<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB
        (Mark One)

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

For the Fiscal Year Ended December 31, 2000
                                       OR
[ ]  TRANSITION REPORT UNDER  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

For the transition period from _____ to _____

               Commission file number:             0-30166
                                      --------------------------------

                            CONMAT TECHNOLOGIES, INC.
                            -------------------------
        (Exact name of small business issuer as specified in its charter)

          Florida                                       23-2999072
          -------                                       ----------
(State or Other Jurisdiction of             (IRS Employer Identification Number)
Incorporation or Organization)

            Franklin Avenue and Grant Street, Phoenixville, PA 19460
            --------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (610) 935-0225
                                 --------------
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]

         Transitional Small Business Format: YES [ ] NO [X]

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

         The Issuer's revenues for its most recent fiscal year were $13,695,058.

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates as of March 31, 2001 was $493,034, based on the average
of the closing bid and asked prices of the Registrant's common stock as reported
by the Nasdaq OTC Bulletin Board.

As of March 31, 2001, the Registrant had outstanding, 2,988,083 shares of common
stock.

           Transitional Small Business Disclosure Format (check one).

YES _____  NO __X__

                       DOCUMENTS INCORPORATED BY REFERENCE

         None.

                                        1
<PAGE>

                            ConMat Technologies, Inc.

                                   Form 10-KSB

                                      INDEX
<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>        <C>                                                                                                 <C>
PART I

Item 1.    Description of Business.........................................................................     7
Item 2.    Description of Property.........................................................................    12
Item 3.    Legal Proceedings...............................................................................    12
Item 4.    Submission of Matters to a Vote of Security Holders.............................................    13

PART II

Item 5.    Market for Common Equity and Related Stockholder Matters........................................    14
Item 6.    Management's Discussion and Analysis............................................................    14
Item 7.    Financial Statements............................................................................    17
Item 8.    Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure..........................................................................    17

PART III

Item 9.    Directors, Executive Officers, Promoters and Control Persons; Compliance with
             Section 16(a) of the Exchange Act.............................................................    17
Item 10.   Executive Compensation..........................................................................    18
Item 11.   Security Ownership of Certain Beneficial Owners and Management..................................    19
Item 12.   Certain Relationships and Related Transactions..................................................    20
Item 13.   Exhibits List and Reports on Form 8-K...........................................................    20

Index to Financial Statements..............................................................................    F-1
</TABLE>
                                       2
<PAGE>

                           FORWARD LOOKING STATEMENTS


Some of the statements contained in this report discuss future expectations,
contain projections of results of operations or financial condition or state
other "forward-looking" information. Those statements are subject to known and
unknown risks, uncertainties and other factors that could cause the actual
results to differ materially from those contemplated by the statements. The
forward-looking information is based on various factors and was derived using
numerous assumptions.

Important factors that may cause actual results to differ from projections
include, for example,

         o general economic conditions, including their impact on capital
           expenditures;
         o business conditions in the material technology and wastewater
           treatment industries;
         o the regulatory environment;
         o rapidly changing technology and evolving industry standards;
         o new products and services offered by competitors; and
         o price pressures.

In addition, in this report, the words "believe", "may", "will", "estimate",
"continue", "anticipate", "intend", "expect", "plan", and similar expressions,
as they relate to the business or management of ConMat Technologies, Inc. or its
wholly-owned subsidiary, Polychem Corporation, are intended to identify
forward-looking statements.

ConMat undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
after the date of this report. In light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this report may not occur
and actual results could differ materially from those anticipated or implied in
the forward-looking statements.

                                  RISK FACTORS

An investment in ConMat's common stock involves a high degree of risk. Current
shareholders and prospective investors should carefully consider the following
risk factors before making an investment.

Our acquisition and business development strategy may be unsuccessful.

Although we continue to devote significant efforts to improving our current
operations and profitability, ultimately, the success of our business strategy
depends upon both the acquisition of complimentary material technology
businesses and development of new material technology products. No assurances
can be made that we will be successful in identifying and acquiring such
businesses or developing such products or that any such acquisitions or new
products will result in operating profits. In addition, any additional equity
financing required in connection with such acquisitions may be dilutive to
stockholders, and debt financing may impose additional substantial restrictions
on our ability to operate and raise capital. In addition, the negotiation of
potential acquisitions may require management to divert their time and resources
away from our operations.

