board  granted  options to purchase  2,500,000
shares  of the  Company's  Common  Stock to Mr.  Fricke  and  500,000  shares to
Ms.Yrizarry (Mr. Fricke's former spouse) at an exercise price of $.01 per share,
exercisable  until December 21, 2008 for remaining and serving as a Director and
Officer of the Company, together with the attendant liability, after the rest of
the  Board  and  management  had  resigned.  In 1999,  the  Company  substituted
2,500,000  shares and 500,000  shares of its Common  Stock to Mr.  Frick and Ms.
Yrizarry, respectively, in place of these options.

     In lieu of cash payment for serving as a member of the Board of  Directors,
the Board authorized,  but did not issue,  options to purchase 400 shares of the
Company's restricted Common Stock for each meeting attended.  These options were
exercisable  for a period of five (5) years from the date of the  meeting at the
price of $.001 per share.  All three (3) members of the Company's Board attended
each of the  fifteen  (15)  meeting  that were held  during  1999 for options to
purchase a total of 18,000  shares of the  Company's  restricted  Common  Stock.
During 2000,  each of the members of the Company's  Board of Directors  attended
the ten (10)  meetings  for options to purchase a total of 12,000  shares of the
Company's restricted Common Stock. No such options were issued in 2001.

     In lieu of  receiving  cash  payments for his services as an Officer of the
Company,  in  exchange  for salary  arrearages,  and in exchange  for rent,  the
Company issued 10,000,000 shares of its restricted Common Stock to Mr. Fricke in
1999 and 18,500,000 shares of its restricted Common Stock in 2000.

     During 1999,  Dominic Parisi  purchased  2,400,000  shares of the Company's
restricted  Common Stock for a purchase  price of $72,000 for the benefit of the
Dominic G. Parisi Trust.  During 2000, Mr. Parisi purchased  5,750,000 shares of
the Company's restricted Common Stock for a purchase price of $37,500.

     By December 31, 2002,  the Company had entered into  Settlement  Agreements
with seven (7) creditors to exchange one (1) share of the  Company's  restricted
Common  Stock  for each  dollar of debt owed by the  Company  to each  creditor.
Pursuant to these Agreements,  the Company intends to issue approximately 18,410
shares of the Company's restricted Common Stock.

     No  filings  have  been  made with the SEC with  respect  to the  foregoing
transactions.

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

General:
-------

     Since the  Reorganization,  management  of the Company has  concentrated  a
significant  portion of its efforts on the  marketing  and sale of the Company's
paint stripping product and NaturalCool products. The Company does not intend to
engage in any research and  development in 2002 due to its financial  condition.
During 1999 the Company  eliminated  virtually all of its corporate overhead and
focused  exclusively  on  AmeriStrip  and  NaturalCool  products  in the hope of
producing a positive cash flow and revenue.


                                       15
<PAGE>

     During 2000 and 2001,  the  Company  concentrated  its sales and  marketing
through direct sales from the Company's offices in Derby,  Vermont.  The Company
established  a small network of  independent  distributorships  with  commission
sales  persons to sell the Natural Cool product.  The Company  continued to sell
the Ameristrip product directly to its former customers and over the internet.

     Although sales were nominal in 2001 and 2000, the sales were  sufficient to
pay the  Company's  greatly  reduced  overhead.  The Company has had losses from
operations  since its inception.  It is likely that the Company will continue to
have losses from operations in the near-term future.  There is no assurance that
the Company will have profit from operations at any time after 2001.

     The report of the Company's  independent auditor contains a paragraph as to
the Company's ability to continue as a going concern. Among the factors cited by
the  auditors  as  raising  substantial  doubt as to the  Company's  ability  to
continue  as a  going  concern  are:  (i) the  Company  has  incurred  recurring
operating losses;  and, (ii) the Company has a working capital  deficiency.  See
Note 4 to the Financial Statements included herein.

Results of Operations for the Fiscal Years Ended December 31, 2001 and 2000:
----------------------------------------------------------------------------

     Sales;  Gross Margins;  Net Losses.  For the fiscal year ended December 31,
2001,  sales  decreased to $88,286 from $93,510 in the prior year, a decrease of
$5,233 due to reduced sales of the Company's  paint  stripping  product line and
modest initial sales of the Company's NaturalCool product.

     The Company's  gross margin on sales  decreased from (88%) in 2000 to (79%)
in 2001.

     For the year ended  December 31, 2001,  the Company  reported a net loss of
$(129,135),  or $(.0023) per share,  as compared with $(258,552) or $(.0061) per
share  in the  prior  year,  a  decreased  loss of  $129,417.  The loss for 2001
includes  a charge for  $273,649,  which  represents  a "Loss on  troubled  debt
restructuring"  as  described  in "Note 17" of the  financial  statements.  Also
included  was  $56,000  forgiveness  of debt  income for two of the  Convertible
Notes,  plus $6,000 of accrued  interest,  as noted in Item 5. The loss for 2000
included an  additional  provision  of  $114,000  due to the entry of a judgment
against  the Company in In re  Bankruptcy  Estate of Samuel E.  Bernstein  (U.S.
Bankruptcy Court,  District Conn.  Adversary  Proceeding File No. 97-5078).  The
Company  will  continue  to incur net losses as sales of its  products  have not
materialized  at levels  sufficient to cover the Company's cost of marketing and
selling,  which has  included  substantial  non-cash  expenses  associated  with
compensating,  marketing and selling personnel in shares of the Company's Common
Stock.  The  decline  in the net loss per  share in 2001  from  2000 is due to a
larger number of shares outstanding during 2001.

     Selling,  General and Administrative  Expenses. For the year ended December
31, 2001, the Company incurred selling,  general and administrative  expenses of
$70,755, as compared to $97,869 in the prior year.  Calculations with respect to
the percentage of selling,  general and administrative expenses to sales are not
meaningful.


                                       16
<PAGE>

     During the fourth  quarter of 1997 and the first half of 1998,  the Company
and third  parties have taken a number of actions which are and will continue to
have the result of  significantly  reducing the Company's  selling,  general and
administrative  expenses.  These  include:  (1)  termination  of  the  Company's
agreements with SSC, pursuant to which the Company paid  approximately  $203,000
between  November 1, 1996 and December 31, 1997, which savings will be offset in
part by selling expenses associated with the temporary increase in the Company's
in-house sales staff;  (2)  resignation  and  termination  of certain  officers,
employees  and  consultants  who had been  compensated  in 1998  and  1997  with
substantial  amounts of Common Stock; and (3) closing the Company's  Brookfield,
Connecticut laboratory facility. In 2001, the Company further reduced the square
footage,  and consequently the rent, in its Vermont facility.  As a result, even
with lower sales,  the Company's net loss decreased from 2000 due to lower costs
of rent and payroll.

     Research and  Development.  For the years ended December 31, 2001 and 2000,
the Company did not have any research and development expenses. The research and
development  of the Company's  product lines were  terminated in 1998 due to the
Company's financial condition. The research facility in Brookfield,  CT was also
closed in 1998.  Calculations  with  respect to the  percentage  of research and
development expenses relative to sales are not meaningful.

Balance Sheets:
--------------

     At December 31, 2001, the Company had current assets of $5,707, compared to
$19,234 at December  31,  2000.  The  decrease in current  assets was  primarily
attributable to a decrease in accounts  receivable from $11,996 to $4,510 due to
lower sales and an  allowance  for bad debts of $5,000 in 2000.  At December 31,
2001, the Company had cash of $1,197,  as compared to cash of $7,238 on December
31, 2000, reflecting the lower sales and no additional funding.

     Accounts  payable  and other  accrued  expenses  decreased  to  $216,531 at
December 31, 2001, from $417,610 at December 31, 2000,  primarily as a result of
write-off of $222,456 of accrued interest on Shareholder  Investor Notes,  which
were charged to additional  paid in capital.  The balance for 2001 also includes
accrued interest on the balance of Convertible  Debenture Notes in the amount of
$40,592.

     Stockholders'  loans  decreased from $926,900 as of December 31, 2000 to $0
at  December  31,  2001.  See "Item 5.  Market  for Common  Equity  and  Related
Stockholder Matters--Recent Sales of Unregistered Securities."

     As of  December  31,  2001,  the  Company  had an  accumulated  deficit  of
$(17,889,646),  which  includes the net loss for fiscal year 2001 of $(126,135),
plus prior  period  adjustment  of  $(230,000)  to record the  trading  value of
restricted  common  shares  issued to officers for the years 1999 and 2000.  See
"Note 18" in the audited financial statements.


