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

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 2002

{ }  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         Commission File Number: 0-24016

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                 (Name of Small Business Issuer in its charter)

                  Nevada                                    65-1148155
     (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                  Identification Number)

 6802 Citicorp Blvd., Suite 500, Tampa, Florida               33619
   (Address of principal executive offices)                 Zip code)

                                 (813) 622-8550
                 (Issuer's telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001
Par Value
                                (Title of Class)

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

     Check if there is no disclosure of delinquent filings pursuant to Item 405
of Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-KSB or any
amendment to this Form 10-KSB [x].

     State issuer's revenues of its most recent fiscal year. $658,593

     State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days (See definition of affiliate in Rule
12b-2 of the Exchange Act). $1,468,000 as of March 31, 2003

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     The number of shares outstanding of the issuer's Common Stock, as of March
31, 2003, was 40,814,578.

     Transactional Small Business Disclosure Format (check one): Yes______ No X
                                                                             ---

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive Information Statement of BBJ Environmental
Technologies, Inc. to be filed with the Securities and Exchange Commission no
later than 120 days after the end of the issuer's 2002 fiscal year are
incorporated by reference into Part III of this Form 10-KSB.

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     This Annual Report on Form 10-KSB contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
are subject to risks, uncertainties, and other factors, which could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements. See "Item 1. Business - Forward Looking Statements
and Business Risk Factors."

                                     PART I

Item 1. General

     BBJ Environmental Technologies, Inc., a Nevada corporation ("BBJ
Environmental Technologies" or the "Company"), was organized in 1988 under the
name Lewiston Energy, Inc. Between 1988 and 1992, the Company changed its name
several times but did not conduct any significant operations. In 1993, the
Company engaged in a stock exchange transaction whereby it acquired all of the
outstanding common stock of Omega Development Corp., which it held as its wholly
owned subsidiary. Subsequently, the Company changed its name to Omega
Development Corp. and thereafter sold the subsidiary to two shareholder groups
in exchange for their shares of the Company's common stock. In 1995, the Company
next acquired all of the outstanding common stock of Home Partners of America,
Inc., which it sold to a principal stockholder of the Company in 1996. Following
the sale of Home Partners of America, Inc. and beginning in September 1996,
business operations of the Company were terminated and the Company remained
inactive until its acquisition of BBJ Environmental Solutions, Inc.

     Effective June 2000, the Company acquired 100% of the outstanding common
stock of BBJ Environmental Solutions, Inc., a Florida corporation organized in
1993 ("BBJ Environmental Solutions"), pursuant to an Agreement and Plan of
Reorganization. As a result, BBJ Environmental Technologies is a holding company
for BBJ Environmental Solutions, its operating subsidiary.

     BBJ Environmental Solutions develops, manufactures, and markets products
and devices that control and remove mold and other contamination in indoor
environments. We have developed technologies that are especially effective in
preventing air pollution originating from heating, ventilation,
air-conditioning, and refrigeration systems of homes offices, health care
facilities, schools, industrial plants and public buildings. Consequently, our
products are highly effective in promoting good indoor air quality and indoor
environment quality. Our leading technology is the BBJ MicroBiocide(R) product
family. These products are registered by the U.S. Environmental Protection
Agency ("EPA") for controlling and inhibiting bacterial and fungal growth in
both building interiors and air-conditioning and air duct systems.

Recent Developments

     .    In January 2003, we introduced our new U.S. Environmental Protection
          Agency registered BBJ MicroBiocide(R) for Air Ducts product.
          Residential and commercial air ducts can become contaminated with mold
          and bacteria. When that occurs, the heating and ventilation systems
          can spread spores causing building occupants to experience discomfort
          and in some cases illness. The U.S. Environmental Protection Agency
          has discouraged use of conventional sanitizers and disinfectants
          because they can actually introduce more

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          contamination into the building's air system. In working with the U.S.
          Environmental Protection Agency over a seven-year period, we developed
          the first EPA registered product specifically formulated for
          inhibiting the growth of mold in air ducts. The product's new
          comprehensive label provides complete information on how to
          effectively clean and treat air ducts and specifically lists the duct
          systems on which BBJ MicroBiocide(R) for Air Ducts is registered for
          use.

     .    At a recent industry association meeting our founder and Chairman of
          the Board, Robert Baker, was recognized by the U.S. Environmental
          Protection Agency for his work in pioneering a clear, site-specific
          label for EPA registration. Our recently approved label found on BBJ
          MicroBiocide(R) for Air Ducts was cited as a model for others to
          follow. We believe that our product is the only product in the
          industry to follow the newly adopted format and provide this level of
          clarity.

     .    The U.S. Environmental Protection Agency also has approved expanded
          label language and claims for two other products in the BBJ
          MicroBiocide(R) family. These products are expected be introduced over
          the next several months.

     .    In January 2003, we took steps that we believe will augment our sales
          and marketing strength. In particular, we created and filled the
          position of Senior Vice President of Operations and hired a full time
          Vice President of Sales. We were successful in recruiting two highly
          qualified senior executives to fill these positions who have a solid
          record of achievement. These individuals are currently developing a
          business plan designed to aggressively seek additional sales revenue.

Development of BBJ Environmental Solutions

     Robert Baker, our Executive Chairman of the Board, first saw the need for
the technologies that form the core of BBJ Environmental Solutions in July 1987
when he acquired an infection during a surgical procedure that resulted in
severe pain and required over six months to heal. Mr. Baker believes his
infection may have resulted from airborne bacteria that grew in the hospital
ventilation system. As a result of this experience, he was determined to learn
all he could about the causes of such infections and do everything possible to
prevent or minimize them. Through diligent research, Mr. Baker became convinced
that a significant cause of indoor air pollution and disease transmission was
directly related to inadequate maintenance of air-conditioning and air-handling
systems. While managing the facilities and other administrative services of a
medical center during the mid-to-late 1980's, he uncovered several instances
where he believed the air-conditioning systems contributed to serious
infection-control problems.

     Mr. Baker began a study of air quality problems, examining their causes and
methods for improvement. He also identified the need to assess the biological
content of air-conditioning systems, establish the level of risk relative to
contamination, and developed methods for controlling the build-up of
contaminating organisms. He initiated a multi-year development effort that led
to formulations that can be used safely in the air stream yet is highly
effective in inhibiting microbial growth. Although pathogens or disease causing
organisms are normally thought of as the greatest concern, he discovered that
the most significant problem is amplification or

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overgrowth of any microbial species. Virtually all bacteria, mold and other
fungi that grow to high concentrations in the indoor environment can cause air
quality problems.

The Market for Indoor Air Quality

     Indoor contaminants are a source of pollution that can cause a host of
symptoms that have become known as sick building syndrome. Sick building
syndrome causes occupant discomfort and complaints, low worker productivity,
and, in severe cases, illness and disability. Such contamination poses a threat
to both human health and the environment. Conventional disinfectants are not a
satisfactory means of control. They kill growing organisms after the damage is
already underway and often add more contamination than they remove. Our
approach, however, is to prevent the formation of potentially harmful organisms
without introducing additional pollution to the indoor environment of buildings
such as homes, office buildings, hotels, schools, food processing plants,
hospitals and nursing homes. Where mold or other organisms have grown to problem
levels, the preferred approach is to remove the accumulated contamination
utilizing mild, non polluting cleaning products, then treat surfaces with a BBJ
MicroBiocide(R) product to control new growth.

     Contamination of air associated with bacteria, fungi, molds, and yeast
growth is believed by our management to be the primary cause of the indoor air
quality problems that have received so much attention during the past dozen
years. The resulting building related illnesses and sick building syndrome cases
lead to increased employee absenteeism, lost productivity, increased health
insurance premiums and workers' compensation claims. Consequently, sick building
syndrome provides a basis for costly litigation against building owners,
managers, contractors, architects, heating, ventilation, air-conditioning and
refrigeration companies, manufacturers, and others that have worked in the
building. A significant cause of sick building syndrome is microbiological
contamination of indoor environments. The Legionnaires Disease outbreak in
Philadelphia in 1976 is probably the most publicized case of illness caused by a
pathogenic (disease-causing) microbial agent in a building.

     Indoor air quality has become a major health and comfort concern in the
United States and in other developed countries around the world. Indoor air
pollution can lead to serious problems that result in evacuation and closure of
buildings and significant economic disruption.

     The U.S. Environmental Protection Agency ranks poor indoor air quality
among the top five environmental risks to public health. Although poor indoor
air quality is a relatively new problem, methods to prevent and control it are
available. The simplest solutions are proper facility management and regular
maintenance programs.

     According to reports by the U.S. Environmental Protection Agency a clean
air-conditioning system in a building is extremely important since many people
spend more than 90 percent of their time in indoor environments. These reports
indicate that levels of indoor contamination can be up to 100 times higher than
outside. The re-circulation of stale air in an indoor environment concentrates
airborne particles and organic compounds, byproducts of combustion and
biological contamination. Heating, ventilation and air conditioning systems must
be well maintained, inspected and cleaned on a prescheduled and periodic basis
and repaired as needed. Additionally, if maintenance is inadequate, problems
that may arise include growth and

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dissemination of microbial agents from water reservoirs or water-damaged areas
and the dissemination of irritant dust through air supply from the heating,
ventilation and air conditioning systems.

     According to the U.S. Environmental Protection Agency, many heating,
ventilation and air conditioning system components can act as direct or indirect
sources of particles and/or volatile organic chemicals. In a report published in
1997 by the U.S. Environmental Protection Agency, the most prominent is the
occurrence of biological growth and bioaerosol generation in the presence of
moisture provided by air washers and other recirculating water systems,
inadequate humidity control, poorly designed humidifying systems, insufficient
cooling coil maintenance, and condensate drip pans. These problems appear to be
exacerbated by dust accumulation, and infiltration of outdoor contaminants that
are distributed to indoor spaces by the heating, ventilation and air
conditioning system, and the results of such contamination are that allergic
reactions can range from mildly uncomfortable to life-threatening, as in a
severe asthma attack. Some common signs and symptoms are watery eyes, runny nose
and sneezing, nasal congestion, itching, coughing, wheezing and difficulty
breathing, headache, and fatigue.

     Commercial building owners, employees, and homeowners have become
increasingly concerned about the effects of bacteria and mold contamination in
air-conditioning systems. During the last few years, many new products have been
brought to the market, which claim to improve the quality of indoor air. We do
not believe that any of the products currently available in the market provide
the efficacy of our approach. We believe that our products have a competitive
advantage in that our products are low in toxicity yet highly efficacious. In
fact, we believe that BBJ MicroBiocide(R) for Air Ducts is the only product that
has received a full efficacy and risk review by the U.S. Environmental
Protection Agency for use in air ducts.

     Remediation contractors, building maintenance technicians and heating,
ventilation, air conditioning and refrigeration contractors use our products
both in scheduled preventative maintenance programs and during non-routine
cleanup operations.

The Heating, Ventilation and Air-Conditioning Industry

     The heating, ventilation and air conditioning industry consists of the
installation, replacement, maintenance service and repair of heating,
ventilation and air conditioning systems at existing residences and commercial
businesses and the installation of systems at newly constructed homes and
businesses.

     Information provided by the Air Conditioning, Heating and Refrigeration
News, an industry news publication, estimates that there are approximately 43
million central air conditioners, 54 million furnaces and nine million heat
pumps in operation in homes in the United States. Further, this publication
states that there are over 30,000 heating, ventilation and air conditioning
contractors operating in the United States and according to the Air Conditioning
and Refrigeration Institute, over 61 million air conditioners have been
installed in the United States since 1975.

     According to a report published by the U.S. Department of Housing and Urban
Development for 1995, 80% of all new houses constructed in the United States
included central air

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conditioning and according to the U.S. Census Bureau, manufacturers sales for
all residential air conditioners and warm air furnaces produced in 1997 were
approximately $5.5 billion, reflecting a compound annual growth rate of 7.2%
from 1993 to 1997.

The Refrigeration Industry

     The refrigeration industry consists of the installation, replacement,
maintenance service and repair of refrigeration cooling apparatus and systems at
existing commercial businesses and industrial processes and the installation of
refrigeration systems at newly constructed industries and businesses. An
ancillary market that must be addressed with different channels, but similar
products is the transport refrigeration industry. It consists of the
installation, replacement, maintenance service and repair of refrigeration
cooling apparatus and systems on existing vehicles, such as over-the-road
trucks, railroad and shipboard businesses and the installation of refrigeration
systems at newly constructed vehicles. The U.S. Census Bureau reports that close
to 20,000 food processing/manufacturing locations that require significant
volumes of refrigerated air to control and preserve their products.