We continually evaluate potential acquisition opportunities, including those
that could be material in size and scope. Acquisitions involve a number of
special risks, including:

         o the focus of management's attention to the assimilation of the
           acquired companies and their employees and on the management of
           expanding operations;
         o the incorporation of acquired products into our product line;
         o the increasing demands on our operational systems;
         o adverse effects on our reported operating results;
         o the amortization of acquired intangible assets; and
         o the loss of key employees and the difficulty of presenting a unified
           corporate image.

We may not be able to obtain adequate financing for working capital, future
acquisitions or new product development.

                                       3
<PAGE>

We have financed our working capital requirements and capital expenditures
primarily through bank debt and cash flow generated from operations. In order to
satisfy our existing obligations and support our future growth strategy, we may
require additional capital. There can be no assurance that additional capital
will be available or that, if available, we can obtain such capital on
satisfactory terms. Any additional equity financing may be dilutive to
stockholders, and debt financing may impose substantial restrictions on our
ability to operate and raise additional funds.

We have a large amount of debt which we may not be able to service and which
restricts our activities. We have a large amount of debt in relation to our
assets and our revenues. At December 31, 2000, our aggregate amount of
indebtedness was $5.4 million. We may also incur additional debt from time to
time to finance acquisitions or capital expenditures or for other purposes,
subject to the restrictions in our existing debt instruments. Our existing debt
entails significant risks, including the following:

         o It may be difficult for us to satisfy our substantial debt service
           obligations;
         o Our ability to obtain additional financing, if necessary, for working
           capital, capital expenditures, acquisitions or other purposes may be
           impaired or such financing may not be available on favorable terms;
         o We will need a substantial portion of our cash flow to pay the
           principal and interest on our debt, including debt that we may incur
           in the future;
         o Payments on our debt will reduce the funds that would otherwise be
           available for our operations and future business opportunities;
         o A moderate decrease in our net operating cash flow could make it
           difficult for us to meet our debt service requirements and force us
           to modify our operations;
         o We may be more highly leveraged than our competitors, which may place
           us at a competitive disadvantage; and
         o We may be more generally vulnerable to a downturn in our business or
           the economy generally.

If we are unable to service our debt or obtain additional financing, as needed,
our business and financial condition would be materially adversely affected. Our
ability to satisfy our debt obligations will depend upon our future financial
and operating performance as well as the availability of revolving credit
borrowings under our credit facility, which is dependent on, among other things,
our compliance with covenants and specified borrowing base prerequisites.

If we cannot service our debt, we will be forced to take actions such as
reducing or delaying acquisitions and new product development or reducing
capital expenditures, selling assets, restructuring or refinancing our debt, or
seeking additional equity capital or bankruptcy protection. We cannot assure you
that any of these remedies can be effected on satisfactory terms, if at all.

Restrictive debt covenants in our loan instruments restrict our activities.

Our loan instruments restrict, among other things, our ability to:

         o incur additional debt;
         o pay dividends;
         o redeem capital stock;
         o create liens, dispose of assets, engage in mergers; and
         o make contributions, loans or advances.

We are controlled by a small group of stockholders.

Our common stock is held by a small group of stockholders. Therefore, our public
stockholders may not have the power to elect ConMat's directors and direct the
policies of ConMat.

There is a limited public market for our common stock.

There is no established active public trading market for our common stock. Our
common stock is traded in the over-the-counter market and "bid" and "asked"
quotations regularly appear on the Nasdaq OTC Bulletin Board under the symbol

                                       4
<PAGE>

"CNMT". As of March 31, 2001, the last reported sale price of ConMat's common
stock was $0.20, and there were 11 firms listed as market makers for our common
stock. There can be no assurance that our common stock will trade at prices at
or about its present level, and an inactive or illiquid trading market may have
an adverse impact on the market price. Moreover, price fluctuations and the
trading volume in our common stock may not necessarily be dependent upon or
reflective of our financial performance.

Holders of our common stock may experience substantial difficulty in selling
their securities. The trading price of our common stock could be subject to
significant fluctuations in response to variations in quarterly operating
results, changes in the analysts' estimates, announcements of technological
innovations and general industry conditions.

If we do not adapt to technological advances in our industry as quickly as our
competitors, our operating results and financial condition could be adversely
affected.

We compete in markets and industries that require sophisticated manufacturing
systems and other advanced technology to deliver state-of-the-art products.
These systems and technologies will have to be refined and updated as the
underlying technologies advance. We cannot assure you that, as systems and
technologies become outdated, we will be able to replace them, to replace them
as quickly as our competitors or to develop and market new and better products
in the future. Higher overhead and manufacturing costs due to a failure to
update and improve processes could limit our competitive position. In addition,
failure to make technological advances could adversely affect our ability to
successfully market custom engineered plastics and composite products.

