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

                                   FORM 10-QSB

(Mark One)

|X|   Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934

               For the quarterly period ended September 30, 2002

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

                  For the transition period from _____ to _____

                        Commission file number 000-26095

                              ENVIROKARE TECH, INC.
        (Exact name of small business issuer as specified in its charter)

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

             2470 Chandler Avenue, Suite 5, Las Vegas, Nevada 89120
                    (Address of principal executive offices)

                                 (702) 262-1999
                          (Issuer's telephone number)

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

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

                                 NOT APPLICABLE

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: The total number of shares of Common
Stock, par value $.001 per share, outstanding as of October 16, 2002, was
28,856,144.

Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|

<PAGE>

                                TABLE OF CONTENTS

Part I -- FINANCIAL INFORMATION

Item 1.     Financial Statements.............................................. 1

                      Accountant's Review Report.............................. 2

                      Consolidated Balance Sheets............................. 3

                      Consolidated Statements of Operations................... 4

                      Consolidated Statement of Stockholders' Equity.......... 5

                      Consolidated Statements of Cash Flows................... 7

            Notes to the Consolidated Financial Statements.................... 8


Item 2.     Plan of Operation.................................................24


Part II -- OTHER INFORMATION

Item 1.     Legal Proceedings.................................................34

Item 2.     Changes in Securities.............................................34

Item 3.     Defaults Upon Senior Securities...................................34

Item 4.     Submission of Matters to a Vote of Security Holders...............34

Item 5      Other Information.................................................34

Item 6.     Exhibits and Reports on Form 8-K..................................35

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements


                              ENVIROKARE TECH, INC.
                              Financial Statements
                               September 30, 2002


                            WILLIAMS & WEBSTER, P.S.

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


                                       1
<PAGE>

Board of Directors
Envirokare Tech, Inc.
2470 Chandler, Suite 5
Las Vegas, Nevada  89120

                           ACCOUNTANT'S REVIEW REPORT

We have reviewed the accompanying consolidated balance sheet of Envirokare Tech,
Inc. (a development stage company) as of September 30, 2002 and the related
consolidated statements of operations, cash flows, and stockholders' equity for
the three months and nine months ended September 30, 2002 and 2001, and for the
period from June 15, 1998 (inception) through September 30, 2002. These
financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with accounting principles generally accepted in the United States of
America.

The financial statements for the year ended December 31, 2001 were audited by us
and we expressed an unqualified opinion on them in our report dated February 11,
2002, but we have not performed any auditing procedures since that date.

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

Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
October 10, 2002


                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                     September 30
                                                                         2002        December 31,
                                                                      (unaudited)       2001
                                                                      -----------    -----------
<S>                                                                   <C>            <C>
ASSETS
      CURRENT ASSETS
         Cash                                                         $    53,473    $   118,927
                                                                      -----------    -----------
              TOTAL CURRENT ASSETS                                         53,473        118,927
                                                                      -----------    -----------

      PROPERTY AND EQUIPMENT
         Furniture and fixtures                                             1,893          1,893
         Office equipment                                                   7,999          7,999
         Molds                                                             59,000         43,000
              Less accumulated depreciation                                (6,206)        (4,829)
                                                                      -----------    -----------
              TOTAL PROPERTY AND EQUIPMENT                                 62,686         48,063
                                                                      -----------    -----------

      OTHER ASSETS
         Deposits and retainers                                            64,603         22,223
         License agreement                                                525,000        525,000
         Patent acquisition costs and technology rights                 1,958,939      1,968,459
                                                                      -----------    -----------
              TOTAL OTHER ASSETS                                        2,548,542      2,515,682
                                                                      -----------    -----------

         TOTAL ASSETS                                                 $ 2,664,701    $ 2,682,672
                                                                      ===========    ===========

LIABILITIES & STOCKHOLDERS' EQUITY
      CURRENT LIABILITIES
         Accounts payable                                             $    59,146    $   100,759
         Accounts payable - related party                                      --         20,921
         Customer deposit                                                  61,215             --
         Notes payable                                                     61,965         61,965
         Accrued interest                                                  23,775         19,186
         Notes payable to stockholders                                    300,000             --
         Accrued interest to stockholders                                  48,534             --
                                                                      -----------    -----------
              TOTAL CURRENT LIABILITIES                                   554,635        202,831
                                                                      -----------    -----------

      LONG-TERM LIABILITIES
         Notes payable to stockholders                                    725,000      1,025,000
         Accrued interest to stockholders                                  96,514         30,051
                                                                      -----------    -----------
              TOTAL LONG-TERM LIABILITIES                                 821,514      1,055,051
                                                                      -----------    -----------

      COMMITMENTS AND CONTINGENCIES                                            --             --
                                                                      -----------    -----------

      STOCKHOLDERS' EQUITY
         Convertible preferred stock, 10,000,000 shares authorized,
              $.001 par value; 0 shares issued and outstanding                 --             --
         Common stock, 200,000,000 shares authorized,
              $.001 par value; 28,856,144 and 24,356,144 shares
              issued and outstanding, respectively                         28,856         24,356
         Additional paid-in capital                                     4,112,240      3,320,790
         Stock options and warrants                                       588,865        840,642
         Accumulated deficit during development stage                  (3,441,409)    (2,760,998)
                                                                      -----------    -----------
         TOTAL STOCKHOLDERS' EQUITY                                     1,288,552      1,424,790
                                                                      -----------    -----------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 2,664,701    $ 2,682,672
                                                                      ===========    ===========
</TABLE>

             See accompanying notes and accountant's review report.


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                           Period from
                                           Three Months    Three Months    Nine Months     Nine Months     June 15,1998
                                              Ended           Ended           Ended           Ended       (Inception) to
                                           September 30,   September 30,   September 30,   September 30,   September 30,
                                               2002            2001            2002            2001            2002
                                           (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)
                                           ------------    ------------    ------------    ------------    -----------
<S>                                        <C>             <C>             <C>             <C>             <C>
REVENUES                                   $         --    $         --    $         --    $         --    $        --
                                           ------------    ------------    ------------    ------------    -----------

EXPENSES
      Consulting fees - related parties          37,000          37,000          73,000         198,500        715,455
      Other consulting fees                      53,685          31,000         264,858         168,000      1,004,523
      Financing costs                                --              --              --              --        219,642
      Rent                                        8,109           7,871          20,177          20,975         70,185
      General and administrative                 33,416          24,367          87,401          62,271        435,464
      Depreciation                                  472             473           1,377           1,314          6,206
      Professional fees                          47,777          44,250          90,826         114,601        471,538
      Research and development                    2,505          82,269          20,755          82,269        201,693
      Wages, salaries, and payroll taxes             --             455              --          14,377        131,879
                                           ------------    ------------    ------------    ------------    -----------
           TOTAL EXPENSES                       182,963         227,685         558,393         662,307      3,256,585
                                           ------------    ------------    ------------    ------------    -----------

LOSS FROM OPERATIONS                           (182,963)       (227,685)       (558,393)       (662,307)    (3,256,585)