                                       17
<PAGE>

Liquidity and Capital Resources:
-------------------------------

     The  Company  has  never  generated  sufficient  revenues  to  finance  its
operations and has been able to remain in business solely as a result of raising
capital.  At December  31, 2001,  the Company had current  assets of $15,707 and
current  liabilities of $893,031.  The Company's  ability to continue as a going
concern in the near term is dependent upon obtaining additional financing. As of
December 31, 2001,  the Company did not have the financial  resources to operate
its business,  continue  research and  development  or market its products.  The
Company has been financing its operations through loans from shareholders, which
aggregated approximately $926,900 as of December 31, 2000 and from approximately
$726,500 in net proceeds from a private placement of convertible notes completed
in April,  1998.  See "Item 5. Market For Common Equity And Related  Stockholder
Matters - Recent Sales Of Unregistered  Securities."  By the end of 1998,  those
investors who had previously  provided capital for the Company were unwilling to
advance any further  funds.  As of year-end 1998, the Company had not identified
any prospects for raising  additional  capital.  By the end of 1999, the Company
had basically moved its scaled down operations to Vermont. During 2000 and 2001,
the Company  continued to reduce its overhead by reducing the square footage and
rent at its Vermont facility.

     The Company has entered into agreements with the respective licensors under
the licenses  with respect to the various  technologies  under which the Company
has undertaken substantial ongoing financial commitments. The Company was unable
to obtain  additional  financing,  and the Company is currently in default under
such agreements. See "Item 1. The Company - Licenses."

     The Company estimated that it would require  approximately  $1.1 million in
financing in order to continue  operations for fiscal 1998 and the first half of
fiscal 1999. Much of that financing was provided through additional  shareholder
loans,  accruing  interest at 8%, and convertible notes issued in April 1998, in
the aggregate principal amount of $726,500. See "Item 5. Market or Common Equity
And Related Stockholder Matters - Recent Sales Of Unregistered  Securities." The
shareholders  who were providing funds to the Company do not have any commitment
to  continue  lending  money,  and the  Company  has been  forced to scale  back
operations.  The Company  agreed to repay  $433,333 in  principal  amount of the
shareholder  loans on or before  September 9, 1998;  an  additional  $433,333 in
principal  amount on or before  January 9, 1999;  and an additional  $433,333 in
principal  amount  on or  before  March 9,  1999.  The  principal  amount of the
Convertible Notes,  together with unpaid interest thereon,  was due and payable,
if not  earlier  converted,  on  March 3,  1999.  The  Company  has not made any
payments on these Notes and is in default.  As of December 31, 2000, the Company
had not identified a source of repayment of any of these obligations. In October
2001,  the Company  issued  4,000,000  shares of restricted  common stock to the
remaining  shareholders  in the  Investor  Group.  These  shares  were issued in
consideration of a waiver of all rights to or under any stock, options, warrants
or other right to additional stock in the Company.

ITEM 7.  FINANCIAL STATEMENTS:

     The  audited  financial  statements  of the Company as of and for the years
ending December 31, 2001 and 2000 are included beginning at Page F-1 below.


                                       18
<PAGE>

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

     As more fully set forth in Note 4 to the Financial Statements, the auditors
have stated that the Company's  recurring  operating  losses and working capital
deficiencies  for fiscal years 2001 and 2000 raise  substantial  doubt about its
ability  to  continue  as  a  going  concern.  The  Company  agrees  with  those
statements.

                                    PART III

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

     The Company's Officers and Directors during 2001 are as follows:

         NAME                 AGE          POSITION

         Richard Fricke        57          President, Chief Executive Officer,
                                           Chief Financial Officer and Director

         Dominic G. Parisi     71          Secretary and Director

     Mr. Richard J. Fricke has served as President and Chief Executive  Officer,
except for a short period as set forth below, of the Company since January 1998.
He is also a Director of the Company.  He has been a practicing general practice
attorney in the State of Connecticut  since 1970 and was admitted to the bar the
same year.  From  1970-73,  he worked  with the law firm of Gregory & Adams,  in
Wilton,  Connecticut.  From 1973 to 1990,  he was a  partner  in the Law Firm of
Crehan & Fricke,  in  Ridgefield,  Connecticut.  Mr. Fricke filed for protection
under Chapter 7 of the federal  bankruptcy  laws in 1996. In addition to private
practice,  Mr. Fricke was Town Counsel for the town of Ridgefield,  Connecticut.
From 1973-81,  he served as Director of Village Bank & Trust Company and for the
Ridgefield  Community Center and the Ridgefield  Montessori  School.  Mr. Fricke
received his undergraduate  and law degrees from Cornell  University in 1967 and
1970,  respectively.  Mr. Fricke's biographies can be found in Marquis Who's Who
in America, Who's Who in the World, Who's Who in Business and Finance, and Who's
Who in the East.

     Mr.  Dominic  Parisi  is  a  self-employed  consultant  regarding  business
management,  development  and  training.  He has an MBA from the  University  of
Chicago, Chicago,  Illinois and a Ph.D. from Northwestern University,  Evanston,
Illinois.  He is  Professor  Emeritus  and past  Chairman of the  Department  of
Management, DePaul University,  Chicago, Illinois. Mr. Parisi serves as a member
of the Board of Directors of First Frontier  Holdings,  Inc., SOBRO GROUP,  Inc.
and San Diego Downtown Residents (Non-profit).

     Messrs. Fricke, Hastings, and Parisi were appointed to the Board on January
18, 1999 with their terms to expire on December 31, 2001. Mr. Hastings chose not
to serve on the Board of Directors for another year. Mr.  Chester  Greenwood was
appointed to fill that vacancy but was  relocated.  Messrs.  Fricke and Hastings
were reappointed to the Board to serve until December 31, 2002.

     Officers  are  elected  by and  serve  at the  discretion  of the  Board of
Directors.

     There are no family relationships among the members of the Board.


                                       19
<PAGE>


Board Committees:
----------------

     The Board had no Committees during 2001.

ITEM 10. EXECUTIVE COMPENSATION:

Director Compensation:
---------------------

     Although  the  Members of the Board of  Directors  did not receive any cash
fees for the  service on the  Board,  they are  entitled  to be  reimbursed  for
expenses incurred in attending Board meetings.  In 1999, the Company  authorized
the issuance of four hundred  (400) shares of the  Company's  restricted  Common
Stock to each member of the Board for each  meeting  attended.  Under this plan,
each  Director  is entitled to the  issuance  of 6,000  shares of the  Company's
Common Stock for 1999, 0 shares for 2000, and 0 shares for 2001. On December 21,
1998, the Board granted  options to purchase  2,500,000  shares of the Company's
Common Stock to Mr.  Fricke and 500,000  shares to Ms.  Yrizarry  (Mr.  Fricke's
former  spouse)  at an  exercise  price of $.01  per  share,  exercisable  until
December  21, 2008 for  remaining  and serving as a Director  and Officer of the
Company, together with the attendant liability,  after the rest of the Board and
management had resigned.  In 1999, the Company substituted  2,500,000 shares and
500,000 shares of its Common Stock to Mr. Frick and Ms. Yrizarry,  respectively,
in place of these options.

Compliance With Section 16(A) Of The Exchange Act:
-------------------------------------------------

     Based  solely  upon a review of Forms 3, 4 and 5, and  amendments  thereto,
furnished to the Company with respect to fiscal years 2001 and 2000, the Company
believes that (1) Messrs.  James Hastings,  Chester  Greenwood,  and Mr. Dominic
Parisi each failed to file a Form 3 upon  becoming  Directors  of the Company in
January  1999;  and (2) Mr.  Richard J. Fricke  failed to file a timely  initial
report on Form 3  statement  of  initial  ownership  of shares of the  Company's
Common  Stock,  and has  failed  to file any Forms 4 or a Form 5  reporting  the
acquisition from the Company of shares of Common Stock.

     The  Company  did not receive any Form 3, 4 or 5 from any of its present or
former  Officers or Directors  during 2002 or 2000.  Thus, the Company  believes
that: (1) Messrs.  Hill, Hunt, McNamara,  Fricke,  Parisi, and Ms. Yrizarry each
failed  to  file  a  Form  4 or  Form 5  reporting  transactions  involving  the
acquisition of shares of the Company's Common Stock;  and (2) Messrs.  Percheski
and Berger failed to file a Form 4 or Form 5 reporting one transaction involving
the acquisition of shares of the Company's Common Stock.

Officer Compensation:
--------------------

     The following table sets forth compensation received by the Company's Chief
Executive  Officer and the four remaining  most highly paid  executive  Officers
(except  where such  compensation  does not exceed  $100,000  per annum) for the
three fiscal years ended December 31, 2001.



                                       20
<PAGE>
<TABLE>
<CAPTION>



                           SUMMARY COMPENSATION TABLE

                             Long Term Compensation
                             ----------------------

                      Annual Compensation                     Awards                    Payouts
                      -------------------                     ------                    -------

Name and          Year        Salary       Bonus     Other Annual  Restricted   Securities      LTIP      All Other
Principal                                            Compensation    Stock      Underlying      Payout   Compensation
Position                                             (Notes 1-3)    Awards $    Options/SAR
                                                                                (Notes 2,3)
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S>           <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>

Richard J.         2001    $         0               $          0            0            0
Fricke
President &
CEO (from
1/98 until
9/98 & 12/98
to date), CFO
(from
1/01/2001 to
date)
Secretary
(until 1/98)
& Director
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
                   2000    $          0              $  92,500.40   18,504,000        4,000
                                                        (Note 2)
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
                   1999    $     34,615              $ 137,566.00   12,506,000        6,000
                                                        (Note 2)
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Dominic            2001    $          0              $          0            0            0
Parisi,
Secretary
(2001) and
Director
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
                   2000    $          0                     20.00                     4,000
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
                   1999    $          0                     66.00                     6,000
------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>


     1. The  Company  established  a Medical and Dental  Reimbursement  Plan for
Richard J. Fricke  providing for  reimbursement  of up to $10,000 of medical and
dental  expenses  annually.  The  Company  has not  received  any  requests  for
reimbursements under this plan.

