<PAGE>

                                   EXHIBIT 13
                               2002 ANNUAL REPORT


                                TABLE OF CONTENTS

Message to Shareholders ...................................................    1
Company Profile ...........................................................    2
Market Information ........................................................    3
Selected Financial Data ...................................................    4
Management's Discussion and Analysis of Financial Condition
         and Results of Operations ........................................    5
Independent Auditors' Report ..............................................   10
Consolidated Balance Sheets ...............................................   11
Consolidated Statements of Operations .....................................   13
Consolidated Statements of Stockholders' Equity (Deficit) .................   14
Consolidated Statements of Cash Flows .....................................   15
Notes to Consolidated Financial Statements ................................   17
Directors and Officers ....................................................   37
Shareholder Information ...................................................   38





                           FORWARD LOOKING STATEMENTS


         This Annual Report includes certain forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products and similar matters. None of the
Company's statements about the future are guarantees of future results or
outcomes. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for such forward-looking statements. In order to comply with the terms of
the safe harbor, the Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that could significantly
affect the operations, performance, development and results of the Company's
business include, but are not limited to, the following: (i) changes in
legislative enforcement and direction; (ii) unusually poor or extreme weather
conditions; (iii) unanticipated delays in contract execution; (iv) project
delays or changes in project costs; (v) unanticipated changes in operating
expenses and capital expenditures; (vi) sudden loss of key personnel; (vii)
abrupt changes in competition or the political or economic climate; and (viii)
abrupt changes in market opportunities.

                                        1

<PAGE>

                             MESSAGE TO SHAREHOLDERS

Dear Shareholders:

The financial results produced by InfraCor Inc. during fiscal 2002 speak loudly
and clearly. Our Company's wholly-owned operating subsidiary, InfraCor of
Virginia, has been significantly impacted by the downturn in the economy,
resulting in a loss of net worth to the point of putting us back financially to
where InfraCor started at the beginning of fiscal 1999, four years ago. The
Company's net worth as of March 31, 2002 was a negative $1,000,313. Authorized
backlog has slipped to about $4,700,000.

Ironically, the China Steel air pollution control contract which had hampered
InfraCor in our attempts to get adequately capitalized, is now all but finished.
At the same time, while we continue to maintain a fifty percent interest in any
royalties associated with the future sale of Limestone Emission Control units,
to our knowledge no additional units have been sold by the patent holder,
Crystal Clear Technologies.

There are relatively few options available to InfraCor from which to choose at
this point. Even though InfraCor of Virginia managed to expand its existing
credit facility, it can no longer support the expenses associated with the
parent company, although those costs have been substantially decreased via
elimination of much of the corporate overhead. One possibility might be to
transfer ownership of InfraCor of Virginia from InfraCor, leaving the parent
company as a publicly-owned and actively reporting shell with which to reverse
merge into a profitable private concern, thereby making the latter entity
public. Management will continue to explore the company's strategic options
during fiscal 2003. We will continue to keep shareholders informed of the
developments as they occur via press releases and our corporate website
(www.infracor.net).

We appreciate your continuing loyalty and support.

Sincerely,

/s/ James B. Quarles

James B. Quarles
Chairman and President

                                       2

<PAGE>

                                 COMPANY PROFILE

         InfraCor Inc. ("INFC" or the "Company"), a Virginia corporation formed
in 1987, is a technology-based firm that historically has provided both
environmental and construction products and services. During the second half of
fiscal 1998, INFC made a determination to focus on its construction lines of
business and to de-emphasize its environmental products and services.
Specifically, INFC is directing its efforts to the development and growth of its
existing underground infrastructure products and services related to the
installation and rehabilitation of subsurface pipelines using trenchless
technologies as well as conventional methods. Trenchless technology involves the
installation and rehabilitation of underground pipelines with minimal surface
disruption. Some of the methods used are pipe relining, manhole construction and
"pipe bursting."

         INFC operates its infrastructure business through its wholly owned
affiliate, InfraCor of Virginia, Inc. ("ICVA"), a Virginia corporation
headquartered in Richmond, Virginia. ICVA was formed as a result of INFC's
acquisition on June 1, 1994, of Stamie E. Lyttle Company, Inc., Lyttle
Utilities, Inc. and LPS Corporation. The three firms, the history of which dates
back to 1947, were consolidated into one corporation, ICVA. ICVA utilizes
trenchless technologies to install and rehabilitate subsurface pipelines. INFC's
infrastructure customers include municipalities, government agencies, Fortune
500 companies and developers. ICVA, through its Service Division, also designed
and installed septic and irrigation systems and provided related repair and
maintenance services. As part of INFC's effort to focus on the infrastructure
business, INFC, in April 1998, sold the Service Division of ICVA to a new
corporation formed by Coleman S. Lyttle, a director of INFC and President of
ICVA at time of the transaction.

         Infracorps Technology, Inc., a Virginia corporation ("ICTI"), was
formed as a result of the purchase of the assets of Cat Contracting in Richmond,
VA in April 1999. ICTI utilizes trenchless technologies to install and
rehabilitate subsurface pipelines. ICTI's infrastructure customers include
municipalities and government agencies. Due to losses incurred in the operation,
INFC discontinued this operation during the previous fiscal year. Management is
completing the winding up of the business.

         INFC's principal executive offices are located at 7400 Beaufont Springs
Drive, Suite 415, Richmond, Virginia 23225, and its telephone number is (804)
272-6600.

                                        3

<PAGE>

                               MARKET INFORMATION

         The Common Stock of INFC was traded in the over-the-counter market and
was quoted under the symbol ETSI on the OTC Bulletin Board, an electronic
quotation and trade reporting service of the National Association of Securities
Dealers. On August 17, 2000, the Company changed its name to InfraCor Inc. and
is currently quoted under the symbol INFC.

         The table below sets forth for each of the fiscal years during INFC's
last two fiscal years the range of the high and low bid information for INFC
Common Stock. Such information reflects inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.

                                                           High        Low

Fiscal 2001
Quarter ended June 30, 2000 ....................         $0.3125    $0.1875
Quarter ended September 30, 2000 ...............         $  0.49    $0.3125
Quarter ended December 31, 2000 ................         $  0.25    $  0.17
Quarter ended March 31, 2001 ...................         $  0.34    $  0.22


Fiscal 2002
Quarter ended June 30, 2001 ....................         $  0.31    $  0.24
Quarter ended September 30, 2001 ...............         $  0.19    $  0.19
Quarter ended December 31, 2001 ................         $  0.10    $  0.10
Quarter ended March 31, 2002 ...................         $  0.01    $  0.01

                                       4

<PAGE>

                             SELECTED FINANCIAL DATA
                     as of and for the years ended March 31,
    except for 1998 which is as of and for the 10 month period ended March 31

<TABLE>
<CAPTION>

                                                            2002            2001             2000           1999           1998
                                                            ----            ----             ----           ----           ----
<S>                                                     <C>             <C>             <C>            <C>             <C>

Total revenue                                           $ 14,860,971    $ 25,119,188    $ 23,593,187   $ 18,877,867    $ 11,267,909
Gross profit (loss)                                       (1,805,193)      2,597,533       3,320,884      2,589,255       1,695,185
Operating income (loss)                                   (4,397,899)        528,617         661,210        315,998          19,530
Income (loss) from continuing
   operation                                              (5,335,084)         55,956         379,022        378,460        (658,861)
Income (loss) from discontinued
   operations                                                      -               -               -       (343,110)     (2,756,617)
Loss on disposal of discontinued
   operations                                                      -               -               -       (747,214)     (1,391,873)
Extraordinary gain                                                 -               -               -      2,550,000               -
Net income (loss)                                         (5,495,084)         76,956         518,022      1,838,136      (4,807,351)
Total assets                                              11,755,907      14,567,834      13,031,191      8,570,447       8,550,871
Long term debt,
  net of current portion                                   3,622,158       2,624,011       1,881,900        682,046         907,896
Total stockholders' equity (deficit)                      (1,000,313)      4,796,139       4,319,556      2,574,917        (713,619)
Income (loss) from continuing
   operations per common share:
    Basic                                                      (0.36)          (0.01)           0.02           0.02           (0.04)
    Diluted                                                    (0.36)          (0.01)           0.02           0.02           (0.04)
Income (loss) from discontinued operations per common share:

    Basic                                                          -               -               -          (0.02)          (0.18)
    Diluted                                                        -               -               -          (0.02)          (0.18)
Loss on disposal of discontinued operations per common share:

    Basic                                                          -               -               -          (0.04)          (0.09)
    Diluted                                                        -               -               -          (0.04)          (0.09)
Extraordinary gain

    Basic                                                          -               -               -           0.15               -
    Diluted                                                        -               -               -           0.14               -
Net income (loss) per common share:

    Basic                                                      (0.36)          (0.01)           0.02           0.11           (0.31)
    Diluted                                                    (0.36)          (0.01)           0.02           0.10           (0.31)

</TABLE>

                                        5

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Result of Operations

Fiscal year ended March 31, 2002 compared to fiscal year ended March 31, 2001.