OTHER EXPENSE
      Interest expense                          (41,132)        (16,251)       (122,018)        (19,526)      (184,824)
                                           ------------    ------------    ------------    ------------    -----------
           TOTAL OTHER EXPENSE                  (41,132)        (16,251)       (122,018)        (19,526)      (184,824)
                                           ------------    ------------    ------------    ------------    -----------

LOSS BEFORE INCOME TAXES                       (224,095)       (243,936)       (680,411)       (681,833)    (3,441,409)

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

NET LOSS                                   $   (224,095)   $   (243,936)   $   (680,411)   $   (681,833)   $(3,441,409)
                                           ============    ============    ============    ============    ===========

      BASIC AND DILUTED NET LOSS
      PER COMMON SHARE                     $      (0.01)   $      (0.02)   $      (0.03)   $     (0.05)
                                           ============    ============    ============    ===========

      WEIGHTED AVERAGE NUMBER
      OF BASIC AND DILUTED COMMON
      STOCK SHARES OUTSTANDING               28,280,057      14,889,478      26,546,986     14,233,800
                                           ============    ============    ============    ===========
</TABLE>

             See accompanying notes and accountant's review report.


                                       4
<PAGE>

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

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

Net loss for period ended December 31, 1998                         --             --             --             --             --
                                                           -----------    -----------    -----------    -----------    -----------
Balance, December 31, 1998                                          --             --     10,000,000         10,000             --

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

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

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

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

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

Foreign currency translation loss                                   --             --             --             --             --
                                                           -----------    -----------    -----------    -----------    -----------
Balance, December 31, 1999                                     500,000            500     10,746,140         10,746        585,400

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

Issuance of common stock at an average of $0.45
      per share for cash                                            --             --        543,338            543        356,957

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

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

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

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

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

Foreign currency translation loss                                   --             --             --             --             --
                                                           -----------    -----------    -----------    -----------    -----------
Balance, December 31, 2000                                     500,000            500     13,889,478         13,889      3,066,257

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

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

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

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

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

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

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

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

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

Net loss for period ended December 31, 1998                         --             --        (34,427)            --        (34,427)
                                                           -----------    -----------    -----------    -----------    -----------
Balance, December 31, 1998                                          --             --        (34,427)            --        (24,427)

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

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

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

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

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

Foreign currency translation loss                                   --             --             --         (1,202)        (1,202)
                                                           -----------    -----------    -----------    -----------    -----------
Balance, December 31, 1999                                     552,000       (105,000)      (927,600)        (1,202)       114,844

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

Issuance of common stock at an average of $0.45
      per share for cash                                            --             --             --             --        357,500

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

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

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

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

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

Foreign currency translation loss                                   --             --             --         (2,846)        (2,846)
                                                           -----------    -----------    -----------    -----------    -----------
Balance, December 31, 2000                                     529,000             --     (1,538,929)        (4,048)     2,066,669

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

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

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

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

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

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

Foreign currency translation gain                                   --             --             --          4,048          4,048

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

             See accompanying notes and accountant's review report.


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                            Preferred Stock               Common Stock
                                                                        -------------------------   -------------------------
                                                                          Number                       Number
                                                                         of Shares        Amount     of Shares        Amount
                                                                        -----------   -----------   -----------   -----------
<S>                                                                     <C>           <C>            <C>            <C>
Balance, December 31, 2001                                                       --   $        --    24,356,144   $    24,356

Issuance of common stock for services at $0.16 per share                         --            --       700,000           700

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

Issuance of common stock at an average of $0.07 per share for
cash with attached warrants at an average of $0.08 per share for cash            --            --       800,000           800

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

Expiration of stock options                                                      --            --            --            --

Net loss for the nine months ended September 30, 2002                            --            --            --            --
                                                                        -----------   -----------   -----------   -----------
Balance, September 30, 2002 (unaudited)                                          --   $        --    28,856,144   $    28,856
                                                                        ===========   ===========   ===========   ===========

<CAPTION>
                                                                         Additional  Stock Options                     Total
                                                                          Paid-in         and        Accumulated    Stockholders'
                                                                          Capital       Warrants       Deficit         Equity
                                                                        -----------   -----------    -----------    -----------
<S>                                                                     <C>           <C>            <C>            <C>
Balance, December 31, 2001                                              $ 3,320,790   $   840,642    $(2,760,998)   $ 1,424,790

Issuance of common stock for services at $0.16 per share                    111,300            --             --        112,000

Issuance of common stock at an average of $0.06 per share for
cash with attached warrants at an average of $0.04 per share for cash       168,950       128,050             --        300,000

Issuance of common stock at an average of $0.07 per share for
cash with attached warrants at an average of $0.08 per share for cash        59,200        60,000             --        120,000

Issuance of stock options for services                                           --        12,173             --         12,173

Expiration of stock options                                                 452,000      (452,000)            --             --

Net loss for the nine months ended September 30, 2002                            --            --       (680,411)      (680,411)
                                                                        -----------   -----------    -----------    -----------
Balance, September 30, 2002 (unaudited)                                 $ 4,112,240   $   588,865    $(3,441,409)   $ 1,288,552
                                                                        ===========   ===========    ===========    ===========
</TABLE>

             See accompanying notes and accountant's review report.


                                       6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                    Period from
                                                                     Nine Months     Nine Months   June 15, 1998
                                                                        Ended           Ended      (Inception) to
                                                                    September 30,   September 30,   September 30,
                                                                         2002            2001            2002
                                                                     (unaudited)     (unaudited)     (unaudited)
                                                                    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net loss                                                     $   (680,411)   $   (681,833)   $ (3,441,409)
       Adjustments to reconcile net loss
             to net cash used by operating activities:
       Depreciation                                                        1,377           1,314           6,206
       Intangible asset expensed                                           9,520
       Stock options issued for consulting fees                           12,173         164,000         849,173
       Stock issued for consulting fees                                  112,000              --         112,000
       Warrants issued for financing expense                                  --              --         219,642
       Consulting fees due to related party applied to receivable             --              --          15,000
       Decrease (increase)  in deposits and retainers                     18,836          61,337          (3,387)
       Increase (decrease) in accounts payable                           (62,534)        141,783          59,146
       Increase in accrued interest receivable                                --            (315)             --
       Increase in accrued interest payable                              119,585          18,464         168,822
                                                                    ------------    ------------    ------------
       Net cash used by operating activities                            (469,454)       (295,250)     (2,014,807)
                                                                    ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Loan to related party                                                  --              --         (15,000)
       (Purchase) write-off of molds                                     (16,000)         27,000         (59,000)
       Payments of license agreement                                          --        (525,000)       (525,000)
       Patent costs                                                           --          (1,733)           (609)
       Purchase of equipment                                                  --          (1,338)         (8,045)
                                                                    ------------    ------------    ------------
       Net cash used in investing activities                             (16,000)       (501,071)       (607,654)
                                                                    ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from sale of preferred stock                                  --              --         250,000
       Proceeds from sale of common stock                                420,000         200,000       1,379,799
       Repurchase of common stock                                             --              --          (7,500)
       Proceeds from notes payable                                            --         300,000              --
       Proceeds from issuance of notes payable to related parties             --         285,000       1,053,635
                                                                    ------------    ------------    ------------
       Net cash provided by financing activities                         420,000         785,000       2,675,934
                                                                    ------------    ------------    ------------

