<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)

[X] Annual report under Section 13 or 15(d) of the Securities
    Exchange Act of 1934

For the fiscal year ended December 31, 2001

[ ] Transitional report under Section 13 or 15(d) of the Securities Exchange
    Act of 1934

For the transition period from               to
                               -------------    --------

Commission file number  333-43732

                        Industrialex Manufacturing Corp.
                 (Name of Small Business Issuer in Its Charter)

                 Colorado                                    84-1454260
     (State or Other Jurisdiction of                      (I.R.S. Employer
     Incorporation or Organization)                       Identification No.)

        63-A South Pratt Parkway
               Longmont, CO                                     80501
(Address of Principal Executive Offices)                      (Zip Code)

                                  303-651-6672
                (Issuer's Telephone Number, Including Area Code)

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

<Table>
<Caption>
                                                   Name of Each Exchange
       Title of Each Class                          On Which Registered
       -------------------                         ---------------------
<S>                                           <C>
----------------------------------            ----------------------------------


----------------------------------            ----------------------------------
</Table>

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

--------------------------------------------------------------------------------
                                (Title of Class)


--------------------------------------------------------------------------------
                                (Title of Class)

<PAGE>

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such 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 filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

Issuer's revenues for the year ended December 31, 2001 were $3,971,972.

The aggregate market value of the voting common stock held by non-affiliates on
April 30, 2002 was $2,934,926.

The number of shares of the issuer's Common Stock outstanding on April 30, 2002
was 12,121,548.

Transitional Small Business Disclosure Format (check one): Yes [ ]; No [X]


                       DOCUMENTS INCORPORATED BY REFERENCE

Certain Exhibits to this Annual Report on Form 10-KSB have been incorporated by
reference. See Index to Exhibits on Page 28.


                                       2
<PAGE>


                     INDUSTRIALEX MANUFACTURING CORPORATION

                          ANNUAL REPORT ON FORM 10-KSB
                      FOR THE YEAR ENDED DECEMBER 31, 2001

                                TABLE OF CONTENTS


<Table>
<Caption>
Item                                                                          Page
Number                                                                       Number
------                                                                       ------
<S>                                                                          <C>
                                     PART I

  1       Description of Business .............................................  4
  2       Description of Property ............................................. 12
  3       Legal Proceedings ................................................... 13
  4       Submission of Matters to a Vote of Security Holders ................. 13

                                     PART II

  5       Market for Common Equity and Related Stockholder Matters ............ 13
  6       Management's Discussion and Analysis of Financial Condition and
              Results of Operations ........................................... 14
  7       Financial Statements ................................................ 23
  8       Changes In and Disagreements with Accountants on Accounting and
              Financial Disclosure ............................................ 23

                                    PART III

  9       Directors, Executive Officers, Promoters and Control Persons:
              Compliance with Section 16(a) of the Exchange Act ............... 23
 10       Executive Compensation .............................................. 25
 11       Security Ownership of Certain Beneficial Owners and Management ...... 25
 12       Certain Relationships and Related Transactions ...................... 26
 13       Exhibits and Reports on Form 8-K ..................................   28
          Signatures ........................................................   29
</Table>


                                       3
<PAGE>


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

         We have made certain forward-looking statements in this document and in
the documents referred to in this document, which are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of
management and on the information currently available to such management.
Forward-looking statements include information concerning possible or assumed
future results of Industrialex. These statements may be preceded by, followed
by, or otherwise include the words "believes," "expects," "anticipates,"
"intends," "plans," "estimates" or similar expressions.

The Company intends that such forward-looking statements be subject to the safe
harbors for such statements. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. Any forward-looking statements represent management's best
judgment as to what may occur in the future. However, forward-looking statements
are not guarantees of performance. They involve risks, uncertainties and
assumptions. The future results and stockholder values of Industrialex may
differ materially from those expressed in these forward-looking statements. Many
of the factors that will determine these results and values are beyond our
ability to control or predict. Investors are cautioned not to put undue reliance
on any forward-looking statements. Except for our ongoing obligations to
disclose material information as required by the federal securities law, we do
not have any intention or obligation to update forward-looking statements after
the date of this Annual Report on Form 10-KSB, even if new information, future
events or other circumstances have made them incorrect or misleading.

You should understand that various factors, in addition to those discussed
elsewhere in this document and in the documents referred to in this document,
could affect the future results of the Company and could cause results to differ
materially from those expressed in such forward-looking statements.


                                     PART I

Item 1. Description of Business.

         Industrialex is a provider of protective coating services to a broad
range of companies in the manufacturing industry. Our services include the
application of chemical adhesions, conformal coating, shielding, powder coating,
liquid painting and screen printing, to four categories of general products:
metal, plastic, glass and printed circuit board assemblies. These various
adhesion processes provide many benefits including enhanced general aesthetics
and protection from hostile environments, corrosion and electrostatic discharge.
The markets we serve include high technology, medical, aerospace, defense,
consumer electronics, data storage, semiconductor, transportation and general
manufacturing.

RECENT DEVELOPMENTS

         In February of 2002, Industrialex undertook a private placement of
1,750,000 common shares at $0.20 per share. The Company sold the common shares
in this placement directly to investors in Canada and in the United States under
an exemption provided by Section 4(2) of the Securities Act of 1933.


                                       4
<PAGE>


In January of 2002, Industrialex issued 250,000 shares of common stock to an
officer and majority shareholder of the Company in return for the officer's
personal guarantee on the Company's line of credit described below.

The Company's registration on Form SB-2 (SEC File No. 333-43732) covering its
IPO of 2,666,667 Units at $0.75 was declared effective on February 9, 2001. Each
unit consisted of one share of common stock, $.01 par value, and one common
stock purchase warrant. Each purchase warrant entitles the holder to purchase
one share of common stock for two years from the close of the IPO at a price of
$1.00 in the first year and $1.25 in the second year.

Thomson Kernaghan & Co. Limited acted as the Company's agent to sell 2,000,000
units in Canada only. Industrialex sold 332,882 units in this IPO directly to
investors in the United States at a price of $0.75 per unit. Thomson Kernaghan &
Co. Limited is not licensed to sell securities in the United States and was not
involved in the sale of the units in the United States.

OUR HISTORY

         Industrialex began operations in Longmont, Colorado, initially focusing
on the provision of conformal coating applications, primarily using silicon, for
printed circuit board assemblies. These services were subsequently expanded to
provide potting and electro-magnetic interference/radio frequency interference
shielding applications of printed circuit board assemblies. Electro-magnetic
interference/radio frequency interference shieldings are designed to be
conductive and maintain conductivity and to protect internal and external
sources from the emissions of electromagnetic interference and radio frequency
interference. In 1997, Industrialex expanded its conformal coating applications
to include using urethane, acrylic and powder coating.

On April 4, 2000, Industrialex acquired Broomfield Industrial Painting, Inc.
("Broomfield"), located in Westminster, Colorado. Founded in 1983, Broomfield
provides industrial finishing to metal products for the high technology, medical
and aerospace industries, utilizing liquid painting and powder coating
applications. As a result of this acquisition, our service offering expanded
into liquid painting of metal and plastic products.

On May 1, 2000, Industrialex acquired Decorative & Coating Systems, Inc. ("
Decorative"), located in Denver, Colorado. Founded in 1976, Decorative was the
first company to provide powder coating services in the state of Colorado. As a
result of this acquisition, our offering of powder coating applications for
metal products was significantly enhanced.

On July 17, 2000, Industrialex acquired Screen Tech Graphics, Inc. (" Screen
Tech"), located in Colorado Springs, Colorado. Founded in 1976, Screen Tech
provides powder coating, liquid painting and screen printing services in
southern Colorado. As a result of this acquisition, we expanded our services
into the southern region of Colorado.


                                       5
<PAGE>

OVERVIEW OF OPERATIONS

         The specific coating services required by our customers will vary
depending upon the nature of the product to be coated and the environment within
which that product will be used. The following table demonstrates the specific
application for each coating service provided by Industrialex and each of its
subsidiaries:

<Table>
<Caption>
                    Metal and Plastic Products     Painted Circuit Board Assembly Products
                 -------------------------------   ----------------------------------------
                 Screen Printing   Powder  Paint   Urethane   Potting   Silicon   Shielding
                 ---------------   ------  -----   --------   -------   -------   ---------
<S>              <C>               <C>     <C>     <C>        <C>       <C>       <C>
Industrialex                                           X          X        X          X
Broomfield                            X      X
Decorative                            X      X
Screen Tech            X              X      X
</Table>

We currently operate out of three facilities, all located in Colorado. These
facilities are equipped with a total of 12 coating chambers. Two of the
facilities are located in northern Colorado and one facility is located in
southern Colorado. These facilities range in size from 6,500 square feet to
16,000 square feet of production space. Currently, we employ 61 personnel. Each
facility is managed by a general manager who oversees day-to-day operations.

Our operations must comply with federal, state and local environmental
regulations on the storage, handling, discharge and disposal of chemicals and
gases used in the manufacturing process. Industrialex holds permits from the
Colorado State Air Pollution Control Division and various wastewater treatment
entities. All of our facilities meet electro static discharge and United States
Occupational Safety and Health Administration requirements and our personnel
have been internally certified for operational procedures, quality standards,
document control and safety.

Our current facilities have two chambers dedicated to conformal coating, six
chambers dedicated to powder coating and three chambers dedicated to liquid
coating. This allows for reduction of cross contamination among different
coating applications.

In December of 2001, Industrialex entered into a lease with an officer and
majority shareholder of the Company for a 50,000 square foot plant and office
located in Arvada, Colorado. We are in the process of equipping the facility
with equipment from the Westminster location as well as an automated paint line
we acquired in July of 2001. We plan to consolidate our operations in the
facility, beginning in June of 2002. This action is contemplated as part of our
consolidation of the conformal coating companies in Colorado.

The general coating process for metal and plastic products at our facilities is
as follows:

         1.       Products are received at the facilities where they are
                  prepared for placement into the specialized chemical washing
                  equipment.

         2.       After drying, critical areas that do not require coating are
                  masked and the part is placed on specially designed fixtures
                  for entry into a coating chamber.

         3.       Custom designed spray guns apply the coating material to the
                  surface of the part.

         4.       Once the parts are coated, they are placed in a heating oven.
                  Heat ensures proper adhesion of chemicals onto the surface of
                  the part and promotes drying.

         5.       In the final stage of the process, the masking is removed and
                  coated parts are inspected for quality purposes. The inspected
                  parts are packaged and shipped to the customer.


                                       6
<PAGE>


CONFORMAL COATING

         Conformal coating of printed circuit board assemblies functions as a
dielectric insulator, providing a durable barrier against environmental
contaminants and moisture over a wide temperature and humidity range. Conformal
coating also acts as a shock and vibration absorber, thus protecting the final
product from possible damage.

The process of conformal coating normally begins with masking of critical areas
of the board. Circuit boards are carefully masked, leaving only the desired
coating area exposed. Coatings are then applied either by spraying the board
surface, brushing, or by dipping the boards directly into the coating material.
Each process offers a system for precisely coating the boards to the exact
specifications. Coating materials include acrylic, epoxy, urethane and silicone.

Acrylic is a clear, tough coating that protects printed circuit boards against
moisture, corrosion, thermal shock and static discharge. It also protects and
insulates electrical and electronic components and assemblies, including
generators, motors, transformers, relays and solenoid coils.

Epoxy is a non-porous, water and chemical resistant material that contains a
form of nylon material. It is normally black in color, is non-conductive and is
therefore suitable for electrical insulation.

Urethane provides excellent dielectric properties. It is also used to protect
parts from moisture and other harsh environmental elements.

Silicone is a clear, durable material that protects printed circuit boards from
moisture, corrosion, thermal shock and static discharge. Silicone is flexible at
temperatures ranging from -65C to +200C. Silicone dries within minutes and cures
at room temperature in four to twelve hours. Silicone illumines under ultra
violet light source, which makes it an ideal agent for quality control
inspection.

ENCAPSULATION/POTTING

         The encapsulation, or potting, process involves submerging an assembly
into resin, usually epoxy, and allowing the resin to harden. Encapsulation
provides effective resistance and environmental protection against humidity,
while acting as an insulator against shock and vibration. It also works
effectively in maintaining the security of the printed circuit board assembly
design by preventing third parties from accessing the printed circuit board
assembly without destroying the encapsulated technology. Encapsulation/potting
is used in a variety of electro-mechanical applications including automotive,
ballasts, relays, mold making, high voltage power supplies, solenoids,
batteries, switches, circuit breakers, transformers, medical equipment and other
devices.

POWDER COATING

         Powder coating is an advanced method of applying a decorative and
protective finish to a wide range of materials and products. The powder used is
a mixture of finely ground particles of pigment and resin that are
electrostatically charged and sprayed onto the parts to be coated. The parts are
electrically grounded so that the charged powder particles projected at them
adhere to the parts and are held there until melted and fused into a smooth
coating in a curing oven. The result is a uniform, durable, high quality finish.
Because of the unique process of powder coating, many problems and issues
inherent in liquid coating are eliminated or minimized.

Powder coating contains no solvents and emits negligible, if any, polluting
volatile organic compounds into the atmosphere. Exhaust air from the coating
booth can be safely returned to the coating room, and less oven air is exhausted
to the outside, making the powder coating process a


                                       7
<PAGE>


safer and cleaner finishing alternative. In addition, since powder coating uses
a dry powder, up to 98% of powder coating over-spray can be retrieved and reused
with proper recycling units. The waste that results is negligible, and can be
disposed of easily and economically with United States Environmental Protection
Agency certified disposal facilities.

LIQUID COATING

         Liquid coating, or liquid painting, uses polyurethane, water-based,
solvent-based and high-solid paints and conductive coatings. These
environmentally compliant coating materials were developed in response to
limitations recently placed on the emission of volatile organic compounds in
certain areas of the United States. Volatile organic compounds are toxic gases
that are harmful to the environment.

Even as the demand for powder coating increases, there exists a need for liquid
coating. Certain cosmetic requirements can only be achieved through the
application of liquid coating as well as the application of conductive coating
on plastics requiring electro-magnetic interference/radio frequency
interference. Most government and military specifications refer to liquid
coating. Even though powder coating is superior to most liquid coating,
industrial coating manufacturers have produced materials that stand up to highly
abrasive chemicals and solvents, making them a continued desirable coating in
many original equipment manufacturer product lines.