Concentration of order backlog in a single project could expose us to operating
losses and cash flow problems.

From time to time we have a significant percentage of our order backlog
concentrated in a single project. If construction or payment for shipped
materials is delayed on such a significant project, we could be exposed to
operating losses and restrictive cash flow problems. This could also hamper our
ability to pursue new business opportunities or result in credit shortages.

We are subject to risks related to our international operations.

We anticipate that international sales will increasingly account for a
significant portion our net sales and revenue. We intend to expand our export
sales to markets in Asia, Europe, South America and the Middle East and to enter
additional countries in these international markets, which may require
significant management attention and financial resources. Our operating results
will be increasingly subject to risks related to international sales, including:

         o regulatory requirements;
         o political and economic changes and disruptions;
         o transportation delays; o national preferences for locally
           manufactured products; and
         o import duties or other taxes, which may affect the prices of our
           products in other countries relative to competitors.

We do not have firm contracts with plastic resin suppliers and our operating
results may be adversely affected by shortages or price increases.

Our operations are dependent on adequate supplies of plastic resins. We source
plastic resin primarily from major industry suppliers. We have long-standing
relationships with some of these suppliers but have not entered into a firm
supply contract with any of our resin vendors. We may not be able to obtain
plastic resins in adequate supply or at an acceptable cost in the event of an
industry-wide general shortage of resins, or a shortage or discontinuation of
certain types of grades of resin purchased from one or more of our suppliers.

In addition, plastic resins are subject to cyclical price fluctuations,
including those arising from supply shortages and changes in the prices of
natural gas, crude oil and other petrochemical intermediates from which resins
are produced. An increase in resin prices may have a material adverse effect on
our financial condition and results of operations.

Industry consolidation may result in pricing pressures or our exclusion from
bidding on larger projects, which could have an adverse affect on our operating
results.

Major corporations with an international presence continue to consolidate
products and services within the wastewater treatment industry on a global

                                       5
<PAGE>

basis. This trend may result in more single source bidding for large scale new
wastewater treatment construction and may result in pricing pressures for our
core products or our exclusion from larger projects. In response to this trend,
we intend to expand our product offerings to the wastewater treatment industry
through acquisitions of or joint ventures with smaller companies offering
complimentary products and to develop or acquire product lines serving
industries other than wastewater treatment. However, no assurances can be made
that we will be successful in these pursuits.

Privatization of municipal wastewater treatment plants may limit our ability to
bid on projects. Until recently most wastewater facilities were owned and
operated by the municipal governments. As a result of a drop in federal funding,
municipalities are beginning to consider private management or ownership as a
financially attractive alternative. Consequently, some large international
corporations are becoming more involved in ownership or management. Such
arrangements could impact the exclusive supplier relationships with our
competitors thereby precluding us from bidding on projects. We are in
discussions with a number of these management companies in an attempt to become
an exclusive supplier. However, there can be no assurance that Polychem will be
successful in establishing such relationships.

The markets in which Polychem competes are highly competitive.

Experienced competition exists in each of Polychem's major markets, and many of
Polychem's competitors maintain good working relationships with their customers
produce quality products and have access to significantly greater financial
resources. There can be no assurance that we will be able to keep pace with the
technological demands of the marketplace or successfully enhance our products or
develop new products, which are demanded by the industry. Our operations and
properties may expose us to material costs or liabilities related to
environmental regulations. Our operations and properties are subject to a wide
variety of federal, state and local laws and regulations, including those
governing the use, storage and handling, generation, treatment, emission,
remediation of contaminated soil and ground water, and the health and safety of
employees. There is no assurance that our operations or properties will comply
with applicable regulations. As such, our operations and properties expose us to
the risk of claims with respect to such matters and we may incur material costs
or liabilities in connection with such claims.

                                       6
<PAGE>

PART I

Item 1. Description of Business.