The BBJ Solution to Indoor Air Quality

     We believe that we are the leaders in the use of the prevailing strategy
favored by researchers throughout the world for controlling the growth of
organisms in the indoor environment through prevention rather than spending
billions to fix problems after they have forced the evacuation of buildings. We
believe that we excel in developing new technologies for effective control,
training users and building owners in their proper use and distributing
companion products that are effective yet low in impact on humans and the
environment. We develop and manufacture formulated products and the policies and
procedures needed to use them in the safest, most effective and economic manner.

     Our policy is to produce only products that can be shipped in interstate
commerce without designated hazard classification. This provides greater safety
for our employees, our customers, the environment and ultimately the occupants
of spaces where our products are used. The U. S. Department of Transportation
("DOT") has developed objective scientific criterion that we use to determine
that products fit our policy.

     Our executives occupy positions of leadership in both the producer and user
communities. As a result, we are on the cutting edge of indoor environmental
technology and create both the emerging technologies and the public and industry
policy that drives their use.

Description of Products Competitive Strengths and Strategy

     Our existing products include the following:

     BBJ MicroBiocide(R) for HVAC/R Equipment, our flagship product, is
       specifically registered by U.S. Environmental Protection Agency for use
       in air-conditioning and refrigeration systems to control and inhibit the
       growth of a broad range of microorganisms. It inhibits microbial growth
       in air handlers and other ventilation equipment for six months or longer
       following application. This product is to be applied after cleaning the
       coils with Power Coil Clean(R) or

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       Micro Coil Clean(R). It is a key component of the preventative
       maintenance strategy for any building. BBJ MicroBiocide(R) for HVAC/R
       Equipment also is manufactured by us and sold under the Nalco Diversified
       Technologies private label "Coil Clear".

     Micro Coil Clean(R) removes built-up dirt and debris safely without
       damaging surfaces where applied. This detergent based coil cleaner has
       great cleaning activity yet it is safe enough to wash your hands in. It
       does not etch the coil fins and, if accidentally spilled, it will not
       damage carpeting or furnishings. Further, this product is readily
       biodegradable. It does not contain alkalis that are caustic, phosphates
       that contaminate the environment, solvents that result in air pollution,
       or strong acids that make many products corrosive. Although primarily
       developed as a refrigeration coil cleaner, it is an effective, economical
       and virtually non-toxic general purpose cleaner that can be used for mold
       remediation and other general cleaning tasks in both homes and commercial
       locations. Micro Coil Clean(R) is a companion product to BBJ
       MicroBiocide(R) for HVAC/R Equipment. A system must be cleaned before it
       can be successfully treated with BBJ MicroBiocide(R) for HVAC/R
       Equipment.

     BBJ Mold and Mildew Remover Disinfectant/Cleaner(TM) is registered with the
       U.S. Environmental Protection Agency and combines the germ killing
       ability of a disinfectant with a cleaning agent to remove harmful mold
       and mildew. Specially formulated to clean and disinfect walls, floors,
       and other surfaces where mold and mildew grow.

     FreshDuct(R) Odor Eliminator was formulated especially for conditions
       inside of heating, ventilation and air conditioning duct systems. It
       encapsulates odors at the source, not just covers them up. Its advanced
       technology destroys odors on contact to freshen and deodorize air ducts,
       basements, attics, crawl spaces, and other areas prone to odors. It is
       non-toxic, biodegradable, and has a light, pleasing fragrance to be used
       in conjunction with BBJ MicroBiocide(R). Since it was developed for
       maximum effectiveness in ducts constructed or lined with porous materials
       such as fiberglass, it is extremely effective in all porous materials and
       has been found to be an excellent fabric odor control. It utilizes our
       exclusive EnviroGard(R) technology which provides efficacy at extremely
       low active concentrations. Thus, FreshDuct(R) Odor Eliminator is
       hypoallergenic for all but the most sensitive individuals.

     BBJ MicroBiocide(R) for Air Ducts is specifically registered by U.S.
       Environmental Protection Agency for controlling and inhibiting the growth
       of microorganisms - such as bacteria, fungi, and mold - that grow in the
       ductwork of HVAC systems. Registration of this product in December 2002
       represents the culmination of a unique seven-year effort between the U.S.
       Environmental Protection Agency's Antimicrobials Division and us. The
       U.S. Environmental Protection Agency has long been concerned about the
       use of pesticides in ventilation systems because of the lack of data on
       safety, effectiveness and instructions for safe use in these
       applications. We worked with the U.S. Environmental Protection Agency to
       overcome these limitations by producing safety and efficacy data that had
       never been produced on such a product before. Additionally, we developed
       a set of comprehensive and detailed instructions that was approved by the
       U.S. Environmental Protection Agency that they then hailed as the
       standard benchmark for future products.

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       We believe that this product has established a new era of available
       knowledge for users and protection for occupants of spaces where it is
       used.

     Power Coil Clean(R) is a non-caustic, non-corrosive heavy duty coil cleaner
       that safely cleans and deodorizes evaporator coils, condenser coils,
       window units, air filters, blowers, and other dirty heating, ventilation,
       air-conditioning, and refrigeration components without damaging metal
       surfaces. It was a significant challenge to develop a cleaner that could
       cope with the highly resistant soiling encountered in and on HVAC system
       components without creating a product that posed a significant risk to
       users, damage to equipment, and a source of noxious fumes. We believe
       that this product overcomes those challenges and is achieving broad
       acceptance in the industry. Similar to Micro Coil Clean(R), Power Coil
       Clean(R), as a cleaning agent, is a companion product to BBJ
       MicroBiocide(R) for HVAC/R Equipment.

     BBJ MicroBiocide(R) for Floors and Walls is an antimicrobial treatment that
       is specifically registered by U.S. Environmental Protection Agency for
       inhibiting the growth of microorganisms on floors, walls, and other
       interior surfaces. It is specially formulated not only to control the
       growth of microorganisms on floors, walls and other interior surfaces,
       but its residual effect inhibits the regrowth of microbes for months.

     BBJ Mold and Mildew Remover Disinfectant/Cleaner(TM), a hospital strength
       disinfectant/cleaner product, is registered with the U.S. Environmental
       Protection Agency. This product and combines the germ killing ability of
       a disinfectant with a cleaning agent to remove harmful mold and mildew.
       Specially formulated to clean and disinfect walls, floors, and other
       surfaces where mold and mildew grow.

     Our Power Coil Clean(R), Micro Coil Clean(R), and Fresh Duct(R) Odor
Eliminator are not EPA registered and do not fall within the EPA's jurisdiction
because these products are not pesticides as defined under the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA").

Business Strategy

     Our objective is to become a leading provider of indoor air quality, indoor
environmental quality and heating, ventilation and air conditioning hygiene
products and services. The key elements of our strategy to accomplish this
objective include the following:

     .    Penetrate the Industrial/Commercial Industry Market. Significant users
          of high-capacity industrial heating, ventilation, air conditioning and
          refrigeration systems exist in the manufacturing, education, office
          buildings, health care, and retail industry. Our strategy is to
          demonstrate to these users that by using our products on a regular
          preventative maintenance schedule they can not only improve indoor air
          quality, but also reduce their energy costs.
     .    Penetrate Duct Cleaning and Mold Remediation Distribution Channel.
          With our new registration for BBJ MicroBiocide(R) for Air Ducts along
          with BBJ MicroBiocide(R) for Floors and Walls we will focus on
          expanding distribution through duct cleaning and mold remediation
          contractors, wholesalers, and maintenance service providers.
     .    Expand Heating, Ventilation and Air Conditioning Distribution Channel.
          We will

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          continue to focus on expanding distribution through heating,
          ventilation and air conditioning contractors, wholesalers and dealers,
          maintenance service providers, refrigeration wholesalers, dealers, and
          contractors. We will advertise in trade publications and attend trade
          shows
     .    Enhance Consumer Awareness. We intend to further establish our brand
          name recognition through public relations and mass-market advertising.

Manufacturing

     Currently, all of the Company's manufacturing processes take place in our
Tampa, Florida facility. The production facility consists of a modern automated
clean liquid filling line and weight batch blending room. Production and
blending operations are climate controlled and meet good manufacturing
production specifications. Good manufacturing practices is an industry term that
represents a formal set of procedures mandated for manufacturers of
pharmaceuticals and medical devices. Although we are not subject to good
manufacturing practices, we conduct our manufacturing operations in general
conformance with the good manufacturing practice regulations. Our management
believes that this facility along with readily available contract packaging
companies has the capacity to meet our anticipated production forecasts for the
foreseeable future.

Source and Availability of Raw Materials

     We rely on various suppliers to furnish the raw materials and components
used in the manufacturing of our products. During the past two years, the
following manufacturers or suppliers accounted for more than 5% of our raw
material supplies except as described in the following table:

                                    Suppliers

     Company Name                                  2002             2001
     --------------------------------------------------------------------
     B & G Equipment Co.                           21.2%            8.3%
     Brenntag Mid-South Inc.                        9.5%            7.1%
     CCL Container Co.                              9.9%            8.5%
     Consolidated Label Co.                         9.2%           10.1%
     DeForest Enterprises, Inc.                     6.0%            7.7%
     Harcros Chemicals Inc.                         2.6%            6.2%
     PRH Products Co.                               7.9%           15.3%
     Smith Container Corp.                         22.5%           22.2%

     Management believes that there are alternative suppliers for all of the key
raw material and component needs.

Marketing Orientation

     Since 1994, BBJ Environmental Solutions has been manufacturing quality
products that not only help to remove microbial growth but also aid in the
prevention of it. We have positioned ourselves in our product brochures and
advertising sheets as an environmental company

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providing solutions to a targeted niche market - inhibition of microbial
contamination in heating, ventilation, air conditioning and refrigeration
systems. Four important industry persons currently advise us. They include Tom
Yacobellis, President of the Indoor Air Quality Association, Al Veeck, Executive
Director of the National Air Filtration Association, George Benda, President of
Chelsea Group Ltd., and Glenn Fellman, publisher of Indoor Environment
Connections. We are members of several trade associations that include Air
Conditioning Contractors of America, Indoor Air Quality Association, American
Society of Heating, Refrigerating and Air Conditioning Engineers, Inc., National
Air Duct Cleaners Association, Air Conditioning Contractors Association, and
Consumer Specialty Products Association. Our relationship with these industry
persons and trade associations has allowed us to remain on the forefront of all
technological advancements in the indoor air quality field. We also maintain a
solid relationship with government entities, such as the U.S. Environmental
Protection Agency and Occupational Safety and Health Administration. By adhering
to the guidelines established by these agencies and remaining active in the
development and implementation of new regulations, we expect to develop new
products in the most efficient manner possible.

     To further our image and promote our product line, we have engaged outside
marketing communications advisors to develop our product brochures, advertising
sheets and some product public relations.

Sales and Distribution Strategy

     Our current sales focus is to distribute our products through established
national and regional wholesale distributors in the heating, ventilation, air
conditioning and refrigeration industry. Our strategy is to gain entry into
these distributors through a combination of our own outside sales force and
manufacturer's representative companies that have already penetrated them with
an experienced and well-trained sales force. Our manufacturer's representatives
are independent sales representatives that sell our products, as well as other
manufacturer's products, to heating, ventilation, and air-conditioning
distributors.

     Management is working on leveraging the distribution gained in the last
year to create a sharper selling focus on the building owner/manager. We expect
to test a revised sales process in the first half of 2003 and, if successful at
accelerating revenue, expand the revised focus in the back half of the year.

Heating, Ventilation, and Air-Conditioning Distribution Channel

     Our experience has found that heating, ventilation, and air-conditioning
contractors who serve the majority of residential and commercial customers buy
most of their parts and supplies from local heating, ventilation, and
air-conditioning distributors. Such distributors range from small single
location companies to huge national chains. To be successful in moving products
through these outlets, our regional managers and manufacturer's representatives
spend a significant amount of time and effort helping distributors sell our
products and training sessions for distributor employees and heating,
ventilation, and air-conditioning contractors.

     There are approximately 40,000 to 45,000 heating, ventilation, and
air-conditioning contractors in the U.S. serving the residential, commercial,
and industrial markets. These

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contractors have technicians that provide equipment, parts, and service to
residential and commercial customers. Traditionally, the majority of the
contractor's business was the installation and repair of heating, ventilation,
and air-conditioning equipment. Recently, contractors have been moving into new
areas that generate increased profit margins. By using our products as part of a
regular preventative maintenance program, contractors can offer a valuable
service to their customers, generate additional revenue, and do not have to lay
off their employees during their slow periods.