Increase (decrease) in cash                                              (65,454)        (11,321)         53,473

Cash, beginning of period                                                118,927          11,362              --
                                                                    ------------    ------------    ------------

Cash, end of period                                                 $     53,473    $         41    $     53,473
                                                                    ============    ============    ============

SUPPLEMENTAL CASH FLOW INFORMATION:
       Interest paid                                                $      2,432    $      1,265    $     14,989
                                                                    ============    ============    ============

       Income taxes paid                                            $         --    $         --    $         --
                                                                    ============    ============    ============

NON-CASH TRANSACTIONS:
       Common stock issued for acquisition of subsidiary            $         --    $         --    $  1,925,000
       Note issued for purchase of property, equipment,
              and operating expenses                                $         --    $         --    $      3,635
       Note issued for pending patent to related party              $         --    $         --    $     33,330
       Note issued for deposit for stock                            $         --    $    100,000    $    100,000
       Warrants issued for financing activities                     $         --    $         --    $    219,642
       Stock options issued for consulting fees                     $     12,173    $    164,000    $    849,173
       Stock issued for consulting fees                             $    112,000    $         --    $    112,000
       Stockholder's contribution for equipment                     $         --    $         --    $      1,847
</TABLE>

             See accompanying notes and accountant's review report.


                                       7
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Envirokare Tech, Inc., (hereinafter "the Company" or "Envirokare"), was
incorporated in June 1998 under the laws of the State of Nevada. In December
1998, the Company acquired the property, assets and undertakings of a business
engaged in developing a rubber mold technology and patent rights potentially
applicable to future development of a pallet made of recycled materials. The
Company believes the early-stage rubber mold technology to be of marginal
commercial value. During 2001, the Company acquired, via license agreement,
extensive rights to a proprietary thermoplastic processing technology, the
Thermoplastic Flowforming process (variously referred to herein as "TPF
Process", the "Process" or "TPF technology"). See Note 3. The licensing
agreement provides the Company with the ability to utilize the TPF technology to
design, develop, manufacture, market, license and sublicense a wide range of
large structural parts, including the Company's proprietary pallet. The pallet
is now composed of long-fiber reinforced thermoplastic composite and will be
manufactured using the acquired TPF technology. The Company's current operating
strategy is based on developing products to be manufactured by the TPF Process,
as well as marketing the TPF technology to potential sublicensees of the
Company. The Company maintains an office in Las Vegas, Nevada. The Company has
elected a fiscal year-end of December 31.

The Company includes the assets and investment in Electroship Acquisition
Corporation and Envirokare Composite Corp., wholly-owned non-operating
subsidiaries, in these financial statements. See Notes 3 and 7.

The Company is in the development stage and, as of September 30, 2002, had
realized no revenues from its planned operations.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Going Concern

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

As shown in the accompanying financial statements, the Company has incurred an
accumulated deficit of $3,441,409, which includes a net loss of $680,411 for the
nine months ended September 30, 2002, and has a working capital deficit and no
revenues. The Company, being a development stage enterprise, is currently
marketing the TPF technology which will, if


                                       8
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Going Concern (continued)

successful, mitigate these factors which raise substantial doubt about the
Company's ability to continue as a going concern. Management plans to fund
operations from sales of its debt and equity in the near-term and from product
sales, product development agreements and proceeds realized from licensing the
TPF technology on an ongoing basis.

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

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

Accounting Method

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

Cash and Cash Equivalents

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

Compensated Absences

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

Development Stage Activities

The Company has been in the development stage since its formation in June 1998.
It is primarily engaged in the marketing of the TPF technology, which is a
proprietary thermoplastics processing technology. The TPF Process allows for
various products to be manufactured from recycled or virgin plastic materials.

Derivative Instruments

The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities -


                                       9
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Derivative Instruments (continued)

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

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

Historically, the Company has not entered into derivative contracts to hedge
existing risks or for speculative purposes.

At September 30, 2002, the Company has not engaged in any transactions that
would be considered derivative instruments or hedging activities.

Fair Value of Financial Instruments

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

Loss Per Share

Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Basic and diluted shares
outstanding are the same, as the inclusion of common stock equivalents would be
anti-dilutive. As of September 30, 2002, the Company had stock options and
warrants outstanding, equivalent to 8,425,000 common stock shares, which are
considered to be anti-dilutive.

Principles of Consolidation

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


                                       10
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Provision for Taxes

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

At September 30, 2002, the Company had net deferred tax assets of approximately
$453,350, principally arising from net operating loss carryforwards for income
tax purposes. As management of the Company cannot determine that it is more
likely than not that the Company will realize the benefit of the net deferred
tax asset, a valuation allowance equal to the net deferred tax asset has been
established at September 30, 2002.

At September 30, 2002, the Company has net operating loss carryforwards of
approximately, which expire in the years 2018 through 2022. The net operating
loss carryforwards do not include expenses that are not deductible for tax
purposes, such as compensation expense, in the amount of approximately$1,181,000
attributable to options, warrants and restricted stock issued to employees and
consultants.

Advertising

The Company expenses advertising costs as incurred.

Comprehensive Income and Loss

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

Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" ("SFAS No.
141") and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
SFAS No. 141 provides for the elimination of the pooling-of-interests method of
accounting for business combinations with an acquisition date of July 1, 2001 or
later. SFAS No. 142 prohibits the amortization of goodwill and other intangible
assets with indefinite lives and requires periodic reassessment of the
underlying value of such assets for impairment. SFAS No. 142 is effective for
fiscal years beginning after December 15, 2001. An early adoption provision
exists for companies with fiscal years beginning after March 15, 2001. On
September 1, 2001, the Company adopted SFAS No. 142. Application of the
nonamortization provision of SFAS No. 142 had no effect on the Company's
financial statements at September 30, 2002 or December 31, 2001.


                                       11
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Pronouncements (continued)

In October 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 establishes guidelines related to
the retirement of tangible long-lived assets of the Company and the associated
retirement costs. This statement requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived assets. This statement is effective for financial statements issued
for the fiscal years beginning after June 15, 2002 and with earlier application
encouraged. The Company adopted SFAS No. 143 and does not believe that the
adoption will have a material impact on the financial statements of the Company
at September 30, 2002.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS 144 replaces SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This new standard establishes a single accounting model for
long-lived assets to be disposed of by sale, including discontinued operations.
SFAS No. 144 requires that these long-lived assets be measured at the lower of
carrying amount or fair value less cost to sell, whether reported in continuing
operations or discontinued operations. This statement is effective beginning for
fiscal years after December 15, 2001, with earlier application encouraged. The
Company adopted SFAS No. 144 and does not believe any adjustments are needed to
the carrying value of its assets at September 30, 2002.