ELECTRO-MAGNETIC INTERFERENCE/RADIO FREQUENCY INTERFERENCE SHIELDING

         This process involves the application of conductive shielding
materials. Through reflection and/or absorption, these materials effectively
reduce electro-magnetic interference/radio frequency interference emitted by
certain printed circuit board assembly based products used primarily in the
telecommunications industry. We utilize several chemical materials that meet a
wide range of specifications.

SCREEN PRINTING

         Our screen printing capability includes a computerized art department,
darkrooms, in-house screen fabrication and die-cutting. These capacities allow
us to manufacture custom labeling and to print directly onto customer-supplied
substrates. Applications include polycarbonate overlays, foil labels, aluminum
nameplates, decals, bumper stickers, panels and chassis.

All of our coating processes must comply with federal, state and local
regulations that impose various environmental controls on the storage, handling,
discharge and disposal of chemicals and gases. There can be no guarantee that
new environmental laws will not be imposed which will have an adverse impact on
our manufacturing process and ability to compete effectively.

THE COATING INDUSTRY

         The coating industry in the United States is divided into several major
categories including product coating for original equipment manufacturers,
architectural coating, special purpose coating and miscellaneous allied paint
products. The segment of the market that applies to our business is the product
coating market. All coatings that are designed for use by the original equipment
manufacturers of industrial and consumer goods are called OEM product coatings.


                                       8
<PAGE>


Liquid and powder coating are frequently positioned as competitive products.
However, each can serve both protective and decorative functions. They are
applied to many types of manufactured goods, furniture, appliances, automotive
parts and electronic components.

The requirements of our customers are generally met either through short-term
purchase orders or long-term contracts. The short-term purchase orders are
serviced in an efficient and cost effective manner because of our ability to
perform on a short runs basis where providing 24 to 48 hour turnaround is
essential. Industrialex's operating subsidiaries are set up with the facilities,
tooling and processes that provide such turnaround. Long-term contracts are
typically established with original equipment manufacturers where production
runs are predictable and can be designed with production control systems.

MARKETING

         Our goal is to become a leading provider of a full spectrum of coating
applications for the manufacturing industry. We plan to grow the business
regionally in two phases. Phase One will be in the Colorado region and Phase Two
will encompass all of North America. During Phase One, we will establish two
facilities in the Colorado region. These facilities will integrate the
operations of the acquired companies and will be replicated and rolled out
throughout the subsequent phases. Due to the general downturn in the economy
during 2002, Management expects to begin Phase Two in 2003 rather than in 2002,
as originally planned.

To accomplish these goals, our sales and marketing plans will focus on
establishing two areas that management believes are lacking in today's
protective coating services industry. One is the establishment of a brand and
the other is the establishment of a standard. To achieve this, we will attempt
to leverage relationships with customers to secure long-term contracts for our
base business. We also plan to utilize the internet in establishing a direct
line of communication and commerce with the original manufacturers. Such tools
will be utilized to provide proposals and quotes directly to the customers.

Our base business has traditionally been established through long-term
relationships and our reputation in the region. We plan to utilize a direct
sales approach to grow its business by developing new customers and finding new
opportunities. Currently, there is one full time sales person covering customers
in the Colorado region. In order to develop new business, we plan to utilize
additional sales personnel. Sales strategy will be based on developing key
account relationships where Industrialex is involved at the very early part of
the customers' product design so that coating specifications are established at
the beginning of the product cycle. In the process of establishing such key
accounts, we plan to establish high executive level relationships with the
customers' management.

By utilizing a direct sales force and leveraging its operational efficiencies,
combined with the creation of a strong brand identity program, management
expects to establish long-term contracts with ongoing long-term revenue streams.


                                       9
<PAGE>


RESEARCH AND DEVELOPMENT

         Industrialex utilizes advanced technologies in two primary areas: the
application of chemicals on products, and the utilization of advanced process
equipment in its coating operations. Our longstanding relationships with the
manufacturers of chemicals allow for access to the latest advancements in
chemical materials. We do not expend any capital in research and development
activities. We will work with customers who wish to experiment with the
application of specific chemical materials on unique products, however, this
type of research and development on new products is customer driven and is
funded by the customer. Industrialex is working with its customers in
experimenting with applying powder coating chemicals on glass, wood and
different grade steel products. Effective utilization of these applications may
create a growth opportunity in segments that can use such coatings.

Industrialex experiments with advanced equipment for use in its coating
operations. Such equipment coupled with internally engineered fixtures and
mechanization improves efficiency, reduction of chemical usage and overall cost
effectiveness of its processes.

COMPETITION

         There are both competing technologies and competing companies in the
protective coating services industry. We do not propose to engage in research
and development or to incur expenses associated with new product development.
Instead, we will focus on developing and strengthening our current competitive
advantage, which is breadth of knowledge in the coating process. Because
management believes we have better knowledge of the coating process than our
competitors and can use that knowledge to generate economies of scale and
shorter turn around times, Industrialex can compete with other companies on the
basis of price and customer services. Our competition within the Colorado market
consists of companies that compete in our business segment or that provide the
same complement of services which include the application of chemical adhesions,
conformal coating, shielding, powder coating, liquid painting and screen
printing, to four categories of general products: metal, plastic, glass and
printed circuit board assemblies.

PATENTS, TRADEMARKS AND COPYRIGHTS

         We rely solely on general trademark and copyright law to protect our
products and have neither formally registered trademarks or copyrights nor
obtained any patent protection for any products.

PERSONNEL

         At December 31, 2001 we employed approximately 44 employees, all of
which worked on a full-time basis. Of these, 7 employees served in management
and administration capacities, 3 employees served in production management
capacities and 34 employees served in production capacities. None of our
employees are subject to collective bargaining agreements. Management believes
relations with employees are good.

ACQUISITIONS

         The following is a description of the acquisitions made by Industrialex
during the past five fiscal years.


                                       10
<PAGE>


ACQUISITION OF BROOMFIELD INDUSTRIAL PAINTING INC.

         Under a stock purchase agreement dated March 22, 2000 between
Industrialex, Mark S. Trawinski, Donald R. Lauer and Angela Bennet Lauer,
Industrialex purchased all of the issued and outstanding shares of Broomfield.

The purchase price for the Broomfield shares was $925,000 comprised as follows:

(a) a closing payment of $425,000 delivered to the Broomfield stockholders at
closing; and

(b) an aggregate of 500,000 special warrants, valued at $1.00 each, delivered to
the Broomfield stockholders at closing, convertible into 500,000 shares at the
IPO, for no additional consideration. Each Broomfield stockholder agreed, upon
the IPO, to enter into a lock-up agreement, pursuant to which, each Broomfield
stockholder agreed not to sell or transfer 70% of their Industrialex shares for
a period of nine months following the IPO.

The acquisition of Broomfield closed on April 4, 2000.

ACQUISITION OF DECORATIVE & COATING SYSTEMS, INC.

         Under a stock purchase agreement dated May 1, 2000 between Decorative &
Coating Systems, Inc., Joseph Triolo, Jr., Joseph Triolo, Sr., Gary Triolo and
John Triolo and Industrialex, Industrialex purchased all the issued and
outstanding shares of Decorative from the Decorative stockholders.

The purchase price for the Decorative shares was $1,200,000 paid as follows:

(a) A closing payment of $300,000 delivered to the Decorative stockholders at
closing;

(b) a promissory note in the principal amount of $700,000 bearing interest at a
rate of 12% per annum and originally due on or before October 1, 2000, but
extended to be due December 31, 2001, delivered to the Decorative stockholders
on closing; and

(c) an aggregate of 200,000 special warrants, valued at $1.00 each, delivered to
the Decorative stockholders at closing, convertible into 200,000 shares at the
IPO, for no additional consideration. Each Decorative stockholder agreed, upon
the IPO, to enter into a lock-up agreement pursuant to which each Decorative
stockholder agreed not to sell or transfer 70% of their Industrialex shares for
a period of nine months following the IPO.

The acquisition of Decorative closed on May 1, 2000.

On April 17, 2001, the $700,000 note listed above was retired as follows:

         (a)      $200,000 was paid in cash;

         (b)      $265,000 was paid by delivery of 353,333 shares of the
                  Company's common stock and,

         (c)      $235,000 was paid by delivery of a promissory note, with
                  principal and interest to be paid in 24 equal monthly
                  installments beginning on May 17, 2001. The note bears
                  interest at 8.0%.


                                       11
<PAGE>

ACQUISITION OF SCREEN TECH GRAPHICS, INC.

         Under a stock purchase agreement dated June 7, 2000 between
Industrialex and Susan Elizabeth DiNapoli and Vincent DiNapoli, Industrialex
purchased all of the issued and outstanding shares of Screen Tech from the
Screen Tech stockholders.

The purchase price for the Screen Tech shares was $1,000,000, comprised as
follows:

(a) a closing payment of $300,000 delivered to the Screen Tech stockholders at
closing;

(b) a promissory note in the principal amount of $610,000, bearing interest at
12% per annum and due on or before December 31, 2000, delivered to the Screen
Tech stockholders at closing; and

(c) an aggregate of 90,000 special warrants, valued at $1.00 each, delivered to
the Screen Tech stockholders at closing, convertible into 90,000 shares at the
IPO, for no additional consideration. Each Screen Tech stockholder agreed, upon
the IPO, to enter into a lock-up agreement pursuant to which each Screen Tech
stockholder agreed not to sell or transfer 90% of their Industrialex shares for
a period of nine months following the IPO.

The acquisition of Screen Tech closed on July 5, 2000.

On April 4, 2001, the $610,000 note listed above was retired as follows:

         (a)      $350,000 was paid in cash;

         (b)      $160,000 was paid by delivery of 213,333 shares of the
                  Company's common stock and;

         (c)      $100,000 was paid by delivery of a promissory note, with
                  principal and interest to be paid in 18 equal monthly
                  installments beginning on May 15, 2001. The note bears
                  interest at 8.0%.

In April of 2002, the Company's two largest note holders agreed to extend the
terms of their notes. Interest only will be paid through August of 2002, at
which time the status of principal payments will be reviewed.

Item 2. Description of Property.

         Our principal corporate office, along with our Longmont facility, is
located in approximately 4,800 square feet of space in Longmont, CO under a
lease that expired on May 1, 2001. We have signed an agreement to extend this
lease on a month-to-month basis. For our operations, we also lease
approximately; 15,000 square feet of space in Denver, CO under a lease that
expired on January 31, 2002. We are presently negotiating a short-term extension
of this lease. We also lease 16,000 square feet of space in Colorado Springs, CO
under a lease that expires on May 31, 2005.

In December of 2001, we consolidated the operations of our Westminster location
with the operations of our Denver location. Our lease on the Westminster
location was on a month-to month basis, since May 31, 2001.

We are in the process of consolidating our operations into a larger space, as
described above, as part of our consolidation strategy described above.


                                       12
<PAGE>


Item 3. Legal Proceedings.

         On September 18, 2001, the Colorado Civil Rights Division notified the
Company that a former employee of Screen Tech Graphics, Inc., Renee Kilpatrick,
filed a charge of alleged discrimination, based on physical disability, with the
Division. The claimant is seeking back pay and benefits, assurance against
retaliation and other and further relief as may exist within the Commission's
power and which the Commission deems necessary and proper. The Company has
responded to the charge, denying the allegation. The Division has not yet acted
on this charge.

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

         None.


                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

         The Company's registration on Form SB-2 (SEC File No. 333-43732)
covering its IPO of 2,666,667 Units at $0.75 was declared effective on February
9, 2001. Each unit consisted of one share of common stock, $.01 par value, and
one common stock purchase warrant. Each purchase warrant entitles the holder to
purchase one share of common stock for two years from the close of the IPO at a
price of $1.00 in the first year and $1.25 in the second year. Thomson Kernaghan
& Co. Limited acted as the Company's agent to sell 2,000,000 units in Canada
only. Industrialex sold 332,882 units in this IPO directly to investors in the
United States at a price of $0.75 per unit. Thomson Kernaghan & Co. Limited is
not licensed to sell securities in the United States and was not involved in the
sale of the units in the United States.

The proceeds to us from the sale of units in this IPO at the initial public
offering price of $0.75 per unit was approximately $1,750,000.


The Company's common stock is quoted on the Canadian Venture Exchange (the
"CDNX") under the symbol "IXC.U." Additionally, the Company's common stock
purchase warrants are also quoted on the CDNX under the symbol "IXC.WT.U." The
following table sets forth, for the period indicated, the range of high and low
sales prices per share of common stock, as reported on the CDNX.

2001
<Table>
<Caption>
                                                            High        Low
                                                            ----        ---
<S>                                                        <C>         <C>
First Quarter (March 21, 2001 through March 31, 2001)      $0.75       $0.30
Second Quarter                                              0.45        0.21
Third Quarter                                               0.22        0.17
Fourth Quarter                                              0.30        0.08
</Table>

No common stock purchase warrants have traded. At April 30, 2002 the last
reported sale price of the common stock was $0.40, and the number of holders of
record of the common stock was approximately 90. This does not include the
number of persons whose stock is in nominee or "street name" accounts through
brokers.


                                       13
<PAGE>


We have never declared or paid cash dividends on our common stock or other
securities. We currently anticipate that we will retain all of our future
earnings for use in the expansion and operation of our business and we do not
anticipate paying any cash dividends in the foreseeable future.

The transfer agent for the Company's common stock and common stock purchase
warrants is Computershare Trust Company of Canada, 510 Burrard Street,
Vancouver, BC V6C-3B8.

RECENT SALES OF UNREGISTERED SECURITIES

During the period following the Company's incorporation through the date of this
Annual Report on Form 10-KSB, the Company has issued the following shares:

<Table>
<Caption>
                                       NUMBER OF      PRICE PER       TOTAL
                       DATE          ISSUED SHARES      SHARE     CONSIDERATION
                 -----------------   -------------    ---------   -------------
<S>              <C>                 <C>              <C>         <C>
Prior sales:     September 6, 2001   566,666(1)(2)      $0.750       $425,000
</Table>


(1) The Company issued 566,666 shares to Decorative and Screen Tech stockholders
    to retire $425,000 in notes payable related to the acquisitions of
    Decorative and Screen Tech.

(2) The Company issued these shares in exempt transactions under Section 4(2) of
    the Securities Act of 1933 as no public offering was involved.