     2. The Company paid no "Other Annual  Compensation" in 2001.  "Other Annual
Compensation" for Mr. Fricke included for 2000:  18,500,000 shares of restricted
Common Stock and a currently  exercisable option to purchase 4,000 shares of the
Company's  restricted  Common  Stock  (valued  at $.0005  per  share).  In 1999:
12,500,000 shares of restricted Common Stock and currently  exercisable  options
to purchase 6,000 shares of the Company's  restricted Common Stock (at $.011 per
share) to expire in 2004. The monetary value of the restricted  Common Stock set
forth in this table is the market value of the  Company's  free  trading  Common
Stock.


                                       21
<PAGE>

     3. In 1999, the Company authorized the issuance of options to purchase four
hundred (400) shares of the Company's  restricted Common Stock to each member of
the Board for each  meeting  attended at a price of $.011 per share  exercisable
for a period of five years  from the date of the  meeting  attended.  Under this
plan, each Director  received  options to purchase 6,000 shares of the Company's
restricted  Common Stock in 1999 and 4,000 shares of the Company's  Common Stock
in 2000. There were no such awards in 2001.

Employment Agreements:
---------------------

     The  Company  does  not  have  any   employment   agreements,   termination
agreements,   change-in-control   agreements   or  change  in   responsibilities
agreements with any of its employees.

Limitation Of Liability And Indemnification Matters:
---------------------------------------------------

     The Company's By-Laws provide for the  indemnification,  to the full extent
allowed by Florida law, of its directors, Officers, employees and agents who are
or were a party, or are threatened to be made a party to any threatened, pending
or completed  legal action,  suit or proceeding by reason of the fact that he or
she is or was serving a director,  Officer,  employee or agent of the Company or
is or was serving in such capacity at another  entity at the Company's  request.
The extent,  amount and eligibility for such indemnification are determined by a
majority vote of a quorum of disinterested directors, or by a majority vote of a
quorum of disinterested shareholders.

     Section 607.0850 of the Florida Business Corporation Act empowers a Florida
corporation to indemnify any person who is a party to any proceeding (other than
an  action by or in the  right of such  corporation)  by reason of the fact that
such  person  is  or  was  a  director,  Officer,  employee  or  agent  of  such
corporation,  or is or was  serving  at the  request  of such  corporation  as a
director,  officer,  employee  or agent of another  corporation  or  enterprise,
provided that he acted in good faith and in a manner he  reasonably  believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal  action or  proceeding,  had no reasonable  cause to believe his
conduct was unlawful.  A Florida  corporation  may indemnify any person who is a
party to any  proceeding  by or in the right of the  corporation  under the same
conditions,  except  that  no  indemnification  is  permitted  without  judicial
approval if the officer or director is adjudged to be liable in the  proceeding.
Where an officer, director,  employee or agent of a corporation is successful on
the merits or  otherwise  in the defense of any action  referred  to above,  the
corporation  must  indemnify  him against  the  expenses  which he actually  and
reasonably incurred in connection therewith.


                                       22
<PAGE>
<TABLE>
<CAPTION>



     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors,  officers and controlling  persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the  Commission  such  indemnification  is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.

     The Company is not aware of any claims,  whether possible or asserted,  for
indemnification.

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

     The following  table shows,  as of December 31, 2001,  the shares of Common
Stock  beneficially  owned by all of the persons who served as the  directors or
officers  of the  Company  during  2001 as well  as the  principal  shareholders
(greater  than 5%) of the  Company  individually  and, as to the  directors  and
officers,  as a group.  The address of each person or entity,  unless  otherwise
noted, is c/o Safe Alternatives  Corporation of America,  Inc., 440 Main Street,
Ridgefield, Connecticut.

     The  number  of  shares  beneficially  owned by each  person  or  entity is
determined  under  rules of the  Securities  and  Exchange  Commission,  and the
information is not necessarily  indicative of beneficial ownership for any other
purpose. Under such rules,  beneficial ownership includes any shares as to which
the person has the sole or shared voting power or investment  power and also any
shares  which the person  has the right to  acquire as of a date  within 60 days
after the relevant date through the exercise of any stock option or other right.


     Beneficial Owner               Position           Number of Shares Owned            Percent
        and Address                                                                                             of Class (%)
-------------------------- -------------------------- -------------------------- --------------------------
<S>                        <C>                        <C>                        <C>
Richard J. Fricke          President & CEO (from 1/98                 33,462,252                      57.11
25 Buckingham Ridge Road   to 9/98 & during 12/98),                (Notes 1 & 2)
Wilton CT 06897            CFO (from 1/01) Secretary
                           (until 1/98) & Director
-------------------------- -------------------------- -------------------------- --------------------------
Dominic G. Parisi          Secretary & Director                        8,160,000                      13.93
701 Kettner Blvd #75                                                    (Note 2)
San Diego CA
-------------------------- -------------------------- -------------------------- --------------------------
All Directors and Officers                                            41,622,252                      71.02
as a Group
-------------------------- -------------------------- -------------------------- --------------------------
</TABLE>

     1. Includes (a) 300,000 shares of the Company's  restricted Common Stock as
compensation  for his  services  as an Officer and  Director  during  1998;  (b)
currently  exercisable  options to purchase  2,500,000  restricted shares of the
Company's Common Stock at an exercise price of $.01 per share, exercisable until
December  21, 2008,  for his  continued  service,  together  with the  liability
exposure attendant thereto,  as an Officer and Director of the Company after the
remainder of the Company's  Officers and Directors resigned in December 1998. In
1999,  the Company  converted  the award of these  options  into an award of the
Company's  restricted  Common Stock; (c) options to purchase 4,500 shares of the
Company's  restricted Common Stock as compensation for serving as an Officer and
Director of the Company  during  1998;  and (d) 2,954  shares owned by The Ridge
Group.


                                       23
<PAGE>

     Although the following are included in the total,  Mr. Fricke  specifically
disclaims any ownership in the following  shares:  (a) 82,080 shares held by the
Fricke Family Trust; (b) 636,800 shares held by Mr. Fricke's former spouse;  (c)
82,080  shares held by his father;  (d) 15,303  shares that he holds as Trustee;
and (e) 82,080 held by his grown children.

     2. In 1999, the Company  authorized  the issuance  options to purchase four
hundred  (400)  shares of the  Company's  restricted  Common Stock at $.0001 per
share for a period of five (5) years from the date of the meeting to each member
of the Board for each  meeting  attended.  Under this  plan,  each  Director  is
entitled  to  currently  exercisable  options to  purchase  6,000  shares of the
Company's  restricted  Common Stock in 1999 and options to purchase 4,000 shares
of restricted Common Stock for 2000. There were no options issued in 2001.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

     During  1997 and the first  half of 1998,  the  Investor  Group,  including
current  shareholders  and persons who were Directors of the Company for part of
1997 and 1998, advanced working capital loans and committed to make loans to the
Company in the aggregate amount of approximately $1.0 million.  During the first
quarter of 1998,  in  consideration  for,  among  other  things,  not  demanding
immediate  repayment of the loans,  the Company and the Investor Group agreed to
exchange all of such outstanding  indebtedness for a convertible promissory note
(the  "Investor  Note"),  2,000,000  shares of the  Company's  Common Stock with
piggyback registrations rights (but which may not be traded until the $1,300,000
note is  converted)  and stock  options.  The Investor  Note is in the aggregate
principal amount of $1.3 million, and accrues interest at a rate of 8% per annum
beginning  January 1, 1998.  The Board  authorized  the  issuance of warrants in
connection  with the  Investor  Note that are  exercisable  for a period of five
years to  acquire  1,500,000  shares  of  Common  Stock at $.25  per  share  and
1,500,000  shares of Common  Stock at $.50 per  share.  In  connection  with the
Investor  Note,  the Company  also  issued  options to acquire  Common  Stock as
follows: options to purchase 2.6 million shares at an exercise price of $.01 per
share,  1.95  million  shares at an exercise  price of $.25 per share,  and 1.95
million  shares at an exercise  price of $.50,  all of which may be exercised at
any time  between June 30, 1999 and June 30, 2003,  the  expiration  date of the
options.  The  Investor  Note is  repayable  as follows:  $433,333 in  principal
amount,  plus interest,  was due and payable on or before  September 9, 1998; an
additional  $433,333 in principal  amount,  plus interest,  was due on or before
January 9, 1999; and any unpaid principal balance, plus interest,  was due on or
before  March 9, 1999.  In addition to any other  remedies  they may have if the
Company  fails  to make  the  principal  payment  on the  shareholder  loans  on
September 9, 1998,  the Company will be obligated to issue to the lender options
to acquire an additional  75,000 shares of Common Stock,  exercisable at a price
of $.01 per share, for each 30 days that the principal  payments are in default.
The Company did not make any of the payments required under these Investor Notes
and is  currently in default.  On May 29, 1999,  in exchange for the issuance of
1,000,000 shares of the Company's  restricted Common Stock,  Nicky Hunt released
the Company from: (1) paying any sums due to him,  including  amounts due to him
under the foregoing $1.3 million Note; (2) issuing any additional stock then due
or becoming due to him; and (3) any and all rights he had,  including  any right
under any option or warrant,  to receive any  additional  Common  Stock from the
Company  that arose as a result of his  association  with the  Company.  Messrs.
McNamara and Hill released the same  obligations in October 2001 in exchange for
the issuance of 4,000,000 shares of the Company's restricted Common Stock.