In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS Statements No.
44, and 64, Amendment of SFAS No. 13, and Technical Corrections" ("SFAS No.
145"), which updates, clarifies and simplifies existing accounting
pronouncements. SFAS No. 44, which required all gains and losses from the
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related tax effect was rescinded, and as a result,
SFAS No. 64, which amended SFAS No. 44, was rescinded as it was no longer
necessary. SFAS No. 145 amended SFAS No. 13 to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications which have economic effects similar
to those of sale-leaseback transactions. The pronouncement will not affect the
Company as it has not entered into any of the aforementioned transactions.

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


                                       12
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Pronouncements (continued)

2002 and is not yet effective. The impact on the Company's financial position or
results of operations from adopting SFAS No. 146 has not been determined.

Research and Development Costs

Costs of research and development are expensed as incurred.

Use of Estimates

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

Concentration of Risk

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

Interim Financial Statements

The interim financial statements for the period ended September 30, 2002,
included herein, have not been audited at the request of the Company. They
reflect all adjustments, which are, in the opinion of management, necessary to
present fairly the results of operations for the period. All such adjustments
are normal recurring adjustments. The results of operations for the period
presented is not necessarily indicative of the results to be expected for the
full fiscal year.

NOTE 3 - INTANGIBLE ASSETS

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

On December 1, 2000, the Company through its wholly-owned subsidiary,
Electroship Acquisition Corporation, acquired technology rights in exchange for
shares of the Company's common stock. See Note 7. The acquired technology rights
relate to an application-stage patent for an invention that is expected to
facilitate shipping commerce and/or for processing information regarding
shipping services in a network environment. This acquisition was valued using
the trading price of the Company's common stock at the date of acquisition.


                                       13
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 3 - INTANGIBLE ASSETS (continued)

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

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

NOTE 4 - PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                               September 30,        December 31,
                                                   2002                 2001
                                               ------------         ------------
<S>                                            <C>                  <C>
Furniture and Fixtures                         $      1,893         $      1,893
Less:  Accumulated Depreciation                       1,100                  899
                                               ------------         ------------
Net Furniture & Fixtures                       $        793         $        994
                                               ============         ============

Office Equipment                               $      7,999         $      7,999
Less:  Accumulated Depreciation                       5,106                3,930
                                               ------------         ------------
Net Office Equipment                           $      2,893         $      4,069
                                               ============         ============

Molds                                          $     59,000         $     43,000
                                               ============         ============
</TABLE>

The Company, in the development of its pallet product, has acquired two sets of
molds. The first generation mold was utilized for preliminary testing and pallet
redesign purposes. This mold was developed at a cost of $70,000 and is of no
commercial value. Accordingly, the first generation mold costs were expensed to
research and development on September 30, 2001. The second generation molds were
acquired at a cost of $43,000. These molds are currently carried at cost. The
Company is continuing its research and development using these molds. When
completed and placed in service, the molds will be depreciated over their
expected useful lives. If the second generation molds are deemed to be of no
commercial value, their carrying cost valuation will be expensed to research and
development at the time in which that determination may be made.

The Company, in the development of prototype construction products, has acquired
a mold that will produce a Beam. This first generation Beam mold was developed
at a cost of $16,000. This mold is currently carried at cost. The Company is
continuing its research and development using


                                       14
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 4 - PROPERTY AND EQUIPMENT (continued)

this mold. When completed and placed in service, the mold will be depreciated
over its expected useful life.

NOTE 5 - SHORT-TERM DEBT

As of September 30, 2002, current debt consisted of: i) a $100,000 note payable,
dated July 9, 2001, and a $200,000 note payable dated September 30, 2001, which
mature two years from the dates of issuance, bear interest at 15% per annum and
are unsecured, and ii) unsecured notes payable totaling $61,965, bearing
interest at 10% per annum, originated between August 18, 1998 and December 16,
1998, are payable to Mr. Real Morel and due on demand.

The Company is a named defendant in an action filed by Mr. Real Morel in the
Supreme Court of British Columbia, Canada, under which the Company was served in
May 2000. In this action, Mr. Morel alleges non-payment by the Company of
amounts due pursuant to the aforementioned demand promissory notes. After
consultation with British Columbia legal counsel and a review of the
circumstances surrounding the issuance of the notes, the Company has resolved to
dispute this liability. Management of the Company believes that the outcome will
not have a material adverse effect on the financial position of the Company. The
status of this matter remains unchanged from and the same as discussed in the
Company's Annual Report of Form 10-KSB for the year ended December 31, 2001.

NOTE 6 - LONG-TERM DEBT

As of September 30, 2002, long-term debt consisted of a $200,000 note payable,
dated November 9, 2001, a $375,000 note payable, dated November 15, 2001, a
$100,000 note payable, dated November 16, 2001, and a $50,000 note payable,
dated November 23, 2001. All of the aforementioned notes are unsecured and bear
interest at 15% per annum, payable at maturity, which is two years from the
dates of issuance. Three common stock warrants are attached to each dollar of
debt, with an exercise price of $0.195 per share. These warrants are fully
exercisable for up to two years from the dates of issuance. See Note 9.

NOTE 7 - COMMON STOCK

During the third quarter of 2002, the Company sold 800,000 "units" for aggregate
cash consideration of $120,000. The units, which consisted of 800,000 shares of
common stock with one warrant attached to each common share, were issued at
$0.15 per unit. Each warrant is exercisable at $0.50 per share for two years
from the dates of issuance. See Note 9. These shares were offered and sold in
reliance upon the exemption from registration provided by Rule 506 promulgated
under Section 4(2) of the Securities Act.


                                       15
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 7 - COMMON STOCK (continued)

During the first two quarters of 2002, the Company sold 3,000,000 "units" for
aggregate cash consideration of $300,000. The units, which consisted of
3,000,000 shares of common stock with one warrant attached to each common share,
were issued at $0.10 per unit. Each warrant is exercisable at $0.25 per share
for two years from the dates of issuance. See Note 9. These shares were offered
and sold in reliance upon the exemption from registration provided by Rule 506
promulgated under Section 4(2) of the Securities Act.

During the first quarter of 2002, the Company issued 700,000 shares of its
common stock, with an aggregate value of $112,000, as payment for services
provided by consultants. The securities were issued in reliance upon the
exemption from registration provided for under Section 4(2) of the Securities
Act.

During June 2001, 1,000,000 units of the Company, consisting of 1,000,000 shares
of common stock with one warrant attached to each common share, were issued at
$0.20 per unit. Each warrant is exercisable at $0.50 per share until June 30,
2003. See Note 9. These shares were offered and sold in reliance upon the
exemption from registration provided by Rule 506 promulgated under Section 4(2)
of the Securities Act.

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

During December 2000, 100,000 stock options were exercised at $0.575 per common
stock share. These stock options were granted under the Envirokare Tech, Inc.
1999 Stock Option Plan. See Note 9.

During September 2000, 200,000 shares of common stock were issued at $0.50 per
share. These shares were issued in reliance upon the exemption from the
registration requirements of the Securities Act specified by the provisions of
Regulation S.

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


                                       16
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 7 - COMMON STOCK (continued)

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

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

Upon incorporation on September 15, 1998, 10,000,000 shares of common stock were
issued at $0.001 per share, under Regulation D, Rule 504. At December 31, 1998,
this common stock was held by 30 shareholders, none of whom held in excess of
ten percent of the total.