          Revenues for the fiscal year ended March 31, 2002 (the "fiscal year
2002") were $14,860,971, as compared to $25,119,188 for the fiscal year ended
March 31, 2001 (the "fiscal year 2001"), resulting in a 40.8% decrease in
revenues. This decrease largely was the result of the economic downturn for
which municipalities elected to defer or hold contracts during the year

          Cost of goods and services for the fiscal year 2002 was $16,666,164 or
112.1% of sales, as compared to $22,521,655 or 89.6% of sales for the fiscal
year 2001. Gross profits for the fiscal year 2002 were a loss of $1,805,193 or
(12.1)% of sales compared to $2,597,533 or 10.4% of sales for the fiscal year
2001. The cost of goods sold increased due to the loss of several key employees
and the higher costs associated with completing several large projects that were
unanticipated.

          Selling, general and administrative expenses were $2,592,706 or 17.4%
of sales for the fiscal year 2002, as compared to $2,068,916 or 8.2% of net
sales for the fiscal year 2001. The general and administrative expense increase
was due to a general increase in all costs especially in employee benefits which
included the accrual of vacation pay earned but not taken.

          Loss on sale of assets for fiscal year 2002 was $79,565, as compared
to loss on sale of assets of $16,852 for the fiscal year 2001. These amounts
reflect the replacement of older equipment. Interest expense for the fiscal year
2002 was $902,669 compared to $641,642 for the fiscal year 2001. Interest
expense reflects interest paid on notes payable and long-term debt, including
credit lines, and capital leases. The increase was due to a general increase in
interest rates during the year, coupled with higher debt and capital lease
amounts.

          Loss from continuing operations for the fiscal year 2002 was
$5,335,084 compared to net income of $55,956 for the fiscal year 2001. The
income tax expense of $160,000 is the reduction of the benefit attributable to
the portion of the net operating loss carry forwards more likely will not be
realizable in the near term. Net loss for the fiscal year 2002 was $5,495,084 as
compared to a net income of $76,956 for the fiscal year 2001.

Fiscal year ended March 31, 2001 compared to fiscal year ended March 31, 2000.

          Revenues for the fiscal year 2001 were $25,119,188, as compared to
$23,593,187 for the fiscal year ended March 31, 2000 (the "fiscal year 2000"),
resulting in a 6.5% increase in revenues. This increase largely was the result
of several large contracts awarded to the Company during this period.

          Cost of goods and services for the fiscal year 2001 was $22,521,655 or
89.6% of sales, as compared to $20,272,303 or 86% of sales for the fiscal year
2000. Gross profits for the fiscal year 2001

                                        6

<PAGE>

were $2,597,533 or 10.4% of sales compared to $3,320,884 or 14% of sales for the
fiscal year 2000. The gross profit ratio declined, primarily due to losses
associated with ICTI of approximately $360,000.

          Selling, general and administrative expenses were $2,068,916 or 8.2%
of sales for the fiscal year 2001, as compared to $2,659,674 or 11.3 % of net
sales for the fiscal year 2000. The general and administrative expense decrease,
as a percentage, was due to increased sales and efforts by management to control
these costs during the year.

          Loss on sale of assets for fiscal year 2001 was $16,852, as compared
to gain on sale of $3,195 for the fiscal year 2000. These amounts reflect the
replacement of older equipment. Interest expense for the fiscal year 2001 was
$641,642 compared to $347,337 for the fiscal year 2000. Interest expense
reflects interest paid on notes payable and long-term debt, including credit
lines, and capital leases. The increase was due to a general increase in
interest rates during the year, coupled with higher debt and capital lease
amounts. Other income for fiscal year 2001 of $119,516 reflects proceeds from a
life insurance policy.

          Income from continuing operations for the fiscal year 2001 was $55,956
compared to $379,022 for the fiscal year 2000. The income tax benefit is the
effect of the Company having a net operating loss carryforward. The benefit
recognized is attributable to the portion of the net operating loss carry
forwards more likely than not realizable in the near term. Net income for the
fiscal year 2001 was $76,956 as compared to $518,022 for the fiscal year 2000.

Liquidity and Capital Resources as of March 31, 2002

          The Company incurred a net loss of approximately $5.5 million for the
year ended March 31, 2002, as compared to net income of $76,956 for the year
ended March 31, 2001. The deterioration in operating results is due, in part, to
decreased revenue, without a corresponding decrease in operating expenses. In
response to these trends, in January 2002, the Company initiated a plan to
reduce operating expenses by reducing its workforce by approximately 30
employees. The Company's ability to generate operating income in the future is,
in large part, dependent on its success in achieving revenue goals and reducing
operating expenses. The Company believes that its January 2002 reduction in
force will result in further reductions in operating expenses that will result
in a return to profitability in the first quarter of fiscal year 2003. Due to
market conditions, competitive pressures and other factors beyond its control,
there can be no assurances that the Company will be able to achieve its revenue
goals in the future. In the event that the anticipated cost reductions are not
realized or revenue goals are not met, the Company may be required to further
reduce its cost structure. There can be no assurance that the Company will
become profitable.

          The success of the Company is also dependent on its ability to
generate adequate cash for operating and capital needs. The Company is relying
on its existing cash and cash equivalents and credit facility together with
future sales and the collection of the related accounts receivable to meet its
future cash requirements. If cash provided by these sources is not sufficient to
fund future operations, the Company will be required to consider other
alternatives, such as: (1) further reductions in its expenditures for
operations; (2) mergers with companies in the infrastructure industry; or (3) to
seek additional capital through other means that may include the sale of assets,
the sale of equity securities or additional

                                        7

<PAGE>

borrowings. Although the Company believes that it has the ability to generate
additional cash through such actions, the results of such actions may be
dilutive. There can be no assurance that additional capital will be available,
or available on terms that are reasonable or acceptable to the Company. If the
Company were unable to generate additional cash, the business and financial
condition would be materially and adversely affected such that the Company may
need to consider other alternatives for its future.

          In March 2001, the secured credit line was obtained for $4,000,000.
The note that established the line calls for a monthly interest of prime plus
two percent over a two-year term. The credit line is provided by Southern
Financial Bank. In January 2002, Southern Financial Bank agreed to increase the
credit line to $4,500,000, and approved a $500,000 loan backed by the Small
Business Administration at an interest rate of prime plus two and a quarter
percent. Interest only will be payable monthly for the first six months and then
the loan will be repaid over the next 60 months. The Company also negotiated
concessions from its major leasing company to pay interest only for the next
three months. The Company believes that with this additional financing,
concessions and reduction of expenses through layoffs and cost containment,
there will be adequate working capital for the next twelve months. At March 31,
2002, the balance due under the line of credit was $4,331,975.

          In April, 2002, the line of credit was renegotiated and was reduced to
$4,200,000. The payment terms remain at prime plus two percent, with interest
only payable until May 1, 2003. In conjunction with this transaction, the
Company's bank approved a $1,250,000 loan guaranteed by the Small Business
Administration. The loan is payable with an interest rate of prime plus two and
one-half percent, with no principal payments for six months, and principal and
interest payable at $20,145 per month, thereafter. The loan proceeds were used
to finance outstanding payables. Additionally, the Company's bank approved
another loan for $525,000. This loan is payable in sixty monthly installments of
approximately $10,775 with interest at 8.5%, and is due on May 1, 2007. The
proceeds from this loan were used to refinance existing debt.

          In a transaction on September 30, 2000, Dr. Allen Kahn agreed to
purchase 800,000 shares of Series A Preferred Stock bearing a 4% dividend
payable monthly for $800,000. Along with the Series A Preferred Stock, warrants
were issued to purchase 300,000 shares of stock at $0.25. In a subsequent
transaction on December 31, 2000, Dr. Allen Kahn agreed to purchase 750,000
shares of Series A Preferred Stock bearing a 4% dividend payable monthly for
$750,000.

Warrants were issued to purchase 750,000 shares of stock at $.20. The Series A
shares were convertible to common stock. However, in April 2001, Dr. Allen Kahn
exchanged these shares for Series B Preferred Stock bearing an 8% dividend
payable monthly, without conversion rights.

          In a transaction on December 28, 1999, an investor agreed to purchase
751 shares of Series C Preferred Stock for $751,000. In addition warrants for
300,400 shares with a conversion price of $0.16 were issued to the investor. The
preferred shares paid 6% interest with no conversion rights. These shares were
redeemed in August 2000. The redemption resulted in a charge to retained earning
of $37,680.

          Net cash used by operating activities in 2002 was $2,654,660. Major
components of cash flows used in operating activities include an decrease in
accounts receivable of $861,430, and a decrease in costs

                                        8

<PAGE>

and estimated earnings in excess of billings on uncompleted contracts of
$965,826. These decreases reflect the completion and collection of revenue on
completed jobs. The decrease also reflects the holding of projects by the
municipalities during the economic downturn.

          Net cash used in investing activities consisted mainly of purchase of
property, plant and equipment in the amount of $228,355 that was the result of
usual replacement of capital assets. Net cash provided by financing activities
of $2,635,582 includes in part proceeds from notes payable bank of $2,495,984,
proceeds from long term debt of $1,942,979 and principal payments on long term
debt of $2,019,643. The cash and cash equivalents at March 31, 2002 were
$1,284,352 including $600,000 of restricted cash.