                                       24
<PAGE>


     In lieu of cash  payments  for their  service  as  members  of the Board of
Directors  and committee  members,  the Company has agreed to issue stock and/or
options to the members of the Board of Directors. In 1997, the Company agreed to
issue to each of Messrs.  Sean  McNamara  and  Richard  Hill  200,000  shares of
restricted  Common Stock for their services.  On January 16, 1998 and in lieu of
monetary  compensation,  the Board of Directors authorized:  (1) the issuance of
stock options to the members of the Management Committee (Messrs. McNamara, Hunt
and Hill) to purchase 100,000 shares of the companies restricted Common Stock at
a price of $.01 per share and  exercisable  for a period of five years;  (2) the
issuance  of  stock  options  to the  members  of the  Management  Committee  to
purchase,  at $.01 per share,  $2,500  worth of stock (with the number of shares
being  determined by the last per share sales price of the month) for each month
and  exercisable  for a period  of five  years;  and (3) the  issuance  of stock
options to each member of the Board of Directors (Messrs.  McNamara,  Hunt, Hill
and Fricke) to  purchase,  at $.01 per share,  $500.00  worth of stock (with the
number of shares  being  determined  by the last per  share  sales  price of the
month) for each Board meeting and  exercisable  for a period of five years.  The
Company's obligation to issue these options was released by Mr. Hunt in May 1999
and by Messrs. McNamara and Hill in October 2001.

     On June 1, 1998,  Nicky Hunt was  granted  options to purchase up to 40,000
shares of the Company's restricted Common Stock at a price of $.01 per share for
doing the due  diligence  in  connection  with  Norfield  Corporation.  Mr. Hunt
released the Company's obligation to issue these options in May 1999.

     On May 29, 1999,  in exchange  for the issuance of 1,000,000  shares of the
Company's  restricted  Common Stock,  Nicky Hunt released the Company from:  (1)
paying any sums due to him,  including  amounts  due to him under the  foregoing
$1.3 million Note; (2) issuing any additional  stock then due or becoming due to
him; and (3) any and all rights he had,  including any right under any option or
warrant, to receive any additional Common Stock from the Company that arose as a
result of his association with the Company.  Messrs.  McNamara and Hill released
the same  obligations  in October 2001 in exchange for the issuance of 4,000,000
shares of the Company's restricted Common Stock.

     During  1998,  the Company  issued its  restricted  Common Stock to pay for
services to the Company,  as follows:  Sam Armato,  Jr., 50,000 shares;  Chester
Greenwood,  50,000 shares;  Kenneth  Hodgdon,  10,000  shares;  and Neil Rogers,
100,000  shares.  In  addition,  the  Company  authorized  (issued  in 1999) the
following as compensation and incentive pay: 100,000 shares of restricted Common
Stock to Robert  Berger;  and (2) 25,000 shares of restricted  Common Stock plus
options to purchase 234,000 shares of restricted  Common Stock exercisable for a
period of 5 years at a price of $.01 per share to Robert Percheski.  In 1999 the
Company issued 50,000 shares of its restricted  Common Stock to Scott Purvis for
services he rendered to the Company.


                                       25
<PAGE>


     On December  21,  1998,  the Board  granted  options to purchase  2,500,000
shares of the  Company's  Common Stock to Mr.  Fricke and 500,000  shares to Ms.
Yrizarry (Mr.  Fricke's  former  spouse) at an exercise price of $.01 per share,
exercisable  until December 21, 2008 for remaining and serving as a Director and
Officer of the Company, together with the attendant liability, after the rest of
the  Board  and  management  had  resigned.  In 1999,  the  Company  substituted
2,500,000  shares  and  500,000  shares  of its  Common  Stock to Mr.  Frick and
Ms.Yrizarry, respectively, in place of these options.

     In lieu of cash payment for serving as a member of the Board of  Directors,
the Board authorized,  but did not issue,  options to purchase 400 shares of the
Company's restricted Common Stock for each meeting attended.  These options were
exercisable  for a period of five (5) years from the date of the  meeting at the
price of $.001 per share.  All three (3) members of the Company's Board attended
each of the  fifteen  (15)  meeting  that were held  during  1999 for options to
purchase a total of 18,000  shares of the  Company's  restricted  Common  Stock.
During 2000,  each of the members of the Company's  Board of Directors  attended
the ten (10)  meetings  for options to purchase a total of 12,000  shares of the
Company's restricted Common Stock. There were no in-person meetings of the Board
of Directors during 2001 and no options were awarded.

     In lieu of  receiving  cash  payments for his services as an Officer of the
Company,  in  exchange  for salary  arrearages,  and in exchange  for rent,  the
Company issued 10,000,000 shares of its restricted Common Stock to Mr. Fricke in
1999 and 18,500,000 shares of its restricted Common Stock in 2000.

     During 1999,  Dominic Parisi  purchased  2,400,000  shares of the Company's
restricted  Common Stock for a purchase  price of $72,000 for the benefit of the
Dominic G. Parisi Trust.  During 2000, Mr. Parisi purchased  5,750,000 shares of
the Company's restricted Common Stock for a purchase price of $37,500.

     Mr.  Fricke  is one of the  licensors  under the foam  technology  license;
however,   he  renounced  his  interest  in  the  license  in  1998.  See  "Item
1.Description of Business - Licenses."

     In March and April,  1998, the Company issued its 6% Convertible Notes (the
"Notes") in the aggregate  principal  amount of $726,500 in a private  placement
under Rule 505 of Regulation D. Interest on the Notes is payable  semi-annually.
The principal amount of the Notes, together with unpaid interest thereon, is due
and  payable,  if not  earlier  converted,  on  March 3,  1999.  The  Notes  are
convertible  into shares of Common Stock at the option of the holder at any time
following  the  earlier  of (i) 90  days  after  the  filing  of a  registration
statement  with the SEC covering the shares to be received  upon  conversion  or
(ii)  the date the SEC  declares  such  registration  statement  effective.  The
conversion  price per share is the lesser of (i) 70% of the average  closing bid
price  per  share  of  Common  Stock  for the  five  trading  days  prior to the
conversion date or (ii) $0.25. Upon conversion,  any accrued and unpaid interest
is waived by the holder. The Company has the option to repurchase the Notes from
the holder prior to  registration  of the underlying  shares at a premium of 10%
over the purchase  price of the Notes.  The Company  agreed to file with the SEC
not later than June 3, 1998, and use its best efforts to have declared effective
not later than July 3, 1998, a  registration  statement  registering  for resale
them shares that would be issued upon  conversion of the Notes.  The Company has
made no payments on these notes;  has not  repurchased  these  Notes,  and is in
default with regard to its registration obligation.


                                       26
<PAGE>

     In November  2001,  one of the holders of the foregoing  Convertible  Notes
released all obligations to it under or as a result of the Convertible  Notes in
exchange for the issuance of 4,00,000 shares of the Company's  restricted Common
Stock.  As of February 11, 2002, a total of six (6) holders  released all of the
obligations to them under or as a result of the Convertible Notes,  representing
a total of $450,000 in principal and not including interest, in exchange for the
issuance of a total of  16,624,236  shares of the  Company's  restricted  Common
Stock. In addition,  as of December 31, 2002, the Company had been informed that
two (2) additional holders, representing a total of $50,000 in principal and not
including interest, have written off their interests in the Convertible Notes

     The Company  believes that the terms of the  transactions  discussed herein
are at least as favorable  to the Company as those which the Company  could have
negotiated with unaffiliated parties.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits.  The following  exhibits are filed  herewith or  incorporated  by
     reference herein:

     Exhibit No           Description

     3.1*                 Certificate of Incorporation of the Company

     3.2*                 By-Laws of the Company

     3.3***               Amendment  to  Articles on  Incorporation  increasing
                          the  number of  authorized  shares  of the  Company's
                          common  stock  to one  hundred  seventy-five  million
                          (175,000,000) shares at $0.0001 par value.