NOTE 8 - PREFERRED STOCK

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

NOTE 9 - STOCK OPTIONS AND WARRANTS

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

Warrants

During August and September 2002, 800,000 shares of common stock with one
warrant attached to each common stock share were issued. Each warrant is
exercisable at $0.50 per share until August and September 2004. These warrants
were valued at an average price of $0.08 per share, for a total of $60,000. See
Note 7.

During June 2002, 1,500,000 shares of common stock with one warrant attached to
each common stock share were issued. Each warrant is exercisable at $0.25 per
share until late June 2004. These warrants were valued at $0.03 per share, for a
total of $42,000. See Note 7.


                                       17
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 9 - STOCK OPTIONS AND WARRANTS (continued)

Warrants (continued)

During April 2002, 1,000,000 shares of common stock with one warrant attached to
each common stock share were issued. Each warrant is exercisable at $0.25 per
share until April 3, 2004. These warrants were valued at $0.06 per share, for a
total of $55,000. See Note 7.

During March 2002, 500,000 shares of common stock with one warrant attached to
each common stock share were issued. Each warrant is exercisable at $0.25 per
share until March 12, 2004. These warrants were valued at $0.06 per share, for a
total of $31,050. See Note 7.

During June 2001, 1,000,000 shares of common stock with one warrant attached to
each common stock share were issued. Each warrant is exercisable at $0.50 per
share until June 30, 2003. These warrants were valued at $0.06 per share, for a
total of $60,000. See Note 7.

During 2001, $1,025,000 was raised in a private debt offering. Three warrants
are attached to each dollar of debt, with an exercise price of $0.195 per share.
These warrants are fully exercisable for up to two years from the dates of
issuance. These warrants were valued at $0.07 per share, for a total of
$219,642. See Note 6.

Stock Options

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

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

The Company filed a Form S-8 under the Securities Act with the Securities and
Exchange Commission in March 2000 to register 1,150,000 shares (2,300,000 as
adjusted for the stock split) of common stock authorized for issuance under the
Plan. In September 2000, the


                                       18
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 9 - STOCK OPTIONS AND WARRANTS (continued)

Stock Options (continued)

Company filed Post-Effective Amendment No. 1 to the Form S-8, to register the
remaining 1,700,000 shares under the Securities Act. For the year ended December
31, 1999, the Company recorded $552,000 ($.24 per option) in consulting fees for
the value of these options. These stock options will expire September 29, 2009.
See Note 10.

On August 13, 2002, stock options totaling 100,000 shares expired. These stock
options were valued at $0.24 per option for a total of $24,000. On June 10,
2002, stock options totaling 1,100,000 shares expired. See Note 10. These stock
options were valued at $0.24 per option for a total of $264,000. On May 28,
2002, stock options totaling 700,000 shares expired. These stock options were
valued at $0.15 per option for a total of $105,000. On February 28, 2002, stock
options totaling 200,000 shares expired. These stock options were valued at
$0.15 per option for a total of $30,000. On March 13, 2002, stock options
totaling 100,000 shares expired. These stock options were valued at $0.29 per
option for a total of $29,000. On January 15, 2002, stock options totaling
100,000 shares were issued. These options were valued at $0.12 per option for a
total of $12,173.

On March 6, 2001, stock options totaling 300,000 shares expired. These stock
options were valued at $0.24 per option for a total of $72,000. On June 28,
2001, stock options totaling 250,000 shares expired. These stock options were
valued at $0.24 per option for a total of $60,000. On January 16, 2001, stock
options totaling 100,000 shares were issued. These options were valued at $0.29
per option for a total of $29,000. On March 14, 2001, stock options totaling
700,000 shares were issued. These options were valued at $0.15 per option for a
total of $105,000. On June 28, 2001, stock options totaling 200,000 shares were
issued. These stock options were valued at $0.15 per option for a total of
$30,000.

<TABLE>
<CAPTION>
                                                                              Weighted
                                                                               Average
                                                                              Exercise
                                                               Shares           Price
                                                            ------------    ------------
<S>                                                         <C>             <C>
Outstanding at January 1, 2001                                 2,200,000
Expired                                                         (550,000)   $      0.575
Granted                                                          100,000           0.600
Granted                                                          900,000           0.300
                                                            ------------    ------------
Outstanding and exercisable at December 31, 2001               2,650,000    $      0.469
                                                            ============    ============

Outstanding at January 1, 2002                                 2,650,000
Granted                                                          100,000    $      0.300
Expired                                                       (2,200,000)          0.456
                                                            ------------    ------------
Outstanding  and  exercisable  at September 30, 2002             550,000    $      0.425
                                                            ============    ============

Weighted average fair value of options granted during
the nine months ended September 30, 2002                                    $       0.12
                                                                            ============
</TABLE>


                                       19
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 10 - RELATED PARTIES

Jeannie M. Runnalls, who was appointed president, secretary, and director of the
Company on January 24, 2000, received $32,988 and $22,715 in cash for consulting
fees during the years ended December 31, 2000 and 1999, respectively.

On August 8, 2000, the Company authorized a shareholder's loan to Ms. Runnalls
in the amount of $15,000. Terms of the unsecured, demand loan require interest
payments of 7% per annum, simple interest. This loan was retired during December
2001 in consideration of consulting services provided to the Company by Ms.
Runnalls during the fourth quarter of 2001, valued at $6,753.

Stock options of 2,300,000 were issued for common stock shares during the year
ended December 31, 1999. Of these stock options, 1,000,000 were issued to
related parties. Of these granted related party stock options for common stock
shares, 500,000 expired unexercised during September 2000 and 500,000 expired
unexercised during June 2002. See Note 9. During the year ended December 31,
2000, the Company granted 200,000 stock options for common stock shares to the
then president of the Company. See Note 9. On December 11, 2000, the president
of the Company resigned and remained a member of the board of directors of the
Company until December 8, 2001. The stock options that were granted to this
former president of the Company expired unexercised during June 2002.

During 2001, a shareholder loaned the Company $285,000. This amount, including
interest calculated at 10% per annum, was paid in full on November 15, 2001.
This same shareholder invested $375,000 in an unsecured note payable, dated
November 15, 2001, bearing interest at 15% per annum, payable at maturity, which
is two years from the date of issuance. See Note 6. As of December 31, 2001, the
Company owed this shareholder $20,921 for reimbursable expenses. The Company
paid the expenses owing to this shareholder during the first quarter of 2002.

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

On March 14, 2001, the Company granted 100,000 stock options for common stock
shares to Charles Stein, then president of the Company. See Note 9. Effective
May 1, 2001, Mr. Stein resigned as president of the Company and remained a
member of the board of directors of the Company until November 27, 2001. The
options granted to Mr. Stein expired unexercised on May 27, 2002.