In January of 2000 the Company issued 400,000 warrants to BVP to acquire Company
stock at $0.25 per share in consideration for assistance in acquisitions. The
Company issued BVP an additional 560,000 warrants upon the completion of the
Company's initial public offering in consideration for assistance in raising
capital. In January 2001, BVP agreed to a reduction in the number of warrants
granted pursuant to its consulting agreement from 960,000 to 865,000. The
warrants became exercisable as follows: 375,000 at $0.25 per share in January,
2000, of which 200,000 shares were exercised in September, 2000; 314,375 at
$1.00 per share as of May, 2000 and 175,625 at $0.75 upon the completion of the
IPO.

In March of 2000 the Company commenced a private placement of 2,357,000 special
warrants at $0.50 to officers and friends of the Company. In conjunction with
the Company's IPO each special warrant was converted into one share of the
Company's common stock at no additional cost.

During 2001 and 2000, the Company granted 297,000 and 390,000 options,
respectively, to purchase shares of common stock to its employees and to its
non-employee directors and a non-employee consultant under the terms of the
Company's Stock Option Plan.

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

         This report contains forward-looking statements within the meaning of
Section 72A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual events and/or future results of operations may
differ materially from those contemplated by such forward-looking statements, as
a result of the factors described herein, and in the documents incorporated
herein by reference, including, in particular, those factors described under
"Risk Factors."


                                       14
<PAGE>


Introduction

         Industrialex is a provider of protective coating services to a broad
range of companies in the manufacturing industry. Our services include the
application of chemical adhesions, conformal coating, shielding, powder coating,
liquid painting and screen printing, to four categories of general products:
metal, plastic, glass and printed circuit board assemblies. These various
adhesion processes provide many benefits including enhanced general aesthetics
and protection from hostile environments, corrosion and electrostatic discharge.
The markets we serve include high technology, medical, aerospace, defense,
consumer electronics, data storage, semiconductor, transportation and general
manufacturing.

We incurred operating losses and net losses for 2001 and 2000. During 2001 and
2000, we began to implement our strategy to focus on Colorado as a model for our
national roll-up plan. We incurred increasing operating and net losses as we
increased our operating expenses to build our infrastructure. Such growth
requires significant up-front investments including the costs to hire additional
staff and create the facility to deliver our services. These costs are generally
incurred some time before significant revenue is generated. As a result of
unfavorable economic conditions in the United States, our revenue has and may
continue to decline. If the economic conditions in the United States continue to
worsen or if a wider economic slowdown occurs, we may experience a material
adverse impact on our business, operating results and financial condition.
During these unfavorable economic periods, it may be more difficult to obtain
new customers or expand relationships with existing customers.

Our quarterly operating results may continue to fluctuate in the future based on
a number of factors, many of which are beyond our control. We believe that
period-to-period comparisons of operating results should not be relied upon as
predictive of future performance. Our prospects must be considered in light of
the risks, expenses and difficulties encountered in the protective coating
industry, particularly given that we face an uncertain economic environment. We
may not be successful in addressing such risks and difficulties.

Critical Accounting Policies and Estimates

Management's discussion and analysis of its financial condition and results of
operation are based upon Industrialex's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements require
Industrialex to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an ongoing basis, the Company evaluates these
estimates. Industrialex bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances. The results of these estimates form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. While there are a number of
accounting policies, methods and estimates affecting our financial statements,
areas that are particularly significant include revenue recognition policies,
valuation of accounts receivable, the assessment of recoverability and measuring
impairment of long-lived, tangible and intangible assets and goodwill, and
consolidation reserve.

         Revenue recognition. The Company recognizes revenue upon completion of
conformal coating and shipment of product to customer.


                                       15
<PAGE>


         Allowance for doubtful accounts. We maintain an allowance for doubtful
accounts for estimated losses resulting from the inability of our customers to
make payments of amounts due to us. The allowance is comprised of specifically
identified customer account balances for which collection is currently deemed
doubtful. In addition to specifically identified accounts, estimates of amounts
that may not be collectible are made based on actual historical bad debt write
off experience of those accounts whose collection is not yet deemed doubtful but
which may become doubtful in the future if the financial condition of our
customers were to deteriorate.

         Valuation of long-lived, tangible and intangible assets and goodwill.
The Company periodically evaluates the recoverability of the carrying value of
its long-lived, tangible and intangible assets and goodwill whenever events or
changes in circumstances indicate the carrying amounts of such assets may not be
recoverable. Recoverability of these assets is evaluated by comparing the
forecasted undiscounted future cash flows of the operation to which the assets
relate to the net book value, including associated intangible assets, of such
operation. If the operation is determined to be unable to recover the carrying
amount of its assets, then intangible assets are written down first, followed by
the other long-lived assets of the operation, to fair value. Fair value is
determined based on the discounted cash flows or appraised values, whichever is
more readily determinable, depending on the nature of the assets. Net long-lived
tangible and intangible assets and goodwill amounted to approximately $2,796,000
as of December 31, 2001.

In 2002, Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, ("FAS 142") became effective and as a result, Industrialex
will cease to amortize goodwill. The Company estimates that the reduction of
amortization expense following the implementation of FAS 142 will result in a
$0.02 increase in earnings per diluted share in 2002. In lieu of amortization,
Industrialex will perform an initial impairment review of its goodwill in 2002
and an annual impairment review thereafter. Industrialex is currently in the
process of completing the initial impairment review. The Company does not expect
to record an impairment charge upon completion of the initial impairment review,
however, there can be no assurance that at the time the review is completed a
material impairment charge will not be recorded.

         Consolidation reserve. Late in 2001, we began planning and implementing
a comprehensive initiative to consolidate our plant capacity. In December of
2001, we entered into a lease for a new facility located in Arvada, Colorado,
which will become our corporate headquarters as well as our plant facility. As a
result of this initiative, we recorded consolidation charges in the fourth
quarter of 2001 of $365,000 to continuing operations for this initiative,
primarily for facility consolidation and exit costs. Each reporting period we
will review these estimates based on the status of execution of our
consolidation plan and, to the extent that these assumption change due to
changes in market conditions and our business, the ultimate consolidation
expenses could vary by material amounts.

This information should be read in conjunction with the financial statements and
related notes thereto included elsewhere in this Annual Report on Form 10-KSB.
Financial information for each of the two years in the period ended December 31,
2001 has been derived from the audited financial statements.


                                       16
<PAGE>


<Table>
<Caption>
                                                    Year Ended December 31,
                                                  ----------------------------
                                                      2001             2000
                                                  -----------      -----------
<S>                                               <C>              <C>
Income statement information
     Revenues                                     $ 3,971,972      $ 3,681,521
     Cost of sales                                  3,155,387        2,928,255
     General and administrative expenses            1,248,402        1,033,580
     Depreciation and amortization expense            342,913          193,638
     Consolidation expenses                           365,000               --
     Facility start-up costs                           24,807               --
     Other (income) expenses                           89,747          107,746
                                                  -----------      -----------
     Net loss                                     $(1,254,284)     $  (581,698)
                                                  ===========      ===========
Balance sheet information
     Total assets                                 $ 3,205,125      $ 4,433,700
     Total current liabilities                    $ 1,076,313      $ 1,883,830
     Working capital deficit                      $  (696,030)     $  (961,525)
     Equity                                       $ 1,922,759      $ 1,878,576
</Table>

RESULTS OF OPERATIONS

         The following table sets forth various items as a percentage of
revenues for 2001 and 2000.

<Table>
<Caption>
                                                   Years Ended December 31,
                                                  ----------------------------
                                                      2001             2000
                                                  -----------      -----------
<S>                                               <C>              <C>
Revenues                                                100.0%           100.0%
Cost of sales                                            79.4%            79.5%
General and administrative expenses                      31.4%            28.1%
Depreciation and amortization expense                     8.6%             5.3%
Consolidation charges                                     9.2%             0.0%
Facility start-up costs                                   0.6%             0.0%
Operating loss                                          (29.2)%          (12.9)%
Interest expense                                          2.2%             3.3%
Other (income) expense, net                               0.1%            (0.4)%
Net loss                                                (31.5)%          (15.8)%
</Table>


COMPARISON OF YEARS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000

         Revenues increased $290,000, or 7.9%, to $3,972,000 for the year ended
December 31, 2001 from $3,682,000 for 2000. We acquired Broomfield, Decorative
and Screen Tech in April, May and July of 2000, respectively. The increase in
revenues is due primarily to the inclusion of these acquisitions for the entire
year of 2001. The incremental increase from these acquisitions during 2001 was
$651,000. This increase was offset by a decrease in revenue from existing
customers of $361,000, related to the overall downturn in the economy during
2001.


                                       17
<PAGE>


         Cost of sales increased $227,000, or 7.8%, to $3,155,000 for the year
ended December 31, 2001 from $2,928,000 for the same period in 2000. As a
percentage of revenues, cost of sales remained stable, decreasing slightly to
79.4% in 2001, from 79.5% in 2000. We were able to maintain our cost of sales,
as a percentage of revenues, despite increases in our costs mainly by reducing
material and payroll costs by allocating certain work from our older facilities
to our facility which is newer and more efficient and by reducing our employee
base.

         General and Administrative expenses increased $214,000, or 20.7%, to
$1,248,000 for 2001 from $1,034,000 for 2000. The acquisition of Broomfield,
Decorative and Screen Tech, noted above, increased G&A by approximately
$371,000. This increase was offset by the elimination of certain positions
during 2001 and the transfer of an employee to operations from administration,
along with certain other expense reductions related to the general operation of
the Company.

         Depreciation and Amortization expense increased $149,000, or 76.8%, to
$343,000 for 2001 from $194,000 for 2000. We acquired Broomfield, Decorative and
Screen Tech in April, May and July of 2000, respectively. This increase is due
to a full year of amortization during 2001 of the goodwill related to these
acquisitions.

         Consolidation charges are the result of a comprehensive initiative to
consolidate our plant capacity implemented in late 2001. In December of 2001, we
entered into a lease for a new facility located in Arvada, Colorado, which will
become our corporate headquarters as well as our new plant facility. The Company
recorded consolidation charges in the fourth quarter of 2001 of $365,000 to
continuing operations for this initiative, primarily for facility exit costs
consisting of rent, utilities, facility repair and clean-up, taxes and
insurance.

         Facility start-up costs are the result of the consolidation plan
described above. These costs are associated with the new facility and are
comprised primarily of rent, utilities and insurance.

         Interest expense decreased $36,000, or 29.3%, to $87,000 for 2001 from
$123,000 for 2000. This decrease is due primarily to a decrease in the
outstanding balance of the notes payable issued in connection with the
acquisitions of Decorative and Screen Tech as a result of scheduled payments,
combined with the debt restructuring noted above.

Liquidity and capital resources

         During the year ended December 31, 2001 we used cash in operations in
the amount of $62,000 compared to cash generated from operations of $31,000 for
2000. This is a result primarily of an increase of $672,000 in net loss to
$1,254,000 for 2001, compared to a net loss of $582,000 for 2000. This increase
in net loss was offset by a) an increase in non-cash adjustments to reconcile
net loss to net cash of $627,000, to $873,000 for 2001 compared to $246,000 for
2000, and b) a decrease in changes in operating assets and liabilities,
excluding the effects of business acquisitions of $48,000, to $320,000 for 2001
compared to $368,000 in 2000.

Cash used in investing activities totalled $157,000 for 2001 compared to
$1,161,000 for 2000, due primarily to the acquisitions of Broomfield, Decorative
and Screen Tech in 2000.

Cash generated by financing activities was $94,000 for 2001, compared to
$1,220,000 for 2000. In 2001, we issued a total of $986,000 in common stock and
common stock warrants, net of offering costs. We paid $673,000 on notes payable
and capital lease obligations and we also paid $219,000 to reduce the balance of
our line of credit.


                                       18
<PAGE>


Cash and cash equivalents decreased by approximately $125,000 for 2001, compared
to an increase of approximately $90,000 in 2000.

Working capital deficit at December 31, 2001 was approximately $696,000 compared
to working capital deficit of approximately $962,000 at December 31, 2000. The
increase in working capital is due to a) a reduction in the bank line of credit
and accounts payable due cash provided by the Company's initial public offering
in March of 2001; b) a reduction in the notes payable associated with
Industrialex's acquisition of Decorative and Screen Tech due to scheduled
payments, as well as the debt restructuring of these notes described above.
These increases in working capital were offset by a) a decrease in accounts
receivable due to decreasing sales during the last half of 2001 as a result of
the weakness of the general economy; b) a reserve recorded for facility
consolidation; and c) a net operating loss of $1,254,000 during 2001.

In March of 2000, Industrialex undertook a private placement of 2,357,000
special warrants at $0.50 per special warrant. Each special warrant was
converted into one share of common stock for no additional consideration upon
the Company's IPO as described below.

The Company's registration on Form SB-2 (SEC File No. 333-43732) covering its
IPO of 2,666,667 Units at $0.75 was declared effective on February 9, 2001. Each
unit consisted of one share of common stock, $.01 par value, and one common
stock purchase warrant. Each purchase warrant entitles the holder to purchase
one share of common stock for two years from the close of the IPO at a price of
$1.00 in the first year and $1.25 in the second year. Thomson Kernaghan & Co.
Limited acted as the Company's agent to sell 2,000,000 units in Canada only.
Industrialex sold 332,882 units in this IPO directly to investors in the United
States at a price of $0.75 per unit. Thomson Kernaghan & Co. Limited is not
licensed to sell securities in the United States and was not involved in the
sale of the units in the United States.

The net proceeds to us from the sale of units in this IPO at the initial public
offering price of $0.75 per unit totaled approximately $867,000, net of offering
costs.

We used these net proceeds to reduce our acquisition debt, to reduce the
outstanding balance on our bank line of credit and for working capital to fund
our operations.

Capital Resources

         During the year ended December 31, 2001, the Company incurred a net
loss of approximately $1,254,000 and used cash in operating activities of
approximately $365,000. The Company has a line of credit with a bank with a
balance of approximately $181,000 at April 30, 2002 ($162,000 at December 31,
2001) that matured on April 10, 2002. The Company is working with the bank and
management believes the due date on the line of credit will be extended. The
line of credit is also personally guaranteed by an officer and majority
shareholder of the Company. In its operating plan, the Company contemplates
generating positive cash flows from operations during 2002 due to the
consolidation of its operations into a facility which management believes will
be more efficient than its current, smaller facilities. Management anticipates
that capacity will be increased by approximately 100%, without a corresponding
increase in labor, materials or other operating costs. The most significant
components of the Company's cost structure are payroll, benefits and other
related costs that vary largely with headcount.


                                       19
<PAGE>


Industrialex's cash flow decreased for the year ended December 31, 2001, from
2000, due primarily to a net operating loss, payments on our bank line of
credit, accounts payable and accrued liabilities. These payments were partially
offset by the proceeds of our initial public offering described above.