     4*                   Copy of specimen certificate representing
                          shares of Common Stock, $.0001 par value per
                          share, of the Company

     10.1*                Asset Purchase Agreement and Plan of
                          Reorganization between the Company and
                          SAC Delaware dated August 21, 1995

     10.2*                License Agreement for coatings and sealants
                          Technologies between Richard B. Kennedy
                          and the Company as licensee dated December 9, 1992


                                       27
<PAGE>


     10.3*                License Agreement for packaging applications
                          of foam  Technologies  between  Richard  B.  Kennedy,
                          Patrick   J.   Crehan  and   Richard  J.   Fricke  as
                          licensors   and  the   Company  as   licensee   dated
                          December 9, 1992

     10.4*                License Agreement for fire retardant
                           applications of foam Technologies between
                          Richard B.  Kennedy,  Patrick J.  Crehan and  Richard
                          J.  Fricke as  licensors  and the Company as licensee
                          dated December 9, 1992

     10.5*                Amendment to Technology License
                          Agreements of foam Technologies between
                          Richard B. Kennedy, Patrick J. Crehan and
                          Richard J.  Fricke as  licensors  and the  Company as
                          licensee dated August 23, 1993

     10.6**               Financial Accord among Rudolph L. Chase,
                          Raymond C. Chase, and Clement H. Royer,
                          dated as of March 1, 1997, relating to royalties
                          on NaturalCool Technology

     10.7**               Agreement between Natural Cool, Inc., and the
                          Company dated as of May 6, 1998, relating to
                          acquisition of assets of Natural Cool, Inc.

     10.8**               License Agreement between Rudolph Chase
                          and Raymond Chase, and the Company dated
                          As  of  May  6,  1998,   relating  to   licensing  of
                          NaturalCool patent rights

     10.9**               Promissory Note of Natural Cool, Inc.,
                          guaranteed  by the Company,  dated as of May 6, 1998,
                          relating to  acquisition  of assets of Natural  Cool,
                          Inc.

     10.10**              Bill of Sale of Rudolph Chase and Raymond
                          Chase,  dated as of May 6, 1998,  relating to sale of
                          stock of Natural Cool, Inc. to the Company

     10.11**              Bill of Sale of Natural Cool, Inc, dated as of
                          May 6,  1998,  relating  to sale of assets of Natural
                          Cool, Inc. to the Company


                                       28
<PAGE>


*    Incorporated by reference from the Registrant's  Registration  Statement on
     Form 10-KSB filed December 31, 1996.

**   Incorporated  by reference  from the Company's  Form 10-KSB for fiscal year
     ended December 31, 1997 and filed as of September 3, 1998.

***  Incorporated  by  reference  from  the  Registrant's  Form  10-QSB  for the
     quarterly period ended June 30, 2001.

(b)  Reports on Form 8-K.

     The  following  Form 8-Ks were filed during the fiscal year ended  December
     31, 200: NONE.

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.

                                TABLE OF CONTENTS


Report of Independent Auditors -
  Green, Holman, Frenia and Company, LLP                                 F-1

Balance Sheets,
  December 31, 2001 and 2000                                             F-2

Statements of Operations,
  For the Years Ended December 31, 2001 and 2000                         F-3

Statements of Changes in Stockholders' Deficit,
  For the Years Ended December 31, 2001 and 2000                         F-4

Statements of Cash Flows,
  For the Years Ended December 31, 2001 and 2000                         F-5

Notes to Financial Statements                                         F-6 - F-14

                                   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.


                                       29
<PAGE>



                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.


Date: 4/12/02                       By:  /s/ Richard J. Fricke
                                         ---------------------
                                         Richard J. Fricke,
                                         President, Chief Executive Officer,
                                         Chief Financial Officer & Director


     In accordance  with 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/ Richard J. Fricke         President, Chief Executive           4/12/02
---------------------         Officer, Chief Financial Officer
                              and Director

/s/ Dominic G. Parisi         Secretary and Director               04-10-02
---------------------



                                       30

<PAGE>
                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                    FINANCIAL STATEMENTS FOR THE YEARS ENDED
                           DECEMBER 31, 2001 AND 2000


<PAGE>


                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                                TABLE OF CONTENTS



Independent Auditors' Report                                              1

Balance Sheets,
December 31, 2001 and 2000                                                2

Statements of Operations,
For the Years Ended December 31, 2001 and 2000                            3

Statements of Changes in Stockholders' Deficit,                           4
For the Years Ended December 31, 2001 and 2000

Statements of Cash Flows,                                                 5
For the Years Ended December 31, 2001 and 2000

Notes to Financial Statements                                           6 - 14


<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
Safe Alternatives Corporation of America, Inc.

We have audited the accompanying balance sheets of Safe Alternatives Corporation
of America,  Inc. as of December 31, 2001 and 2000 and the related statements of
operations,  changes in stockholders'  deficit and cash flows for the years then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Safe Alternatives  Corporation
of  America,  Inc.  as of  December  31,  2001 and 2000 and the  results  of its
operations,  stockholders'  deficit and cash flows for the years then ended,  in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As more fully described in Note 4, the
Company  has  incurred  recurring  operating  losses  and has a working  capital
deficiency. These conditions raise substantial doubt about the Company's ability
to continue as a going  concern.  The  financial  statements  do not include any
adjustments  to reflect the possible  future effects on the  recoverability  and
classification of assets or the amounts and  classifications of liabilities that
may result from the outcome of this uncertainty.




                                       GREEN, HOLMAN, FRENIA AND COMPANY, L.L.P.
                                       Certified Public Accountants


Woodbridge, New Jersey
January 28, 2002


<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                                 Balance Sheets
                           DECEMBER 31, 2001 AND 2000


                                                       2001             2000
                                                   ------------    ------------

                                     ASSETS

Current Assets:
  Cash                                             $      1,197    $      7,238
  Accounts receivable - net of allowance
    of $5,000 for 2001 and 2000                           4,510          11,996
                                                   ------------    ------------

                                                          5,707          19,234
  Total current assets                                     --              --


                                                         24,114          31,696
Property and Equipment, Net                                --              --


Other Asset:                                               --           273,649
  Troubled debt restructuring costs                        --              --


                                                   $     29,821    $    324,579
                                                   ============    ============




                      Liabilities and Stockholders' Deficit


Current Liabilities:
  Accounts payable and other accrued expenses      $    216,531    $    417,610
  Current maturities of stockholders' loans                --           926,900
  Convertible debentures                                676,500         726,500
                                                   ------------    ------------

  Total current liabilities                             893,031       2,071,010
                                                   ------------    ------------

Other Liabilities:
  Loss contingency                                         --           140,000
                                                   ------------    ------------

  Total other liabilities                                  --           140,000
                                                   ------------    ------------

Stockholder's Deficit:
  Common stock, $.0001 par value,
   200,000,000 shares authorized;
   issued and outstanding (including
    shares in treasury)
   58,580,960 shares in 2001 and                        110,747         110,747
   54,580,960 in 2000
  Additional paid-in capital                         16,908,030      15,528,674
  Accumulated deficit
  Subscriptions issuable                            (17,884,146)    (17,528,011)
                                                          2,160           2,160
                                                   ------------    ------------

                                                       (863,209)     (1,886,430)

  Less: treasury stock                                       (1)             (1)
                                                   ------------    ------------

  Total stockholders' deficit                          (863,210)     (1,886,431)
                                                   ------------    ------------


                                                   $     29,821    $    324,579
                                                   ============    ============



See auditors' report and notes to financial statements.


                                       2
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                            Statements of Operations
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


                                                        2001            2000
                                                   ------------    ------------

Sales                                              $     88,286    $     93,519

Cost of Goods Sold                                       17,845          10,728
                                                   ------------    ------------

Gross Profit                                             70,441          82,791
                                                   ------------    ------------

Operating Costs:
  Selling, general and administrative                    70,755          97,868
  Research and development                                 --              --
  Depreciation and amortization                           7,582           7,582
                                                   ------------    ------------

  Total operating costs                                  78,337         105,450
                                                   ------------    ------------

Loss from Operations                                     (7,896)        (22,659)
                                                   ------------    ------------

Other Income and Expenses:
    Interest expense                                    (40,590)       (116,893)
    Estimated litigation settlement                        --          (114,000)
    Forgiveness of convertible debentures                56,000            --
    Forgiveness of settlement of lawsuit                140,000            --
    Loss on troubled-debt restructuring                (273,649)           --
    Provision for bad debt                                 --            (5,000)
                                                   ------------    ------------

  Total other expenses                                 (118,239)       (235,893)
                                                   ------------    ------------


Net Loss                                           $   (126,135)   $   (258,552)
                                                   ============    ============

Net Loss per Common Share                          $     (.0023)   $      (.061)
                                                   ============    ============

Average Number of Common Shares                      56,580,960      42,455,960
                                                   ============    ============




See auditors' report and notes to financial statements.