On March 14, 2001, the Company granted 300,000 stock options for common stock
shares each to Gerald Breslauer, the vice president of administration of the
Company, and Mark Kallan, the executive vice president of the Company. Mr.
Breslauer and Mr. Kallan resigned their


                                       20
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 10 - RELATED PARTIES (continued)

respective positions with the Company on November 28, 2001. The options granted
to Messrs. Breslauer and Kallan expired unexercised on May 28, 2002.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Consulting Agreement

In July 2001, the Company entered into a consulting agreement with Erwin
Pruefer. The consultant performs marketing and sales services for the Company
and is compensated on a commission basis. The compensation details for various
products sold by Mr. Pruefer are as follows: development contracts, 10% of
revenues from contracts; production contracts, 7.5% of revenues from contracts
(not to exceed 15% of gross margin on a given contract); technology licensing
contracts, 10% of revenues from contracts, with a minimum commission of $25,000
per licensing system sold. A cap of $50,000 commission per customer exists.
After this maximum is reached, compensation agreements call for stock options to
be issued to the consultant to pay any additional commissions payable, with the
maximum of 500,000 options available to Mr. Pruefer.

Lease Agreements

The Company entered into a lease for office space in Las Vegas, Nevada for the
period of thirty-six months beginning October 1, 1998. The lease was extended
for a three-month period to December 31, 2001, by mutual agreement between the
landlord and the Company. The lease agreement was further extended for an
additional twelve-month period to December 31, 2002, by mutual agreement between
the landlord and the Company.Monthly payments are currently $838 per month,
including $40 for utilities. In compliance with the terms as contained in each
office lease held in the Company's name, the Company has purchased comprehensive
public liability insurance.

The Company entered into a lease for office space in Boca Raton, Florida on
February 7, 2001 for sixty months. Monthly payments of the lease are currently
$2,795 per month with additional charges for common area. A security deposit and
last month's rent were paid in the amount of $8,412. A portion of this office
space is being subleased with the sub-lessee reimbursing the Company $3,000 of
the security deposit and last month's rent. There is no written sublease
agreement at this time. The Company made lease payments for the Boca Raton,
Florida office totaling $10,000 during the nine months ended September 30, 2002,
but is no longer occupying this Florida office. Pursuant to a letter of
understanding between Gerald Breslauer and the Company, dated November 28, 2001,
Mr. Breslauer will be compensated by the Company in the amount of $15,000 should
he be successful in locating a suitable tenant to sublease the remainder of the
Company's Boca Raton, Florida office space.


                                       21
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 11 - COMMITMENTS AND CONTINGENCIES (continued)

Lease Agreements (continued)

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

Future annual minimum lease payments for the term of the Boca Raton and Orlando,
Florida lease agreements as of September 30, 2002 are as follows for the years
ending December 31:

                    Orlando Office        Boca Raton Office
                    --------------        -----------------
2002                $       7,785          $         8,385
2003                $      31,557          $        34,876
2004                $      32,819          $        36,272
2005                $      22,455          $        37,725
2006                $          --          $         3,270

Litigation

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

Merger Agreement with Thermoplastic Composite Designs, Inc.

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

Agreement with Schaefer Systems International, Inc.

The Company and Schaefer Systems International, Inc. (SSI) entered into a
product development and production agreement dated August 6, 2002, which
provides that the Company, with technical design and product development support
provided by TCD, will develop a part on behalf of SSI, with part prototypes
being deliverable to SSI no later than six months after the agreement date.
Initial payment, in the amount of $61,215, was made by SSI to the Company to
facilitate development of the part. In the event that the Company fails to
perform under the contract, this payment is returnable to SSI. Accordingly, the
Company currently recognizes the value of the initial payment made by SSI to the
Company as a deposit for product development.


                                       22
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                               September 30, 2002

NOTE 11 - COMMITMENTS AND CONTINGENCIES (continued)

Agreement with Schaefer Systems International, Inc. (continued)

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

NOTE 12 - SUBSEQUENT EVENT

Letter Agreement with New Age Shelters Ltd.

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


                                       23
<PAGE>

Item 2. Plan of Operation

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

      Overview

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

      The Company's license agreement with TCD enables the Company to
commercially exploit the TCD-developed TPF Process by marketing composite
materials products currently in development, developing and marketing other
products containing composite materials within various market sectors and
industries, and sublicensing the TPF Process. Products developed by the Company
will be manufactured by the Company or by sublicensees. In November 1999, the
Company engaged TCD to design and supply a system to manufacture a pallet (the
"Pallet", or sometimes referred to herein as the "E Pallet") and other
contemplated materials handling products and to assist in making Pallet design
modifications to meet product specifications provided by the Company. The
Company also has engaged TCD to produce Pallets, as well as other products in
development, in quantities required for testing and analysis, on an as-needed
basis.


                                       24
<PAGE>

      Anticipated Revenue Sources; Marketing and Distribution

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

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

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

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


                                       25
<PAGE>

improving product substrate composition, prior to initiating the launch of
production operations by the Company or its sublicensees.

      The Company's testing program has included in-depth analysis of substrate
compounds, extrusion methods and equipment modifications. Initial prototypes of
the Pallet and Beam have been developed and refined. The Company expects to have
potential customers evaluate these products through in-use testing some time
during the first half of 2003. Company management anticipates that the Company,
or its sublicensees, will commence commercial production of the Pallet, or other
products either in development or contemplated for development, once appropriate
production facilities are procured and commissioned for production, currently
anticipated to occur sometime in 2003, and upon completion of final testing and
evaluation of the first products.

      License and Merger Agreements with TCD

      On March 30, 2001, the Company, through its wholly-owned subsidiary,
Envirokare Composite Corp. ("ECC"), entered into a licensing agreement with TCD
that, subject to certain limitations, allows the Company to commercially exploit
the TPF Process on its own and on behalf of Company licensees. The agreement
provides the Company with the ability to utilize the TPF technology to design,
develop, manufacture, market, license and sublicense a wide range of large
structural parts, including the Company's proprietary Pallet, manufactured
through the joint efforts of the Company and TCD, or the Company's sublicensees,
for industries which may include agriculture, aerospace, automotive,
construction, marine, medical, military, transportation and waste management.
The license fee payable to TCD under the agreement was $525,000, which included
a $75,000 deposit held on the Company's account by TCD. Envirokare has completed
payment of the full license fee to TCD.

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

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

      On August 6, 2002, the Company entered into a product development and
purchase agreement with SSI, pursuant to which the Company has been contracted
to develop a proprietary


                                       26
<PAGE>

product for SSI. The agreement provides for a development phase and a production
phase. For the development phase, the agreement specifies that the Company will
design and develop the product, including molds, and produce a quantity of
prototypes for field testing, field trials and approvals. This new product is
expected to be significantly lighter and stronger than currently available
competitive products. Payments to the Company for successful completion of
product development will aggregate $185,500, with an additional $300,000 to be
payable if SSI elects to develop an additional, similar product with different
dimensions. The Company is to deliver product prototypes to SSI no later than
six months after the agreement date. Initial payment of $61,215 was made by SSI
to the Company to facilitate the development of the proprietary product. In the
event that the Company fails to perform under the contract, then such payment is
returnable to SSI. Upon SSI approval of the prototype product, the Company will
proceed with the fabrication to supply SSI with the new proprietary product, as
specified in the production phase of the agreement.

Letter Agreement with New Age Shelters Ltd.