Cash and cash equivalents decreased to approximately $4,000 at December 31, 2001
from approximately $130,000 at December 31, 2000, with the decrease due to the
issues described above.

Management anticipates that Industrialex will continue to invest resources in
completing the roll-up of its industrial coating companies in 2002 and will
require additional funds to support the consolidation of these entities.

Industrialex intends to expend approximately $250,000 on equipment and facility
enhancements to consolidate Longmont, Broomfield and Decorative facilities into
a leased facility equipped with updated manufacturing lines. These expenditures
are contemplated as part of Industrialex's consolidation of the industrial
coating companies in Colorado.

The Company has financed its operational growth and acquisitions primarily from
internally generated cash flow from operations, borrowings under the line of
credit and the issuance of equity securities.

The Company anticipates that its cash flow from operations, borrowings under the
line of credit and the proceeds from the issuance of equity securities in
February of 2002, described below, will provide sufficient cash to enable the
Company to meet its working capital needs and debt service requirements through
2002. In the event that cash flow from operations, if any, together with the
proceeds of any future financings, are insufficient to meet the Company's
working capital needs and the expenditures for debt service and facility
expansion, Industrialex will be required to re-evaluate its planned expenditures
and expansion plans.

In February of 2002, Industrialex undertook a private placement of 1,750,000
common shares at $0.20 per share. The Company sold the common shares in this
placement directly to investors. The net proceeds to us from the sale of common
stock, after deducting estimated expenses of approximately $7,000 was $343,000.

Management believes Industrialex will require additional funding to execute any
future expansion plans. In the event that cash flow from operations, if any,
together with the proceeds of any future financings, are insufficient to meet
the expenditures for acquisition debt and facility expansion, Industrialex will
be required to re-evaluate its planned expenditures and allocate its total
resources in such manner as the board of directors and management deems to be in
Industrialex's best interests.

Qualitative and quantitative disclosure about market risk

         The Company is exposed to certain financial market risks, the most
predominant being fluctuations in interest rates on variable rate debt.
Management monitors interest rate fluctuations as an integral part of the
company's overall risk management program, which recognizes the unpredictability
of financial markets and seeks to reduce the potential adverse effect of our
results. The effect of interest rate fluctuations historically has been small
relative to other factors affecting operating results, such as labor and
occupancy costs.


                                       20
<PAGE>


Seasonality and inflation

         The Company does not believe that seasonality affects its operations in
a material manner. Management does not believe that inflation had a material
effect on income during 2001. Increases in labor, materials or other operating
costs could adversely affect the Company's operations. In the past, however, the
company generally has been able to increase prices or modify its operating
procedures to substantially offset increases in its operating costs.

RISK FACTORS

         The Company operates a growing business in a competitive market. There
are a number of risks inherent to the Company's business. These are summarized
as follows:

Our Business Model Is Based On Acquiring Existing Coating Companies and
Consolidating, And We May Fail to Achieve the Benefits of Integrating Operations
From Acquired Companies.

         Industrialex's success depends upon our ability to successfully
integrate the operations of Industrialex, Broomfield, Decorative, Screen Tech
and future acquisitions. There can be no assurance that past or future
acquisitions will increase production capacity, provide for improved economies
of scale, improve gross profit margins or reduce consolidated expenses as
anticipated. In addition, there can be no assurance that we will create a common
interface for the overall support of the several production lines, or that we
will be able to market previously separate product lines. Acquisitions also
require increased capacity through installation of new automated equipment.
Failure to increase capacity could inhibit our ability to grow as planned.

The Loss of Key Personnel, Especially If Without Advance Notice, or the
Inability to Hire or Retain Qualified Personnel, Could Have a Material Adverse
Effect Upon Our Business, Financial Condition and Results of Operations.

         Our future success depends in significant part upon the continued
service of certain key management personnel. Key personnel of Industrialex
include Ahmad Akrami, Chief Executive Officer, Stephen King, Chief Financial
Officer and the executive management of its operating facilities; Mark
Trawinski, Joseph Triolo, Jr., Mark Harmon and Mansour Akrami. Industrialex has
entered into employment agreements with its key personnel. All of the agreements
contain confidentiality provisions that are unrestricted as to time, and
non-competition and non-solicitation provisions.

Competition for such personnel is particularly intense in the coating industry,
and there can be no assurance that Industrialex can retain its key personnel or
that it can attract, assimilate or retain other highly qualified personnel in
the future.

We Rely On Sales to a Small Number of Customers, the Loss of Any One of Which
Could Have an Adverse Impact On Revenues.

         We derive a substantial portion of our revenue from a limited number of
customers, the loss of any one of which could adversely impact our operations.
Our five largest customers represented 26% and 37% of total revenues for the
years ended December 31, 2001 and 2000, respectively. These customers also
represented 24% and 39% of total accounts receivable at December 31, 2001 and
2000, respectively. We anticipate that our operating results will continue to
depend on sales to a relatively small number of customers. None of our current
customers has any minimum purchase


                                       21
<PAGE>


obligations, and they may stop placing orders with us at any time, regardless of
any forecast they may have previously provided.

Competition Could Result In Reduced Market Share and Adversely Affect the
Company's Price Levels and Profit Margins.

         The Company's products compete against those of other established
companies, some of which have greater financial, marketing and other resources
than those of the Company. These competitors may be able to institute and
sustain price wars, or imitate the features of the Company's products, resulting
in a reduction of the Company's share of the market and reduced price levels and
profit margins.

Even With the Proceeds From Our Initial Public Offering and Subsequent Private
Placement, We May Not Have Sufficient Funds to Cover Expenses.

         There can be no assurance that cash flow from operations together with
working capital and net proceeds from our initial public offering and subsequent
private placement will be sufficient to fully fund the planned expansion of our
operations. If necessary, we may seek additional funds through equity or debt
financing. There can be no assurance that additional financing will be available
when needed or on terms acceptable to us. If adequate funds are not available,
we may need to delay or cancel planned acquisitions or expansion of operations.

Goodwill Could Adversely Affect Earnings In Future Years.

         As of December 31, 2001, approximately $2,437,000, or 76%, of
Industrialex's total assets and 127% of Industrialex's stockholders' equity is
represented by goodwill. Goodwill represents the excess of cost over the fair
market value of net assets acquired in business combinations accounted for under
the purchase method. Through December 31, 2001, we amortized goodwill on a
straight-line method over a period of 15 years with the amount amortized in a
particular period constituting a non-cash expense that reduced its net income.
In 2002, we will adopt the provisions of FAS 142 and discontinue the
amortization of goodwill. Goodwill will no longer be amortized, instead it will
be tested for impairment upon adoption and then annually, or more frequently if
events or changes in circumstances indicate that the asset might be impaired.

A reduction in net income resulting from the write down or impairment of
goodwill would affect financial results and could have a material and adverse
impact upon the market price of Industrialex common stock. Industrialex believes
that anticipated cash flows and fair value associated with intangible assets
recognized in connection with its acquisitions will support the current carrying
amount of such assets when the rules of FAS 142 are applied, however, continuing
losses could result in a material and adverse write down or impairment of
goodwill. The Company has not completed its analysis under FAS 142 and cannot
currently make a definitive determination as to the ultimate impact on the
Company.

New Environmental Laws Could Have an Adverse Impact On the Company's
Manufacturing Processes.

         The Company is required to comply with federal, state and local
regulations that impose various environmental controls on the storage, handling,
discharge and disposal of chemicals and gases used in its manufacturing process.
The Company has continuously complied with such regulations in the past,
however, there can be no guarantee that new environmental laws will not be
imposed which will have an adverse impact on the Company's manufacturing
processes.


                                       22
<PAGE>



Item 7.  Financial Statements.

<Table>
<S>                                                                 <C>
Independent Auditors' Report ......................................  F-1
Consolidated Balance Sheets - December 31, 2001 and 2000 ..........  F-3
Consolidated Statements of Operations - For the Years
         Ended December 31, 2001 and 2000 .........................  F-4
Consolidated Statements of Equity - For the Years
         Ended December 31, 2001 and 2000 .........................  F-5
Consolidated Statements of Cash Flows - For the Years
         Ended December 31, 2001 and 2000 .........................  F-6
Notes to Consolidated Financial Statements ........................  F-7
</Table>

Item 8. Changes In and Disagreements With Accountants on Accounting and
        Financial Disclosure.

         On April 16, 2002, Industrialex Manufacturing Corporation dismissed
Deloitte & Touche LLP as the Company's principal accountant.

The report of Deloitte & Touche LLP on the financial statements of the Company
for either of the past two fiscal years ended December 31, 1999 and 2000 did not
contain an adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting principles. The Company
does not believe there were any disagreements with Deloitte & Touche LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, during the past two fiscal years ended December 31,
1999 and 2000 and during the subsequent interim period through April 16, 2002,
on which date the relationship ended, which if not resolved to Deloitte & Touche
LLP's satisfaction, would have caused Deloitte & Touche LLP to make reference to
the subject matter of the disagreement(s) in connections with its reports.

The Company engaged Hein + Associates LLP as its new principal accountants as of
April 16, 2002.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons.

         The following is a list of our current directors and senior officers,
and their municipalities of residence, current positions with Industrialex, and
principal occupations during the past five years.

<Table>
<Caption>
Name                  Age     Position
----                  ---     --------
<S>                   <C>     <C>
Ahmad Akrami           42     Chairman, Chief Executive Officer and Director
Stephen J. King        50     Chief Financial Officer
Thomas S. Plunkett     46     Director
Francis Lundy          64     Director
</Table>

Mr. Akrami founded Industrialex Manufacturing Corp. in 1994 and has provided
strategic direction and business guidance in the capacity of Founder and Chief
Executive Officer. Mr. Akrami has served as Chairman and Chief Executive Officer
on a full-time basis since December 2000. From September 1999 to December 2000,
Mr. Akrami was a partner at Bolder Venture Partners, a venture capital firm in
Boulder, Colorado, from October 1999 to February 2000, Mr. Akrami was
interim-CEO of Panoramic Care Systems, Inc., a medical software developer in
Wheat Ridge, Colorado. From September 1996 to September 1999, Mr. Akrami was
Vice President of Zygo


                                       23
<PAGE>


Corp., a developer of precision measuring equipment in Middlefield, Connecticut.
From December 1992 to September 1996, Mr. Akrami was Founder, President & CEO of
NexStar Automation, Inc., a developer of robotics and factory automation systems
in Longmont, Colorado. From August 1987 to October 1992, Mr. Akrami was the
Founder, Chairman, President and Chief Executive Officer of TechniStar
Corporation, a developer of robotics and factory automation systems in Longmont,
Colorado. Mr. Akrami attended the University of California at Los Angeles from
1977 to 1981 in the School of Engineering and Applied Science and obtained a
Bachelors degree in Applied Science from Western Illinois University in December
1995.

Mr. King has been Chief Financial Officer of the Company since May 2000. Prior
to that he was a self-employed business consultant from March 1999 to May 2000.
Mr. King was Chief Financial Officer of Back Yard Burgers, Inc. an operator and
franchisor of restaurants located in Memphis, Tennessee, from June 1993 to March
1999. Mr. King obtained a Masters of Business Administration degree from the
University of Memphis, Memphis, Tennessee in May 1982, a Masters of Education
degree from the University of Memphis, Memphis, Tennessee in May 1974 and a
Bachelor of Science (Education) degree from the University of Arkansas,
Fayetteville, Arkansas in May 1973.

Mr. Plunkett has been a Director of the Company since May 2000; Chief Financial
Officer and Chief Operating Officer of RT One Inc., a communications company in
Boulder, Colorado, since August 1999; prior to that he was Chief Financial
Officer of Webb Interactive, an internet communications company in Denver,
Colorado, from October 1996 to April 1999; prior to that he was Vice President
of Business Planning of Maxtor Corp., a data storage products manufacturer
located in Longmont, Colorado, from December 1995 to September 1996.

Mr. Lundy has been a Director of the Company since June 2000; Chairman of TISF,
a precision optical and metrology company located in San Francisco, California,
since 1996. Prior to that he was a Vice President of Zygo Corporation, a
precision optics and metrology equipment company located in Middlefield,
Connecticut, from August 1996 to December 1999.


                                       24
<PAGE>

Item 10. Executive Compensation.

         The following table sets forth information concerning the compensation
that we paid during the years ended December 31, 2001 and 2000, for services
rendered to the Company and its subsidiaries by our Chief Executive Officer. No
other executive officer's salary and bonus exceeded $100,000 during such year.


<Table>
<Caption>

                             ANNUAL COMPENSATION                    LONG TERM COMPENSATION
                    --------------------------------------   -------------------------------------
                                                 OTHER          AWARDS      PAYOUTS
  NAME AND                                       ANNUAL      ------------   -------
  PRINCIPLE                                   COMPENSATION   OPTIONS/SARS   LTIP(1)    ALL OTHER
  POSITION          YEAR    SALARY    BONUS       (2)         GRANTED(#)    PAYOUTS   COMPENSATION
  ---------         ----   --------   -----   ------------   ------------   -------   ------------
<S>                 <C>    <C>        <C>     <C>            <C>            <C>       <C>
Ahmad Akrami        2001   $119,019    N/A       $10,115          N/A         N/A       $50,000(3)
President and CEO   2000   $ 94,365    N/A       $12,000          N/A         N/A          N/A
</Table>


(1) "LTIP" or "long term incentive plan" means any plan which provides
    compensation intended to serve as incentive for performance to occur over a
    period longer than one financial year, but does not include option or stock
    appreciation right plans.

(2) The amount indicated represents indirect compensation to Mr. Akrami for use
    of a company automobile.

(3) The amount indicated represents a stock bonus paid to Mr. Akrami in return
    for his personal guarantee on the Company's line of credit with a bank.

Options Granted During the Most Recently Completed Fiscal Year

         During the Company's most recently completed fiscal year, no incentive
stock options were granted to the executive officer, no incentive stock options
were exercised by the executive officer and there were no unexercised incentive
stock options outstanding.

Directors of Industrialex are not paid for their service on the board of
directors other than receiving an option grant for their services. Each director
was granted 25,000 options on May 15, 2000. These options vest in 24 equal,
monthly installments. The exercise price of these options is $0.75.

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

         The following tables set forth information with respect to beneficial
ownership of our common stock as of April 30, 2002. Information is given for:

         o        each person, or group, who is known by us to beneficially own
                  more than five percent of our common stock;

         o        each of our directors;

         o        each of our officers; and

         o        all of our directors and officers as a group.