     Residential customers consist of all homeowners that have heating,
ventilation and air conditioning systems installed. Commercial customers are
building owners or maintenance technicians who purchase heating, ventilation,
air-conditioning and refrigeration products or service for the facility. These
facilities consist of hospitals, hotels, schools, government entities, food
processing plants, small and large businesses, and any other type of commercial
facility. In instances where the facility is large enough to have its own
maintenance department, they will buy directly for a heating, ventilation and
air conditioning distributor or strategic channel partner. It is our experience
that these consumers are becoming increasingly aware of the problems associated
with poor indoor air quality and are taking active roles in seeking a solution.

Strategic Channel Partners

     Although our distribution strategy focuses primarily on heating,
ventilation and air conditioning distributors, we also use strategic channel
partners of indoor air quality, indoor environment quality, and heating,
ventilation, and air-conditioning hygiene products to penetrate niche markets.
Strategic channel partners distribute our brand line or their private label
line. The characteristics of a strategic channel partners is a company that:

     .    Buys and resells our products,
     .    Has a good reputation in market assigned segment (preferably a market
          leader),
     .    Has a strong presence with users in market segment,
     .    Outside sales force, telemarketing sales force, and/or e-commerce
          capability,
     .    Carries inventory and finances receivables, and
     .    Orders more than $ 25,000 net sales per year.

     Major strategic channel partners that have had success in selling our
products include Abatement Technologies, AAF International, Nalco Diversified
Technologies, Inc. and Pure A Tech. During the past two years, no customer
accounted for more than 10% of our revenues except for CC Dickson (19%) and
Johnstone Supply (10%) in 2002 and Nalco Diversified Technologies (17%) and
Johnstone Supplies (11%) in 2001.

Other Markets

     Air Duct and Automobile MicroBiocide: The growth of fungi in air ducts is a
major problem in both homes and public buildings. The U.S. Environmental
Protection Agency has not recently registered any new products for use in air
ducts. During the past few years, EPA enforcement inspectors have removed a
number of products from the market that have made improper claims for use in air
ducts. On December 31, 2002, the U.S. Environmental Protection Agency granted

                                       12

<PAGE>

us a primary registration for the specific use of BBJ MicroBiocide(R) for Air
Ducts in heating, ventilation, and air conditioning systems air ducts. It is
highly effective in preventing or inhibiting the growth of active microorganisms
such as bacteria, algae, mold and other fungi in air ducts for at least six
months at a time.

     During the development and registration process of BBJ MicroBiocide(R) we
developed data that will allow us to make additional important claims for use of
this product in automobiles. Allergy and asthma physicians, in particular, have
inquired on behalf of their patients for a product for automobiles.

     Automated Clean-in-Place System: BBJ Environmental Solutions believes it
has produced a novel new technology. We currently have developed a prototype of
a device that a contractor installs on a central air conditioning unit. It has
not been introduced into the market and is in a patent pending status in the
United States. This device cleans and treats the air handler cooling coil,
keeping the system in like new condition and eliminating the mold and bacterial
growth and other fouling that normally accumulates during operation. Systems
maintained in this manner will operate more economically, last longer, and
provide cleaner and healthier air to the conditioned spaces in the home or
business where installed. This device is an advantage to the contractor in that
it automates a difficult and messy task that many technicians avoid doing yet is
vitally important to customer satisfaction. It also provides an additional
source of revenue and the opportunity for ongoing revenue by providing annual
replacement of the consumable fluids used in the device. We are considering the
time frame to introduce the device.

     Energy Efficiency: Although most experts believe that clean systems operate
more efficiently and use less energy than dirty systems, this issue has not been
well studied. Not only do we not know the level of contamination needed to
reduce efficiency and how long it takes to build to that level, we do not know
how to detect when contamination is at a critical point. During 2001, we
initiated a series of studies with the School of Engineering at Oklahoma State
University to better understand this issue. We are hopeful that these studies
will lead to new products for both detection removal of energy wasting
contamination.

Major Obstacle - Overcoming Lack of Knowledge

     In the past, heating, ventilation and air conditioning contractors/dealers
have not been knowledgeable about indoor air quality and indoor environmental
quality. Consequently they have looked to equipment sales as the main source of
profit. Heating, ventilation and air conditioning hygiene has been accomplished
through repeated cleaning using products, which are both harsh to the
environment and damaging to the equipment being cleaned. This has changed
dramatically over the past few years. We have found that contractors are
becoming more knowledgeable regarding indoor air quality and indoor
environmental quality due to the articles, seminars, and media attention on the
subject. Pricing for major equipment sales is becoming more competitive, thus
bringing margins down. Users and owners are demanding longer life and improve
performance from their existing systems to avoid additional capital outlays.
Therefore, we have seen contractors/dealers as well as original equipment
manufacturers generating increased sales and profits from the service and parts
division of their business.

Government Regulation

                                       13

<PAGE>

     As a chemical manufacturer, we are subject to a wide variety of local,
state and federal regulations. While we believe that our operations are in
compliance with all applicable regulations, there can be no assurances that from
time to time unintentional violations of such regulations will not occur.
Certain of our products are regulated by the United States Environmental
Protection Agency and the individual states where marketed. Government
regulation results in added costs for compliance activities and the risk of
losing revenues should regulations change.

     The Federal Trade Commission, Department of Transportation and Consumer
Product Safety Commission all impact some or all of our products from a
regulatory standpoint. The regulations of these agencies do not represent the
same complexity as the U.S. Environmental Protection Agency regulations as they
deal with concepts and factors that have been is long term use, are well
understood. As a result, compliance is a matter of assuring that the products
and the manner in which they are marketed and distributed conform to these
regulations. In contrast, the U.S. Environmental Protection Agency regulations
require specific advanced review and approval of each product and change in that
product and exist in a context of developing science and application.

     American Society of Heating, Refrigerating and Air-Conditioning Engineers,
Inc., also known in the industry as ASHRAE, is a professional society for
engineers. This society has an effect on the industry by establishing standards
and guidelines for energy efficiency, test methods, indoor air quality
ventilation and other requirements. Standards developed by ASHRAE are based upon
standards established by the American National Standards Institute, also known
as ANSI, a private, non-profit organization that administers and coordinates the
U.S. voluntary standardization and conformity assessment system, and are adopted
by reference by building code authorities throughout the United States and even
in other parts of the world. Thus, these standards determine how environmental
control systems in buildings must be designed and establish the minimum
operational specifications for such systems. ANSI serves as an administrator of
the United States private sector voluntary standardization system.

     The industry consensus standards for attaining acceptable levels of indoor
air quality in both residential and commercial buildings are being finalized/or
updated by the American Society of Heating, Refrigeration, and Air-conditioning
Engineers. These standards are referenced in building codes throughout the
United States and serve as models for the rest of the world. For the first time,
they will include requirements for the periodic inspection and cleaning of
heating and air-conditioning systems. These new standards are expected to lead
to growth in demand for products that prevent microbial growth in and clean
air-conditioning systems. Management believes that BBJ MicroBiocide(R) for
HVAC/R Equipment has features that make it desirable to meet the needs of this
new market.

     Several leading industry societies have joined to develop the first
standard and reference guide for remediation of mold in buildings. We have a
leading role in this project that is expected to be finalized by the end of
2003. This will provide for the first time uniform guidance for this rapidly
growing industry. Our participation will assure a clearly described role for the

                                       14

<PAGE>

use of products that we produce in the remediation of mold-contaminated
facilities and the prevention of future contamination.

Research and Development

     See "Other Markets" for a description of our recent research and
development efforts. For the years ended December 31, 2002 and 2001, we spent
$103,864 and $153,411, respectively, on research and development efforts.

Proprietary Rights

     Our registration number with the U.S. Environmental Protection Agency is
67212. Our BBJ MicroBiocide(R) products are registered with the EPA under number
67212-1. This gives us the right to control the marketing of this technology for
17 years. BBJ Mold and Mildew Remover Disinfectant/Cleaner,(TM) is based on
chemicals that are purchased by us from Stepan Company which owns the U.S.
patent for these formulas under 5,444,094 and the EPA registration no. 1839-83.
As a purchaser of these chemicals, we are permitted by the manufacturer to
market and sell these purchased chemicals under our product names and as an EPA
sub-registrant. As a sub-registrant, we have registered the sale of the BBJ Mold
and Mildew Remover Disinfectant/ Cleaner(TM) with the U.S. Environmental
Protection Agency under no. 1839-83-67212. These U.S. Environmental Protection
Agency registered products are also registered in all states in which they are
marketed.

     The FreshDuct(R) Odor Eliminator formula was issued a Patent on September
18, 2001 and the Power Coil Clean(R) formula was issued a Patent on October 15,
2002. Both of these Patents were issued by the United States Patent and
Trademark Office. BBJ's Micro Coil Clean(R) formula is guarded by trade secrets.
We also rely on a combination of trade secret laws, nondisclosure and other
contractual agreements and technical measures to protect our proprietary rights
in our products. We also have registered trademarks in the United States on all
of our products. We believe that our products, trademarks, and other proprietary
rights do not infringe on the proprietary rights of third parties.

     We own the Patents described above for the FreshDuct(R) Odor Eliminator and
Power Coil Clean(R) formulas. Stepan Company owns the Patent that is the basis
for our BBJ Mold and Mildew Remover Disinfectant/Cleaner(TM). We do not pay
Stepan any licensing, concession or royalty fees, although we are required to
purchase the formulas (chemicals) from them to be incorporated into the
abovementioned products. No other products are patented or licensed from others.

Competition

     The market for indoor air quality products and services is relatively new.
Management believes that our current competition for our products is limited
because of the U.S. Environmental Protection Agency regulatory approval granted
on BBJ MicroBiocide(R). The market for heating, ventilation, air conditioning
and refrigeration service and replacement industry is highly competitive. As the
market for indoor air quality products and services expands, competition will
likely be greater in the future. Competition may involve companies

                                       15

<PAGE>

with greater experience, financial and other resources than us. The primary
technologies that might be considered as alternatives to our products for indoor
air quality improvement include: air cleaning and filtration and photocatalytic
destruction (UV light) sold as ultraviolet germicidal irradiation systems. No
one company dominates the market and while alternative products may be deemed
competitive, management believes such products can be used in conjunction with
our products.

     Although management believes that there are presently no other products
that inhibit microbial growth on the market that have U.S. Environmental
Protection Agency registration for the air-conditioning system as does BBJ
MicroBiocide(R), heating, ventilation, air conditioning and refrigeration
contractors may perceive any product claiming to control contamination as being
equal to our products.

     The following provides a brief description of technologies that compete
with our products to improve indoor air quality:

     1.   Air Cleaning and Filtration: Some potential users initially see
          improved air cleaning as a competing technology for use of an
          antimicrobial (such as our products) to control microbial growth.
          However, while high efficiency filtration is beneficial, it does not
          substitute for effective control of bacteria and other growth in the
          heating, ventilation and air conditioning system.

     2.   Ozone and Negative Ion Generation: Although ozone generators and like
          devices are aggressively marketed with impressive sounding claims,
          Management believes that they are not effective. In fact, it is the
          position on ozone of the U.S. Environmental Protection Agency and the
          California Environmental Protection Agency to absolutely reject the
          use of ozone. Ozone generators that are sold as air cleaners
          intentionally produce the gas ozone. The Federal Trade Commission has
          taken legal action against manufacturers and vendors of ozone
          generators that make statements and claims that lead the public to
          believe that these devices are always safe and effective in
          controlling indoor air pollution. Because of misleading claims, and
          because ozone can cause health problems at high concentrations,
          several federal government agencies have worked in consultation with
          the U.S. Environmental Protection Agency to produce public information
          on Ozone. Manufacturers and vendors of ozone devices often use
          misleading terms to describe ozone. Terms such as "energized oxygen"
          or "pure air" suggest that ozone is a healthy kind of oxygen. Ozone is
          a toxic gas with vastly different chemical and toxicological
          properties from oxygen. Several federal agencies have established
          health standards or recommendations to limit human exposure to ozone.
          Potential health effect risks are: decreases in lung function;
          aggravation of asthma; throat irritation and cough; chest pain and
          shortness of breath; inflammation of lung tissue; and higher
          susceptibility to respiratory infection.