          New orders received for the fiscal year 2002 were $3,255,319 compared
to $21,086,297 for the fiscal year ended 2001. Backlog at March 31, 2002 was
$4,700,000, compared to $17,300,000 at March 31, 2001. The decrease in the
backlog was due to several large contracts being completed during the year and
municipalities holding contracts.

Impact of Accounting Pronouncements

          In June 2001, the FASB issued Statement No 141, "Business
Combinations" and Statement No. 142, "Goodwill and Other Intangible Assets."
Statement No. 141 prospectively prohibits the pooling of interest method of
accounting for business combinations initiated after June 30, 2001. Statement
No. 142 requires companies to cease amortizing goodwill that existed at June 30,
2001. The amortization of existing goodwill will cease on December 31, 2001. Any
goodwill resulting from acquisitions completed after June 30, 2001 will not be
amortized. Statement No. 142 also establishes a new method of testing goodwill
for impairment on an annual basis, or on an interim basis, if an event occurs or
circumstances change that would reduce the fair value of a reporting unit below
its carrying value. Statement No. 142 will be effective for fiscal years
beginning after December 15, 2001. Adoption is not expected to have a material
effect, if any, on the Corporation's financial position or the results of its
operations.

          In June 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations". It requires an entity to recognize the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred, if a reasonable estimate of fair value can be made. If a reasonable
estimate of fair value cannot be made in the period the asset retirement
obligation is incurred, the liability shall be recognized when a reasonable
estimate of fair value can be made. The Corporation is in the process of
evaluating the financial statement impact of adopting Statement No. 143, which
will be effective for financial statement issued after June 15, 2002.

          In August 2001, the FASB issued Statement No. 144, "Accounting the
Impairment or Disposal of Long-Lived Assets," which supercedes Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." Statement No. 143 will be effective for fiscal years
beginning after December 15, 2001. Adoption is not expected to have a material
effect, if any, on the Corporation's financial position or the results of its
operations.

                                        9

<PAGE>

                                  CONSOLIDATED
                              FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001















                                 INFRACOR, INC.
                                       AND
                                  SUBSIDIARIES

                                       10

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
InfraCor, Inc. and Subsidiaries

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

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

          In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
InfraCor, Inc. and Subsidiaries and the results of their operations and their
cash flows for the years then ended 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 shown in the financial
statements, the Company incurred a net loss of $5,495,084 during the year ended
March 31, 2002, and, as of that date, had a working capital deficiency of
$2,363,152 and a stockholders' deficit of $1,000,313. As described more fully in
Note 17, the Company is evaluating its alternatives with respect to these
matters. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Goodman & Company, L.L.P.

Norfolk, Virginia
June 7, 2002

                                       11

<PAGE>

INFRACOR, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
March 31,                                                                          2002                2001
                                                                             -------------------------------------
<S>                                                                          <C>                  <C>
                                    ASSETS

Current assets
     Cash and cash equivalents                                               $        684,552     $        649,385
     Accounts receivable:
        Trade (net of allowance of $50,000 in 2002
            and 2001)                                                               3,850,267            4,676,280
        Other                                                                           1,250               36,667
     Costs and estimated earnings on uncompleted contracts in
        excess of billings of: 2002 - $2,883,856; 2001 - $11,019,904                  711,537            1,677,363
     Notes receivable                                                                  64,008              147,606
     Inventories                                                                    1,152,574            1,125,005
     Prepaid expenses                                                                  77,555               63,200
                                                                             -------------------------------------
            Total current assets                                                    6,541,743            8,375,506
                                                                             -------------------------------------
Property, plant and equipment
     Furniture and fixtures                                                           348,364              364,236
     Tools and equipment                                                            7,586,889            7,473,369
     Vehicles                                                                       1,718,284            1,782,862
     Leasehold improvements                                                           311,248              307,663
                                                                                    9,964,785            9,928,130
                                                                             -------------------------------------
     Less accumulated depreciation and amortization                                (5,420,133)          (4,876,933)
                                                                             -------------------------------------
                                                                                    4,544,652            5,051,197
                                                                             -------------------------------------
Other assets

     Restricted cash                                                                  600,000              600,000
     Notes receivable                                                                   6,750              158,347
     Cash surrender value of life insurance (net of outstanding
        Loans of $212,024 in 2002 and $182,931 in 2001)                                 8,249               20,114
     Assets under contractual arrangements (net of
        valuation allowance of $858,000 in 2001)                                                           133,768
                                                                                            -
     Other                                                                             54,513              228,902
                                                                             -------------------------------------
                                                                                      669,512            1,141,131
                                                                             -------------------------------------

                                                                             $     11,755,907     $     14,567,834
                                                                             =====================================
</TABLE>

                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                                                   2002                 2001
                                                                             -------------------------------------
<S>                                                                          <C>                  <C>
                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 Current liabilities
      Bank overdraft                                                         $        518,724     $        586,458
      Note payable to bank                                                          4,331,975            2,507,551
      Notes payable to affiliates                                                     295,400              624,566
      Current portion of long-term debt                                             1,023,674              976,925
      Accounts payable                                                              2,076,099            2,209,957
      Accrued expenses and other liabilities                                          659,023              235,868
                                                                             -------------------------------------
             Total current liabilities                                              8,904,895            7,141,325
                                                                             -------------------------------------

 Long-term debt                                                                     3,622,158            2,624,011
 Notes payable to affiliates                                                          229,167                    -
 Liabilities under contractual arrangements                                                 -                6,359
                                                                             -------------------------------------
                                                                                    3,851,325            2,630,370
                                                                             -------------------------------------

             Total liabilities                                                     12,756,220            9,771,695
                                                                             -------------------------------------

 Stockholders' equity (deficit)
      Preferred stock, no par value; authorized 5,000,000 shares:
        4% cumulative Series A, $1 convertible, 1,750,000 and
            3,300,000 shares outstanding at March 31, 2002 and
            2001, respectively (liquidation value of $1,750,000)                      730,311            2,112,771
        8% Series B, 30,921 and 15,421 shares outstanding at
            March 31, 2002 and 2001, respectively (liquidation value
            of $3,092,100)                                                          3,092,100            1,542,100
            6% Series C, no shares outstanding at March 31, 2002 and
            2001                                                                            -                    -
      Common stock, no par value; authorized 30,000,000 shares; Outstanding
        16,572,387 and 16,492,387 shares at March 31,
        2002 and 2001, respectively                                                 5,966,226            5,950,226
      Additional paid-in capital                                                            -              167,540
      Accumulated deficit                                                         (10,788,950)          (4,976,498)
                                                                             -------------------------------------
             Total stockholders' equity (deficit)                                  (1,000,313)           4,796,139
                                                                             -------------------------------------

                                                                             $     11,755,907     $     14,567,834
                                                                             =====================================
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       13

<PAGE>

INFRACOR, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
 Years Ended March 31, 2002 and 2001
-----------------------------------------------------------------------------------

                                                          2002         2001
                                                     ------------------------------
<S>                                                  <C>               <C>
Contract revenues                                    $ 14,860,971      $ 25,119,188
                                                     ------------------------------

Costs of goods and services                            16,666,164        22,521,655
Selling, general and administrative
    expenses                                            2,592,706         2,068,916
                                                     ------------------------------
                                                       19,258,870        24,590,571
                                                     ------------------------------

                                                       (4,397,899)          528,617

Interest income                                            45,049            66,317
Interest expense                                         (902,669)         (641,642)
Other income                                                   --           119,516
Loss on sale of equipment                                 (79,565)          (16,852)
                                                     ------------------------------

Income (loss) before income taxes                      (5,335,084)           55,956

Income taxes (benefit)                                    160,000           (21,000)
                                                     ------------------------------

Net income (loss)                                    $ (5,495,084)     $     76,956
                                                     ==============================

Basic loss per common share                          $      (0.36)     $      (0.01)
                                                     ==============================

Diluted loss per common share                        $      (0.36)     $      (0.01)
                                                     ==============================
</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       14

<PAGE>

INFRACOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
Years Ended March 31, 2002 and 2001
-------------------------------------------------------------------------------------------------------------------------------
                                         Preferred Stock Preferred Stock  Preferred Stock                            Additional
                                            Series A        Series B         Series C           Common Stock          Paid-in
                                         -------------------------------------------------------------------------
                                             Amount          Amount           Amount       Shares          Amount     Capital
                                         --------------- ----------------------------   ------------  ------------ ------------
<S>                                        <C>             <C>              <C>           <C>           <C>            <C>
Balances at March 31, 2000               $    830,311    $  1,542,100     $  713,317    16,392,387    $  5,933,226   $       --

Issuance of Series A Preferred Stock        1,382,460              --             --            --              --      167,540
Redemption of Series A Preferred Stock       (100,000)             --             --            --              --           --
Redemption of Series C Preferred Stock             --              --       (713,317)           --              --           --
Common stock issued upon exercise
       of stock options                            --              --             --       100,000          17,000           --
Dividends                                          --              --             --            --              --           --
Net income                                         --              --             --            --              --           --
                                         --------------------------------------------------------------------------------------

Balances at March 31, 2001                  2,112,771    $  1,542,100             --    16,492,387       5,950,226      167,540