The Company and New Age Shelters Ltd. (New Age) entered into a non-binding
letter agreement, dated October 1, 2002, expressing the intent of the parties to
combine their businesses through a merger of New Age into a wholly-owned
subsidiary of the Company. New Age is a building systems manufacturing company,
which manufactures patented modular products that have a variety of applications
including use for warehousing, greenhouses, food storage, residential, military
field stations and camps, emergency shelters and temporary schools and
hospitals. Terms of the letter agreement provide that, subject to conditions
including due diligence review, obtaining necessary approvals, and negotiation
and execution of a definitive merger agreement, New Age would merge with and
into a wholly-owned subsidiary of Envirokare, with the subsidiary to be the
surviving company in the merger and to continue the business of New Age. Merger
consideration would be in the form of Envirokare common stock issued to New Age
shareholders, with 1,000,000 shares to be issued upon completion of the merger,
and additional shares to be issued in 2006 based on net profits of New Age
during the 2003-2005 period. The Company filed a Form 8-K with the Commission,
dated October 18, 2002, containing a press release relating to this matter.

      TPF Process

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

      Historically, advanced composite materials were utilized almost
exclusively by the military and aerospace industries where such usage was
normally restricted to the manufacture of small parts due to the inordinate cost
of hand application, i.e., the process of manually applying layers


                                       27
<PAGE>

of composite materials to a mold or shape. Management believes that the TPF
Process provides a cost-effective alternative for the in-line production of many
larger, long-fiber reinforced plastic parts at very low processing costs. The
Process has key advantages over many manufacturing processes currently in use
such as compression molding, injection molding and rotational molding. One such
advantage is in the cost savings that may be realized in the reduced labor
required to create larger parts made using the TPF Process. The cost required to
assemble multiple smaller components to generate a complete larger part, which
often occurs in current production environments, is higher than with the TPF
Process. Material costs will typically also be lower when using the Process,
because of its use of recycled material, reuse of its own production scrap and
in-line compounding, which is the process of mixing raw material components as
an actual part of the production process.

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

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

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

      In September 2002, Metis Design presented the Company's management with
final findings regarding the TPF technology. In its report, Metis Design noted
that, as the utilization of advanced thermoplastic composite materials has
extended into market segments such as military and aerospace, commercial
manufacturers are increasingly demanding lower cost, quicker and more flexible
reinforced thermoplastic processing techniques. Metis Design found that the TPF
Process has significant potential to address this need. In addition, Metis
Design reported that the TPF Process could represent a solution to a
long-standing need in the long-fiber reinforced composite manufacturing process
- the TPF Process enables manufacturers to mass-produce at


                                       28
<PAGE>

high rates and labor efficiencies compared to many current production
techniques, while retaining accuracy and the ability to utilize low molding
pressures. The report also noted that the TPF Process provides economic
advantages over other thermoplastic composite molding methods through reduced
labor, material, tooling and machine costs.

      Metis conducted narrow coupon tensile tests were conducted on composite
material samples produced from the TPF Process. These tests are an American
Standards and Testing Measures (ASTM) standard for extracting straight
mechanical properties of a material. The test results demonstrated that the
material properties exhibited in the product, as formed by the TPF Process, are
comparable to those from products formed through traditional processes, and are
similar to those properties published by commercially available materials.

      Products; Product Development

      The Pallet

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

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

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


                                       29
<PAGE>

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

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

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

      The study findings included the following:

      o     The Pallet could safely support a 2,800 pound, uniformly distributed
            load in warehouse storage racks as well as on conveyors;

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

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


                                       30
<PAGE>

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

      Once redesign work is completed by Metis Design, the Company will conduct
further tests on the Pallet, with testing designed to provide information as to
the longevity of the Pallet, as compared to pallets made from non-TPF processes,
including pallets made from other materials. Information provided from this
additional engineering analysis will further the development of marketing
strategies for the Company. There can be no assurance that this additional
engineering will not delay the Company's plans for the commercialization of the
Pallet.

      In addition to the second-generation Pallet discussed above, the Company
is also developing a Pallet incorporating wireless tracking capabilities, based
on technology acquired in the Company's 2000 merger with Electroship (N.Y.) Inc.
Design work commenced on initial wireless Pallet prototypes during the first
quarter of 2001. The Company believes that initial Pallet designs that
incorporate wireless tracking capabilities will prove marketable to many
prospective customers. Company plans for additional development of this wireless
Pallet technology are scheduled for late 2002. The primary asset that the
Company acquired in the Electroship merger was a provisional patent application
that was filed by Electroship with the United States Patent and Trade Office
("USPTO"), which expired after filing without the Company filing a regular
patent application with priority from the original provisional application. The
Company made application to the USPTO to provisionally refile the patent during
the third quarter of 2002.

      The Beam

      The Company has also developed a mold for a first generation Beam
anticipated to have commercial application in the housing construction and
marine industries. A prototype Beam mold was built for the Company by TCD during
the first half of 2002, at a cost of $16,000. The Beam is designed to carry
specific weights, or loads, and to act as an interconnector for structural
components within various designed systems such as docks and modular structures.
The Company is presently conducting tests on the Beam mold to ascertain more
precise engineering specifications. Management expects the Beam to become a key
component of, among other

                                       31
<PAGE>

applications, docks and modular structures, with commercialization of the Beam
targeted for 2004.

      Liquidity and Capital Resources

      The Company is not yet generating revenues. For the period ended September
30, 2002, the Company had a net loss of $680,411. The Company's net loss
accumulated for the period from June 15, 1998 (inception) to September 30, 2002
was $3,441,409. The Company anticipates that it will begin to generate revenue
during 2003, upon the anticipated start of commercial sales of its products by
the Company or its sublicensees. At September 30, 2002, the Company had current
assets of $53,473. During the period ended September 30, 2002, the Company's
cash resources decreased by $65,454. At September 30, 2002, the Company had
current liabilities of $554,635. At September 30, 2002, current liabilities
exceeded current assets by $501,162. Other than as discussed above, the Company
is not aware of any trends, demands, commitments or uncertainties, other than
those affecting business and the economy in general, that could result in the
Company's liquidity decreasing or increasing in a material way within the next
12 months.

      To date, the Company has raised capital through private placements of
common stock, convertible preferred stock and units consisting of promissory
notes and warrants. The Company has budgeted pre-production and other
production-related expenditures for the twelve months through September 30, 2003
at $720,000 and plans to raise additional funds in the next several months to
cover its proposed expenditures. These funds may be raised through additional
equity financings, as well as through borrowings and other resources. There can
be no assurances, however, that the Company will be able to raise these funds.

      During 2001, the Company raised a total of $1,225,000 in two private
placement financings. The first was a private placement consisting of units of
the Company's common stock and warrants to purchase common stock, in which the
Company raised proceeds of $200,000. Additionally, the Company completed a new
private placement of units during November 2001. This offering consisted of
promissory notes due between July 2003 and November 2003 that bears interest at
a rate of 15% per annum and a warrant to purchase three shares of the Company's
common stock, at an exercise price of $0.195 per share, exercisable for two
years from the date of subscription. The Company raised $1,025,000 in this
offering.