The details of each person's holding are described in the notes below the table.

Percentages of the outstanding shares of common stock are based on 12,121,548
shares outstanding as of April 30, 2002, plus all shares of common stock
issuable on exercise of options within 60 days of April 30, 2002 held by the
particular beneficial owner.

The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the individual or entity has voting power or investment power and any shares


                                       25
<PAGE>


which the individual has the right to acquire within 60 days of April 30, 2002,
through the exercise of any stock option or any other right. Except pursuant to
applicable community property laws or as indicated in the footnote to this
table, to our knowledge, each stockholder identified in the table possesses sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by such stockholder.

Unless otherwise noted, the principal address of each of the stockholders below
is c\o Industrialex Manufacturing Corporation, 63-A South Pratt Parkway,
Longmont, Colorado 80501.

<Table>
<Caption>
                                                         Shares            Percentage of
Name of Beneficial Owner                            Beneficially Owned   Outstanding Shares
------------------------                            ------------------   ------------------
<S>                                                 <C>                  <C>
Ahmad Akrami(1)                                         5,422,166              43.3%

Francis Lundy(2)                                          120,833               1.0%

Thomas S. Plunkett(3)                                      70,833                 *

Stephen J. King(4)                                         39,550                 *

All current executive officers and directors
  as a group (4 persons)                                5,590,382              44.9%

5% Stockholders

  The CIT Group, Inc.(5)                                1,852,734              14.2%
    650 CIT Dr.
    Livingston, NJ  07039

  Daryl Yurek(6)                                        1,154,400               9.1%
    4085 Guadeloupe St.
    Boulder, CO 80301

  Bolder Venture Partners L.L.C.(7)                       955,500               7.4%
    4085 Guadeloupe St.
    Boulder, CO 80301
</Table>

---------

*   Less than 1.0%

(1) Includes 413,333 shares subject to share purchase warrants exercisable
    within 60 days of April 30, 2002.

(2) Includes 100,000 shares held by Mr. Lundy as Trustee of The Lundy Living
    Trust. And also includes 20,833 shares subject to stock options exercisable
    within 60 days of April 30, 2002.

(3) Includes 20,833 shares subject to stock options exercisable within 60 days
    of April 30, 2002.

(4) Includes 5,400 shares subject to share purchase warrants and 8,750 shares
    subject to stock options exercisable within 60 days of April 30, 2002.

(5) Includes 926,367 shares subject to share purchase warrants exercisable
    within 60 days of April 30, 2002.

(6) Includes 628,000 shares subject to share purchase warrants exercisable
    within 60 days of April 30, 2002.

(7) Includes 785,000 shares subject to share purchase warrants exercisable
    within 60 days of April 30, 2002.

Item 12. Certain Relationships and Related Transactions.

         In December of 2001, the Company entered into a lease with Mr. Ahmad
Akrami, an officer and majority stockholder of the Company for office and plant
space. The lease is for a term of 11 years with annual rental payments starting
at $297,500 and increasing annually an amount equal to the increase of the "Cost
of Living Index."

In December of 2001, the Company recorded a bonus payable in the amount of
250,000 shares of common stock valued at $50,000, to Mr. Akrami in return for
the his personal guarantee on the Company's line of credit described above. In
January of 2002, Industrialex issued 250,000 shares of common stock to retire
this liability.


                                       26
<PAGE>


In May of 2000, the Company entered into an agreement and signed a note with Mr.
Scott Robidart an officer of the Company, in the amount of $130,000. The
repayment of this note was forgiven in lieu of a severance package upon the
officer's separation from the Company in June of 2001.

In July of 2000, Mr. Akrami loaned Industrialex $83,100 to be used in connection
with the acquisition of Screen Tech. The debt, which was repaid in full by
Industrialex on July 13, 2000, bore interest at the rate of 10.5%.

In July of 2000, Industrialex entered into a lease agreement with DiNapoli
Holdings, LLC, owned by the former stockholders of Screen Tech. The lease is for
a term of five years with annual rental payments starting at $92,800 and
increasing approximately 15% at the beginning of year two and approximately 14%
at the beginning of year four.

In July of 2000, the Company entered into a line of credit agreement with
FirstBank of Longmont. The line of credit had a maximum limit of $400,000 and
was secured by substantially all assets of the Company and was personally
guaranteed by an officer and majority shareholder of the Company. At December
31, 2000, the line of credit had an outstanding balance of $381,000. In October
of 2001, the line of credit was extended to April 10, 2002. The line of credit
has a maximum limit of $200,000 and is secured by substantially all assets of
the Company and is personally guaranteed by Mr. Ahmad Akrami, an officer and
majority shareholder of the Company. As of December 31, 2001, the line of credit
had an outstanding balance of $162,000. All outstanding principal and accrued
interest was due on the maturity date of April 10, 2002. The Company is working
with the bank and management believes the line of credit will be extended.

Bolder Venture Partners L.L.C.

Industrialex was party to a consulting agreement with Bolder Venture Partners
L.L.C. ("BVP") dated January, 2000 (as amended June 28, 2000). BVP is a limited
liability company incorporated under the laws of the State of Colorado and is
owned 80% by Daryl Yurek and 20% by Tom Tennessen.

Under the terms of the consulting agreement, Bolder provided consulting services
to the officers of Industrialex relating to matters of corporate development,
strategic planning, raising of capital and other financial matters, and assisted
with certain private placements and public offerings of Industrialex's
securities.

In consideration of these services, Industrialex paid Bolder Venture Partners a
monthly fee of $4,500, $50,000 upon closing of the private placement of special
warrants, and granted warrants to acquire up to 960,000 shares of the Company's
common stock for a period of five years from January, 2000. On January 26, 2001,
BVP agreed to a reduction in the number of warrants granted pursuant to the
consulting agreement from 960,000 to 865,000. The warrants became exercisable as
follows:

o        375,000 at $0.25 per share as of January, 2000, of which 200,000 were
         exercised in September 2000;

o        314,375 at $1.00 per share as of May, 2000; and

o        175,625 at $0.75 per share upon the IPO.

The consulting agreement ended on November 30, 2000.

In conjunction with the Company's IPO, the Company issued BVP 120,000 IPO units
in lieu of cash payment for $90,000 due BVP under the terms of the agreement
described above.


                                       27
<PAGE>


Item 13. Exhibits and Reports on Form 8-K.

         (a)      Exhibits.

<Table>
<Caption>
EXHIBIT
NUMBER      DESCRIPTION OF EXHIBIT
-------     ----------------------
<S>         <C>

  3.1       Restated Articles of Incorporation of Industrialex Manufacturing
            Corp.(1)

  3.2       Bylaws of Industrialex Manufacturing Corp.(1)

  4.1       Form of Special Warrant (1)

  4.2       Form of Unit Warrant(1)

 10.1       Incentive Compensation Plan(1)

 10.2       Letter Agreement dated December 28, 1999 between Industrialex
            Manufacturing Corp. and Bolder Venture Partners L.L.C.(1)

 10.3       Letter Agreement dated June 28, 2000 between Industrialex
            Manufacturing Corp. and Bolder Venture Partners L.L.C. amending
            letter dated December 28, 1999(1)

 10.4       Stock Purchase Agreement dated March 22, 2000, between Industrialex
            Manufacturing Corp., Mark S. Trawinski, Donald R. Lauer and Angela
            Bennet Lauer(1)

 10.5       Stock Purchase Agreement dated May 1, 2000, between Industrialex
            Manufacturing Corp., Decorative & Coating Systems, Inc., Joseph
            Triolo, Jr., Joseph Triolo, Sr., Gary Triolo and John Triolo(1)

 10.6       Stock Purchase Agreement dated June 7, 2000, between Industrialex
            Manufacturing Corp., Screen Tech Graphics, Inc. and Susan Elizabeth
            DiNapoli and Vincent DiNapoli(1)

 10.7       Form of employee/consultant/confidentiality agreement(1)

 10.8       Lock-up Agreement entered into by Ahmad Akrami and Industrialex
            Manufacturing Corp.(2)

 10.9       Lock-up Agreement entered into by Mansour Akrami and Industrialex
            Manufacturing Corp.(2)

10.10       Lock-up Agreement entered into by Gary E. Landgren and Industrialex
            Manufacturing Corp.(2)

10.11       Lock-up Agreement entered into by Afshin K. Sarvestani and
            Industrialex Manufacturing Corp.(2)

10.12       Lock-up Agreement dated February 1, 2001 entered into by Bolder
            Venture Partners LLC and Industrialex Manufacturing Corp.(3)

10.13       Agreement dated April 4, 2001, between Industrialex Manufacturing
            Corp., Screen Tech Graphics, Inc. and Susan Elizabeth DiNapoli and
            Vincent DiNapoli(4)

10.14       Agreement dated April 17, 2001, between Industrialex Manufacturing
            Corp., Decorative & Coating Systems, Inc., Joseph Triolo, Jr.,
            Joseph Triolo, Sr., Gary Triolo and John Triolo(4)

10.15       Agreement dated December 1, 2001, between Industrialex Manufacturing
            Corp. and Sophia and Ahmad Akrami*

21          List of Subsidiaries*
</Table>
---------
(1) Previously filed on Form SB-2 dated August 14, 2000 (Reg. No. 333-43732)

(2) Previously filed on Amendment No. 2 to Form SB-2 dated December 8, 2000

(3) Previously filed on Amendment No. 4 to Form SB-2 dated February 2, 2001

(4) Previously filed on Form 10-KSB dated May 21, 2001

*   Filed herewith

         (b)      Reports on Form 8-K

                  None


                                       28
<PAGE>


                                   SIGNATURES

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

INDUSTRIALEX MANUFACTURING CORP.


By /s/ Ahmad Akrami
   --------------------------------------------------
   Ahmad Akrami, Chairman and Chief Executive Officer


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

<Table>
<Caption>
Signature                           Title                             Date
---------                           -----                             ----
<S>                     <C>                                       <C>
/s/ Ahmad Akrami        Chairman, Chief Executive Officer         May 30, 2002
-------------------        and Director                           ------------
Ahmad Akrami


/s/ Stephen J. King     Chief Financial Officer and               May 30, 2002
-------------------        Principal Accounting Officer           ------------
Stephen J. King


/s/ Francis Lundy       Director                                  May 30, 2002
-------------------                                               ------------
Francis Lundy


/s/ Thomas Plunkett     Director                                  May 30, 2002
-------------------                                               ------------
Thomas Plunkett
</Table>


                                       29

<PAGE>

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
Industrialex Manufacturing Corp.
Longmont, Colorado

We have audited the accompanying consolidated balance sheet of Industrialex
Manufacturing Corp. (a Colorado corporation) and subsidiaries as of December 31,
2001 and the related consolidated statements of operations, shareholders' equity
and cash flows for the year ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Industrialex Manufacturing
Corp. and subsidiaries as of December 31, 2001 and the results of their
operations and their cash flows for the year ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficit, which raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters are also discussed in Note 1 to the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


/s/ Hein + Associates LLP

Denver, Colorado,
April 26, 2002


                                      F-1
<PAGE>


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
Industrialex Manufacturing Corp.
Longmont, Colorado

We have audited the accompanying consolidated balance sheet of Industrialex
Manufacturing Corp. (the Company) as of December 31, 2000, and the related
consolidated statements of operations, equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with 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 audit provides a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Industrialex Manufacturing Corp. as
of December 31, 2000, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.


/s/ DELOITTE & TOUCHE LLP


May 11, 2001


                                      F-2
<PAGE>


INDUSTRIALEX MANUFACTURING CORP.

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                            DECEMBER 31,
                                                                     --------------------------
                            ASSETS                                       2001          2000
                                                                     -----------    -----------
<S>                                                                  <C>            <C>
Current assets:
  Cash and cash equivalents                                          $     4,352    $   129,519
  Accounts receivable, net of allowance for doubtful accounts of
    $21,000 and $13,500                                                  307,890        662,742
  Prepaids and other current assets                                       89,627        130,044
                                                                     -----------    -----------
           Total current assets                                          401,869        922,305

Property and equipment, net                                              358,776        361,814

Other assets:
  Notes receivable from officers                                              --        101,080
  Deferred initial public offering costs                                      --        421,621
  Goodwill,net                                                         2,436,874      2,619,274
  Other                                                                    7,606          7,606
                                                                     -----------    -----------
           Other assets                                                2,444,480      3,149,581
                                                                     -----------    -----------

Total assets                                                         $ 3,205,125    $ 4,433,700
                                                                     ===========    ===========

             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Bank line of credit                                                $   162,116    $   380,995
  Current portion of notes payable                                        55,627        667,180
  Accounts payable                                                       350,605        598,132
  Accrued liabilities                                                    152,855        226,646
  Consolidation charges                                                  365,000             --
  Current portion of capital lease obligations                            11,696         10,877
                                                                     -----------    -----------
           Total current liabilities                                   1,097,899      1,883,830

Notes payable, less current portion                                      167,690        642,820

Capital lease obligations, less current portion                           16,777         28,474

Commitments and contingencies (Notes 3, 6, and 10)

Stockholders' equity:
  Common stock, $.01 par value - 50,000,000 authorized, 10,121,548
    and 4,450,000 issued and outstanding, respectively                   101,215         44,500
  Additional paid-in capital                                           3,657,526      2,457,374
  Accumulated deficit                                                 (1,835,982)      (581,698)
  Deferred compensation                                                       --        (41,600)
                                                                     -----------    -----------
           Total equity                                                1,922,759      1,878,576
                                                                     -----------    -----------

Total liabilities and stockholders' equity                           $ 3,205,125    $ 4,433,700
                                                                     ===========    ===========
</Table>

See notes to consolidated financial statements.


                                      F-3
<PAGE>


INDUSTRIALEX MANUFACTURING CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                              YEARS ENDED
                                                              DECEMBER 31,
                                                       --------------------------
                                                           2001           2000
                                                       -----------    -----------
<S>                                                    <C>            <C>
Revenues                                               $ 3,971,972    $ 3,681,521

Cost of sales                                            3,155,387      2,928,255
General and administrative expenses                      1,248,402      1,033,580
Depreciation and amortization expense                      342,913        193,638
Consolidation charges                                      365,000             --
Facility start-up costs                                     24,807             --
                                                       -----------    -----------
Operating loss                                          (1,164,537)      (473,952)

Other income (expenses):
  Interest expense                                         (87,464)      (123,443)
  Other, net                                                (2,283)        15,697
                                                       -----------    -----------
Net loss                                               $(1,254,284)   $  (581,698)
                                                       -----------    -----------
Loss per share
   Basic and diluted                                   $     (0.14)   $     (0.09)
                                                       ===========    ===========

Weighted average number of common shares outstanding
   Basic and diluted                                     9,265,391      6,825,833
                                                       ===========    ===========
</Table>


See notes to consolidated financial statements.