Issuance of Series B Preferred Stock               --       1,550,000             --            --              --           --
Issuance of stock to vendors for
services                                           --              --             --        80,000          16,000           --
Redemption of Series A Preferred Stock     (1,382,460)             --             --            --              --     (167,540)
Dividends                                          --              --             --            --              --           --
Net income (loss)                                  --              --             --            --              --           --
                                         --------------------------------------------------------------------------------------

Balances at March 31, 2002               $    730,311    $  3,092,100     $       --    16,572,387    $  5,966,226   $       --
                                         ======================================================================================


<CAPTION>
                                          Accumulated
                                            Deficit           Total
                                         ---------------  ------------
<S>                                        <C>              <C>
Balances at March 31, 2000                 (4,699,398)      4,319,556

Issuance of Series A Preferred Stock               --       1,550,000
Redemption of Series A Preferred Stock             --        (100,000)
Redemption of Series C Preferred Stock        (37,683)       (751,000)
Common stock issued upon exercise
       of stock options                            --          17,000
Dividends                                    (316,373)       (316,373)
Net income                                     76,956          76,956
                                         ----------------------------

Balances at March 31, 2001                 (4,976,498)      4,796,139

Issuance of Series B Preferred Stock               --       1,550,000
Issuance of stock to vendors for
services                                           --          16,000
Redemption of Series A Preferred Stock             --      (1,550,000)
Dividends                                    (317,368)       (317,368)
Net income (loss)                          (5,495,084)     (5,495,084)
                                         ----------------------------

Balances at March 31, 2002               $(10,788,950)   $ (1,000,313)
                                         ============================
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements

                                       15

<PAGE>

INFRACOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years Ended March 31, 2002 and 2001
------------------------------------------------------------------------------------------------------------

                                                                             2002                 2001
                                                                      --------------------------------------
<S>                                                                   <C>                   <C>
Cash flows from operating activities
     Net income                                                       $       (5,495,084)   $         76,956
     Adjustments to reconcile to net cash from
        operating activities:
        Depreciation and amortization                                            645,656             611,437
        Deferred income taxes                                                    160,000             (21,000)
        (Gain) loss on sale of equipment                                          88,514              16,853
        Write down of impaired assets under contractual
            arrangements                                                         100,768                  --
        Changes in:
           Accounts receivable                                                   861,430            (858,737)
           Costs and estimated earnings in excess of
              billings on uncompleted contracts                                  965,826            (669,899)
           Inventories                                                           (27,569)             (8,209)
           Prepaid expenses                                                      (14,355)               (303)
           Cash surrender value of life insurance, net                            11,865               3,355
           Accounts payable                                                     (133,858)         (1,540,147)
           Accrued expenses and other liabilities                                187,791            (228,591)
           Other assets                                                           (5,644)             (9,381)
                                                                      --------------------------------------
            Net cash from operating activities                                (2,654,660)         (2,627,666)
                                                                      --------------------------------------

 Cash flows from investing activities
     Purchases of property, plant and equipment                                 (228,355)           (349,568)
     Proceeds from sale of equipment                                              20,764               1,500
     Payments received on assets and liabilities under
        contractual arrangements, net                                             26,641            (116,664)
     Notes receivable payments (advances)                                        235,195              73,171
                                                                      --------------------------------------
            Net cash from investing activities                                    54,245            (391,561)
                                                                      --------------------------------------
</TABLE>

                                   (Continued)

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       16

<PAGE>

INFRACOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

<TABLE>
<CAPTION>
 Years Ended March 31, 2002 and 2001
------------------------------------------------------------------------------------------------------------

                                                                             2002                 2001
                                                                      --------------------------------------
<S>                                                                   <C>                   <C>
 Cash flows from financing activities
     Bank overdraft increase (decrease)                                          (67,734)            489,136
     Proceeds from notes payable to banks, net                                 1,824,424           1,507,551
     Proceeds from (payments on) notes payable from
         affiliates                                                             (100,000)             22,547
     Proceeds from exercise of common stock options                               16,000              17,000
     Proceeds from issuance of preferred stock                                         -           1,550,000
     Redemption of preferred stock                                                     -            (751,000)
     Proceeds from long-term debt                                              3,064,539           1,753,269
     Principal payments on long-term debt                                     (2,019,643)         (1,145,252)
     Preferred stock dividends                                                   (82,004)           (224,068)
                                                                      ---------------------------------------
            Net cash from financing activities                                 2,635,582           3,219,183
                                                                      ---------------------------------------

 Net change in cash and cash equivalents                                          35,167             199,956

 Cash and cash equivalents at beginning of year,
      including $600,000 of restricted cash                                    1,249,385           1,049,429
                                                                      ---------------------------------------
 Cash and cash equivalents at end of year,
      including $600,000 of restricted cash                            $       1,284,552    $      1,249,385
                                                                      ---------------------------------------
</TABLE>

Supplemental disclosures of cash flow information and noncash investing and
financing activities

     Interest paid on notes payable and long-term debt was $881,872 and $622,462
        for the fiscal years 2002 and 2001, respectively. Capital lease
        obligations of $537,481 were incurred during 2001 under leases entered
        into for vehicles, furniture and fixtures, and equipment. Accrued and
        unpaid dividends amounted to $235,363 for the year ended March 31, 2002.

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       17

<PAGE>

INFRACOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2002 AND 2001


NOTE 1 - BUSINESS AND ORGANIZATION

       InfraCor, Inc., formerly ETS International, Inc., (the "Company") is a
       Virginia corporation formed in 1987. The Company and its wholly-owned
       subsidiaries provide infrastructure products and services primarily
       related to the installation and rehabilitation of underground pipelines.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


       Principles of Consolidation

       The consolidated financial statements include the accounts of InfraCor,
       Inc. and its wholly owned subsidiaries, IC Subsidiary, Inc. (formerly
       ETS, Inc.), ETS Analytical Services, Inc., Infracorps of Florida, Inc.
       (formerly ETS Liner, Inc.), Infracorps of Virginia, Inc. (formerly ETS
       Water and Waste Management, Inc.), Infracorps Technology, Inc. and
       Infracorps International, Inc. Significant intercompany accounts and
       transactions have been eliminated in consolidation. During fiscal 1999,
       the operations of Infracorps of Florida, Inc. were discontinued. During
       fiscal 1998, substantially all assets and certain liabilities of ETS,
       Inc. and ETS Analytical Services, Inc. were sold.

       Cash Equivalents

       The Company considers all highly liquid investments with a maturity of
       three months or less when purchased to be cash equivalents.

       Inventories

       Inventories, consisting of raw materials, tools, and supplies are stated
       at the lower of cost (first-in, first-out method) or market.

                         (Notes continued on next page)

                                       18

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

       Credit Risk

       Financial instruments which potentially subject the Company to
       concentration of credit risk consist principally of temporary cash
       investments, restricted cash and trade accounts receivable. At March 31,
       2002 and 2001, the Company had deposits in excess of federally insured
       limits of approximately $1,009,119 and $956,442, respectively. The
       Company places its temporary cash investments and restricted cash with
       high credit quality financial intermediaries to minimize its exposure.
       The Company grants trade credit to customers in the normal course of
       business, and any related losses, in the aggregate, have not exceeded
       management's expectations.

       Contract Revenue and Cost Recognition

              The Company recognized revenues from fixed-price and modified
              fixed-price construction contracts on the percentage-of-completion
              method, measured by the percentage of cost incurred to date to
              estimated total cost for each contract. That method is used
              because management considers total cost to be the best available
              measure of progress on the contracts. Because of inherent
              uncertainties in estimating costs, it is at least reasonably
              possible that the estimates used will change within the near term.

       Revenues related to certain government contracts are subject to
       adjustments upon audit of costs by the respective governmental entity,
       with any such adjustments reflected in the accounting period in which
       determined. Billings are prepared according to specific terms of
       individual contracts. Contracts will generally provide for periodic
       payments as work is completed with final amounts due upon completion and
       acceptance of the project by the customer.

       Contract costs include all direct material and labor costs and those
       indirect costs related to contract performance, such as indirect labor,
       supplies, tool, repairs, and depreciation. Selling, general, and
       administrative costs are charged to expense as incurred. Provisions for
       estimated losses on uncompleted contracts are made in the period in which
       such losses are determined. Changes in job performance, job condition,
       and estimated profitability may result in revisions to costs and income,
       which are recognized in the period in which the revisions are determined.
       Changes in estimated job profitability resulting from job performance,
       job conditions, contract penalty provisions, claims, change orders, and
       settlements, are accounted for as changes in estimates in the current
       period.

       The asset, "Costs and estimated earnings in excess of billings on
       uncompleted contracts," represents revenues recognized in excess of
       amounts billed.

                         (Notes continued on next page)

                                       19

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

       Property, Plant and Equipment

       Property, plant and equipment are stated at cost. Property and equipment
       under capital leases are stated at the present value of minimum lease
       payments at the inception of the lease.