      During 2002, the Company has raised, to date, a total of $420,000 in two
private placement financings. The first was a private placement consisting of
units of the Company's common stock and warrants to purchase common stock at a
price of $0.10 per unit, each unit consisting of one share of the Company's
common stock and a warrant to purchase one share of the Company's common stock,
at an exercise price of $0.25 per share, exercisable for two years from the date
of subscription. The Company raised proceeds of $300,000 from this offering.
Additionally, the Company is currently conducting a private placement offering
of units at a price


                                       32
<PAGE>

of $0.15 per unit, each unit consisting of one share of the Company's common
stock and a warrant to purchase one share of the Company's common stock, at an
exercise price of $0.50 per share, exercisable for two years from the date of
subscription. The Company has raised $120,000 in this offering as of September
30, 2002. With the capital it has raised to date, and the additional funds it
plans to raise in the next several months, the Company believes that it will be
able to continue with its development and marketing plans and meet its
obligations including cash requirements for at least the next twelve months, to
September 30, 2003. During the twelve months ending September 30, 2003, the
Company anticipates that it will continue its current research and development
activities, primarily focusing on further testing and refinement of the Pallet
and the Beam. If adequate funds are not available, the Company may have to
curtail operations significantly. The Company would in such case first delay
further testing of the Beam and then, if necessary, postpone refinement of the
Pallet design, which would delay the planned commercial production of the Pallet
beyond the currently anticipated start in 2003.

      The Company is currently assessing the merits and feasibility of
purchasing its own plant and equipment for production of products currently in
development. If this study indicates a Company-acquired production facility is
warranted, the Company would anticipate developing a construction plan during
the later part of 2002. In the event that the Company decides to acquire its own
production facility, the Company will have to raise substantial funds in
addition to those funds already raised. There can be no assurance that
additional funding will be available to the Company under favorable terms, if at
all. If the Company cannot raise enough funds, it may not be able to carry out a
plan to set up its own manufacturing operations. The Company might also have to
obtain funds through entering into arrangements with collaborative partners or
others. Such arrangements could require, among other things, that the Company
relinquish rights to certain products, which could impair future sources of
revenues for the Company.

      Employees

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


                                       33
<PAGE>

                           PART II -OTHER INFORMATION

Item 1. Legal Proceedings

      Reference is made to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2001 (the "2001 Annual Report"), for a discussion of an
action filed by Mr. Real Morel against the Company in the Supreme Court of
British Columbia, Canada. The status of this matter remains the same as
discussed in the 2001 Annual Report.

Item 2. Changes in Securities

      The Company is currently undertaking a private placement of units priced
at $0.15 per unit, each unit consisting of one share of the Company's common
stock and a warrant to purchase one share of the Company's common stock, at an
exercise price of $0.50 per share, exercisable for two years from the date of
subscription. As of September 30, 2002, the Company has raised $120,000 in this
offering. The securities are being offered and sold in reliance upon the
exemption from registration provided by Rule 506 promulgated under Section 4(2)
of the Securities Act of 1933 (the "Securities Act").

      During the second quarter of 2002, the Company completed a private
placement of units priced at $0.10 per unit, each unit consisting of one share
of the Company's common stock and a warrant to purchase one share of the
Company's common stock, at an exercise price of $0.25 per share, exercisable for
two years from the date of subscription. The Company raised $300,000 in this
offering. The securities were offered and sold in reliance upon the exemption
from registration provided by Rule 506 promulgated under Section 4(2) of the
Securities Act.

Item 3. Defaults Upon Senior Securities

      None

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

      None

Item 5. Other Information

      None


                                       34
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

      (a) Exhibits

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

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

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

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

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

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

10.5      Employment Agreement between the Company and Charles H. Stein,     (4)
          dated December 18, 2000

10.6      Employment Agreement between the Company and Mark L. Kallan,       (4)
          dated December 18, 2000

10.7      Employment Agreement between the Company and Gerald Breslauer,     (4)
          dated December 18, 2000

10.8      Amendment to Employment Agreements between the Company and each    (4)
          of Charles H. Stein, Mark Kallan, and Gerald Breslauer, dated
          March 14, 2001

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


                                       35
<PAGE>

Exhibit
Number    Description of Document
------    -----------------------
10.10     Agreement and General Release between the Company and Charles H.   (5)
          Stein, dated November 27, 2001

99.1      Officer's Certificate, dated November12, 2002

(1)   Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
      year ended December 31, 1999, filed with the Commission on April 7, 2000,
      and incorporated herein by reference.
(2)   Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
      year ended December 31, 2000, filed with the Commission on April 16, 2001,
      and incorporated herein by reference.
(3)   Filed as an exhibit to the Company's Current Report on Form 8-K, filed
      with the Commission on January 3, 2001, and incorporated herein by
      reference.
(4)   Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
      the period ended March 31, 2001, filed with the Commission on June 15,
      2001, and incorporated herein by reference.
(5)   Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
      year ended December 31, 2001, filed with the Commission on March 28, 2002,
      and incorporated herein by reference.

      (b)   Reports on Form 8-K

      A report on Form 8-K was filed by the Company on July 9, 2002, concerning
      the issuance of a press release announcing that it raised $300,000 from a
      private placement of Company units. See "Part II - Item 2. Changes in
      Securities"

      A report on Form 8-K was filed by the Company on September 25, 2002,
      concerning the issuance of a press release announcing that it had entered
      into an agreement with Schaefer Systems International, Inc. to develop
      products and supply products on behalf of the client. See "Part I - Item
      2. Product Development and Purchase Agreement with Schaefer Systems
      International, Inc."


                                       36
<PAGE>

                                        SIGNATURE

      In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on November 12, 2002.

                              ENVIROKARE TECH, INC.
                              Registrant

                              By: /s/     STEVE PAPPAS
                                  ------------------------------------------
                                  Name:   Steve Pappas
                                  Title:  President
                                          (Principal Executive Officer and
                                          Principal Financial and Accounting
                                          Officer)


                                       37
<PAGE>

                                 CERTIFICATIONS

      I, Steve Pappas, certify that:

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

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

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

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

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

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

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

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

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


                                       38
<PAGE>

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

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

      Date:  November 12, 2002

                                       /s/    STEVE PAPPAS
                                       -----------------------------------------
                                       Name:  Steve Pappas
                                       Title: President and Treasurer (Principal
                                              Executive Officer and Principal
                                              Financial Officer)


                                       39
<PAGE>

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

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

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

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

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

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

10.5      Employment Agreement between the Company and Charles H. Stein,     (4)
          dated December 18, 2000

10.6      Employment Agreement between the Company and Mark L. Kallan,       (4)
          dated December 18, 2000

10.7      Employment Agreement between the Company and Gerald Breslauer,     (4)
          dated December 18, 2000

10.8      Amendment to Employment Agreements between the Company and each    (4)
          of Charles H. Stein, Mark Kallan, and Gerald Breslauer, dated
          March 14, 2001

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

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


                                       40
<PAGE>

Exhibit
Number    Description of Document
------    -----------------------

99.1      Officer's Certificate, dated November 12, 2002

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

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

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

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

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


                                       41