                                      F-4
<PAGE>


INDUSTRIALEX MANUFACTURING CORP.

CONSOLIDATED STATEMENTS OF EQUITY

<Table>
<Caption>
                                                                 ADDITIONAL
                                                      COMMON      PAID-IN      MEMBER'S    ACCUMULATED    DEFERRED
                                        SHARES        STOCK       CAPITAL       EQUITY       DEFICIT    COMPENSATION     TOTAL
                                      -----------    --------    ----------    --------    -----------  ------------   -----------
<S>                                   <C>            <C>         <C>           <C>         <C>          <C>            <C>
Balance at January 1, 2000                     --          --            --     343,380             --           --        343,380

Distributions                                  --          --            --     (16,033)            --           --        (16,033)

Merger with Industrialex
  Manufacturing Corp.                   4,250,000      42,500       284,847    (327,347)            --           --             --

Exercise of common
  stock warrants                          200,000       2,000        48,000          --             --           --         50,000

Issuance of common stock
  warrants                                     --          --     2,074,527          --             --           --      2,074,527

Deferred employee stock
  compensation                                 --          --        50,000          --             --      (50,000)            --

Amortization of deferred
  employee stock compensation                  --          --            --          --             --        8,400          8,400

Net loss                                       --          --            --          --       (581,698)          --       (581,698)
                                      -----------    --------    ----------    --------    -----------    ---------    -----------

Balance at December 31, 2000            4,450,000      44,500     2,457,374          --       (581,698)     (41,600)     1,878,576

Cancellation of common stock             (500,000)     (5,000)        5,000          --             --           --             --

Issuance of common stock, net
 of offering costs of $882,435          2,457,882      24,579       842,648          --             --           --        867,227

Exercise of common stock
 special warrants                       2,357,000      23,570       (23,570)         --             --           --             --

Exercise of special warrants
 for acquisitions                         790,000       7,900        (7,900)         --             --           --             --

Issuance of common stock
 for debt                                 566,666       5,666       419,334          --             --           --        425,000

Deferred employee stock
  compensation                                 --          --       (35,360)         --             --       41,600          6,240

Net loss                                       --          --            --          --     (1,254,284)          --     (1,254,284)
                                      -----------    --------    ----------    --------    -----------    ---------    -----------
Balance at December 31, 2001           10,121,548    $101,215    $3,657,526    $     --    $(1,835,982)   $      --    $ 1,922,759
                                      ===========    ========    ==========    ========    ===========    =========    ===========
</Table>


See notes to consolidated financial statements.


                                      F-5
<PAGE>

INDUSTRIALEX MANUFACTURING CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                                 YEARS ENDED
                                                                                 DECEMBER 31,
                                                                          --------------------------
                                                                             2001           2000
                                                                          -----------    -----------
<S>                                                                       <C>            <C>
Cash flows from operating activities:
  Net loss                                                                $(1,254,284)   $  (581,698)
  Adjustments to reconcile net loss to net cash provided by operations:
    Depreciation and amortization                                             342,913        193,638
    Allowance for doubtful accounts                                             7,500         13,500
    Non-cash stock and deferred compensation                                  157,320         37,320
    Consolidation charges                                                     365,000             --
    Changes in operating assets and liabilities excluding
      effects of business acquisitions:
      Accounts receivable                                                     347,352        134,639
      Prepaids and other current assets                                        40,417         37,973
      Other assets                                                                 --          3,253
      Accounts payable                                                         55,846         32,403
      Accrued liabilities                                                    (123,791)       159,515
                                                                          -----------    -----------
           Net cash (used in) provided by operating activities                (61,727)        30,543
                                                                          -----------    -----------

Cash flows from investing activities:
  Payments for business acquisitions, net of cash acquired                         --     (1,091,684)
  Capital expenditures                                                       (157,475)       (68,847)
                                                                          -----------    -----------
           Net cash used in investing activities                             (157,475)    (1,160,531)
                                                                          -----------    -----------

Cash flows from financing activities:
  Issuance of common stock and common stock warrants                        1,749,662      1,228,500
  Offering costs                                                             (764,187)            --
  Amounts collected from related parties under notes receivable                    --         11,449
  Amounts loaned to related parties under notes receivable                         --       (130,000)
  Net (payments) borrowings under bank line of credit                        (218,879)       380,995
  Payments on notes payable                                                  (661,683)      (245,219)
  Distributions to member                                                          --        (16,033)
  Payments on capital lease obligations                                       (10,878)       (10,115)
                                                                          -----------    -----------
           Net cash provided by financing activities                           94,035      1,219,577
                                                                          -----------    -----------

Net (decrease) increase in cash and cash equivalents                         (125,167)        89,589

Cash and cash equivalents at beginning of period                              129,519         39,930
                                                                          -----------    -----------

Cash and cash equivalents at end of period                                $     4,352    $   129,519
                                                                          ===========    ===========

Supplemental disclosures of cash flow information:
  Cash paid for interest                                                  $    87,464    $   110,037
                                                                          ===========    ===========

Supplemental disclosure of non-cash investing
  and financing activities - See Notes 3 and 8.
</Table>


See notes to consolidated financial statements.


                                      F-6
<PAGE>


INDUSTRIALEX MANUFACTURING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000


1.       ORGANIZATION

         The accompanying consolidated financial statements present the
         consolidated financial position and results of operations of
         Industrialex Manufacturing LLC ("LLC"), a limited liability company
         organized under the laws of the state of Colorado in 1994. Ahmad Akrami
         and The Rudder Group, LLC were the original members of the Company. In
         February of 2000 LLC merged with Industrialex Manufacturing Corp. (the
         "Company") and the Company became the surviving entity. Because the
         Company and LLC are entities under common control, the financial
         statements of LLC represent the historical financial statements of the
         Company.

         The Company operates in one segment of the industrial coating industry
         and provides services to the manufacturing industry located primarily
         along the front range of Colorado.

         As further discussed in Note 3, the Company acquired certain businesses
         during 2000. All references to the Company in these financial
         statements include all acquired subsidiaries.

         As shown in the accompanying statement of operations, the Company
         incurred an aggregate net loss of approximately $1,836,000 over the
         past two years and has negative working capital. To meet its immediate
         cash needs, the Company undertook a private placement of 1,750,000
         common shares at $0.20 per share, which was completed in February of
         2002. The Company is also seeking additional financial resources
         through additional credit facilities.

         The financial statements have been prepared on a going concern basis,
         which assumes continuity of operations and realization of assets and
         liquidation of liabilities in the ordinary course of business.
         Continuation of the Company as a going concern is dependent upon
         achieving profitable operations during and after the Company's
         consolidation. If the Company cannot successfully extend payment terms
         with its lenders and maintain sufficient working capital to fund its
         operations and ultimately achieve profitable operations, there is a
         substantial doubt about the ability of the Company to continue as a
         going concern. The financial statements do not include any adjustments
         should the Company be unable to continue operations as a going concern.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION - The consolidated financial statements of
         the Company include the accounts of all wholly owned subsidiaries. All
         intercompany transactions have been eliminated.

         ESTIMATES - The preparation of financial statements in conformity with
         accounting principles generally accepted in the United States of
         America requires management to make estimates and assumptions that
         affect the reported amounts of assets, liabilities and the disclosure
         of contingent assets and liabilities at the date of the financial
         statements, and the reported amounts of revenues and expenses.
         Significant estimates underlying the accompanying financial statements
         include the recovery of intangible and other long-lived assets. It is
         reasonably possible that actual results could differ materially from
         those estimates in the near term.


                                      F-7
<PAGE>


         CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
         debt instruments with original maturities of three months or less to be
         cash equivalents.

         PROPERTY, PLANT AND EQUIPMENT - The Company records property, plant and
         equipment at cost. Depreciation is computed using the straight-line
         method over the estimated useful lives as follows:
<Table>
<S>                                                      <C>
         Machinery and equipment                         3-7 years
         Furniture and fixtures                          3-5 years
         Vehicles                                          5 years
</Table>

         Improvements on leased property are amortized on the straight-line
         method over the life of the lease. Expenditures for repairs and
         maintenance are charged to operations as incurred.

         Upon retirement or disposition of property, plant or equipment, the
         related cost and accumulated depreciation are removed from the accounts
         and any resulting gain or loss is recognized in income or loss for the
         period.

         IMPAIRMENTS OF LONG-LIVED ASSETS - Management periodically evaluates
         the recoverability of the carrying value of its long-lived tangible and
         intangible assets whenever events or changes in circumstances indicate
         the value of these assets may not be recoverable. Recoverability of
         these assets is evaluated by comparing the forecasted undiscounted
         future cash flows of the operation to which the assets relate to the
         net book value, including associated intangible assets, of such
         operation. If the operation is determined to be unable to recover the
         carrying amount of its assets, then intangible assets are written down
         first, followed by the other long-lived assets of the operation, to
         fair value. Fair value is determined based on the discounted cash flows
         or appraised values, whichever is more readily determinable, depending
         on the nature of the assets.

         GOODWILL - Goodwill of $2,735,104 net of accumulated amortization of
         $298,230, represents the excess cost over the fair value of net assets
         acquired in business acquisitions accounted for under the purchase
         method. Goodwill is amortized on a straight-line basis over fifteen
         years. In 2002, the Company will adopt the provisions of Statement of
         Financial Accounting Standards No. 142 ("FAS 142"), Goodwill and Other
         Intangible Assets, and discontinue the amortization of goodwill. See
         additional details on this pronouncement in the "New Accounting
         Pronouncements" section below.

         REVENUE RECOGNITION - The Company recognizes revenue upon completion of
         conformal coating and shipment of product to customer.

         INCOME TAXES - Income taxes include U.S income taxes. Certain items are
         not reported in tax returns and financial statements in the same year.
         The tax effects of these differences are reported as deferred income
         taxes.

         COMPREHENSIVE INCOME - For the year ended December 31, 2001 and 2000,
         the Company's comprehensive losses, as defined by Statement of
         Financial Accounting Standards ("SFAS") No. 130, "Reporting
         Comprehensive Income," are equal to its net losses.

         SEGMENT REPORTING - The Company has adopted FAS No. 131, "Disclosure
         about Segments of an Enterprise and Related Information," which
         requires companies to report selected information about operating
         segments, as well as enterprise-wide disclosures about products,
         services, geographical areas and major customers. Operating segments
         are determined based on the way management organizes its business for
         making operating decisions and assessing performance. The Company
         operates solely within one business segment, industrial coating
         services.


                                      F-8
<PAGE>


         RECLASSIFICATIONS - Certain prior year amounts have been reclassified
         to conform to current year presentation.

         STOCK-BASED COMPENSATION - The Company applies Accounting Principles
         Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees,
         and related interpretations in accounting for its stock option plan,
         and accordingly, does not recognize compensation cost for options
         granted to employees and directors whose exercise price is equal to or
         exceeds the fair value of common stock as of the grant date. In March
         2000, the Financial Accounting Standards Board ("FASB") issued
         Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions
         Involving Stock Compensation--An Interpretation of APB Opinion No. 25."
         FIN 44 clarifies the application of APB Opinion No. 25 and, among other
         issues, clarifies the following: the definition of an employee for the
         purpose of applying APB Opinion No. 25, the criteria for determining
         whether a plan qualifies as a non-compensatory plan, the accounting
         consequence of various modifications to the terms of previously issued
         fixed stock options or awards, and the accounting for an exchange of
         stock compensation awards in a business combination. Stock-based awards
         issued to other than employees are accounted for at fair value under
         FAS 123, Accounting for Stock-Based Compensation.

         FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of the
         Company's financial instruments including cash and cash equivalents,
         accounts receivable, line of credit, accounts payable and accrued
         liabilities approximate fair value due to the short-term maturity of
         these instruments. The fair value of long-term obligations for notes
         payable and capital leases was estimated by discounting the future cash
         flows using market interest rates and does not differ significantly
         from the amounts reflected in the consolidated financial statements.

         NEW ACCOUNTING PRONOUNCEMENTS - In June of 2001, the FASB issued
         Statement of Financial Accounting Standards No. 141 ("FAS 141"),
         Business Combinations and Statement of Financial Accounting Standards
         No. 142 ("FAS 142"), Goodwill and Other Intangible Assets.

         FAS 141 requires that all business combinations be accounted for using
         the purchase method. Under this method, the purchase price of an
         acquired business is allocated to the individual tangible and
         intangible assets acquired and liabilities assumed based upon the
         estimated fair values at the date of acquisition. If the purchase price
         exceeds the amounts assigned to the assets acquired and liabilities
         assumed, the excess is recognized as goodwill. After initial
         recognition, goodwill and intangible assets acquired in the business
         combination must be accounted for under FAS 142. FAS 141 is effective
         for the Company for all business combinations initiated after June 30,
         2001.

         FAS 142 addresses financial accounting and reporting for (i) intangible
         assets acquired individually or with a group of other assets at
         acquisition and (ii) goodwill and other intangible assets subsequent to
         their acquisition. Under the provisions of FAS 142, if an intangible
         asset is determined to have an indefinite useful life, it shall not be
         amortized until its useful life is determined to no longer be
         indefinite. An intangible asset that is not subject to amortization
         shall be tested for impairment annually, or more frequently if events
         or changes in circumstances indicate that the asset might be impaired.
         Goodwill will also no longer be amortized. Rather, it will be tested
         for impairment upon adoption of this standard and thereafter on an
         annual basis and between annual tests in certain circumstances. FAS 142
         is required to be applied starting with fiscal years beginning after
         December 15, 2001 (December 31, 2001 for the Company). The Company
         estimates that the reduction of amortization expense following the
         implementation of FAS 142 will result in an increase in earnings of
         $182,400, or $0.02 per diluted share, in 2002.

         Industrialex believes that anticipated cash flows and fair value
         associated with intangible assets recognized in connection with its
         acquisitions will support the current carrying amount of such assets
         when the rules of FAS 142 are applied, however, continuing losses could
         result in a material and adverse


                                      F-9
<PAGE>


         write down or impairment of goodwill. The Company has not completed its
         analysis under FAS 142 and cannot currently make a definitive
         determination as to the ultimate impact on the Company.