       Provisions for depreciation and amortization have been calculated using
       the straight-line method over the following estimated useful lives of the
       assets:

              Furniture and fixtures                              5 - 10 years
              Laboratory equipment                                5 - 10 years
              Tools and equipment                                 5 - 10 years
              Vehicles                                            3 - 10 years
              Leasehold improvements                              5 - 31 years

       Property and equipment under capital leases are amortized on the
       straight-line basis over the shorter of the lease term or the estimated
       useful life of the asset. Leasehold improvements are amortized on the
       straight-line basis over the shorter of the lease term or the estimated
       useful life of the improvement.

       Research and Development

       Research and development costs are charged to operations as incurred.

       Income Taxes

       Income taxes are accounted for under the asset and liability method.
       Deferred tax assets and liabilities are recognized for the future tax
       consequences attributable to differences between the financial statement
       carrying amounts of existing assets and liabilities and their respective
       tax basis. Deferred tax assets and liabilities are measured using enacted
       tax rates expected to apply to taxable income in the years in which those
       temporary differences are expected to be recovered or settled. The effect
       on deferred tax assets and liabilities of a change in tax rates is
       recognized in income in the period that includes the enactment date.

                         (Notes continued on next page)

                                       20

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

       Earnings Per Share

       As a public business enterprise, the Company is required to make a dual
       presentation of basic and diluted EPS on the face of the income
       statement, and present a reconciliation of the numerator and denominator
       of the basic EPS computation to the numerator and denominator of the
       diluted EPS computation. Basic EPS excludes dilution and is computed by
       dividing income available to common stockholders by the weighted-average
       number of common shares outstanding for the period. Diluted EPS reflects
       the potential dilution that could occur if securities or other contracts
       to issue common stock were exercised or converted into common stock or
       resulted in the issuance of common stock that then shared in the earnings
       of the entity.

       Business Segments and Related Information

       As a public business enterprise, the Company is required to report
       information about operating segments in annual financial statements and
       in interim financial reports issued to shareholders. The Company is also
       required to make related disclosures about products and services,
       geographic areas and major customers. Operating segments are components
       of an enterprise about which separate financial information is available
       that is evaluated regularly by management in deciding how to allocate
       resources and in assessing performance. For the years ended March 31,
       2002 and 2001, the Company had only one operating segment.

       Stock Options and Warrants

       The Company accounts for its stock options and warrants in accordance
       with the provisions of Accounting Principles Board (APB) Opinion No. 25,
       Accounting for Stock Issued to Employees, and related interpretations. As
       such, compensation expense is recorded on the date of grant only if the
       current market price of the underlying stock exceeded the exercise price.
       Statement of Financial Accounting Standards No. 123, Accounting for
       Stock-Based Compensation (Statement No. 123), permits entities to
       recognize as expense over the vesting period the fair value of all
       stock-based awards on the date of grant. Alternatively, Statement No. 123
       also allows entities to continue to apply the provisions of APB Opinion
       No. 25, and provide pro forma net income or loss and pro forma net income
       or loss per common share disclosures for stock option and warrant grants
       made in 1996 and future years as if the fair-value-based method defined
       in Statement No. 123 had been applied. The Company has elected to
       continue to apply the provisions of APB Opinion No. 25 and provide the
       pro forma disclosure provisions of Statement No. 123.

                         (Notes continued on next page)

                                       21

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


       Estimates

       The preparation of financial statements requires management to make
       estimates and assumptions that affect the reported amounts of assets,
       liabilities, revenues, and expenses and disclosure of contingent assets
       and liabilities for the reported periods. Actual results could differ
       from those estimates and assumptions.

       Advertising

       Advertising costs are charged to operations as incurred.

       Reclassification

       Certain reclassifications have been made to the consolidated financial
       statements of the prior periods, to place them on a basis comparable with
       the current year's consolidated financial statements.

NOTE 3 - RESTRICTED CASH

       Restricted cash represents a performance bond relating to the Company's
       contract with China Steel Corporation (the China Steel Contract). The
       Board of Directors of the Company is continuing to review the financial
       and other aspects of the Limestone Emission Control (LEC) technology that
       is being developed for the China Steel Contract. This review was
       undertaken after potential issues were brought to current management's
       attention regarding the budget to meet certain of the performance
       specifications of the China Steel Contract and the overall viability of
       the LEC technology for wide-scale commercialization. If the LEC
       technology does not meet contract specifications, China Steel Corporation
       may seek to impose financial penalties or attempt to recover damages or
       obtain other relief under the contract, including drawing down on the
       $600,000 performance bond posted by the Company. The Company has entered
       into a management agreement with Air Technologies, Inc. (ATI), a
       newly-formed firm, to provide management services with respect to the
       China Steel Contract. In connection with the sale of the Company's
       environmental operations subsidiary in March, 1998, ATI and CCTI agreed
       to accept responsibility for any potential liabilities associated with
       the China Steel Contract and to provide their best efforts to have the
       contract transferred from the Company to ATI. ETS Acquisition, Inc., CCTI
       and ATI are owned by John D. McKenna, Arthur B. Nunn, III and John C.
       Mycock, three former executive officers of the Company and former members
       of the Company's Board of Directors.

                         (Notes continued on next page)

                                       22

<PAGE>

NOTE 4 - ACCOUNTS RECEIVABLE

       A summary of the changes in the allowance for doubtful accounts follows:

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

         Balances, beginning of period          $     50,000     $     50,000
         Provision for bad debts                           -                -
         Accounts written off                              -                -
                                               ---------------- ----------------
         Balances, end of period                $     50,000     $     50,000
                                               ---------------- ----------------




       Accounts receivable includes retainage receivable of $877,851 and
       $898,027 as of March 31, 2002 and 2001, respectively.

NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS IN EXCESS OF
         BILLINGS

       Costs, estimated earnings, and billings on uncompleted contracts are
       summarized as follows as of March 31:

                                                       2002            2001
                                                       ----            ----
         Costs incurred on uncompleted contracts     $ 3,249,193     $ 9,964,628
         Estimated earnings                              346,200       2,732,639
                                                    --------------- ------------
                                                       3,595,393      12,697,267
         Billings to date                              2,883,856      11,019,904
                                                    --------------- ------------
         Costs and estimated earnings in
         excess of billing                           $   711,537     $ 1,677,363
                                                    --------------- ------------

                         (Notes continued on next page)

                                       23

<PAGE>

NOTE 6 - NOTE PAYABLE TO BANK AND LONG-TERM DEBT

      Note payable to bank consists of the following:

<TABLE>
<CAPTION>
                                                                                      March 31,         March 31,
                                                                                        2002               2001
                                                                                   --------------     ---------
        <S>                                                                        <C>                 <C>
         $4,500,000 line of credit, maturing on May 1, 2003,
         bearing interest at prime plus 2%, collateralized by
         accounts receivable and inventory, contracts and
               contract rights, and assignment of proceeds of
         $600,000 certificate of deposit                                           $    4,331,975     $    2,432,551
         $1,250,000 line of credit, due on demand, bearing
         interest at prime plus 1%, collateralized by
         accounts receivable and certain equipment.                                             -             75,000
                                                                                   --------------     --------------
                                                                                   $    4,331,975     $    2,507,551
                                                                                   ==============     ==============


<CAPTION>
      <S>                                                                          <C>                <C>
      Long-term debt consists of the following:

         $300,070 term note payable to bank, due January 2004, bearing interest
               at 10%, payable in monthly installments of $9,689 including
               interest, collateralized by certain equipment.                      $      193,965     $      285,237
         $500,000 term note payable to bank, due April 2005, bearing interest at
               10.5%, payable in monthly installments of $6,749 including
               interest, collateralized by certain equipment.                             440,891            473,437
         $161,000 term note payable to finance company, due July 2001, bearing
               interest at 25.58%, payable in monthly installments of $29,114
               including interest, collateralized by certain  equipment.                        -            109,839
         $250,000  term note payable to finance  company,  due December  2005,
               bearing interest at 20.23%, payable in monthly installments of
               $6,199 including interest, collateralized by certain equipment
               and vehicles, which are cross-collateralized with other notes and
               leases assigned to another financial institution also having
               security interests in aspects of the same equipment and vehicles
               securing this debt.                                                        207,650            232,134
         $300,000 term note payable to finance company, due December 2005,
               bearing interest at 20.22%, payable in monthly installments of
               $7,437 including interest, collateralized by certain equipment
               and vehicles, which are cross-collateralized with other notes and
               leases assigned to another financial institution also having
               security interests in aspects of the same equipment and vehicles
               securing this debt.                                                        246,018            278,624
</TABLE>

                                       24

<PAGE>

NOTE 6 - NOTE PAYABLE TO BANK AND LONG-TERM DEBT (continued)