                                       3
<PAGE>
<TABLE>
<CAPTION>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                 Statements of Changes in Stockholders' Deficit
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000








                        Common Stock          Additional                                        Treasury Stock
                        ------------           Paid-in      Accumulated    Subscription         --------------
                  Shares         Amount        Capital         Deficit       Issuable       Shares         Amount          Total
               ------------   ------------   ------------   ------------   ------------  ------------   ------------   ------------
<S>            <C>            <C>            <C>            <C>            <C>           <C>            <C>            <C>

Balance at
12/31/00         54,580,960   $    110,747   $ 15,528,674    $(17,528,011) $      2,160      (11,682)   $         (1)  $ (1,886,431)

Additional
Paid-In Capital
                                                                                                           1,379,356      1,379,356

Issuance of
common shares     6,535,317              0                                                                                        0


Redemption of
common shares     2,535,317              0                                                                                        0


Prior Period
Adjustment
                                                                               (230,000)                                   (230,000)

Net Loss                                                                       (126,135)                                   (126,135)
               ------------   ------------   ------------   ------------   ------------  ------------   ------------   ------------

Balance at
12/31/01         58,580,960   $    110,747   $ 16,908,030   $(17,884,146)  $      2,160       (11,682)  $         (1)  $   (863,210)
               ============   ============   ============   ============   ============  ============   ============   ============

</TABLE>




See auditors' report and notes to financial statements.

                                       4
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                            StatementS of Cash Flows
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000



                                                         2001         2000
                                                       ---------    ---------

Cash Flows from Operating Activities:

Net Loss                                               $(126,135)   $(258,552)

Adjustments to reconcile net loss to
  net cash used in operating
  activities:
   Depreciation and amortization
   Provision for bad debt                                  7,582        7,582
                                                            --          5,000
   Provision for litigation settlement                      --        114,000
   Loss on troubled debt restructuring                   273,649         --
   Forgiveness of litigation settlement                 (140,000)        --
   Forgiveness of convertible debentures                 (56,000)        --

  Changes in assets and liabilities:
   Decrease in accounts receivable                         7,487       16,628
   Increase in accounts payable
     and accrued expenses                                 27,376       83,614
                                                       ---------    ---------

Net Cash Used In Operating Activities                     (6,041)     (31,728)
                                                       ---------    ---------

Net Cash Flows from Financing Activities:
   Net proceeds from issuance of common
    stock and subscriptions                                 --         37,500
                                                       ---------    ---------

Net Cash Provided by Financing Activities                   --         37,500
                                                       ---------    ---------

Net Increase (Decrease) in Cash                           (6,041)       5,772

Cash, Beginning of Year                                    7,238        1,466
                                                       ---------    ---------

Cash, End of Year                                      $   1,197    $   7,238
                                                       =========    =========




See auditors' report and notes to financial statements.

                                       5
<PAGE>



                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

1.  Reorganization and Basis of Presentation
--------------------------------------------

On September 15, 1995,  the  stockholders  of Safe  Alternatives  Corporation of
America,  Inc.,  a Delaware  corporation,  ("SAC  Delaware")  approved  an Asset
Purchase Agreement and Plan of Reorganization (the "Reorganization") whereby the
assets of SAC  Delaware  were sold to Safe  Alternatives  of  America,  Inc.,  a
Florida  corporation  then operating under the name Portsmouth  Corporation (the
"Company"),  in exchange for 8,000,000 shares of the Common Stock of the Company
and  the   assumption  of  SAC   Delaware's   liabilities.   Subsequent  to  the
Reorganization,  SAC Delaware was liquidated.  Pursuant to such liquidation, SAC
Delaware  distributed to each stockholder  0.2736 shares of the Company's Common
Stock  for  each  share  of SAC  Delaware  that was  owned.  As a result  of the
Reorganization,  the  stockholders of SAC Delaware  controlled 94% of the issued
and outstanding Common Stock of the Company and,  therefore,  the Reorganization
has been accounted for as the  acquisition  of the Company by SAC Delaware.  The
Company had been an inactive public entity with no assets,  liabilities,  or net
worth. The costs of this transaction have been charged to expense.

The issuance of 8,000,000  shares of the  Company's  Common Stock in  connection
with the Reorganization has been treated as a reverse stock split and the shares
of  issued  and   outstanding   Common  Stock  of  the  Company   prior  to  the
Reorganization have been restated for all periods presented.

Subsequent  to  the  Reorganization,  the  Company  changed  its  name  to  Safe
Alternatives Corporation of America, Inc.

Operations
----------

The Company has secured  exclusive  manufacturing,  marketing,  and distribution
rights  to  certain   patented,   patent   pending  and   application-in-process
technologies.  Such technologies are associated with paint stripping  chemicals,
water-based foams, and an ambient air exchanger.

2.  Summary of Significant Accounting Policies
----------------------------------------------

Method of Accounting
--------------------

The financial  statements  are prepared  using the accrual basis of  accounting.
Generally accepted  accounting  principles  requires  management,  under certain
circumstances,  to make  estimates  and  assumptions  that  affect  the  amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ from those estimates.

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

The Company provides for estimated losses on accounts receivables based on prior
years  collections  and review of existing  receivables.  Based on these factors
there is a  provision  for  doubtful  accounts  of $5,000  for the  years  ended
December 31, 2001 and 2000, respectively.



                                       6
<PAGE>


                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

2.  Summary of Significant Accounting Policies (continued)
----------------------------------------------------------

Property, Plant and Equipment
-----------------------------

Property,  plant and equipment are recorded at cost. Depreciation is provided on
a  straight-line  basis over estimated  useful lives of the  respective  assets.
Leasehold  improvements  are  depreciated  over the shorter of the lease term or
economic life of the related improvement. Maintenance and repairs are charged to
expense as incurred; major renewals and betterments are capitalized.  When items
of  property,  plant and  equipment  are sold or retired,  the related  cost and
accumulated  depreciation  are removed from the accounts and any gain or loss is
included in the results of operations.

Organization Costs
------------------

Organization costs are amortized over 60 months using the straight-line  method.
Amortization  expense  was $0 for the years  ended  December  31, 2001 and 2000,
respectively.

Earnings Per Share
------------------

The following data show the amounts used in computing earnings per share.

                                                        2001            2000
                                                   ------------    ------------


Loss used in basic EPS                             $   (126,135)   $   (258,552)
                                                   ============    ============
Weighted average number of common
  shares used in basic EPS                           56,580,960      42,455,960
                                                   ============    ============

Net loss per common share                          $     (.0023)   $      (.061)
                                                   ============    ============


3.  Property and Equipment
--------------------------

As of  December  31,  2001 and 2000  property  and  equipment  consisted  of the
following:

                                                               2001     2000
                                                              -------- --------

         Equipment                                            $ 29,288 $ 29,288
         Furniture & Fixtures                                   10,008   10,008
         Leasehold Improvements                                 11,468   11,468
                                                              -------- --------
                                                                50,764   50,764
         Less: Accumulated depreciation                         26,650   19,068
                                                              -------- --------

         Property and Equipment - Net                         $ 24,114 $ 31,696
                                                              ======== ========

Depreciation  expense was $7,582 for the years ended December 31, 2001 and 2000,
respectively.

4.  Going Concern
-----------------

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles, which contemplates continuation of the
Company  as a  going  concern.  However,  the  Company  has  incurred  recurring
operating losses and has a working capital deficiency.  At December 31, 2001 and
2000, current liabilities exceed current assets by $887,324 and $2,051,776,  and
total  liabilities  exceed  total  assets  by  $863,210  and  $1,886,431.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern.


                                       7
<PAGE>


                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

4.  Going Concern (continued)
-----------------------------

In view of these  matters,  realization  of a major portion of the assets in the
accompanying  balance  sheet  is  dependent  upon  continued  operations  of the
Company,  which  in turn is  dependent  upon the  Company's  ability  to  obtain
sufficient financing, and the success of its future operations. Management plans
to finance its operations  with a combination  of issuance of additional  common
stock and, in the longer  term,  borrowings  and revenues  from  product  sales.
Management  believes these actions  provide the  opportunity  for the Company to
continue as a going concern.

5.  Leases
----------

As  of  January  1,  1999,  the  Company  leased,  on  a  month-to-month  basis,
approximately  12,000  square  feet of space at  Newport,  Vermont at $4,000 per
month.  By December 31, 1999,  the Company had reduced the space to 3,530 square
feet at $1,275 per month.

As of January 1, 2000, the Company was leasing, on a month-to-month basis, 3,530
square feet of space for $1,275 per month.  On July 1, 2000,  the square footage
was reduced to approximately 1,500 square feet at $600 per month.

Rent  expense  was $5,532 and $9,493 for the years ended  December  31, 2001 and
2000, respectively.

6.  Stockholders' Deficit
-------------------------
Treasury Stock
--------------

Treasury stock  represents  11,682 shares (recorded at cost) being held in trust
(by Richard J. Fricke, an officer of the Company) to be used for future issuance
to employees,  investors,  and other potential  funding sources.  As the Company
directly  benefits from the sales of the shares in the trust,  these shares have
been recorded as treasury stock.