         In June of 2001, the FASB issued Statement of Financial Accounting
         Standards No. 143 ("FAS 143"), Accounting for Asset Retirement
         Obligations. FAS 143 addresses financial accounting and reporting for
         obligations associated with the retirement of tangible long-lived
         assets and the associated retirement costs. The statement requires that
         the fair value of a liability for an assets retirement obligation be
         recognized in the period in which it is incurred if a reasonable
         estimate of the fair value can be made. The associated assets
         retirement costs are capitalized as part of the carrying value of the
         long-lived asset. FAS 143 is effective for financial statements issued
         for fiscal years beginning after June 15, 2002. The Company does not
         believe the adoption of this standard will have a significant effect on
         the Company's results of operations or its financial position.

         In October of 2001, the FASB issued Statement of Financial Accounting
         Standards No. 144 ("FAS 144"), Accounting for the Impairment or
         Disposal of Long-Lived Assets. FAS 144 addresses financial accounting
         and reporting for the impairment or disposal of long-lived assets. The
         statement retains the requirements to (a) recognize an impairment only
         if the carrying amount of the long-lived asset is not recoverable from
         its undiscounted cash flows and (b) measure an impairment loss as the
         difference between the carrying amount and the fair value of the asset.
         It does, however, remove goodwill from its scope, eliminating the
         requirement to allocate goodwill to long-lived assets to be tested for
         impairment. The statement also requires that a long-lived assets to be
         abandoned, exchanged for a similar productive assets or distributed to
         owners in a spin-off be considered held and used until it is disposed
         of. Discontinued operations are no longer measured on a net realizable
         value basis, and future operating losses are no longer recognized
         before they occur. FAS 144 broadens the presentation of discontinued
         operations in the income statement to include a component of an entity
         (rather than a segment of a business). A component of an entity
         comprises operations and cash flows that can be clearly distinguished,
         operationally and for financial purposes, from the rest of the entity.
         The provisions of FAS 144 are effective for financial statements issued
         for the fiscal years beginning after December 15, 2001, and interim
         periods within those fiscal years. The Company does not believe the
         adoption of this standard will have a significant effect on the
         Company's results of operations or its financial position.

3.       ACQUISITIONS

         BROOMFIELD INDUSTRIAL PAINTING, INC. - On April 4, 2000, the Company
         acquired all of the outstanding stock of Broomfield Industrial
         Painting, Inc. (BIP). The purchase price, net of cash acquired,
         amounted to approximately $965,000 and consisted of the following:

<Table>
<S>                                                              <C>
         Cash                                                    $430,000
         500,000 special warrants to former BIP shareholders      500,000
         Warrants to third party for acquisition services          35,000
                                                                 --------
         Total                                                   $965,000
                                                                 ========
</Table>

         The fair value of the assets acquired, excluding cash acquired,
         amounted to $220,000 and liabilities assumed were $36,000. The cost in
         excess of net assets acquired amounted to $781,000 and was recorded as
         goodwill in the accompanying consolidated balance sheet as of December
         31, 2000.


                                      F-10
<PAGE>


         DECORATIVE & COATING SYSTEMS, INC. - On May 1, 2000, the Company
         acquired all of the outstanding stock of Decorative & Coating Systems,
         Inc. (DACS). The purchase price, net of cash acquired, amounted to
         approximately $1,233,000 and consisted of the following:

<Table>
<S>                                                              <C>
         Cash                                                    $  298,000
         Note payable to former DACS shareholders                   700,000
         200,000 special warrants to DACS shareholders              200,000
         Warrants to third party for acquisition services            35,000
                                                                 ----------
         Total                                                   $1,233,000
                                                                 ==========
</Table>

         On April 17, 2001, the $700,000 note listed above was retired as
         follows:

                  (a)      $200,000 was paid in cash;

                  (b)      $265,000 was paid by delivery of 353,333 shares of
                           the Company's common stock and;

                  (c)      $235,000 was paid by delivery of a promissory note,
                           with principal and interest to be paid in 24 equal
                           monthly installments beginning on May 17, 2001. The
                           note bears interest at 8.0%.

         The fair value of the assets acquired, excluding cash acquired,
         amounted to $229,000 and liabilities assumed were $57,000. The cost in
         excess of net assets acquired amounted to $1,061,000 and was recorded
         as goodwill in the accompanying consolidated balance sheet as of
         December 31, 2000.

         SCREEN TECH GRAPHICS, INC. - On July 17, 2000, the Company acquired all
         of the outstanding stock of Screen Tech Graphics, Inc. (STG). The
         purchase price, net of cash acquired, amounted to approximately
         $1,011,000 and consisted of the following:

<Table>
<S>                                                              <C>
         Cash                                                    $  275,000
         Notes payable to former STG shareholders                   610,000
         90,000 special warrants to former STG shareholders          90,000
         Warrants to third party for acquisition services            36,000
                                                                 ----------
                                                                 $1,011,000
                                                                 ==========
</Table>

         On April 4, 2001, the $610,000 note listed above was retired as
         follows:

                  (a)      $350,000 was paid in cash;

                  (b)      $160,000 was paid by delivery of 213,333 shares of
                           the Company's common stock and;

                  (c)      $100,000 was paid by delivery of a promissory note,
                           with principal and interest to be paid in 18 equal
                           monthly installments beginning on May 15, 2001. The
                           note bears interest at 8.0%.

         The fair value of the assets acquired, excluding cash, amounted to
         $527,000 and liabilities assumed were $320,000. The cost in excess of
         net assets acquired amounted to $804,000 and was recorded as goodwill
         in the accompanying consolidated balance sheet as of December 31, 2000.

         Each special warrant issued to the former BIP, DACS and STG
         shareholders was converted into one share of Company common stock at no
         additional cost at the time of the IPO in March 2001. These warrants
         are included in equity in the accompanying consolidated balance sheets.


                                      F-11
<PAGE>


         The acquisitions were accounted for by the purchase method of
         accounting for business combinations. Accordingly, the accompanying
         consolidated statements of operations do not include any revenue or
         expenses related to these acquisitions prior to their respective
         closing dates.

         In April of 2002, the Company's two largest note holders agreed to
         extend the terms of their notes. Interest only will be paid through
         August of 2002, at which time the status of principal payments will be
         reviewed.

         The outstanding balance of the Company's notes payable at December 31,
         2001 is as follows:

<Table>
<S>                                                              <C>
         Outstanding balance                                     $223,317
         Less current portion                                     (55,627)
                                                                 --------
         Long-term portion of notes payable                      $167,690
                                                                 ========
</Table>

         The following unaudited pro forma consolidated statement of operations
         data for the year ended December 31, 2000, gives effect to the
         acquisitions of BIP, DACS and STG as if each of these acquisitions had
         occurred on January 1, 2000. These pro forma results give effect to
         purchase accounting adjustments and have been prepared for comparative
         purposes only. They do not purport to be indicative of what operating
         results would have been had the acquisitions actually taken place on
         January 1, 2000 and may not be indicative of future operating results.

<Table>
<Caption>
                                                                    2000
                                                                    ----
<S>                                                              <C>
         Sales                                                   $5,515,751
                                                                 ==========
         Net loss                                                $ (519,339)
                                                                 ==========
         Basic and diluted net loss per share                    $    (0.07)
                                                                 ==========
</Table>

4.       NOTES RECEIVABLE FROM OFFICERS

         In May of 2000, the Company entered into an agreement and signed a note
         with an officer in the amount of $130,000. The repayment of this note
         was forgiven in lieu of a severance package upon the officer's
         separation from the Company in June of 2001.

5.       PROPERTY AND EQUIPMENT

         Property and equipment consist of the following as of December 31:

<Table>
<Caption>
                                                       2001         2000
                                                    ---------    ---------
<S>                                                 <C>          <C>
         Machinery and equipment                    $ 480,583    $ 379,714
         Furniture and fixtures                        49,159       53,101
         Leasehold improvements                        35,305       28,909
         Vehicles                                      34,388       34,388
                                                    ---------    ---------
                                                      599,435      496,112
         Less accumulated depreciation               (240,659)    (134,298)
                                                    ---------    ---------
         Total                                      $ 358,776    $ 361,814
                                                    =========    =========
</Table>

6.       CONSOLIDATION CHARGES

         Late in 2001, we began planning and implementing a comprehensive
         initiative to consolidate our plant capacity. In December of 2001, we
         entered into a lease for a new facility located in Arvada, Colorado,
         which will become our corporate headquarters as well as our new plant
         facility.


                                      F-12
<PAGE>


         The Company recorded consolidation charges in the fourth quarter of
         2001 of $365,000 to continuing operations for this initiative,
         primarily for facility exit costs consisting of rent, utilities,
         facility repair and clean-up, taxes and insurance. The activity in the
         consolidation liability during 2001 was as follows:

<Table>
<S>                                                              <C>
         2001 consolidation charge                               $365,000
         Payments                                                      --
         Non-cash usage                                                --
                                                                 --------
         Balance at December 31, 2001                            $365,000
                                                                 ========
</Table>

7.       LINE OF CREDIT

         In July of 2000, the Company entered into a line of credit agreement
         with FirstBank of Longmont (the "Bank"). The line of credit had a
         maximum limit of $400,000 and was collateralized by substantially all
         assets of the Company and was personally guaranteed by an officer and
         majority shareholder of the Company. At December 31, 2000, the line of
         credit had an outstanding balance of $380,995.

         In October of 2001, the line of credit was extended to April 10, 2002.
         The line of credit has a maximum limit of $200,000 and is
         collateralized by substantially all assets of the Company and is
         personally guaranteed by an officer and majority shareholder of the
         Company. As of December 31, 2001, the line of credit had an outstanding
         balance of $162,116.

         Interest accrues at the Bank's prime rate plus 1% (6.0% at December 31,
         2001) and is payable monthly. All outstanding principal and accrued
         interest was due on the maturity date of April 10, 2002. The Company is
         working with the bank and management believes the line of credit will
         be extended.

8.       STOCKHOLDERS' EQUITY

         WARRANTS - In March of 2000, the Company raised $1,178,500 in a private
         placement of 2,357,000 special warrants to the Company officers and
         other individuals. Each special warrant was converted into one share of
         the Company's common stock at no additional cost at the time of the
         Company's initial public offering in March 2001.

         In April, May and July of 2000, the Company issued a total of 790,000
         special warrants in connection with the acquisitions described above.
         Each special warrant was converted into one share of the Company's
         common stock at no additional cost at the time of the Company's initial
         public offering in March 2001.

         STOCK OPTIONS - Pursuant to the Company's 2000 Stock Option Plan (the
         "Plan"), approved by the board of directors in June of 2000, the
         Company may grant incentive and nonstatutory stock options to
         employees, directors and consultants to acquire up 1,200,000 shares of
         the Company's common stock. Options granted vest over two to four years
         and expire no more that five years from the date of grant. Stock
         options that are forfeited or cancelled revert back to the Plan and may
         be reissued.


                                      F-13
<PAGE>


         The following table summarizes stock option activity during the years
         ended December 31, 2001 and 2000:

         <Table>
         <Caption>
                                                           Weighted                 Weighted
                                                            Average                  Average
                                                 Number    Exercise    Options      Exercise
                                               of Shares    Price     Exercisable    Price
                                               ---------   --------   -----------   --------
         <S>                                   <C>         <C>        <C>           <C>
         Balance at January 1, 2000                   --   $     --          --     $     --
                   Granted                       390,000       0.69
                   Exercised                          --         --
                   Canceled                           --         --
                                               ---------
         Balance at December 31, 2000            390,000       0.69          --           --
                   Granted                       297,000       0.75
                   Exercised                          --         --
                   Canceled                     (370,000)      0.68
                                               ---------
         Outstanding at December 31, 2001        317,000   $   0.75      73,542     $   0.75
                                               =========
</Table>

         All options granted during 2001 and 2000, were at the current market
         price and the weighted average fair value was $0.51 and $0.24,
         respectively. At December 31, 2001, options for 73,542 shares were
         exercisable and of the remaining 243,458 options, 101,750, 74,250,
         56,750 and 10,708 shares will become exercisable in 2002, 2003, 2004
         and 2005, respectively.

         Additional information regarding options outstanding as of December 31,
         2001 is as follows:

<Table>
<Caption>
                                Options Outstanding          Options Exercisable
                    -------------------------------------    --------------------
                                   Weighted
                                    Average      Weighted                Weighted
                                   Remaining      Average                 Average
         Exercise     Options     Contractual    Exercise    Number of   Exercise
          Price     Outstanding   Life (Years)    Price        Shares      Price
         --------   -----------   ------------   ---------   ---------   --------
<S>                 <C>           <C>            <C>         <C>         <C>
         $   0.75     317,000         3.15       $    0.75     73,542    $   0.75
</Table>

         PRO FORMA STOCK-BASED COMPENSATION DISCLOSURES - The Company applies
         APB Opinion 25 and related interpretations in accounting for its stock
         options and warrants which are granted to employees. Accordingly, no
         compensation cost has been recognized for grants of options and
         warrants to employees since the exercise prices were not less than the
         market value of the Company's common stock on the grant dates. Had
         compensation cost been determined based on the fair value at the grant
         dates for awards under those plans consistent with the method of FAS
         123, the Company's net income and EPS would have been reduced to the
         pro forma amounts indicated below.