General

ConMat Technologies, Inc., formerly known as EPL Systems, Inc. and Phoenix
Systems, Inc., was incorporated in Florida in 1986. Operating under its new
trade name, conmattech.com, ConMat is converting to an e-business platform
providing business-to-business Internet capability for its wholly owned
subsidiaries. ConMat is not an operating company and does not have significant
assets or conduct significant business except through its wholly-owned
subsidiary. In December 1998, ConMat acquired 100% of the common stock of
Polychem Corporation from The Eastwind Group, Inc. ConMat's strategy is to
provide a corporate structure and e-commerce platform that optimizes the
business potential of acquired or developed products and companies through
conversion to fast, flexible organizations with an e-business customer focus.
ConMat is focused on material technologies with an emphasis on proprietary
custom-engineered plastics and composite products sold to industrial end users.
Product categories emphasized include those that make the environment cleaner,
operations safer and improve operating efficiencies. ConMat's acquisition of
Polychem was the first step in executing this strategy. ConMat plans to execute
a growth strategy combining internal new product development and corporate
acquisitions.

The principal executive offices of ConMat are located at Franklin Avenue and
Grant Street, Phoenixville, PA 19460. The telephone number is (610) 935-0225.

Business Strategy ConMat's strategy is to create value by improving the
performance of acquired companies and developing new products. ConMat intends to
create value by applying sound management practices, information technology and
electronic commerce capabilities to acquired companies, converting such
acquisitions to fast, flexible organizations with an e-business customer focus.
The intent is to develop the business model at Polychem, ConMat's first
acquisition, and apply the methodology to future acquisitions more quickly and
efficiently. ConMat is currently directing the selection and installation of an
Enterprise Resource Planning ("ERP") system (including new software, hardware
and business practices) and business-to-business ("B2B") capabilities that are
intended to create customer and shareholder value by improving Polychem's level
of customer service, competitive position as well as reduce design, production,
selling and administrative costs as a percentage of sales. Additionally, ConMat
is evaluating ways of making Polychem a variable cost operation. Such a step,
which could make Polychem more competitive, includes both the evaluation of
product outsourcing alternatives and the profitability of individual product
lines.

ConMat is focused on material technologies with an emphasis on proprietary
custom-engineered plastics and composite products sold to industrial end users.
Product categories emphasized include those that make the environment cleaner,
operations safer and improve operating efficiencies. ConMat's acquisition of
Polychem was the first step in executing this strategy. ConMat plans to execute
this growth strategy combining internal new product development along with
corporate acquisitions.

Potential Future Acquisitions. ConMat seeks to acquire other operating companies
with complimentary product lines and technologies or incremental distribution or
production capabilities. Such companies would have proprietary material
technologies and products and would likely have a competitive position in the
wastewater treatment, automotive or other markets, but need not service these
markets exclusively. Acquisition candidates would likely have a value ranging
from $5 million to $15 million. The market for such acquisition candidates is
fragmented and is presently undergoing significant consolidation.

ConMat is not presently negotiating any specific acquisitions. ConMat has
identified a series of complimentary product and production needs and is
presently searching for acquisition candidates that would meet those particular
needs. ConMat may acquire other operating companies with cash, stock or a
combination of cash and stock.

Potential New Products. In January 2000 ConMat entered into an agreement with
TEDCO, Inc. ("TEDCO") to assist in the development of a new process technology
capability, extruded thermosets. Additionally, the agreement involves the
development and commercialization of products utilizing this process technology.
Under the terms of the agreement, ConMat owns the rights to all products
resulting from the venture including any in development by TEDCO prior to the

                                       7
<PAGE>

signing of the agreement. At present two products are under development. While
no assurances can be given, management anticipates a commercial launch of these
products sometime during 2001.

To augment this product line, ConMat acquired in February 2001, equipment and
the rights to products which can be produced using the extruded thermoset
technology. ConMat does not anticipate any material revenues from these products
until 2002.

Polychem

General. Polychem is a wholly-owned subsidiary of ConMat. Polychem was
originally formed in February 1995 by its former owner for the purpose of
acquiring substantially all of the assets and business of The Polychem Division
of The Budd Company. ConMat acquired Polychem on December 8, 1998. Polychem,
which has been in business since 1955, develops and manufactures custom
engineered plastic molded products, which are marketed primarily to wastewater
treatment plants, as well as to other industrial users.