<TABLE>
<CAPTION>
      <S>                                                                          <C>                <C>
      $350,000 term note payable to bank, due July 2004, bearing interest at
            9.75%, payable in monthly installments of $11,265 including
            interest and collateralized by certain equipment.                             280,578                  -
      $750,000 term note payable to finance company, due March 2007, bearing
            interest at 16.59%, payable in monthly installments of $17,257
            including interest, collateralized by certain equipment and
            vehicles, which are cross-collateralized with other notes and
            leases assigned to another financial institution also having
            security interests in aspects of the same equipment and vehicles
            securing this debt                                                            700,134                  -
      $190,139 term note payable to finance company, due February 2002,
            bearing interest at 9.75%, payable in varying monthly
            installments of $2,330 to $6,545 including interest and
            collateralized by equipment.                                                        -             24,466
      $1,000,000  term note  payable to finance  company,  due March  2006,
            bearing interest at 11.75%, payable in monthly installments of
            $22,118 including interest and collateralized by certain
            equipment and vehicles, which are cross-collateralized with other
            notes and leases assigned to another financial institution also
            having security interests in aspects of the same equipment and
            vehicles securing this debt                                                   843,831                  -
$500,000 term note payable to bank, due August 2007, bearing interest
      at 7%, payable in monthly installments of $2,917 including
      interest and collateralized by certain equipment.                                   500,000                  -
Capital lease obligations, with maturities to 2005, bearing interest at
      approximately 24%, payable in varying monthly installments of
      $1,388 to $14,562 including interest, collateralized by certain
      equipment and vehicles, which are cross-collateralized with other
      notes and leases to another financial institution also having
      security interests in aspects of the same equipment and vehicles
      securing this debt.                                                                 443,628            515,602
Capital lease obligations, with maturities to 2004, bearing interest
      at varying interest rates from 6.33% to 14.7%, payable in varying
      monthly installments of $375 to $29,907 including interest,
      collateralized by vehicles and equipment.                                           789,137          1,681,597
                                                                                   --------------     --------------
                                                                                        4,645,832          3,600,936
Less current maturities                                                                 1,023,674            976,925
                                                                                   --------------     --------------

                                                                                   $    3,622,158     $    2,624,011
                                                                                   ==============     ==============
</TABLE>

                                       25

<PAGE>

NOTE 6 - NOTE PAYABLE TO BANK AND LONG-TERM DEBT (continued)

        Principal payments of long-term debt for future years are as follows:

               2003                            $    1,023,674
               2004                                 1,136,368
               2005                                 1,034,752
               2006                                 1,054,713
               2007                                   347,703
               Thereafter                              48,622
                                                  -----------

                                                  $ 4,645,832
                                                  ===========

NOTE 7 - LEASES

        Property, plant and equipment include the following amounts of assets
under capital lease obligations:

                                                     March 31,         March 31,
                                                        2002              2001
                                                        ----              ----

          Furniture and fixtures                    $    75,822    $    75,822
          Tools and equipment                         3,108,826      3,197,712
          Vehicles                                      133,705        133,705
                                                    -----------    -----------
                                                      3,318,353      3,407,239
          Less - accumulated depreciation              (990,893)      (650,169)
                                                    ------------   ------------

                                                    $ 2,327,460    $ 2,757,070
                                                    ===========    ===========

        Capital lease payments were $358,041 in fiscal 2002, and $671,663 in
fiscal 2001.

                         (Notes continued on next page)

                                       26

<PAGE>

NOTE 7 - LEASES (continued)

        Future minimum payments under capital and operating leases are as
        follows:
<TABLE>
<CAPTION>
                                                                               Capital     Operating
                                                                               Leases        Leases
                                                                             ----------   ------------
         <S>                                                                 <C>          <C>
         2003                                                                $  546,965   $  730,880
         2004                                                                   502,193      511,872
         2005                                                                   368,907      216,365
         2006                                                                   250,547       32,263
         2007                                                                    47,850            -
                                                                             ----------   ----------
                                                                              1,716,462   $1,491,380
                                                                                          ==========
         Less amounts representing interest (rates 6.3% - 24%)                 (483,697)
                                                                             ----------
         Present value of lease payments (including $384,438 classified
             as current)                                                     $1,232,765
                                                                             ==========
</TABLE>

        Certain equipment and vehicles securing leases are cross-collateralized
        with other notes and leases, which were assigned to another financial
        institution also having security interests in aspects of the same
        equipment and vehicles securing these leases.

        Rent expense for operating leases of approximately $1,030,166, and
        $1,498,669 was recognized for the years ended March 31, 2002 and 2001,
        respectively.

NOTE 8 - ASSETS AND LIABILITIES UNDER CONTRACTUAL ARRANGEMENTS

        During the ten-month period ended March 31, 1998, the Company disposed
        of its environmental operations segment. In October 1997, the Company
        sold substantially all of the assets and certain liabilities of ETS
        Analytical Services, Inc. (ETSAS), a wholly owned subsidiary, to Q
        Enterprises, Inc. (Q Enterprises), a company owned by James B. Quarles,
        a former employee and senior vice president of ETS International, Inc.
        Mr. Quarles has since become president and chief executive officer of
        the Company and sold his interest in Q Enterprises. Since the risks of
        ownership were not transferred to Q Enterprises, no sale was recognized
        for accounting purposes. Accordingly, the assets and liabilities
        transferred are shown in the noncurrent sections of the balance sheet
        and are designated as "assets under contractual arrangements" and
        "liabilities under contractual arrangements." The Company received an
        8.5 percent promissory note for $1,000,000 with payments amortized over
        30 years with a balloon payment after 10 years. As payments of
        principal and interest are received, they are being recorded as a
        reduction to assets under contractual arrangements until such time the
        Company determines a sale can be recorded for accounting purposes. As
        future payments of principal and interest are not currently expected,
        the note is considered impaired. An impairment loss of $100,768 was
        recognized on assets held under contractual arrangements for the year
        ended March 31, 2002. Prior to impairment, the Company received $33,000
        in cash payments on the related note.

                         (Notes continued on next page)

                                       27

<PAGE>

NOTE 9 - PREFERRED STOCK

        Series A 4% cumulative convertible preferred stock has no par value,
        but is convertible into the Company's common stock on a share for share
        basis. The stock is redeemable at the option of the Company. Dividends
        on the Series A preferred stock are cumulative from the date of
        original issuance and are payable quarterly. During the fiscal year
        ended March 31, 2001, 100,000 shares of this series were redeemed. In
        April, 2001, the Company exchanged 15,500 shares of its Series B
        preferred stock for 1,550,000 shares of Series A preferred stock. Total
        dividends of $70,000 and $163,500 were declared and accrued during the
        fiscal year ended March 31, 2002 and 2001, respectively.

        In March 1999, the Company converted $1,042,100 in debt obligations to
        related parties into 10,421 shares of 8% non-cumulative,
        non-convertible Series B preferred stock. Dividends are paid monthly.
        In January 2000, 5,000 additional shares of Series B preferred stock
        were issued for $500,000. Total dividends paid or accrued on Series B
        preferred stock were $247,368 and $123,368 during the fiscal years
        ended March 31, 2002 and 2001, respectively.

        In December, 1999, the Company issued 751 shares of 6% non-cumulative,
        non-convertible Series C preferred stock. These shares were redeemed by
        the Company during the year ended March 31, 2001. Total dividends paid
        on these shares prior to redemption in the fiscal year ended March 31,
        2001 were $29,505.

NOTE 10 - INCOME TAXES

        Income tax expense (benefit) differs from the amount computed by
        applying the statutory corporate tax rate of 34 percent to income
        (loss), before income taxes as follows:

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

Expected federal income tax expense (benefit)            $(1,813,929)  $ 19,025
Increase (decrease) resulting from:
State income tax, net of federal income tax
    impact                                                  (212,151)     2,238
Meals and entertainment                                        4,502      7,251
Non-taxable life insurance proceeds                               --    (47,736)
Officers life insurance premiums, net                          6,247     16,358
Change in the beginning of the year balance of
    the valuation allowance for deferred tax assets        2,168,784    (18,799)
Other                                                          6,547        663
                                                         -----------   --------
Income tax expense (benefit)                             $   160,000   $(21,000)
                                                         ===========   ========

                         (Notes continued on next page)

                                       28

<PAGE>

NOTE 10 - INCOME TAXES (continued)

        The significant components of deferred income tax expense (benefit) for
the years ended March 31, 2002 and 2001, are as follows:

<TABLE>
<CAPTION>
                                                                2002       2001
                                                              --------   --------
<S>                                                           <C>        <C>
     Deferred tax expense (benefit) exclusive of the
        components listed below                               $     --   $ (2,201)
     Increase (decrease) in beginning of the year balance
        of the valuation allowance for deferred tax assets     160,000     18,799)
                                                              --------   --------

     Deferred income tax expense (benefit)                    $160,000   $(21,000)
                                                              ========   ========
</TABLE>

        The tax effects of temporary differences that give rise to significant
        portions of the deferred tax assets and deferred tax liabilities at
        March 31, 2001 and 2000 are presented below:

<TABLE>
<CAPTION>
                                                                                         2002             2001
                                                                                      ----------       ----------
<S>                                                                               <C>              <C>
     Deferred tax assets:
        Net operating loss and tax credit carryforwards                           $    3,808,999   $    1,771,859
        Bad debts                                                                         18,980           18,980
        Accrued costs, principally due to accrual for financial reporting
           purposes                                                                       34,127           26,231
        Other                                                                             16,704           16,702
                                                                                  --------------   --------------
     Total gross deferred tax assets                                                   3,878,810        1,833,772
        Less valuation allowance                                                      (3,791,424)      (1,622,640)
                                                                                  --------------   --------------

     Deferred tax asset, net of valuation allowance                                       87,386          211,132
                                                                                  --------------   --------------

     Deferred tax liabilities:
        Property, plant and equipment, principally due to differences in
           depreciation for financial reporting and tax purposes.