<Table>
<Caption>
                                                        Year Ended December 31,
                                                        ------------------------
                                                            2001          2000
                                                        -----------    ---------
<S>                                                     <C>            <C>
         Net loss applicable to common shareholders:
               As reported                              $(1,254,284)   $(581,698)
               Pro forma                                $(1,299,240)   $(590,000)

         Net loss per common share:
               As reported - basic and diluted          $     (0.14)   $   (0.09)
               Pro forma - basic and diluted            $     (0.14)   $   (0.09)
</Table>


                                      F-14
<PAGE>


         FAS No. 123 requires the disclosure of pro forma net loss and loss per
         share had the Company adopted the fair value method of accounting for
         stock-based awards. Under SFAS No. 123, the fair value of the
         stock-based awards to employees is calculated through the use of option
         pricing models, even though such models were developed to estimate the
         fair value of freely tradable, fully transferable options without
         vesting restrictions, which significantly differs from the Company's
         stock option awards. These models also require subjective assumptions,
         including expected time to exercise, which greatly affect the
         calculated values. The Company's calculations were made using the
         minimum value method for the year ended December 31, 2000 and the
         Black-Scholes option pricing model for the year ended December 31, 2001
         under the following assumptions:

<Table>
<Caption>
                                                                Year Ended
                                                             December 31, 2001
                                                             -----------------
<S>                                                          <C>
                 Expected Volatility                               93.3%
                 Risk-free interest rate                       4.34% - 4.61%
                 Expected dividends                                 0.0%
                 Expected terms                                 2 - 4 years
</Table>

         STOCK PURCHASE WARRANTS - The Company has granted warrants, which are
         summarized as follows for the years ended December 31, 2001 and 2000:

<Table>
<Caption>
                                             2001                      2000
                                   -----------------------    -----------------------
                                                  Weighted                   Weighted
                                                   Average                    Average
                                     Warrants     Exercise      Warrants     Exercise
                                   Outstanding     Price      Outstanding      Price
                                   -----------    --------    -----------    --------
<S>                                <C>            <C>         <C>            <C>
         Balance at January 1,       3,907,000    $   0.14             --    $     --
          Granted                    2,657,882        1.00      4,107,000        0.15
          Exercised                 (3,147,000)         --       (200,000)       0.25
          Terminated/Canceled          (95,000)       0.74             --          --
                                   -----------    --------    -----------    --------
         Balance at December 31,     3,322,882    $   0.95      3,907,000    $   0.14
                                   ===========                ===========
</Table>

         Warrants outstanding at December 31, 2001 have exercise prices ranging
         from $0.25 to $1.25 as follows:

<Table>
<Caption>

                       Exercise
          Shares         Price       Expiration Date
         ---------    -----------    ---------------
<S>                   <C>            <C>
           175,000    $      0.25     January, 2004
           175,625           0.75     January, 2004
           314,375           1.00     January, 2004
         2,657,882     1.00, 1.25       March, 2003
         ---------
         3,322,882
         =========
</Table>

         All warrants issued during 2001 were issued as part of the initial
         public offering described below.

         INITIAL PUBLIC OFFERING - In March of 2001, the Company completed an
         initial public offering ("IPO") of 2,332,882 units consisting of one
         share of common stock and one common stock purchase warrant at a price
         of $0.75 per unit. Each warrant entitles the holder to purchase one
         share of common stock for two years subsequent to the close of the IPO
         at a price of $1.00 in the first year and $1.25 in the second year.
         Proceeds to the Company totaled approximately $867,000, net of offering
         costs. Concurrent with the


                                      F-15
<PAGE>


         closing of the IPO, all of the special warrants issued in connection
         with the private placement and acquisitions were automatically
         converted into 3,147,000 shares of the Company's common stock.

         DEBT RESTRUCTURING - In April of 2001, the Company issued 566,666
         shares of common stock to retire $425,000 of debt incurred in
         connection with the acquisitions of DACS and STG described above.

9.       INCOME TAXES

         The effect of recognizing accumulated deferred tax assets and
         liabilities, net of the valuation allowance, has been reflected in the
         accompanying 2001 and 2000 financial statements.

         The tax effects of temporary differences that give rise to significant
         portions of the Company's net deferred tax asset as of December 31,
         2001 and 2000 are as follows:

<Table>
<Caption>
                                                               2001           2000
                                                             ---------     ---------
<S>                                                          <C>           <C>
         Deferred tax assets:
           Net operating loss carryforwards                  $ 310,000     $  46,439
           Accrued liabilities                                 135,000        14,788
           Other                                                24,000         8,132
                                                             ---------     ---------
         Total deferred tax assets                             469,000        69,359
         Deferred tax liabilities - property and equipment      (9,000)       (4,872)
         Valuation allowance                                  (460,000)      (64,487)
                                                             ---------     ---------
         Net deferred tax asset                              $      --     $      --
                                                             =========     =========
</Table>

         The gross deferred tax assets have been reduced by a valuation
         allowance because management believes that it is currently more likely
         than not that such benefit will not be realized. At December 31, 2001,
         the Company had approximately $834,000 of net operating loss
         carryforwards that will begin to expire in 2021. The Internal Revenue
         Code places certain limitations on the annual amount of net operating
         loss carryforwards that can be utilized if certain changes in the
         Company's ownership occur.

         The Company's effective tax rate differs from the expected benefit at
         the federal statutory tax rate as follows for the year ended December
         31, 2001 and 2000:

<Table>
<Caption>
                                                               2001           2000
                                                             ---------     ---------
<S>                                                          <C>           <C>
         Taxes computed at federal statutory rate                (34.0)%       (34.0)%
         State income taxes, net of federal benefit               (3.1)         (3.1)
         Permanent and other items                                15.6           7.2
         Change in valuation allowance                            21.5          29.9
                                                             ---------     ---------
         Total provision                                            --%           --%
                                                             =========     =========
</Table>


                                      F-16
<PAGE>


10.      COMMITMENTS AND CONTINGENCIES

         The Company has various noncancelable capital and operating leases for
         office and operating space and equipment that expire at various dates.
         Aggregate minimum annual rentals under such leases are as follows:

<Table>
<Caption>
                                                            CAPITAL     OPERATING
         YEAR ENDING DECEMBER 31:                           LEASES        LEASES
                                                          ----------    ----------
<S>                                                       <C>           <C>
         2002                                             $   13,384    $  430,358
         2003                                                 13,384       415,724
         2004                                                  4,263       421,354
         2005                                                     --       419,104
         2006                                                     --       358,304
         Thereafter                                               --     1,760,232
                                                          ----------    ----------
         Total minimum lease payments                         31,031    $3,805,076
                                                          ----------    ==========
         Less amount representing interest                     2,558
                                                          ----------
         Present value of minimum lease payments              28,473
         Less current portion                                (11,696)
                                                          ----------
         Long-term portion of capital lease obligations   $   16,777
                                                          ==========
</Table>

         The obligations under capital leases are collateralized by equipment
         with a cost of $55,950 at December 31, 2001 and 2000 and associated
         accumulated amortization of $30,778 and $19,583 at December 31, 2001
         and 2000, respectively.

         During 2001 and 2000, rental expense under operating leases amounted to
         $292,926 and $200,968, respectively, including $117,588 and $46,398
         paid to related parties in 2001 and 2000, respectively.

         In July of 2000, the Company entered into a lease agreement with a
         company owned by the former stockholders of STG. The lease is for a
         term of five years with annual rental payments starting at $92,800 and
         increasing approximately 15% at the beginning of year two and
         approximately 14% at the beginning of year four.

         In December of 2001, the Company entered into a lease with an officer
         and majority stockholder of the Company for office and plant space. The
         lease is for a term of 11 years with annual rental payments starting at
         $297,500 and increasing annually an amount equal to the increase of the
         "Cost of Living Index."

11.      RELATED PARTY TRANSACTIONS

         In January 2000, the Company entered into an agreement with Bolder
         Venture Partners L.L.C. ("BVP"). The Company's majority shareholder is
         also a minority shareholder in BVP. Under the agreement, BVP provided
         consulting services to the Company relating to matters of corporate
         development, strategic planning, raising of capital and other financial
         matters, and assisted with certain private placements and public
         offerings of the Company's securities. In consideration of these
         services, the Company paid BVP a monthly fee of $4,500 through November
         2000 totaling $49,500, and $50,000 upon closing of the private
         placement of special warrants. The Company also granted warrants to BVP
         to acquire up to 960,000 shares of the Company's common stock for a
         period of five years from January, 2000. The term of the consulting
         agreement ended on November 30, 2000.


                                      F-17
<PAGE>


         On January 26, 2001, BVP agreed to a reduction in the number of
         warrants granted pursuant to the consulting agreement from 960,000 to
         865,000. The warrants became exercisable as follows:

                  (a)      375,000 at $0.25 per share as of January 2000, of
                           which 200,000 were exercised in September 2000;

                  (b)      315,000 at $1.00 per share as of May 2000 and;

                  (c)      175,000 at $0.75 per share upon completion of the
                           Company's initial public offering in March, 2001.

         The issuance of these warrants was accounted for in accordance with
         FAS 123. The fair value of the warrants was allocated to the purchase
         price of the businesses acquired and as a cost of the acquisitions (see
         Note 3).

         In December of 2001, the Company entered into a lease with an officer
         and majority stockholder of the Company for office and plant space. The
         lease is for a term of 11 years with annual rental payments starting at
         $297,500 and increasing annually an amount equal to the increase of the
         "Cost of Living Index."

         In December of 2001, the Company recorded a bonus payable in the amount
         of 250,000 shares of common stock valued at $50,000, to an officer and
         majority shareholder of the Company in return for the officer's
         personal guarantee on the Company's line of credit described above. In
         January of 2002, Industrialex issued 250,000 shares of common stock to
         retire this liability.

12.      EMPLOYEE BENEFIT PLANS

         The Company had three employee benefit plans. BIP employees
         participated in a simple IRA plan (the "BIP Plan"), STG employees
         participated in a 401(k) profit sharing plan (the "STG Plan") and
         Industrialex and DACS employees participated in a 401(k) savings plan
         (the "Industrialex Plan"). Employees who met the eligibility
         requirements, as defined by each respective plan, could contribute
         specified percentages of their salaries. Under the BIP Plan, the
         Company matched 100% of the employee's contribution up to a maximum of
         3% of the employee's total earnings. Under the STG Plan, the Company
         matched 100% of the employee's contribution up to a maximum of 3% of
         the employee's total earnings. These plans were discontinued during
         2001. The Company contributed $ 9,932 and $10,945 to all plans for the
         years ended December 31, 2001 and 2000.

13.      CONCENTRATIONS OF CREDIT AND OTHER RISKS

         CONCENTRATION OF CREDIT RISK - The Company's financial instruments that
         potentially subject the Company to significant concentration of credit
         risk consist of accounts receivable. The Company manages credit risk
         with respect to accounts receivable through a credit evaluation
         process. Historically, the Company has not incurred any significant
         credit related losses.

         SIGNIFICANT CUSTOMERS - The Company's five largest customers
         represented 26% and 37% of total 2001 and 2000 revenues, respectively,
         and 24% and 39% of total accounts receivable at December 31, 2001 and
         2000, respectively.


                                      F-18
<PAGE>


14.      NET LOSS PER SHARE

         The weighted average shares outstanding for the year ended December 31,
         2000 are calculated as follows:

<Table>
<S>                                                              <C>
         Shares issued upon merger of LLC and the Company        4,250,000
         Shares issued upon exercise of BVP warrants                58,333
         Special warrants issued in private placement            1,964,167
         Special warrants issued in acquisitions                   553,333
                                                                 ---------
                                                                 6,825,833
                                                                 =========
</Table>

         We have excluded all outstanding stock options and share purchase
         warrants from the calculation of diluted net loss for the years ended
         December 31, 2001 and 2000 because all such securities are
         anti-dilutive. Had the effect of these options and warrants been
         dilutive, the Company would have included an additional 2,935,428 and
         482,292 shares in diluted earnings per share for the years ended
         December 31, 2001 and 2000, respectively.

15.      SUBSEQUENT EVENTS (UNAUDITED)

         In February of 2002, Industrialex undertook a private placement of
         1,750,000 common shares at $0.20 per share. The Company sold the common
         shares in this placement directly to investors. The net proceeds to us
         from the sale of common stock, after deducting estimated expenses of
         approximately $7,000 was $343,000.

                                    * * * * *



                                      F-19
<PAGE>


                                 EXHIBIT INDEX


<Table>
<Caption>
EXHIBIT
NUMBER      DESCRIPTION OF EXHIBIT
-------     ----------------------
<S>         <C>

  3.1       Restated Articles of Incorporation of Industrialex Manufacturing
            Corp.(1)

  3.2       Bylaws of Industrialex Manufacturing Corp.(1)

  4.1       Form of Special Warrant (1)

  4.2       Form of Unit Warrant(1)

 10.1       Incentive Compensation Plan(1)

 10.2       Letter Agreement dated December 28, 1999 between Industrialex
            Manufacturing Corp. and Bolder Venture Partners L.L.C.(1)

 10.3       Letter Agreement dated June 28, 2000 between Industrialex
            Manufacturing Corp. and Bolder Venture Partners L.L.C. amending
            letter dated December 28, 1999(1)

 10.4       Stock Purchase Agreement dated March 22, 2000, between Industrialex
            Manufacturing Corp., Mark S. Trawinski, Donald R. Lauer and Angela
            Bennet Lauer(1)

 10.5       Stock Purchase Agreement dated May 1, 2000, between Industrialex
            Manufacturing Corp., Decorative & Coating Systems, Inc., Joseph
            Triolo, Jr., Joseph Triolo, Sr., Gary Triolo and John Triolo(1)

 10.6       Stock Purchase Agreement dated June 7, 2000, between Industrialex
            Manufacturing Corp., Screen Tech Graphics, Inc. and Susan Elizabeth
            DiNapoli and Vincent DiNapoli(1)

 10.7       Form of employee/consultant/confidentiality agreement(1)

 10.8       Lock-up Agreement entered into by Ahmad Akrami and Industrialex
            Manufacturing Corp.(2)

 10.9       Lock-up Agreement entered into by Mansour Akrami and Industrialex
            Manufacturing Corp.(2)

10.10       Lock-up Agreement entered into by Gary E. Landgren and Industrialex
            Manufacturing Corp.(2)

10.11       Lock-up Agreement entered into by Afshin K. Sarvestani and
            Industrialex Manufacturing Corp.(2)

10.12       Lock-up Agreement dated February 1, 2001 entered into by Bolder
            Venture Partners LLC and Industrialex Manufacturing Corp.(3)

10.13       Agreement dated April 4, 2001, between Industrialex Manufacturing
            Corp., Screen Tech Graphics, Inc. and Susan Elizabeth DiNapoli and
            Vincent DiNapoli(4)

10.14       Agreement dated April 17, 2001, between Industrialex Manufacturing
            Corp., Decorative & Coating Systems, Inc., Joseph Triolo, Jr.,
            Joseph Triolo, Sr., Gary Triolo and John Triolo(4)

10.15       Agreement dated December 1, 2001, between Industrialex Manufacturing
            Corp. and Sophia and Ahmad Akrami*

21          List of Subsidiaries*
</Table>
---------
(1) Previously filed on Form SB-2 dated August 14, 2000 (Reg. No. 333-43732)

(2) Previously filed on Amendment No. 2 to Form SB-2 dated December 8, 2000

(3) Previously filed on Amendment No. 4 to Form SB-2 dated February 2, 2001

(4) Previously filed on Form 10-KSB dated May 21, 2001

*   Filed herewith