     3.   Ultra Violet light: Photocatalytic destruction is an old technology
          that recently has received new attention as a possible means of
          destroying contaminants in air ducts. Several units have been brought
          to market during the past few years with claims that they can be
          mounted in a duct and will eliminate all contaminants. In addition,

                                       16

<PAGE>

          installation, operation, and maintenance costs are high and the units
          generate considerable heat that adds to the energy load of the
          facility. Typically, a well designed and maintained system will cost
          an owner ten times the annual operating cost as the semi-annual
          application of our products. Also, the space required for an adequate
          unit is typically not available in most facilities. The fact is that
          these devices introduce a whole new set of maintenance challenges
          themselves. For example, the efficiency of UV lamps degrades rapidly
          when coated with even a light layer of dust. Therefore, most
          manufacturers recommend that they be cleaned monthly (not likely to
          happen and requires more labor than doing it right). Then there is the
          cost of power to run them, replacement of lamps and electronics, and
          the fact that they must be installed so the direct light must reach
          every surface where organisms are likely to grow.

          Finally, the Air-Conditioning and Refrigeration Technology Institute
          (ARTI), a not-for-profit organization established in 1989 to undertake
          scientific research in the public interest, ARTI sponsored a research
          project in 2002 titled: "Defining the Effectiveness of UV Lamps
          Installed in Circulating Air Ductwork (Project 610-40030)". The final
          conclusion from that project report is: "Until rigorous and adequate
          tests have been developed and performed, claims regarding protection
          against aerosol bioterrorism agents are suspect. The potential errors
          are too large and the consequences too great."

     We believe that we are a leader in the indoor environment industry in
establishing not only product technology but more important, the public and
industry policies and procedures that describe and regulate the use of the
products we develop, manufacture and distribute. Our Chairman, Mr. Baker, is a
member of four key Standard setting committees of the American Society for
Heating Refrigeration, and Air-conditioning Engineers, Chairs the Indoor Air
Quality Committee of the Consumer Specialty Products Association and the
Government Affairs Committee of the Indoor Air Quality Association. We are also
active in the National Air Duct Cleaners Association, the American Society For
Testing of Materials, the International Society for Indoor Air Quality, the Air
Conditioning Contractors Association, and other key industry associations. We
are currently actively involved in the preparation of the first Mold Remediation
Standard, writing of laws regulating mold remediation in several states, and
other significant policies, guidelines and standards impacting the industry.

     Our involvement and influential role in the above activities assures that
we are in a position to both assure that policies and procedures are compatible
with and support the use of products we market. In addition, it places us in a
position to anticipate needs of the industry and innovate in the development of
products that meet emerging needs before they are clearly understood by
competitors.

     Management believes that we are able to compete with competitors because of
a combination of strengths as a provider of indoor air quality, indoor
environmental quality and heating ventilation and air conditioning hygiene
products and services. We have been recognized by industry publications for
having innovative and highly rated environmental products. Our competitive
advantages are as follows:

                                       17

<PAGE>

     .    Reputation. We believe that the reputation and stature of Mr. Baker
          and our strategy to establish BBJ Environmental Solutions with a
          reputation for quality products that provide solutions for indoor air
          quality problems, indoor environment quality problems and heating,
          ventilation and air-conditioning hygiene will provide us with a
          competitive edge.
     .    Commitment to Product Innovation and Technological Leadership. Since
          inception, management has dedicated substantial resources to research
          and development and product innovation. We pioneered the introduction
          of the first U.S. Environmental Protection Agency registered
          antimicrobial to be used in controlling bacteria and other growth in
          the heating, ventilation and air conditioning system.
     .    EPA Registration. Mr. Robert Baker, our Executive Chairman, is highly
          regarded by the U.S. Environmental Protection Agency for developing
          and registering products for use in HVAC/R systems. Other
          manufacturers developing (or who have developed) new formulations will
          have to undergo a time consuming U.S. Environmental Protection Agency
          process, which normally takes two years or more.
     .    Research and Development. Mr. Baker is well known in indoor air
          quality research and heating, ventilation, air conditioning science.
          He is on the Board of Directors of the Air Care Division of the
          Consumer Specialties Manufacturers Association and chairs its indoor
          air quality committee. He serves as a member of several technical
          committees of the American Society of Refrigeration and
          Air-conditioning Engineers.

Employees

     As of March 31, 2003, we had 15 full time non-union employees. Additional
sales and marketing personnel may be hired in the future, as our sales efforts
require such additional personnel.

Forward-Looking Statements and Business Risk Factors

     This Annual Report on Form 10-KSB (including the exhibits hereto), and
other reports, proxy and information statements, and other communications to our
stockholders, as well as oral statements made by representatives of the Company,
may contain certain "forward-looking statements" within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995, and
other risks detailed from time to time in our filings with the Securities and
Exchange Commission that are subject to risks and uncertainties, including, but
not limited to, product demand and market acceptance, capital spending plans,
new product development, availability of products from third party suppliers,
fluctuations in operating results with respect to, among other things, the
Company's future revenues, operating income, and earnings per share, as well as
plans and objectives of management. These forward-looking statements are
typically identified by words or phrases such as "believe," "expect,"
"anticipate," "plan," "estimate," "intend," and other similar words and
expressions, or future or conditional verbs such as "will," "should," "would,"
and "could."

     These forward-looking statements reflect the our current views of the
Company at the time they are made and are based on information currently
available to the management of the Company and upon current expectations,
estimates, and projections regarding the Company and its industry, management's
beliefs with respect thereto, and certain assumptions made by management. These
forward-looking statements are not guarantees of future performance and are
subject to risks,

                                       18

<PAGE>

uncertainties, and other factors (many of which are outside the control of the
Company) which could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. The Company undertakes
no obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. The following are some, but not all, of the
factors that may cause the Company's actual results to vary materially from
those which are the subject of such forward-looking statements.

Our auditors have a going concern qualification in their opinion contained in
our audited consolidated financial statements which raises substantial doubt
about our ability to continue as a going concern.

     As a result of our substantial historical operating losses, limited
revenues and working capital and our capital needs, our auditors have added a
going concern qualification (explanatory paragraph) in their report contained in
our audited consolidated financial statements for the year ended December 31,
2002 which raises substantial doubt about our ability to continue as a going
concern. While we have relied principally in the past on external financing to
provide liquidity and capital resources for our operations, we can provide no
assurances that cash generated from operations together with cash received in
the future from external financing, if any, will be sufficient to enable us to
continue as a going concern.

We have incurred substantial losses from inception while realizing limited
revenues and we may never generate substantial revenues or be profitable in the
future.

     For each fiscal year since our inception in July 1988, we have generated
net losses. Our newly acquired subsidiary, BBJ Environmental Solutions, Inc.,
has also generated substantial net losses from its inception in August 1993 and
has accumulated losses totaling approximately $5.7 million as of December 31,
2002. We have only recently emerged from our development stage operations and
have historically generated limited revenues. We can provide no assurances that
our operations will generate substantial revenues or be profitable in the
future.

Our common stock private offerings have been highly dilutive to common
stockholders and such offerings are likely to continue in the future.

     Between January 1, 2002 and December 31, 2002, we have raised approximately
$1.7 million in additional financing principally through the offshore sale of
approximately 14.6 million shares of our restricted common stock to non-U.S.
persons pursuant to Regulation S offerings at prices between $0.11 and $0.14 per
share. In addition, we issued warrants to purchase approximately 1.1 million
shares of common stock exercisable at a price of $0.30 per share. These common
stock offerings have significantly diluted the stockholdings of other common
stockholders. Similar offerings in the future could also be highly dilutive to
the interests of our common stockholders.

We may need to raise additional capital and it may not be available to us on
favorable terms or at all; inability to obtain any needed additional capital on
favorable terms would adversely affect our business, results of operations and
financial condition.

                                       19

<PAGE>

     We estimate that our company may need to raise up to $1 million of
additional capital over the next 12 months to support our operations, meet
competitive pressures and/or respond to unanticipated requirements for a period
of at least 12 to 15 months. While there are no definitive arrangements with
respect to sources of additional financing, management anticipates that these
funds may be raised from one or more of the following possible sources:

       .  The Regulation S sale of restricted securities to offshore investors,
          some of whom are stockholders of our company;
       .  The sale of restricted securities to U.S. investors in a Regulation D
          private placement offering;
       .  Exercise of our outstanding options granted under our employee benefit
          stock plan; and
       .  Exercise of outstanding privately held warrants.

     While Management of our company has held discussions to pursue financing
through each of the above mentioned alternatives and has recently completed
private placement financings as summarized herein, we cannot assure you that
additional financing will be completed on commercially reasonable terms, if at
all. The inability to obtain additional financing, when needed, would materially
adversely affect our business, results of operations and financial condition and
could lead us to curtailing or ceasing operations.

We may be unable to compete effectively with competitors of perceived competing
technologies or direct competitors that may enter our market with new
technologies.

     The market for indoor air quality products and services is relatively new.
Our ability to increase revenues and generate profitability is directly related
to our ability to maintain a competitive advantage because of our U.S.
Environmental Protection Agency regulatory registration of our leading product,
BBJ MicroBiocide(R). Although management believes that there are presently no
other products that inhibit microbial growth on the market that have U.S.
Environmental Protection Agency registration for the heating, ventilation and
air-conditioning system as does BBJ MicroBiocide(R), contractors may perceive
any product claiming to control contamination as being equal to our products.
The primary technologies that might be considered as an alternative to our
products for indoor air quality improvement include air cleaning and filtration,
ozone generators and photocatalytic destruction through ultraviolet light
through the use of ultraviolet germicidal irradiation systems. We also face
potential direct competition from additional companies that may enter this
market with new competing technologies and with greater financial, marketing and
distribution resources than us. These greater resources could permit our
competitors to implement extensive advertising and promotional programs, which
we may not be able to match. We can provide no assurances that we will be able
to compete successfully in the future.

Our sales strategy to increase sales may not be successful.

     Our primary sales focus is to distribute our products through established
national and regional wholesale distributors in the heating, ventilation, air
conditioning and refrigeration industry. Our strategy is to gain entry into
these distributors through a combination of our own outside sales

                                       20

<PAGE>

force and manufacturer's representative companies that have already penetrated
them with an experienced and well-trained sales force. Our manufacturer's
representatives are independent sales representatives that sell our products, as
well as other manufacturer's products, to heating, ventilation, air-conditioning
and refrigeration distributors. We can provide no assurances that our strategy
to increase sales will be successful.

Lack of public knowledge of maintaining good indoor air quality for problem
avoidance may adversely affect sales growth.

     We believe that one of the largest obstacles our business faces is the lack
of public knowledge of maintaining good indoor air quality, which may adversely
affect sales growth. Our employees and officers spend a considerable amount of
their time educating heating, ventilation, air-conditioning and refrigeration
wholesale distributors, contractors and the general public on the importance of
maintaining good air quality and the value of our products in problem avoidance.
We can provide no assurances that these efforts will be successful in the
future.

Our ability to increase revenues is ultimately dependent upon homeowners and
building owners maintaining funds for problem avoidance.

     Sales of our products are dependent upon homeowners and building owners
maintaining funds for good indoor air quality and problem avoidance. In the
event that homeowners and building owners do not have funds available for such
purpose due to the state of the economy or otherwise, the sales of our products
would be adversely affected.

 Our failure to retain the services of Robert G. Baker, executive chairman to
oversee operations could materially affect our operations.

     Our success depends largely upon retaining the continued services of Mr.
Robert G. Baker, our executive chairman, to oversee our operations. Mr. Baker is
a national authority on the impact of bacterial and fungal contamination on
indoor air quality and he sits on several key industry technical committees. He
is an author of books and writes articles on indoor air quality and
contamination of heating, ventilation and air conditioning systems for trade
publications. A failure to retain Mr. Baker to oversee our operations could have
a material adverse effect on our business.

Our products may be subject to technological obsolescence.

     Considerable research is underway outside of us into the causes and
solutions for indoor air quality problems. Discovery of new technologies could
replace or result in lower than anticipated demand for our products and could
materially adversely effect our operations.

We are subject to a wide variety of local, state and federal rules and
regulations, which could result in unintentional violations of such laws. Also,
changes in such laws could result in loss of revenues.

     As a chemical manufacturer, we are subject to a wide variety of local,
state and federal rules and regulations. While we believe that our operations
are in compliance with all applicable rules

                                       21

<PAGE>

and regulations, we can provide no assurances that from time to time
unintentional violations of such rules and regulations will not occur. Certain
of our products are regulated by the U. S. Environmental Protection Agency and
the individual states where marketed. Government regulation results in added
costs for compliance activities and the risk of losing revenues should
regulations change.