Shares Issued as Compensation and Commission

During 2001 and 2000,  respectively,  0 and 175,000  fully vested  shares of the
Company's  common  stock were issued to outside  consultants.  The fair value of
shares awarded,  based upon the value of Common Stock sold during those periods,
were $0 for 2001 and 2000,  respectively,  and has been recorded as compensation
expense.

In addition,  during 2001 and 2000, respectively,  0 and 18,500,000 fully vested
shares of the  Company's  Common Stock were issued to officers of the Company as
compensation for serving as an officer. The fair value of shares awarded,  based
upon the value of Common Stock sold during these periods,  were approximately $0
and  $92,500  for  2001  and  2000,   respectively  and  has  been  recorded  as
compensation expense.

In 1999, the Company also issued 12,500,000 shares to an officer,  for remaining
and serving as a Director and Officer of the  Company.  The fair value of shares
awarded,  based upon the value of Common  Stock sold  during  these  periods was
approximately $137,500 for 1999. (See Note 18)

7.  Income Taxes
----------------

The Company has available  unused  operating loss  carryforwards at December 31,
2001 of  approximately  $9,378,500 for federal purposes and $9,349,000 for state
purposes that may be applied against future taxable income for federal and state
liability,  respectively.  Cumulative  net operating  loss  carryforwards  as of
December  31,  2000 as reported on the  Company's  federal and state  income tax
returns approximated $9,327,000 and $9,298,000.


                                       8
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

7.  Income Taxes (continued)
----------------------------

The tax benefit of the cumulative carryforwards as of December 31, 2001 and 2000
is  approximately  $3,181,000  and  $3,173,000  for  federal  and  approximately
$832,000 and $828,000 for state, offset in full by a valuation allowance.

8.  License Agreements
----------------------

The Company maintains four significant exclusive licensing agreements. Each such
license  has  substantially  the same  terms  and  conditions.  EacFh  licensing
agreement  is valid until  April 17,  2050,  unless the  Company  fails to pay a
royalty of four percent of the gross sales derived from the  exploitation of the
respective   technology,   with  certain  limitations  for  sales  derived  from
inter-company transfers or transactions with subsidiaries.  The Company has also
agreed to pay all maintenance  fees and fees for filing and  prosecuting  patent
applications  pending at the time the licenses were  executed.  All rights under
the licenses are freely assignable by the Company.  The licenses were amended on
August 23, 1993 to collectively  provide for a required  minimum monthly payment
of $5,000,  in the  aggregate.  In addition,  a weekly payment of $1,200 to Mrs.
Kathleen  Kennedy during her lifetime is required in lieu of  progressive  sales
minimums due  beginning in 1993.  The four percent  royalty  payments  described
above, however, would nonetheless survive.

Failure to pay the minimum  weekly  and/or  monthly  payments  may result in the
Company's loss of the exclusivity of such licenses. Failure to pay royalties due
under any  license  may result in the  termination  of the  exclusivity  of such
license.

Currently,  the Company is out of compliance with the minimum payment provisions
and has a  non-exclusive  license.  Mrs.  Kennedy  brought an action against the
Company  to obtain  the  minimum  payments  under the  licenses.  The action was
arbitrated  during 1999. The Company lost the  exclusivity of the license in the
arbitration, but was not required to pay any sums of money to Mrs. Kennedy. (See
"Note 10").

During 1997, the Company modified the payment terms of the licensing agreements,
thus causing the agreements to become non-exclusive.

9.  Related Party Transactions
------------------------------
Stockholders' Loans
-------------------

During 1997 and the first half of 1998,  the "Investor  Group",  which  includes
current  shareholders  and persons who were directors of the Company for part of
1997 and 1998, advanced working capital loans and committed to make loans to the
Company in the aggregate amount of approximately $1.0 million.  During the first
quarter of 1998,  in  consideration  for,  among  other  things,  not  demanding
immediate  repayment of the loans,  the Company and the Investor Group agreed to
exchange all of such outstanding  indebtedness for a convertible promissory note
(the  "Investor  Note"),  2,000,000  shares of the  Company's  common stock with
piggyback registrations rights (but which may not be traded until the $1,300,000
note is  converted)  and stock  options.  The Investor  Note is in the aggregate
principal amount of $1.3 million, and accrues interest at a rate of 8% per annum
beginning January 1, 1998.

On May 29, 1999,  Nicky Hunt  elected to surrender  his portion of this note and
his  share  of  the  2,000,000  restricted  shares  in  exchange  for  1,000,000
restricted  common  shares.  As a result,  the $1.3  million note was reduced to
$926,900 as of December 31,  1999.  The Company did not make any of the payments
required under these remaining Investor Notes and is in default.


                                       9
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

9.  Related Party Transactions (continued)
------------------------------------------

On May 29, 1999,  Nicky Hunt  elected to surrender  his portion of this note and
his  share  of  the  2,000,000  restricted  shares  in  exchange  for  1,000,000
restricted  common  shares.  As a result,  the $1.3  million note was reduced to
$926,900 as of December 31,  1999.  The Company did not make any of the payments
required under these remaining Investor Notes and is in default.

In October 2001 the Company issued 4,000,000  shares of restricted  common stock
to the remaining shareholders in the Investor Group. These shares were issued in
consideration of a waiver by the members of the Investor Group of all money owed
to them and the waiver of all rights to or under any stock, options, warrants or
other rights to additional  stock in the Company.  As a result the total debt of
$1,149,356  ($936,900  loan plus accrued  interest of $222,456) was reclassed as
additional paid-in-capital.

Stockholders' loans at December 31, 2001 and 2000, consisted of the following:

                                                             2001       2000
                                                            --------   --------
Unsecured notes to five stockholders,
bearing interest at 8%.  One-third of the
outstanding balance is due September 1998,
including interest.  The remaining balance
is due January 1999, including interest                     $   --     $926,900
                                                            --------   --------
Total                                                           --      926,900

Less current maturities                                         --      926,900
                                                            --------   --------
Long-term debt, net of current maturities                   $      0   $      0
                                                            ========   ========

Aggregate maturities required on stockholders' loans at December 31, 2001 are as
follows:

                 Year                                           Amount
               ----------                                     ----------
               2002                                           $     --
               2003                                                 --
               2004                                                 --
               2005                                                 --
               2006 and thereafter                                  --
                                                              ----------

               Total                                          $     --
                                                              ==========


Officers' Compensation
----------------------

The officers of the Company had employment contracts entitling them to aggregate
cash  compensation  of $725,000 plus  incentive  bonuses  through 1997.  Amounts
actually  paid to the officers as of December 31, 2001 and 2000  amounted to $0,
respectively.  Each of the officers has waived his rights with respect to salary
arrearages. No bonuses have been paid out in any of the years.

Licensing Agreement
-------------------

An officer of the  Company  has an  interest  in one of the  licenses  discussed
above.  For the years  ended  December  31,  2001 and 2000,  there  have been no
payments to such officer under the aforementioned agreements.



                                       10
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



10.  Contingencies
------------------

On May 29, 1998, SSC  Marketing,  Inc.  ("SSC") filed an action (SSC  Marketing,
Inc. v. Safe Alternatives)  against the Company in federal court in the Southern
District  of New  York.  By  agreement,  the suit was moved to the  District  of
Connecticut  (D. Conn.  File No. 3: 98cv1312 JBA). The complaint  contained four
counts,  each  requesting a judgment for $180,880 plus  interest and  attorney's
fees.  Plaintiff  alleged in its complaint that the Company  breached a contract
and made  misrepresentations.  The Company brought various counterclaims against
SSC.  This action  settled and, in  September  1999 was  dismissed.  The Company
subsequently  delivered  500,000 shares of its restricted  common stock to SSC's
designee pursuant to the settlement agreement in exchange for a general release.

An adversary  proceeding  was brought  against the Company in July 1997, in U.S.
Bankruptcy Court for the District of Connecticut,  by Richard Coan,  Trustee for
the Bankruptcy Estate of Samuel E. Bernstein (U.S. Bankruptcy Court, Dist. Conn.
Adversary  Proceedings  File No  97-5078).  The suit seeks a judgment to recover
accrued but unpaid wages  totaling  approximately  $100,000 for 1995,  which the
Company contends that Mr. Bernstein had waived his right to receive. The Trustee
seeks to avoid the waiver under the Bankruptcy Code and recover the value of the
waiver.  The Company is defending  itself in the matter,  and cannot predict the
outcome of the matter or whether a  settlement  will be  reached.  However,  the
Company  believes  that if the  Trustee is  successful  in  obtaining a judgment
against the  Company,  it should not be required to pay more than the total debt
owed to the debtor's creditors, plus related fees, which the Company believes to
be  approximately  $26,000.  On or about  April 5, 2000 a judgment  against  the
Company  and in favor of the Trustee was entered in this matter in the amount of
$140,000. As a result, an additional reserve of $114,000 has been recorded as of
December  31,  2000.  The  Company's  financial  statements  for the year ending
December  31,  2001 and 2000  include a liability  for a  provision  for loss of
$140,000 and $26,000, respectively, to reflect this matter.