                                                                                          87,386           51,132
                                                                                  --------------   --------------

      Net deferred tax                                                            $                $      160,000
                                                                                  ==============   ==============
</TABLE>

                         (Notes continued on next page)

                                       29

<PAGE>

NOTE 10 - INCOME TAXES (continued)

         In assessing the realizability of deferred tax assets, management
         considers whether it is more likely than not that some portion or all
         of the deferred tax assets will not be realized. The ultimate
         realization of deferred tax assets is dependent upon the generation of
         future taxable income during the periods in which those temporary
         differences become deductible. Management considers the scheduled
         reversal of deferred tax liabilities, projected future taxable income
         and tax planning strategies in making this assessment. Based upon the
         level of historical taxable losses and projections for future taxable
         income over the periods which the deferred tax assets are deductible,
         management believes it is more likely than not the Company will not
         realize the benefits of these deductible differences and loss
         carryforwards in excess of the amount which can be offset by the
         reversal of future taxable items in the foreseeable future.

         At March 31, 2002, the Company has loss carryforwards for income tax
         purposes of $9,948,993 available to offset taxable income. If not
         utilized, these loss carryforwards will expire as follows:

                Expiration Date

                2008                                   $  168,837
                2011                                      582,048
                2012                                      100,841
                2013                                    3,105,673
                2020                                      625,044
                2022                                    5,366,549
                                                       ----------
                                                       $9,948,993
                                                       ==========

NOTE 11 - STOCK OPTIONS AND WARRANTS

         Stock options are granted pursuant to the Company's 1994, 1995 and 1997
         Nonstatutory Stock Option Plans. Each option is made exercisable, in
         whole or in part, at the discretion of the Company's Board of
         Directors. The Company's Board of Directors determines the exercise
         price at the time the options are granted. No options have been granted
         at less than the fair value of the Company's stock on the effective
         date of the grant. The maximum number of shares that may be issued
         under each plan is two million shares. No options will be granted under
         the 1994, 1995, or 1997 Nonstatutory Stock Option Plans after June 1,
         1999, December 31, 1999 and December 31, 2002, respectively. However,
         options granted under the plans before those dates may extend beyond
         those respective dates, but the period of the options shall not exceed
         ten years from the date of the grant. Warrants are issued to certain
         executive officers and directors at the discretion of the Company's
         Board of Directors for services in their respective capacities, and in
         conjunction with the issuance of preferred stock.

                         (Notes continued on next page)

                                       30

<PAGE>

NOTE 11 - STOCK OPTIONS AND WARRANTS (continued)

         The aggregate amount of shares under option pursuant to these
         agreements were as follows:

<TABLE>
<CAPTION>
                                                                           Number of             Weighted Average
                                                                            Shares                Exercise Price
                                                                           ---------             ----------------
<S>                                                                        <C>                   <C>
     Options outstanding at March 31, 2000                                 2,844,000                $   0.47
     Granted                                                                      --                $     --
     Exercised                                                              (100,000)               $   0.17
     Expired                                                                (622,000)               $   0.71
                                                                           ---------
     Options outstanding at March 31, 2001                                 2,082,000                $   0.41

     Granted                                                                      --                $     --
     Exercised                                                                    --                $     --
     Expired                                                                (402,000)               $   0.75
                                                                           ---------
     Options outstanding at March 31, 2002                                 1,680,000                $   0.32
                                                                           =========

     Price range - $.17 - $.27 (weighted-average remaining
         contractual life of 1.3 years)                                    1,175,000                $   0.20
     Exercise price $0.50 (weighted-average remaining
         contractual life of 1.0 year)                                       465,000                $   0.50
     Exercisce price - $1.75 (no expiration)                                  40,000                $   1.75

     Exercisable options:
     March 31, 2002                                                        1,673,000                $   0.32
     March 31, 2001                                                        2,068,000                $   0.41
</TABLE>


         The aggregate amount of shares under warrant agreements were as
         follows:

<TABLE>
<CAPTION>
                                                 Number of    Weighted Average
                                                  Shares       Exercise Price
                                                 ---------    ----------------
<S>                                             <C>           <C>
     Warrants outstanding at March 31, 2000      6,886,295       $     0.33
     Granted                                     1,050,000       $     0.19
     Expired                                      (735,525)      $     0.97
                                                ----------
     Warrants outstanding at March 31, 2001      7,198,770       $     0.33
     Granted                                       150,000       $     0.17
     Expired                                    (1,033,350)      $     0.25
                                                ----------
     Warrants outstanding at March 31, 2002      6,315,420       $     0.23
                                                ==========
</TABLE>

                         (Notes continued on next page)

                                       31

<PAGE>

NOTE 11 - STOCK OPTIONS AND WARRANTS (continued)

         The per share weighted average fair values of stock options and
         warrants granted during the period ended in 2002 was $.16, on the
         various dates of grant using the Black-Scholes option pricing model
         with the following weighted average assumptions: expected dividend
         yield of 0 percent, risk free interest rate of 4.50 percent, expected
         volatility of 191 percent and an expected life of 4 years. No options
         were granted during the fiscal ended March 31, 2001. Warrants were
         issued in conjunction with the Series A preferred stock issuance during
         the fiscal year ended March 31, 2001, and are, therefore,
         non-compensatory.

         The Company uses the intrinsic value method of APB Opinion No. 25 for
         recognizing stock-based compensation in the financial statements. Had
         the Company determined compensation cost based on the fair value at the
         grant date for its stock options and warrants under the provision of
         Statement No. 123, the Company's net income (loss) and net income
         (loss) per common share would have been as shown in the following
         table:

                                                          2002            2001
                                                        --------        --------
         Net income
                  As reported                         $(5,495,084)    $  76,956
                  Pro forma                            (5,519,084)       76,956

         Net loss per common share:
                  Basic, as reported                  $     (0.36)    $   (0.01)
                  Basic, pro forma                          (0.36)        (0.01)
                  Diluted, as reported                      (0.36)        (0.01)
                  Diluted, pro forma                        (0.36)        (0.01)


         Pro forma net income (loss) reflects only options granted from the
         periods ended in 1996 through 2002, and applicable cumulative catch-up
         adjustments for forfeitures. Therefore, the full impact of calculating
         compensation cost for stock options under Statement No. 123 is not
         reflected in the pro forma net income (loss) amounts presented above,
         because compensation cost is reflected over the options vesting periods
         and compensation cost for options granted prior to June 1, 1995 are not
         considered.

                         (Notes continued on next page)

                                       32

<PAGE>

NOTE 12 - RELATED PARTY TRANSACTIONS

         The Company leases the premises of its subsidiary, InfraCor of
         Virginia, Inc., from an estate in which a current director serves as
         executor. Rent expense under this operating lease approximated $121,000
         and $126,000 for fiscal 2002 and fiscal 2001, respectively.

         Other accounts receivable includes advances to officers, directors and
         other employees. At both March 31, 2002 and 2001, $1,250 was the
         balance of these advances.

         During the year ended March 31, 1999, the Company sold fixed assets
         with a book value of $146,522 and inventory with a book value of
         $150,000 to a corporation owned by one of its officers. The Company
         received $350,000 in cash, assumption of $100,000 of indebtedness by
         the buyer and notes in the aggregate amount of $175,000. At March 31,
         2001, a $125,000 note was still outstanding as a result of this
         transaction. During the year ended March 31, 2002, the note was
         satisfied in exchange for amounts due the holder of the note.

         The Company has notes payable to affiliates of $524,566 and $624,566 as
         of March 31, 2002 and 2001, respectively. These affiliates include
         certain partnerships and individuals whose members are officers and
         directors of the Company. The notes bear interest at rates between six
         and twelve percent. The balance at March 31, 2002 is classified as non
         current except for $100,000 which is classified as current.

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards No. 107, Disclosures about
         Fair Value of Financial Instruments (Statement 107), requires the
         Company to disclose estimated fair values of its financial instruments.
         Statement 107 defines the fair value of a financial instrument as the
         amount at which the instrument could be exchanged in a current
         transaction between willing parties.

         The following methods and assumptions were used to estimate the fair
         value of each class of financial instruments: The fair value of notes
         receivable is estimated by discounting the future cash flows at rates
         the Company would currently receive for similar notes receivable. The
         fair values of notes payable and long-term debt is estimated by
         discounting the future cash flows of each instrument at rates currently
         offered to the Company for similar debt instruments of comparable
         maturities by the Company's bank. The carrying amounts reported in the
         consolidated balance sheets for cash and cash equivalents, notes
         receivable, notes payable and long-term debt approximate fair value.