Item 2.   Description of Property

     We are located in a 7,000 square foot facility at 6802 Citicorp Blvd.,
Suite 500, Tampa, Florida. This facility is leased from a non-affiliated party,
and the lease expires on December 31, 2005. We pay a base monthly rent of
approximately $6,100, which includes rent, common area maintenance, insurance
and real estate taxes. The landlord may increase our rent and common area
maintenance, capped at 5% per year plus our pro rata share of insurance and real
estate tax increases. Management believes that these facilities are adequate for
our current and anticipated needs.

Item 3.   Legal Proceedings

     We are not a party to any legal proceeding.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2002.

                                       22

<PAGE>
                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters

     On June 29, 2001, our Common Stock commenced trading on the OTC Electronic
Bulletin Board under the symbol "BBJE" and had a closing sales price on that
date of $0.65. As of March 31, 2003, the last sale of Common Stock in the
Over-the-Counter Market was $0.10. The following table reflects the high and low
closing sales prices of our Common Stock for the periods indicated as reported
by the NASD.

<TABLE>
<CAPTION>
                                                       Common Stock
                                                       ------------
                                                    High          Low
                                                    ----          ---
<S>                                                 <C>          <C>
Year Ended December 31, 2001
----------------------------
     Third Quarter 2001                             $0.72        $0.08
     Fourth Quarter 2001                             0.33         0.09

Year Ended December 31, 2002
----------------------------
     First Quarter 2002                             $0.35        $0.10
     Second Quarter 2002                             0.35         0.09
     Third Quarter 2002                              0.24         0.13
     Fourth Quarter 2002                             0.19         0.09
</TABLE>

     The over-the-market quotations in the table above reflect inter-dealer
prices, without retail markups, markdowns or commissions and may not necessary
represent actual transactions. The trading activity in our Common Stock has been
limited.

     As of March 31, 2003, there were approximately 625 holders of record of our
outstanding Common Stock. Our transfer agent StockTrans, Inc., 44 W. Lancaster
Avenue, Ardmore, PA 19003, supplied the approximate number of holders of record
of our Common Stock.

     The payment of dividends, if any, is within the discretion of the Board of
Directors. The Company has not paid any dividends on its common stock in the
past and the payment of dividends, if any, in the future will depend upon our
earnings, capital requirements, financial condition and other relevant factors.
Our Board of Directors does not presently intend to declare any dividends in the
foreseeable future. Instead, our Board of Directors intends to retain all
earnings, if any, for use in our business operations.

Financing Efforts

     During the quarter ended December 31, 2002, we completed the following
private financing:

     .  In December 2002, we received $594,000 in cash through a Regulation S
        offshore offering to an overseas bank. We sold 5,400,000 shares of our
        common stock at a cash purchase price of $0.11 per share and issued
        warrants to purchase 475,200 shares of our common stock, exercisable at
        $0.30 per share until its expiration date of November 30, 2004.

                                       23

<PAGE>

Item 6.   Managements' Discussion and Analysis or Plan of Operation

Introduction

     We were incorporated in the State of Nevada on July 15, 1988 under the name
Lewison Enterprises, Inc. On January 19, 1994, our name changed to Omega
Development, Inc. and to BBJ Environmental Technologies, Inc. on June 1, 2000.

     Our business plan was to seek to acquire and merge with a potential
business that might bring substantial value to our stockholders. Effective June
1, 2000, we acquired 100% of the then outstanding common stock and preferred
stock of BBJ Environmental Solutions, Inc. in exchange for the issuance of
12,410,666 shares of our common stock pursuant to an Agreement and Plan of
Reorganization. In accordance with this agreement, we also contemporaneously
completed a one-for-three reverse stock split and a stock repurchase of
3,465,000 shares of our common stock at a price of $.0001 per share from certain
shareholders of our company. In connection with the agreement, BBJ Environmental
Solutions loaned us $50,000 to be used by us for the payment of legal and
accounting expenses in connection with the reorganization, bringing us current
in our filings under the Securities Exchange Act of 1934 and retiring all of our
debt, accounts payable and accrued expenses through the closing of the
reorganization so that BBJ Environmental Technologies will have no liabilities
other than a $50,000 demand 6% promissory note payable to BBJ Environmental
Solutions.

Forward-Looking Statements

     This report on Form 10-KSB contains forwarding-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties, and actual results
could be significantly different than those discussed in this prospectus. These
statements discuss, among other things, expected growth, future revenues and
future performance. Although we believe the expectations expressed in such
forward-looking statements are based on reasonable assumptions within the bounds
of our knowledge of our business, a number of factors could cause actual results
to differ materially from those expressed in any forward-looking statements,
whether oral or written, made by us or on our behalf. The forward-looking
statements are subject to risks and uncertainties as described under "Item 1.
Business - Forward Looking Statements and Risk Factors."

Results of Operations

     Comparison of fiscal years ended December 31, 2002 and 2001
     During the year ended December 31, 2002, we generated sales of $658,593, an
increase of $330,195 or 101% from the comparable period of the prior year. Sales
increases were achieved in all of our products. The sales mix of our products
for 2002 was 34% from BBJ MicroBiocide(R) products, 22% from FreshDuct(R) Odor
Eliminator, 20% from Power Coil Clean(R) and 24% from other products. Management
believes that such increases were due primarily to the implementation of a sales
and marketing strategy to focus sales efforts on distributing our products
primarily through established national and regional wholesale distributors in
the

                                       24

<PAGE>

heating, ventilation and air-conditioning and refrigeration industry. Our
strategy is to gain entry into these distributors through a combination of our
own outside sales force and manufacturer's representative companies that have
established relationships.

     During the year ended December 31, 2002, our gross margin was $416,250, an
increase of $210,714 or 103% from the comparable period of the prior year. Our
gross margin percentage was 63% for each of the years ended December 31, 2002
and 2001.

     Total operating expenses for the year ended December 31, 2002 were
$2,153,799 an increase of approximately 29% or $477,890 from the comparable
period of the prior year. For the year ended December 31, 2002, sales and
marketing increased by $323,658 as compared to the comparable period of the
prior year primarily due to increases in salaries and benefits of personnel,
commissions paid to outside sales representatives, consulting fees paid to
Michael Nole as former director of sales and fees paid to an executive search
firm to recruit a Senior Vice President of Operations and a Vice President of
Sales. The consulting fees included a one-time stock bonus of 1,000,000 shares
of our common stock valued at $0.10 per share. For the year ended December 31,
2002, general and administrative expenses increased by $203,779 as compared to
the comparable period of the prior year. This increase was primarily the result
of consulting services, key man life insurance, and legal fees associated with
changing corporate legal counsel and public filings. The consulting services
included an agreement to issue to ACOL International up to 1,400,000 shares of
our common stock valued at $0.10 per share. These consulting services, which
were to be rendered over an eight and one-half month period, were for ACOL
International to provide investor relation services. These services included,
without limitation: disseminating investor relation packages and corporate
profiles to brokers; introductions to market makers interested in making markets
in our common stock; increasing awareness of our company among institutional and
individual investors; seeking potential merger and acquisition candidates;
promoting awareness of our company in the business community of geographic areas
where we wish to establish greater distribution; introducing us to large
individual investors in order to provide potential sources of funding and to
broaden investor base; and introducing us to large individual investors in order
to provide potential sources of funding to broaden investor base; and
introducing us to brokerage firms with the objective of their research
departments tracking our progress. We terminated this agreement in October 2002.
Of the 1,400,000 shares covered by the original agreement, we are not obligated
to issue 100,000 shares to ACOL, as a result of the cancellation of the
agreement.

     Research and development expenses as described in "Business" decreased by
$49,547 during the year ended December 31, 2002, as compared to the comparable
period of the prior year due to our limited working capital. Operating expenses
when expressed as a percentage of sales for the year ended December 31, 2002
were 327% as compared to 510% for the comparable period of the prior year. These
percentages are expected to decrease significantly as sales grow in future
operating periods. Research and development expense in 2003 is expected to be
approximately 20% higher than in 2002.

     For the three months and year ended December 31, 2002, we incurred a net
loss of $596,915 and $1,737,549, respectively, compared to a net loss of
$422,020 and $1,470,373 for the same periods in 2001. Our net loss for the year
ended December 31, 2002 included approximately

                                       25

<PAGE>

$240,000 of non-cash losses resulting from the issuance of 1,000,000 shares of
our common stock as a stock bonus to our former director of sales and an
agreement to issue up to 1,400,000 shares of its common stock to ACOL
International in exchange for consulting services, based upon a value of $0.10
per share.

New Sales Strategy

     During 2002, our sales organization significantly increased the number of
HVAC/R wholesalers distributing our products. We now have 283 stocking wholesale
locations on record. These locations were trained on our product line during
2002 and we anticipate that we will realize revenue during 2003 from this
strategy.

     We are currently in the process of determining how to best leverage our
distribution channels. A recently completed market analysis indicates developing
and executing a pull through strategy that focuses on building owners and
managers who control decisions in the largest buildings can realize gains in the
HVAC maintenance market. This is usually schools, hospitals, and manufacturing
operations. We believe we can create value for these customers by helping them
improve the indoor air quality of their buildings with little or no additional
cost. We are in the process of confirming anecdotal evidence that indicates
utility savings can offset product and labor costs required to deliver improved
HVAC maintenance needed to keep systems free of mold and other contamination
from microorganisms.

     Our market analysis also indicates additional opportunities in duct
cleaning, mold remediation, and mold prevention markets. Efforts will be made in
the coming year to better understand and exploit these opportunities.

While we believe that these efforts will ultimately result in increased sales
and profitable operations, we can provide no assurances in this regard.

Liquidity and Capital Resources

     As of December 31, 2002, we had net stockholders' equity of $554,243,
accumulated deficit of $5,724,017 and a working capital surplus of $479,918.
During the years ended December 31, 2002 and December 31, 2001, the net cash
used in operating activities was $1,266,337 and $1,480,099, respectively. This
was primarily a result of losses incurred by us during those periods. For the
year ended December 31, 2002, compensation due to grant of common stock of
$240,000 and an increase in accounts payable and accrued expenses of $211,882
reduced our net cash used in operating activities. During the years ended
December 31, 2002 and December 31, 2001, net cash used in investing activities
was $9,844 and $12,653, respectively, resulting from the purchase of property
and equipment. During the years ended December 31, 2002 and December 31, 2001,
net cash flows from financing activities amounted to $1,903,640 and $198,336,
respectively. For the year ended December 31, 2002, cash was provided by
financing activities from the sale of capital stock of $1,918,900, partially
offset by payments on capital leases totaling $15,260. During the year ended
December 31, 2001, cash was provided by financing activities from the sale of
our common stock of $220,000 partially offset by payments on capital leases of
$21,664.

                                       26

<PAGE>

     We elected in 2002 to close a revolving line of credit with the Bank of
America secured by secured by assets of the Company, which provided for
borrowings of up to $25,000 and was due on demand. Robert G. Baker and Jerry V.
Schinella guaranteed the line of credit. Interest on the line was charged at
2.5% over the current index rate.

     We also elected in 2002 to close an unsecured revolving line of credit with
AmSouth Bank, which provided for borrowings of up to $45,000 and was due on
demand. Robert G. Baker, Jerry V. Schinella, and Michael J. Gordon guaranteed
the line of credit. Interest on the line was charged at 2.0% over the current
index rate.

     On June 5, 2002, we issued 1,400,000 shares of our common stock upon the
exercise of options at a cash purchase price of $0.375 per share. Payment was
made through the issuance of full recourse promissory notes due September 30,
2002, together with interest at the rate of 5% per annum. These options were
granted to Michael Nole, our then director of sales, and his assistant, Nicholas
Salerno. These notes remain unpaid as of the filing date of this Form 10-KSB and
we have demanded payment. Management is currently accessing the collectibility
of these notes and our legal options. We can provide no assurances that these
notes will be fully collected by us through litigation, settlement or otherwise.

     As described herein we have relied principally on external financing to
provide liquidity and capital resources for our operations. As of March 31,
2003, Management believes that we need approximately $1.0 million of additional
financing to support our anticipated liquidity and capital resource needs during
the balance of 2003 above and beyond anticipated cash flow from operations. We
expect such financing to be obtained through the sale of equity to private
investors. No assurances can be given that our efforts to raise additional
financing for our short term (and long term) needs will be successful or, if
successful, that such financing will be on terms satisfactory to us. As a result
of our operating losses and capital needs, our auditors have added a going
concern qualification (explanatory paragraph) as described in our consolidated
financial statements and notes thereto which follow Item 9.