In 2001 the Company entered into a settlement agreement with the Trustee for the
Bankruptcy  Estate of Samuel L.  Beinstein,  whereby the Company  will receive a
Satisfaction  of  Judgement  in exchange  for $9,000 to be paid on behalf of the
Company. This settlement was approved by the Bankruptcy Court and was settled in
2002.


Ms. Kathleen Kennedy,  the licensor under certain  technology  licenses with the
Company,  brought an  arbitration  action in 1999 against the Company,  claiming
past due minimum royalty payments of approximately $145,000. The arbitrator held
that although the Company did not owe any money or damages to Ms.  Kennedy,  the
licenses  were now  non-exclusive  because of the  Company's  failure to pay the
licensing fees.

At December 31, 2001, a contingent  liability for payroll taxes  attributable to
the issuance of stock as  compensation  exists.  The amount of liability has not
yet been determined as it is subject to certain valuation issues surrounding the
issuance of the restricted shares of stock.

11.  Acquisition
----------------

On May 5, 1998,  the  Company  purchased  the assets of Natural  Cool,  Inc.  in
exchange for the Company's assumption of approximately  $152,700 of the seller's
debts.  The purchased assets consist of inventory,  fixed assets,  and all other
tangible and intangible property.




                                       11
<PAGE>

                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000



12.  Convertible Debentures
---------------------------

On March 10, 1998 the Company  entered into an Agency  Agreement  with Alexander
Wescott & Co., Inc. ("AWC") for the offer and sale of 6% Convertible Notes, with
maximum gross proceeds not to exceed $1,000,000.  The notes bear interest at the
rate of six percent (6%) per annum,  payable  semi-annually in arrears,  in cash
or, at the Company's option, in shares of Common Stock of the Company. The notes
mature on the earlier of (i) the first anniversary of the initial closing of the
proposed offer (April 10, 1999), and (ii) a sale of all or substantially  all of
the Company's  assets or a merger,  acquisition  or  consolidation  in which the
Company is not the  surviving  corporation.  The notes rank  senior to all other
indebtedness of the Company now or hereafter  existing,  other than indebtedness
to banks, in terms of priority and security,  and may not be prepaid without the
holder's  consent.  The  principal  amount of each Note shall be converted  into
shares of Common Stock,  at the option of the holder,  commencing on the earlier
of (a) ninety (90) days following the filing of the Registration  Statement with
the Securities and Exchange  Commission and (b) the date the Commission declares
the Registration Statement effective.


The  conversion  price per share shall  equal the lower of (i)  seventy  percent
(70%) of the average  closing bid price per share of Common  Stock on the NASDAQ
for the five trading days  immediately  preceding  the  conversion  date or (ii)
twenty-five cents ($.25).

AWC  is  to  receive  a  commission  of  10%  plus  3%  non-accountable  expense
reimbursement on the gross proceeds raised. In addition, AWC was issued warrants
exercisable  for 400,000 shares of Common Stock at an exercise price of $.30 per
share expiring June 28, 2003.

In March and April,  1998,  the  Company  issued its 6%  Convertible  Notes (the
"Notes") in the aggregate  principal  amount of $726,500 in a private  placement
under Rule 505 of Regulation D. Interest on the Notes is payable  semi-annually.
The principal amount of the Notes, together with unpaid interest thereon, is due
and payable, if not earlier converted, on March 3, 1999.

The  Company  has made no payments on these  notes;  has not  repurchased  these
Notes, and is in default with regard to
its registration obligation.

As of December 31, 2001 two note holders with notes totaling  $50,000  wrote-off
their balances owed to them by the Company. As a result the Company recognized a
$56,000  forgiveness  of debt income as of December  31,  2001,  which  includes
$6,000 of accrued interest.

As of December  31, 2001,  six (6) holders of the  foregoing  Convertible  Notes
(totaling  $450,000)  agreed to release all obligations  under or as a result of
the  Convertible  Notes in exchange  for the  issuance of a total of  16,624,236
shares of the Company's restricted Common Stock. In addition, two (2) holders of
the foregoing  Convertible  Notes  (totaling  $50,000) have informed the Company
that they have written off the obligations under the foregoing Convertible Notes
and are therefore not interested in any settlement. Therefore, as of January 10,
2002,  the  Company was in default in the  amounts of 226,500 in  principal  and
$54,360 in interest for a total of $280,860 in arrearages.





                                       12
<PAGE>



                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


13.  Restricted Stock Sales
---------------------------

In lieu of  receiving  cash  payments  for his  services  as an  Officer  of the
Company,  in  exchange  for salary  arrearages,  and in exchange  for rent,  the
Company issued to Mr. Fricke,  18,500,000  shares of its restricted Common Stock
in 2000.

During 2001 and 2000,  an officer,  Dominick  Parisi  purchased 0 and  5,750,000
shares of the Company's  restricted  Common Stock for a purchase price of $0 and
$37,500, respectively, for the benefit of the Dominick G. Parisi Trust.

14.  Other Asset
----------------

During  the  first  quarter  of 1998 the  company  and the  "Investor  Group" in
consideration for not demanding  immediate payment agreed to exchange all of the
outstanding  balance due plus  accrued  interest  of $916,201  for a new Note at
$1,300,000 plus two (2) million shares of restricted  common stock.  The Company
recognized a non-cash  transaction  of $383,799 that  represents  the intangible
cost required  increase the original note to its current  balance of $1,300,000.
This amount was capitalized as troubled debt restructuring  costs.  However, due
to the election of a member of the  "Investor  Group" to exchange his portion of
the $1.3 million  Investor Note for restricted  common shares (see Note 9), this
intangible cost was also reduced for his pro-rata share of the Note. As a result
of this adjustment these costs were $0 and $273,649, as of December 31, 2001 and
2000, respectively.


15.  Cash Flow Information
--------------------------

The Company  considers all short-term  investments with an original  maturity of
three months or less to be cash equivalents.

Cash paid for interest  and income  taxes for the years ended  December 31, 2001
and 2000 were zero.

Non-Cash Transaction
--------------------

In October of 2001 the company satisfied $926,900 of shareholder loan debt along
with  $222,456 of accrued  interest on that debt,  by issuing  4,000,000  common
shares to the  remaining  two members of the Investor  Group (Note 9). This debt
was reclassified as additional paid-in-capital as of December 31, 2001.

16.  Subsequent Events
----------------------

As of December  31, 2001,  six (6) holders of the  foregoing  Convertible  Notes
(totaling  $450,000)  agreed to release all obligations  under or as a result of
the  Convertible  Notes in exchange  for the  issuance of a total of  16,624,236
shares of the Company's restricted Common Stock. In addition, two (2) holders of
the foregoing  Convertible  Notes  (totaling  $50,000) have informed the Company
that they have written off the obligations under the foregoing Convertible Notes
and are therefore not interested in any settlement. Therefore, as of January 10,
2002,  the  Company was in default in the  amounts of 226,500 in  principal  and
$54,360 in interest for a total of $280,860 in arrearages.

In 2001, the Company  negotiated with various unsecured  creditors,  whereby the
creditors would receive (1) one share of restricted common share for each dollar
of debt currently outstanding.  The total amount of debt as of December 31, 2001
was $18,411. As of December 31, 2001 these shares have not been issued.


                                       13
<PAGE>



                 SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


17.  Loss on Troubled Debt Restructuring
----------------------------------------

During the first quarter of 2001 there was a change in the treatment of the debt
restructuring that had occurred in 1998 (see Note 14), which originally resulted
in the  capitalization  of an intangible  cost. As per FAS 15, these  intangible
costs associated with this debt  restructuring  should be classified as "Loss on
Troubled Debt Restructuring" and charged against income. As a result, to reflect
this change,  the capitalized  "Troubled Debt  Restructuring  Costs" of $273,649
have been charged against income as of December 31, 2001.

18.  Prior Period Adjustment
----------------------------

Retained  earnings at the  beginning of December  31, 2001 has been  adjusted to
reflect a change that was made to correct the fair value of $0 that was assigned
to the issuance of 18,500,000 and 12,500,000  shares of restricted common shares
for the years ended December 31, 2000 and 1999, respectively.  These shares were
issued to an officer as  compensation in lieu of receiving cash payments for his
services as Director and an Officer of the Company.  The value assigned to these
shares is based upon the  current  trading  value at the date of  issuance.  The
effect of this change was to reduce  retained  earnings and increase  additional
paid-in-capital by the total value of $230,000, which includes $92,500 from 2000
and $137,500 from 1999, respectively,  based upon the value of common stock sold
during 2000 and 1999.(Note 6) This adjustment also results in a loss of earnings
per share of $(.0040)based upon weighted average number of shares outstanding as
of December 31, 2001.

19.  Reclassifications
----------------------

Certain  amounts  in  the  accompanying  2000  financial  statements  have  been
reclassified to conform to the presentation for 2001.



                                       14