                         (Notes continued on next page)

                                       33

<PAGE>

NOTE 14 - CONTINGENCIES

         The Company does not receive hazardous waste during the normal course
         of business. Until the Company's environmental operations were sold in
         fiscal 1998, it received environmental samples for analysis; and,
         occasionally, in the process of analysis, small quantities of hazardous
         waste were generated. Such waste was stored in designated areas, lab
         packed for disposal, picked up by licensed hazardous waste contractors
         and transported to licensed disposal facilities. In addition to its
         laboratory activities, the Company was engaged in field testing. It was
         the Company's intention to conduct its operations in an effective, safe
         and prudent manner, and to ensure against potential risks. The Company
         carries workers' compensation insurance for its employees and insurance
         for any personal liability and injury which could occur to nonemployees
         and/or the property of others.

         The Company is involved from time to time in litigation and
         environmental matters; however, it is the opinion of management that
         there are no litigation or environmental matters currently existing
         which would have a material impact on the financial position or results
         of operations of the Company.

         See previously mentioned contingencies related to the China Steel
         Contract.

NOTE 15 - EARNINGS PER SHARE RECONCILIATION

         The following is a reconciliation of the numerators and denominators of
         the basic and diluted earnings per share computations.

<TABLE>
<CAPTION>
                                                                        For the Year Ended March 31, 2002
                                                                        ---------------------------------
                                                                   Income             Shares           Per Share
                                                                (Numerator)       (Denominator)          Amount
<S>                                                             <C>               <C>                  <C>
  Net loss                                                      $  (5,495,084)
  Less: preferred stock dividends                                    (484,908)
                                                                -------------
  Basic EPS
  Income available (loss applicable) to common
  shareholders                                                     (5,979,992)        16,552,387          $(0.36)
                                                                                                          ======
  Effect of dilutive securities:
       Options and warrants                                                 -                  -
                                                                -------------         ----------
  Diluted EPS
  Income available (loss applicable) to common
         shareholders and assumed conversions                   $  (5,979,992)        16,552,387          $(0.36)
                                                                =============         ==========          ======
</TABLE>

                         (Notes continued on next page)

                                       34

<PAGE>

NOTE 15 - EARNINGS PER SHARE RECONCILIATION (continued)

         Exercisable options and warrants to purchase 7,995,420 shares of common
         stock were outstanding during the year ended March 31, 2002, but were
         not included in the computation of diluted earnings per share because
         the exercise prices were greater than the average market price of the
         common shares. Therefore, the effect of including these options and
         warrants would be antidilutive. Convertible preferred stock was also
         not included, as the effect of its conversion would be antidilutive.

<TABLE>
<CAPTION>
                                                                         For the Year Ended March 31, 2001
                                                                         ---------------------------------
                                                                    Income             Shares           Per Share
                                                                 (Numerator)       (Denominator)          Amount
                                                                 -----------       -------------          ------
<S>                                                              <C>               <C>               <C>
  Net income                                                     $      76,956
  Less: preferred stock dividends, including
       charges to retained earnings on redemption
       of Series C preferred stock of $37,683                         (284,056)
                                                                 --------------

  Basic EPS
  Income (loss) available to common shareholders                      (207,100)       16,412,113      $   (0.01)
                                                                                                      ==========

  Effect of dilutive securities:
       Options and warrants                                                  -                 -
                                                                 --------------      -----------
  Diluted EPS
  Income (loss) available to common shareholders
       and assumed conversions                                   $    (207,100)       16,412,113      $   (0.01)
                                                                 ==============      ===========      ==========
</TABLE>

         Exercisable options and warrants to purchase 9,280,770 shares of common
         stock were outstanding during the year ended March 31, 2001, but were
         not included in the computation of diluted earnings per share as their
         effect was antidilutive to the reported loss per basic common share.
         Convertible preferred stock was also not included, as the effect of its
         conversion would be antidilutive.

NOTE 16 - CONCENTRATIONS

         The Company currently derives its primary contract revenues from
         domestic governmental- entity customers. For the year ended March 31,
         2002, the Company had infrastructure contract revenues from six
         customers, each of which accounted for more than 5 percent of contract
         revenues, aggregating approximately $9,510,352 or 64 percent of
         contract revenues. At March 31, 2002, four customers had accounts
         receivable balances which exceeded 5 percent of the trade accounts
         receivable balance. The accounts receivable balances for these
         customers totaled $1,808,133.

                         (Notes continued on next page)

                                       35

<PAGE>

NOTE 16 - CONCENTRATIONS (continued)

              For the year ended March 31, 2001, the Company had infrastructure
              contract revenues from three customers, each of which accounted
              for more than 5 percent of contract revenues, aggregating
              approximately $9,781,956 or 39 percent of contract revenues. At
              March 31, 2001, four customers had accounts receivable balances
              which exceeded 5 percent of the trade accounts receivable balance.
              The accounts receivable balances for these customers totaled
              $1,694,555.

NOTE 17 - GOING CONCERN

         The Company incurred a net loss of approximately $5.5 million for the
         year ended March 31, 2002, as compared to net income of $76,956 for the
         year ended March 31, 2001. The deterioration in operating results is
         due, in part, to decreased revenue, without a corresponding decrease in
         operating expenses. In response to these trends, in January, 2002, the
         Company initiated a plan to reduce operating expenses by reducing its
         workforce by approximately 30 employees. The Company's ability to
         generate operating income in the future is, in large part, dependent on
         its success in achieving revenue goals and reducing operating expenses.
         Due to market conditions, competitive pressures and other factors
         beyond its control, there can be no assurances that the Company will be
         able to achieve its revenue goals in the future. In the event that the
         anticipated cost reductions are not realized or revenue goals are not
         met, the Company may be required to further reduce its cost structure.
         There can be no assurance that the Company will become profitable.

         As of March 31, 2002, the Company has a working capital deficit of
         $2,363,152 and a stockholders' deficit of $1,000,313. The success of
         the Company is dependent on its ability to generate adequate cash for
         operating and capital needs. The Company is relying on its existing
         cash and cash equivalents and credit facility together with future
         sales and the collection of the related accounts receivable to meet its
         future working capital requirements. If working capital provided by
         these sources is not sufficient to fund future operations, the Company
         will be required to consider other alternatives, such as: (1) further
         reductions in its expenditures for operations; (2) mergers with
         companies in the infrastructure industry; or (3) to seek equity
         securities or additional borrowings. Although the Company believes that
         it has the ability to generate additional working capital through such
         actions, the results of such actions may be dilutive. There can be no
         assurance that additional capital will be available, or available on
         terms that are reasonable or acceptable to the Company. If the Company
         were unable to generate additional working capital, the business and
         financial condition would be materially and adversely affected such
         that the Company may need to consider other alternatives for its
         future.

                         (Notes continued on next page)

                                       36

<PAGE>

NOTE 18 - SUBSEQUENT EVENT

         In March, 2001, a secured line of credit was obtained from a bank for
         $4,000,000, and was increased to $4,500,000 during the fiscal year
         ended March 31, 2002. In April, 2002, the line of credit was
         renegotiated and was reduced to $4,200,000. The payment terms remain at
         prime plus two percent, with interest only payable until May 1, 2003.
         In conjunction with this transaction, the Company's bank approved a
         $1,250,000 loan guaranteed by the Small Business Administration. The
         loan is payable with an interest rate of prime plus two and one-half
         percent, with no principal payments for six months, and principal and
         interest payable at $20,145 per month, thereafter. The loan proceeds
         were used to finance outstanding payables. Additionally, the Company's
         bank approved another loan for $525,000. This loan is payable in sixty
         monthly installments of approximately $10,775 with interest at 8.5%,
         and is due on May 1, 2007. The proceeds from this loan were used to
         refinance existing debt.

                                    * * * * *

                                       37

<PAGE>

INFRACOR INC.

               DIRECTORS AND OFFICERS

                     INFRACOR INC.

                  7400 Beaufont Springs Drive Suite 415
                  Richmond, VA 23225
                  Phone No. (804) 272-6600

                  James B. Quarles, Director, President, Chief Executive Officer
                  Dr. Allen Kahn, Director, Secretary
                  Terence R. Dellecker, Director
                  James G. Zumwalt, Director

                  INFRACOR OF VIRGINIA, INC.

                  2210 Belt Boulevard at Hopkins Road
                  Richmond, VA  23224
                  Phone No. (804) 231-3426

                  Coleman S. Lyttle, Director, President
                  Navin D. Sheth, Director, Chief Operating Officer, Secretary
                  David C. Paulette, Director, Vice President

                                       38

<PAGE>

INFRACOR INC.


                             SHAREHOLDER INFORMATION

Annual Meeting

The 2002 Annual meeting of Shareholders will be held at 10:00 a.m. on July 29,
2002, at the Company's Headquarters, 7400 Beaufont Springs Drive, Suite 415,
Richmond, Virginia 23225.

Requests for Information

Requests for information about INFC should be directed to Warren E. Beam, Jr.,
7400 Beaufont Springs Drive, Suite 415, Richmond, Virginia 23225, telephone
(804) 272-6600. A copy of INFC's Annual Report on Form 10-KSB for the period
from April 1, 2001 to March 31, 2002 is available without charge to any
shareholder requesting the same.

Shareholder Relations
Warren E. Beam, Jr.
7400 Beaufont Springs Drive, Suite 415
Richmond, Virginia 23225
Phone No. (804) 272-6600

Transfer Agent
Mellon Investor Services
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660-2108

Trading Information
OTC Bulletin Board
Symbol:  INFC

                                       39