     While there are no definitive arrangements with respect to sources of
additional financing, management anticipates that these funds may be raised from
one or more of the following possible sources:

     .  The Regulation S sale of restricted securities to offshore investors,
        some of whom are stockholders of our company;

     .  The sale of restricted securities to U.S. investors in a Regulation D
        private placement offering;

     .  Exercise of our outstanding options granted under our employee benefit
        stock plan; and

     .  Exercise of outstanding privately held warrants.

     While Management of our company has held discussions to pursue financing
through each of the above mentioned alternatives and has recently completed
private placement financings as summarized herein, we cannot assure you that
additional financing will be completed on commercially reasonable terms, if at
all. The inability to obtain additional financing, when needed, would materially
adversely affect our business, results of operations and financial condition and
could lead us to curtailing or ceasing operations.

Financing Efforts

     In 2002, we completed a private placement of 366,000 shares of Series A 10%
convertible preferred stock at an aggregate price of $366,000 of which all
shares were converted into 2,928,000

                                       27

<PAGE>

shares of common stock. From August through December 2002, we sold through
subscription agreements approximately 11.7 million restricted shares of common
stock at purchase prices ranging from $0.11 to $0.14 per share along with
warrants to purchase approximately 1.1 million shares of common stock
exercisable at a price of $0.30 per share to a group of overseas accredited
investors for the total amount of approximately $1.3 million. We also received
payment on promissory notes totaling $220,500 resulting from the exercise of
stock options. A more detailed discussion of our financing efforts can found
under Item 5 hereto.

Item 7.  Financial Statements

     The information required by Item 7, and an index thereto, appears at pages
F-1 through F-18 (inclusive) of this Report, which pages follow Item 9.

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

     Not Applicable.

                                       28

<PAGE>
                                    PART III

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

     Information relating to the name of each executive officer, promoter,
nominee and director of the Company, that person's age, positions and offices
with the Company, business and principal occupations, directorships in other
public experience companies, and service as an officer of the Company or service
on the Company's board of directors set forth under the captions "Executive
Officers" and "Election of Directors" in the Information Statement to be filed
with the Securities and Exchange Commission no later than 120 days after the end
of the issuer's 2002 fiscal year (the "2003 Information Statement"), and
information set forth under the subcaption "Section 16 Ownership Requirements"
relating to Section 16 matters, is incorporated herein by reference.

Item 10.  Executive Compensation.

     Information with respect to current remuneration of directors and executive
officers under the headings of "Election of Directors - Compensation of
Directors," "Compensation of Executive Officers," and "Certain Relationships and
Related Transactions" in the 2003 Information Statement is, to the extent such
information as required by Item 402 of Regulation S-B, hereby incorporated
herein by reference.

Item 11.  Security Ownership of Certain Beneficial Owners and Management and
          Related Stockholder Matters.

  (a)  Security ownership information required by Item 403 of Regulation S-B
       relating to directors and named executive officers of the Company,
       beneficial holders of 5% or more of the outstanding Common Stock, and of
       all executive officers and directors as a group set forth under the
       heading "Security Ownership of Management and Certain Beneficial Owners"
       in the 2003 Information Statement is hereby incorporated herein by
       reference.

  (b)  The following table provided information about the Company's Common Stock
       that may be issued upon the exercise of stock options under all of the
       issuer's equity compensation plans in effect as of December 31, 2002.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                         (a)                        (b)                 (c)
-------------------------------------------------------------------------------------------------
Plan category            Number of securities to    Weighted average    Number of securities
                         be issued upon exercise    exercise price of   remaining available for
                         of outstanding options     outstanding         future issuance under
                                                    options (1)         equity compensation plan
                                                                        (excluding securities
                                                                        reflected in column (a))
-------------------------------------------------------------------------------------------------
<S>                      <C>                        <C>                 <C>
Equity compensation
Plan approved by
Security holders               6,482,478                 $0.96                6,517,522
-------------------------------------------------------------------------------------------------
</TABLE>

---------------------
   (1) Based upon 50,000 options exercisable at $2.00 per share, 3,041,250
       options exercisable at $1.25 per share, 1,019,488 options exercisable at
       $1.17 per share, 440,000 options exercisable at $1.00 per share, 620,000
       options exercisable at $0.50

                                       29

<PAGE>

       per share, 1,070,240 options exercisable at $0.30 per share, 225,000
       options exercisable at $0.20 per share, 16,500 options exercisable at
       $.13 per share.

     Our Stock Option Plan provides for a proportionate adjustment to the number
of shares reserved for issuance in the event of any stock dividend, stock split,
combination, recapitalization, or similar event.

Item 12.  Certain Relationships and Related Transactions.

     Information regarding transactions and relationships between the Company
and its directors and executive officers under the headings "Certain
Relationships and Related Transactions" in the 2003 Information Statement is, to
the extent such information as required by Item 404 of Regulation S-B, hereby
incorporated herein by reference.

                                       30

<PAGE>

Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a)(1)(2)      Financial Statements and Financial Statement Schedules.
                    A list of the Financial Statements and Financial Statement
                    Schedules filed as a part of this Report is set forth in
                    Item 8, and appears at Page F-1 of this Report, which list
                    is incorporated herein by reference.

     (a)(3)         Exhibits

      2.1           Agreement and Plan of Reorganization (incorporated by
                    reference to Form 8-K dated June 1, 2000).
      3.1           Amended and Restated Articles of Incorporation as filed
                    with the Secretary of State of the State of Nevada on June
                    19, 2001 (incorporated by reference to the Registrant's Form
                    10-QSB for its quarter ended June 30, 2001).
      3.2           Designation of Rights and Preferences of Series A
                    Convertible Preferred Stock (incorporated by reference to
                    Registrant's Form 10-KSB for its year ended December 31,
                    2001).
      3.6           By-Laws of the Registrant (incorporated by reference to
                    Registration Statement on Form S-1, file Number 33-34200).
      10.1          Facility lease and Amendment No. 1 thereto (incorporated by
                    reference to Registrant's Form 10-QSB for its quarter ended
                    June 30, 2001) and Amendment No. 2 (filed herewith).
      10.2          Agreement with ACOL International Ltd. dated as of April 15,
                    2002 (incorporated by reference to Registration Statement on
                    Form SB-2, filed July 11, 2002).
      10.3          Employment Agreement, dated effective as of January 1, 2003,
                    by and between BBJ Environmental Technologies, Inc. and
                    Robert G. Baker (incorporated by reference to Registrant's
                    Form 8-K - date of earliest event - January 27, 2003).
      10.4          Grant of Option, dated January 27, 2003, by and between BBJ
                    Environmental Technologies, Inc. and Robert G. Baker
                    (incorporated by reference to Registrant's Form 8-K - date
                    of earliest event - January 27, 2003).
      10.5          Consulting Agreement, dated effective as of January 1, 2003,
                    by and between BBJ Environmental Technologies, Inc. and Jean
                    Caillet (incorporated by reference to Registrant's Form 8-K
                    - date of earliest event - January 27, 2003).
      10.6          Stock Grant Agreement, dated January 27, 2003, by and
                    between BBJ Environmental Technologies, Inc. and Jean
                    Caillet (incorporated by reference to Registrant's Form 8-K
                    - date of earliest event - January 27, 2003).
      10.7          Grant of Option, dated January 27, 2003, by and between BBJ
                    Environmental Technologies, Inc. and Jean Caillet
                    (incorporated by reference to Registrant's Form 8-K - date
                    of earliest event - January 27, 2003).

                                       31

<PAGE>

        99.1        Employee Benefit and Consulting Services Compensation Plan
                    adopted November 16, 2000 (incorporated by reference to the
                    Registrant's Exhibit C to its Proxy Statement, filed in
                    April 2001).
        99.2        Amendment to Employee Benefit and Consulting Services
                    Compensation Plan adopted November 16, 2000 (incorporated by
                    reference to the Registrant's Form 10-QSB for its quarter
                    ended March 31, 2002).
        99.3        Audit Committee Charter adopted in May 2001 (incorporated
                    by reference to Registrant's Form 10-KSB for its year ended
                    December 31, 2001).
        99.4        Form of Regulation S Subscription Agreement - August 12,
                    2002 (incorporated by reference to the Registrant's Form
                    10-QSB for its quarter ended September 30, 2002).
        99.5        Form of Regulation S Subscription Agreement - October 23,
                    2002 (incorporated by reference to Registrant's Form 8-K -
                    date of earliest event - 10/23/02).

       (b) Reports on Form 8-K.

     A Form 8-K dated December 19, 2002 was filed during the quarter ended
December 31, 2002 to report the completion of a Regulation S offshore offering.
Subsequent to December 31, 2002, a Form 8-K dated January 6, 2003 was filed to
report the issuance of a press release announcing that the U.S. Environmental
Protection Agency had granted registration to BBJ Environmental Solutions for
BBJ MicroBiocide For Air Ducts, our new antimicrobial product for use in air
duct systems. Additionally, a Form 8-K dated January 27, 2003 was filed to
report that we 1) entered into an Employment Agreement, effective January 1,
2003, with Robert G. Baker as Executive Chairman, 2) entered into a Consulting
Agreement, effective January 1, 2003, with Jean Caillet, a director of the
Company, 3) announced that James E. Buell had been hired to serve as Senior Vice
President, Operations, and 4) announced that Christopher B. Lehmann had been
hired to serve as Vice President of Sales. Except for the foregoing, no other
Form 8-K's were filed since the third quarter of fiscal 2002.

  Item 14     Controls and Procedures.

     (a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures (as
such term is defined in Rule 13a-14(c) and 15d-14(c) promulgated under the
Securities Exchange Act of 1934), as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"). Based on such
evaluation, such officers have concluded that these disclosure controls and
procedures are effective to ensure the disclosure of material information
related to the Company, including its consolidated subsidiaries, that is
required to be disclosed in reports that the Company files and submits under the
Securities Exchange Act of 1934.

     (b) Changes in Internal Controls. There were no significant changes in our
internal controls or in other factors known to us that could significantly
affect these internal controls subsequent to the Evaluation Date.

                                       32

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Issuer has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized this 14th day of April 2003.

                                     BBJ ENVIRONMENTAL
                                     TECHNOLOGIES, INC.

                                     By: /s/ Robert G. Baker
                                         ---------------------------------------
                                     Robert G. Baker, Executive Chairman

                                     /s/ Jerry V. Schinella
                                     -------------------------------------------
                                     Jerry V. Schinella, Chief Financial Officer

     In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates stated.

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

/s/ Robert G. Baker              Chairman of the Board,         April 14, 2003
--------------------------       Executive Chairman
Robert G. Baker

/s/ Jerry V. Schinella           Chief Financial Officer        April 14, 2003
--------------------------
Jerry V. Schinella

/s/ Walter R. Arnett             Director                       April 14, 2003
--------------------------
Walter R. Arnett

/s/ Olivier d'Auriol             Director                       April 14, 2003
--------------------------
Olivier d'Auriol

/s/ Jean Caillet                 Director                       April 14, 2003
--------------------------
Jean Caillet

                                       33

<PAGE>

                                  CERTIFICATION

     I, Robert G. Baker, Executive Chairman, acting Chief Executive Officer, of
the Registrant, certify that:

     1. I have reviewed this annual report on Form 10-KSB of BBJ Environmental
Technologies, Inc.;

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

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

     4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure control 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 entitles, particularly during the
period in which this annual report is being prepared;

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

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

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

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

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

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

Date: April 14, 2003                       /s/ Robert G. Baker
                                           -------------------
                                           Robert G. Baker, Executive Chairman

                                       34

<PAGE>

                                  CERTIFICATION

     I, Jerry V. Schinella, Chief Financial Officer of the Registrant, certify
that:

     I have reviewed this annual report on Form 10-KSB of BBJ Environmental
Technologies, Inc.;

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

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

     4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure control 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 entitles, particularly during the
period in which this annual report is being prepared;

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

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

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

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

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

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

Date: April 14, 2003                /s/ Jerry V. Schinella
                                    ----------------------
                                    Jerry V. Schinella, Chief Financial Officer

                                       35

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                        Consolidated Financial Statements
                           December 31, 2002 and 2001
                   (With Independent Auditors' Report Thereon)

                                      F-1

<PAGE>

Kirkland, Russ, Murphy & Tapp
Certified Public Accountants
13577 Feather Sound Drive, Suite 400
Clearwater, Florida 33762-5539
(727) 572-1400 Fax (727) 571-1933
Internet: www.KRMTCPA.com


                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
BBJ Environmental Technologies, Inc.
  and Subsidiary:

We have audited the accompanying consolidated balance sheets of BBJ
Environmental Technologies, Inc. and Subsidiary as of December 31, 2002 and
2001, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BBJ Environmental
Technologies, Inc. and Subsidiary as of December 31, 2002 and 2001, and the
results of their operations and cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

                                      F-2

<PAGE>

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
consolidated financial statements, the Company's significant operating losses
and accumulated deficit raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
discussed in Note 9. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ Kirkland, Russ, Murphy & Tapp

February 21, 2003
Clearwater, Florida

                                      F-3

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                           Consolidated Balance Sheets

                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                     ASSETS
                                     ------

                                                           2002           2001
                                                         --------       --------
<S>                                                      <C>            <C>
Current assets:
  Cash                                                   $651,315         23,856
  Accounts receivable, net                                 84,396         80,073
  Inventory                                                60,838         48,159
                                                         --------       --------

                    Total current assets                  796,549        152,088

Property and equipment, net                                59,528         86,199
Security deposits                                          14,797         14,614
                                                         --------       --------


                                                         $870,874        252,901
                                                         ========       ========
</TABLE>

                                      F-4

<PAGE>

<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

                                                         2002           2001
                                                     -----------    -----------
<S>                                                  <C>            <C>
Current liabilities:
  Accounts payable and accrued expenses              $   316,631         58,748
  Current portion of capital lease obligations                 -         15,261
                                                     -----------    -----------

             Total current liabilities                   316,631         74,009

Stockholders' equity:
  Common stock, $.001 par value, 50,000,000
    shares authorized, 40,314,578 and 22,396,578
    shares issued and outstanding, respectively           40,315         22,397
  Additional paid-in capital                           6,762,945      4,363,463
  Accumulated deficit                                 (5,724,017)    (3,986,468)
  Stock subscriptions receivable                        (525,000)      (220,500)
                                                     -----------    -----------

             Net stockholders' equity                    554,243        178,892
                                                     -----------    -----------


                                                     $   870,874        252,901
                                                     ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                      Consolidated Statements of Operations

                 For the Years Ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                             2002            2001
                                                         ------------    ------------
<S>                                                      <C>             <C>
Sales, net                                               $    658,593         328,398

Cost of sales                                                 242,343         122,862
                                                         ------------    ------------

      Gross margin                                            416,250         205,536

Operating expense:
  Sales and marketing                                       1,315,820         992,162
  General and administrative                                  734,115         530,336
  Research and development                                    103,864         153,411
                                                         ------------    ------------

      Total operating expenses                              2,153,799       1,675,909
                                                         ------------    ------------

      Net loss                                           $ (1,737,549)     (1,470,373)
                                                         ============    ============

      Net loss per common share - basic and diluted      $       (.06)           (.08)
                                                         ============    ============

      Weighted average number
          of common stock                                  27,644,000      18,660,000
                                                         ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-6

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                 Consolidated Statements of Stockholders' Equity

                 For The Years Ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                            Convertible                           Additional                 Stock         Net
                                          Preferred Stock        Common Stock      Paid-in   Accumulated Subscriptions Stockholders'
                                         Shares     Amount     Shares    Amount    Capital     Deficit     Receivable      Equity
                                        --------  ---------  ---------- -------- ----------  ----------- ------------- -------------
<S>                                     <C>       <C>        <C>        <C>      <C>         <C>         <C>           <C>
Balances at December 31, 2000                  -  $       -  17,592,578 $ 17,593  3,927,767   (2,516,095)           -     1,429,265

Exercise of options for cash and notes         -          -   2,000,000    2,000    438,500            -     (220,500)      220,000

Issuance of additional shares to adjust
  purchase price of 2000 stock issuance        -          -   2,804,000    2,804     (2,804)           -            -             -

Net loss                                       -          -           -        -          -   (1,470,373)           -    (1,470,373)
                                        --------  ---------  ---------- -------- ----------  -----------  -----------   -----------

Balances at December 31, 2001                  -          -  22,396,578   22,397  4,363,463   (3,986,468)    (220,500)      178,892

Issuance of convertible preferred
  stock for cash                         366,000    366,000           -        -          -            -            -       366,000

Issuance of common stock for cash              -          -  11,720,000   11,720  1,320,680            -            -     1,332,400

Issuance of common stock for
  service                                      -          -   1,870,000    1,870    192,130            -            -       194,000

Exercise of options for notes                  -          -   1,400,000    1,400    523,600            -     (525,000)            -

Conversion of convertible preferred
  stock                                 (366,000)  (366,000)  2,928,000    2,928    363,072            -            -             -

Repayment of notes                             -          -           -        -          -            -      220,500       220,500

Net loss                                       -          -           -        -          -   (1,737,549)           -    (1,737,549)
                                        --------  ---------  ---------- --------  ---------  -----------  -----------   -----------

Balances at December 31, 2002                  -  $       -  40,314,578 $ 40,315  6,762,945   (5,724,017)    (525,000)      554,243
                                        ========  =========  ========== ========  =========  ===========  ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-7

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                 For the Years Ended December 31, 2002 and 2001

<TABLE>
<CAPTION>

                                                         2002            2001
                                                      -----------    -----------
<S>                                                   <C>            <C>
Cash flows from operating activities:
  Net loss                                            $(1,737,549)    (1,470,373)
  Adjustment to reconcile net loss to net
    cash used in operating activities:
    Depreciation                                           36,332         40,277
    Provision of uncollectible accounts                    16,637              -
    Compensation due to grant of common stock             240,000              -
    Changes in current assets and liabilities:
       Accounts receivable                                (20,960)       (51,495)
       Inventory                                          (12,679)       (23,114)
       Accounts payable and accrued expenses              211,882         24,606
                                                      -----------    -----------

              Net cash used in operating activities    (1,266,337)    (1,480,099)
                                                      -----------    -----------

Cash flows from investing activities:
  Purchase of property and equipment                       (9,661)       (12,653)
  Security deposits                                          (183)             -
                                                      -----------    -----------

              Net cash used in investing activities        (9,844)       (12,653)
                                                      -----------    -----------

Cash flows from financing activities:
  Proceeds from bank notes and other loans                115,163              -
  Principal payments on bank notes and
    capital leases                                       (130,423)       (21,664)
  Net proceeds from issuance of common stock            1,918,900        220,000
                                                      -----------    -----------

              Net cash provided by financing
                 activities                             1,903,640        198,336
                                                      -----------    -----------

Net increase (decrease) in cash                           627,459     (1,294,416)

Cash, beginning of year                                    23,856      1,318,272
                                                      -----------    -----------

Cash, end of year                                     $   651,315         23,856
                                                      ===========    ===========
</TABLE>

                                                                     (continued)

                                      F-8

<PAGE>

                        BBJ ENVIRONMENTAL SOLUTIONS, INC.
                                 AND SUBSIDIARY

                Consolidated Statements of Cash Flows - Continued

<TABLE>
<CAPTION>
                                                               2002       2001
                                                             --------   --------
<S>                                                          <C>        <C>
Supplemental disclosures of cash flow information:
    Interest paid                                            $  7,737      4,390
                                                             ========   ========

Supplemental disclosures of non-cash financing activities:
    Conversion of convertible preferred stock into
      2,928,000 shares of common stock                       $366,000          -
                                                             ========   ========
    Issuance of 70,000 shares of common stock
      for legal services                                     $ 14,000          -
                                                             ========   ========
     Issuance of 1,400,000 shares of common stock
       for stock subscriptions receivable                    $525,000    220,500
                                                             ========   ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-9

<PAGE>


                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

(1)    Organization and Business

       BBJ Environmental Technologies, Inc. (the "Company"), formerly known as
       Omega Development, Inc., was a development stage enterprise formed under
       the laws of the State of Nevada to evaluate, structure and complete a
       business combination in the form of a merger with, or acquisition of,
       prospects consisting of private companies, partnerships or sole
       proprietorships. The Company had no business operations and no intention
       of engaging in active business prior to a business combination with
       another enterprise.

       During 2000, in connection with the Company's Recapitalization (see Note
       8(a)), the Company's name was changed to BBJ Environmental Technologies,
       Inc.

       The Company is operating through its newly acquired subsidiary, BBJ
       Environmental Solutions. BBJ Environmental Solutions develops,
       manufactures, and markets products and devices that control contamination
       and air pollution in heating, ventilation, air-conditioning, and
       refrigeration systems ("HVAC/R") in homes, offices, health care
       facilities, schools, food processing plants, and public buildings. BBJ
       Environmental Solutions was founded upon the premise that these issues
       can be addressed by the development of products that not only are
       effective against indoor air quality contaminants, but also do not have
       dangerous side effects to users, building occupants, equipment, or the
       environment.

       BBJ Environmental Solutions' activities to date have been related to
       market positioning of its products, registering certain products with the
       appropriate federal and state regulatory agencies, forming distribution
       networks for its products, and obtaining financing for operations and
       marketing.

(2)    Summary of Significant Accounting Policies

       (a)   Principles of Consolidation

             The accompanying consolidated financial statements include the
             accounts of BBJ Environmental Technologies, Inc. and its wholly
             owned subsidiary BBJ Environmental Solutions, Inc. In
             consolidation, all significant intercompany accounts and
             transactions have been eliminated.

       (b)   Inventory

             Inventory, consisting primarily of raw materials and finished
             goods, is stated at the lower of cost or market. Cost is determined
             by the first-in, first-out method.

                                                                     (continued)

                                      F-10

<PAGE>


                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued

(2)    Summary of Significant Accounting Policies - Continued

       (c)   Property and Equipment

             Property and equipment are stated at cost. Depreciation on property
             and equipment is calculated on the straight-line method over the
             estimated useful lives ranging from three to seven years. Equipment
             previously under capital leases and leasehold improvements were
             amortized by the straight-line method over the terms of the related
             leases.

       (d)   Income Taxes

             The Company has adopted Statement of Financial Accounting Standards
             (SFAS) No. 109, "Accounting for Income Taxes." Under the asset and
             liability method of SFAS No. 109, deferred tax assets and
             liabilities are recognized for the future tax consequences
             attributable to differences between the financial statement
             carrying amounts of existing assets and liabilities and their
             respective tax bases. Deferred tax assets and liabilities are
             measured using enacted tax rates expected to apply to taxable
             income in the years in which those temporary differences are
             expected to be recovered or settled. Under SFAS No. 109, the effect
             of a change in tax rates on deferred tax assets or liabilities is
             recognized in income in the period that included the enactment.

       (e)   Research and Development Expenses

             Research and development costs are expensed as incurred.

       (f)   Revenue Recognition

             Revenue from sales of products is recorded when the related product
             is shipped. Sales returns and provision for doubtful accounts are
             netted against gross sales.

       (g)   Allowance of Doubtful Accounts

             It is the policy of management to review the outstanding accounts
             receivable at year end, as well as the bad debt write-offs
             experienced in the past, and establish an allowance for doubtful
             accounts for uncollectible amounts. As of December 31, 2002 and
             2001, the allowance for doubtful accounts was $13,000 and $247,
             respectively.

       (h)   Security Deposits

             Security deposits are held by vendors to ensure the Company's
             faithful performance of obligations for building lease, utilities
             and payroll.

                                                                     (continued)

                                      F-11

<PAGE>


                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued

(2)    Summary of Significant Accounting Policies - Continued

       (i)   Estimates

             In preparing financial statements in conformity with accounting
             principles generally accepted in the United States of America,
             management makes estimates and assumptions that affect the reported
             amounts and disclosures in the financial statements. Actual results
             could differ from those estimates.

       (j)   Stock Options

             The Company measures compensation expense under Accounting
             Principles Board Opinion No. 25, "Accounting for Stock Issued to
             Employees," and no compensation expense has been reported for its
             fixed stock option plan.

             In December 2002, the Company adopted FASB Statement No. 148,
             "Accounting for Stock-Based Compensation-Transition and
             Disclosure." Statement No. 148 amends Statement No. 123,
             "Accounting for Stock-Based Compensation," and provides alternative
             methods of transition for a voluntary change to the fair value
             based method of accounting for stock-based employee compensation.
             Statement No. 148 also amends the disclosure requirements of
             Statement No. 123 to require more prominent and frequent
             disclosures in financial statements about the effects of
             stock-based compensation. The transition guidance and annual
             disclosure provisions of Statement No.148 are effective for
             financial statements issued for fiscal years ending after December
             15, 2002. The interim disclosure provisions are effective for
             financial reports containing financial statements for interim
             periods beginning after December 15, 2002. See Note 8 (d) for
             disclosure under Statement No. 148.

       (k)   Concentration of Credit Risk

             Cash balances are maintained in financial institutions.
             Occasionally, deposits exceed amounts insured by the Federal
             Deposit Insurance Corporation. The Company's customers are located
             primarily in the United States. Approximately 50% of the Company's
             sales were generated from five customers in 2002 and seven
             customers in 2001. Two customers in 2002 and 2001 each accounted
             for more than 10% of the Company's sales.

                                                                     (continued)

                                      F-12

<PAGE>


                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued

 (2)   Summary of Significant Accounting Policies - Continued

       (l)   Net Loss Per Share

             Net loss per common share is computed in accordance with Financial
             Accounting Standards Board Statement No. 128, "Earnings Per Share",
             which requires companies to present basic earnings per share and
             diluted earnings per share. The basic net loss per share of common
             stock is computed by dividing net loss applicable to common stock
             by the weighted average number of shares of common stock
             outstanding. The diluted net loss per common share is computed by
             dividing net loss by the weighted average common shares outstanding
             excluding common stock equivalents, as they would be anti-dilutive.

(3)    Property and Equipment

       Property and equipment consists of the following:

                                                     2002            2001
                                                  ----------     ----------

             Furniture and fixtures               $   32,945         32,945
             Office equipment                        109,915        100,681
             Manufacturing equipment                 107,299        106,872
             Leasehold improvements                   17,272         17,272
                                                  ----------     ----------
                                                     267,431        257,770
             Less accumulated depreciation
               and amortization                     (207,903)      (171,571)
                                                  ----------     ----------

                                                  $   59,528         86,199
                                                  ==========     ==========

(4)    Lines of Credit

       The Company elected to close in 2002 a revolving line of credit with a
       financial institution, secured by assets of the Company, which provided
       for borrowings of up to $25,000 and was due on demand. The line of credit
       was guaranteed by some of the stockholders of the Company. As of December
       31, 2001, there was no outstanding amount under this agreement.

       The Company also elected to close in 2002 an unsecured revolving line of
       credit with another financial institution, which provided for borrowings
       of up to $45,000 and was due on demand. The line of credit was guaranteed
       by some of the stockholders of the Company. As of December 31, 2001,
       there was no outstanding amount under this agreement.

                                                                     (continued)

                                      F-13

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued

(5)    Capital Leases

       The Company paid in full its obligations under various lease agreements
       for certain equipment. These leases were noncancellable and required
       monthly payments through September 2002. The cost of equipment under
       these capital leases at December 31, 2002 and 2001 is $89,611 with
       accumulated amortization of $89,611 and $78,730, respectively.

(6)    Commitments and Contingencies

       (a)   Leases

             In October 2002, the Company extended the operating lease of its
             6,964 square foot operating facility that expired on December 31,
             2002 for an additional three-year period from January 1, 2003
             through December 31, 2005. Total rent expense for the years ended
             December 31, 2002 and 2001 was approximately $75,000 and $71,000,
             respectively. Future minimum lease payments under this operating
             lease are approximately as follows:

                        2003                  $50,000
                        2004                   52,000
                        2005                   54,000

       (b)   Potential Legal Claims

             The Company recognizes that claims may arise during the normal
             course of business, however, currently the Company's management and
             legal counsel are unaware of any pending, threatened or unasserted
             claims made against the Company.

(7)    Income Taxes

       The Company had no income tax expense in 2002 and 2001 due to its
       operating losses. The Company has net operating loss carryforwards of
       approximately $3.7 million for tax reporting purposes at December 31,
       2022. Such loss carryforwards, subject to certain limitations, expire
       through 2017. To the extent that the Company has taxable net income, the
       loss carryforwards will be used to offset the taxable income. In
       addition, the Company had net operating loss (NOL's) carryforwards
       related to its acquisition and recapitalization (Note 1). These NOL's
       are significantly limited under IRC 382.

                                                                     (continued)

                                      F-14

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued

(7)    Income Taxes - Continued

       Deferred income taxes reflect the net tax effects of temporary
       differences between the carrying amounts of assets and liabilities for
       financial reporting purposes and the amounts used for income tax
       purposes. Significant components of the Company's deferred tax assets
       and liabilities as of December 31 are as follows:

<TABLE>
<CAPTION>
                                                                 2002            2001
                                                             ------------    -----------
         <S>                                                 <C>             <C>
         Deferred tax assets:
              Net operating loss carryforwards               $  1,400,000      1,200,000
                                                               ----------    -----------

                 Total deferred tax assets                      1,400,000      1,200,000

              Valuation allowance for deferred tax assets      (1,400,000)    (1,200,000)
                                                             ------------    -----------

                 Net deferred tax assets                     $          -              -
                                                             ============    ===========
</TABLE>

(8)    Stockholders' Equity

       (a)   Recapitalization

             On May 31, 2000, the Company's stockholders approved a reverse
             stock split of one-for-three, which became effective on June 2,
             2000. Contemporaneously, the Company issued 12,410,666 post-split
             shares of its common stock in exchange for all the issued and
             outstanding shares of capital stock of BBJ Environmental Solutions
             in a recapitalization transaction accounted for similar to a
             reverse acquisition. The Company was formerly a non-operating
             public shell corporation with no significant assets and was treated
             as the "acquired" company in the transaction, but remains the
             surviving legal entity. Accordingly, the transaction was treated as
             an issuance of stock by BBJ Environmental Solutions for the net
             monetary assets of the Company, accompanied by a recapitalization.
             Since this transaction is in substance a recapitalization of BBJ
             Environmental Solutions and not a business combination, a valuation
             was not performed and no goodwill was recorded.

       (b)   Preferred Stock

             In 2002, the Company completed a private placement of 366,000
             shares of Series A 10% convertible preferred stock at an aggregate
             price of $366,000. The holders of the convertible preferred stock
             had the right to convert such shares into shares of common stock at
             a conversion price equal to 8 shares of common stock for each share
             of preferred stock. In 2002, all shares of preferred stock were
             converted into 2,928,000 shares of common stock.

                                                                     (continued)

                                      F-15

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued

(8)    Stockholders' Equity - Continued

       (c)   Common Stock

             From August through December 2002, the Company sold through
             subscription agreements approximately 11.7 million restricted
             shares of its common stock at a purchase price ranging from $0.11
             to $0.14 per share to group of overseas accredited investors for
             the total amount of $1,332,400.

             In November and December 2000, the Company sold through
             subscription agreements approximately 2.8 million restricted shares
             of its common stock at a purchase price of $.75 per share to group
             of overseas accredited investors for the total amount of
             approximately $2.1 million. A commission in the nature of a
             finder's fee of up to 200,000 shares of the Company's common stock
             was issued to two accredited investors based on the total amount of
             financing received by the Company. Due to the event that the

             Company's revenues for the period November 1, 2000 through October
             31, 2001 was less than $1,667,075, the purchase price was adjusted
             downward to $.375 per share. On November 1, 2001, the Company
             issued an additional 2.8 million restricted shares of its common
             stock to adjust the purchase price accordingly.

        (d)  Stock Options

             At December 31, 2002, the Company has one stock-based employee
             compensation plan, which is described more fully below. The Company
             accounted for this plan under the recognition and measurement
             principles of Accounting Principles Board Opinion 25, "Accounting
             for Stock Issued to Employees," and related interpretations. No
             stock-based compensation cost is reflected in net income, as all
             options granted under this plan had an exercise price equal to the
             market value of the underlying common stock on the date of grant.
             Had compensation cost for the stock option plan been determined
             based on the fair value at the grant dates consistent with
             recognition provisions of FASB Statement No. 123, "Accounting for
             Stock-Based Compensation," the effect on net loss and earnings per
             share on a pro forma basis would have been immaterial.

             Under the fair value method, the fair value of each option grant is
             estimated using the Black-Scholes option pricing model with the
             following assumptions used for each option grant: (i) no dividend
             yield; (ii) expected volatility of 25%; (iii) a risk free interest
             rate of 5%; and (iv) an estimated option life ranging from three to
             five years. The results calculated under the pricing model may vary
             depending on the assumptions applied within the model.

                                                                     (continued)

                                      F-16

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued

(8)    Stockholders' Equity - Continued

       (d)   Stock Options

             On November 16, 2000, the board of directors adopted the 2000
             Employee Benefit and Consulting Services Compensation Plan, which
             was approved by the shareholders on May 15, 2001. Under the terms
             of this plan, as amended, 13 million shares of authorized but
             unissued shares of Company common stock are reserved for issuance.
             The plan provides for the grant of incentive stock options to
             attract, retain, and reward officers, employees, directors, and
             consultants of the Company and its subsidiary. The options granted
             are at an option price at least equal to the fair market value of
             the Company's common stock on the date the option is granted.
             Options granted under the plan are exercisable for a term no longer
             than ten years, are not transferable, and will terminate within a
             period of time following termination of employment with the Company
             or its subsidiary.

             Option holders of the Company's subsidiary, BBJ Environmental
             Solutions, exchanged in 2001 their options for options in the
             Company's plan. The options were identical, except that the number
             of shares of common stock subject to each option was twice the
             original number of shares with a five-year expiration term. Options
             to purchase 2,459,244 shares of BBJ Environmental Solutions common
             stock under the BBJ Environmental Solutions Plan were converted
             into options to purchase 4,918,488 shares of common stock of the
             Company.

             Changes in stock options are as follows:

<TABLE>
<CAPTION>
                                                             2002                         2001
                                               ------------------------------  ---------------------------
                                                                   Weighted                     Weighted
                                                                    Average                      Average
                                                                   Exercise                     Exercise
                                                     Shares          Price        Shares          Price
                                               --------------  --------------  -------------  ------------
<S>                                            <C>             <C>             <C>            <C>
Beginning balance                                  7,313,488          $  1.03     8,068,488       $ 1.12
Granted                                            1,936,240             0.35     3,283,000         0.41
Exercised                                         (1,400,000)            0.38    (2,000,000)        0.23
Canceled                                          (1,367,250)            1.07    (2,038,000)        1.09
                                               --------------  --------------  ------------   ----------

Ending balance                                     6,482,478          $  0.96     7,313,488       $ 1.03
                                               =============   ==============  ============   ==========

Exercisable                                        6,247,228          $  0.95     6,998,488       $ 1.02
                                               =============   ==============  ============   ==========

Weighted average fair value of
   options granted during the year                                    $  0.35                     $ 0.41
                                                               ==============                 ==========
</TABLE>

                                                                     (continued)

                                      F-17

<PAGE>

                      BBJ ENVIRONMENTAL TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

             Notes to Consolidated Financial Statements - Continued

(8)    Stockholders' Equity - Continued

       (d)   Stock Options

             The following table summarizes information about stock options
             outstanding at December 31, 2002:

<TABLE>
<CAPTION>
                                                                 Weighted
                                                                 Average
                                           Number               Remaining                  Number
                Exercise                Outstanding            Contractual              Exercisable
                  Price                   12/31/02            Life in Years               12/31/02
            -------------------       ----------------     -------------------     ------------------
<S>         <C>                       <C>                  <C>                     <C>
                $ 2.00                          50,000             3.4                         20,000
                  1.25                       3,041,250             3.0                      2,872,500
                  1.17                       1,019,488             3.4                      1,019,488
                  1.00                         440,000             3.4                        440,000
                  0.50                         620,000             4.5                        620,000
                  0.30                       1,070,240             1.8                      1,070,240
                  0.20                         225,000             0.7                        225,000
                  0.13                          16,500             3.0                              -
            -------------------       ----------------     -------------------     ------------------

              $0.13 - $2.00                  6,482,478             3.0                     6,267,228
            ===================       ================     ===================     ==================
</TABLE>

(9)    Going Concern

       As indicated in the accompanying consolidated financial statements, the
       Company has sustained losses of approximately $1.7 million in 2002 and
       has an accumulated deficit of approximately $5.7 million as of December
       31, 2002. These factors raise substantial doubt as to the Company's
       ability to continue as a going concern. Management intends to cure these
       issues through the full implementation of its sales and marketing
       strategy to create product demand through HVAC/R, duct cleaning and mold
       remediation distribution channels and seek alternative sources of
       financing.

       Management believes the Company can improve its cash flow position in
       2003, but recognizes that the Company must secure alternative sources of
       financing to continue operations. Due to positive developments centered
       on the Company's January 2003 hiring of significant additions to its
       management team, the recent registration granted by the U.S.
       Environmental Protection Agency to use the Company's product in air duct
       systems, and improved sales prospects, a group of overseas accredited
       investors have committed to continue providing additional financing to
       the Company. This group of investors has previously provided financing to
       the Company in the aggregate amount of approximately $3.8 million since
       November 2000.

                                      F-18