Water Treatment Products. Polychem's primary products include, among others,
complete non-metallic rectangular clarifier component systems for water and
wastewater treatment operations. Polychem's clarifier component systems are
primarily used for the removal of sediment and solids from wastewater. The
clarifier systems are, in effect, settling tanks through which water passes,
allowing suspended solids to settle. These systems are comprised of non-metallic
chain, sprockets, stub shafts, wear shoes and other products fabricated to
customer specifications. The majority of the balance of Polychem's products are
produced for use in a complete system of wastewater treatment clarifier
equipment that Polychem sells to its customers. Such a complete system is
usually built to customer specifications and sold under an order selected from
competitive bids. The "reaction injection molded" nylon products and the
injected molded products account for between 80% and 90% of Polychem's sales;
compression molded products comprise the balance of the business. The average
life expectancy of Polychem's typical products is ten years. The cost of
Polychem's systems varies based on the scope of the system and the end user
modifications required. The cost of a system generally ranges from $20,000 to
$45,000. In addition to its existing products, Polychem continues to explore new
product applications. Polychem currently has two wastewater treatment products
in the feasibility study stage.

Wastewater treatment plants are primarily used to clean sewage and return water
to general public use. Wastewater treatment plants are generally owned by
municipalities or water authorities. There are over 15,000 wastewater treatment
plants in the United States. Polychem estimates that globally there are 30,000
to 50,000 plants. In the United States, an estimated $22 billion is spent on
wastewater treatment plants annually, while an estimated $83 billion is spent
annually on a global basis.

Polychem provides quotes to contractors for components for approximately 400
wastewater treatment projects each year. Project contracts typically are awarded
on a competitive bid basis. In some cases, the municipality or its engineer
determines, based on price, reliability, system flexibility or other factors,
that certain components must come from a specific manufacturer. If Polychem
products are so required, the successful bidder has to buy the specified
components from Polychem. In most cases a particular manufacturer is not
specified, and the successful bid is selected on such factors as price, system
adaptability and reputation. Historically, Polychem products are used in
approximately 25% of the projects for which Polychem provides quotes. Polychem
does not bid directly for new projects, but rather supplies its products to a
contracting engineer, who in turn bids for new projects. Polychem bids directly
for replacement products. Of the approximately 400 bids submitted annually,
approximately 50% are for replacement parts and 50% are new projects. New
projects account for approximately 60% of Polychem's revenues.

Specialty Products.  Polychem also produces:

         o cast nylon elevator buckets for handling foundry sand, aggregate and
           glass cullet. These buckets are secured to elevators and used to
           convey raw materials to their point of use in the manufacture of
           steel, glass and other products.

         o phenolic sprockets and pulleys used with blade belts in the cutting
           housing for agricultural equipment and for securing electrical cables
           for mining equipment.

         o celeron bearings for the rolling machinery in steel mills.

         o extruded thermoset air conditioning ducts for aircraft.

         o molded conveyor chains and accessories for conveying cans, bottles
           and other packaged materials during production, water and wastewater
           treatment and other material handling industries.

                                       8
<PAGE>

Prior to 2000 Polychem had progressively reduced emphasis on such specialty
products in favor of expansion of wastewater treatment products. In February
2000, ConMat made a strategic decision to rejuvenate this line of products. To
help reestablish market share, ConMat embarked on a series of new market
expansion programs. ConMat operates the specialty products line as a separate
division with dedicated sales, engineering and production resources. This
renewed focus on specialty products has resulted in a reversal of the prior
year's sales decline. Management anticipates that the specialty products line
will make an increasing contribution to future profitability.

Manufacturing Processes. Polychem's plant is equipped and organized to
accommodate the manufacturing cycle through which raw materials are converted
into finished product. Raw materials are stored in tanks inside and outside the
facility. The manufacturing cycle begins with the mixing of raw materials, which
are then sent to the Molding Department. In the Molding Department, products are
molded in batches by one of the following three processes:

         o "Reaction injection molded" molding, which produces nylon buckets,
           stub shafts, and sprockets. In "reaction injection molded" molding, a
           compound containing a catalyst and a compound containing a promoter
           are mixed in the mold where a reaction takes place; the combination
           and percentage of base chemicals and additives determine the
           properties of the final product;

         o Compression molding, which produces phenolic steel mill bearings,
           timing gears, timing pulleys and other molded products. In the
           compression molding process, phenolic macerate or phenolic laminate
           is placed in heated molds (approximately 325 degrees) and cured for a
           specific period of time at pressures up to 3000 PSI; and

         o Injection molding, which produces engineered resin parts used for
           wastewater drives, collector chains and tabletop conveyor chains. In
           injection molding, engineered plastic materials are melted and
           injected into the mold at a controlled temperature and rate. Once in
           the mold, the plastic is cooled to a shape reflecting the cavity.

Products are then sent to the Fabricating Department for machining and assembly.
Polychem's plant operates on a three-shift basis, yet has sufficient available
capacity for growth in most product lines. Most of the employees have been
trained to operate all of the various equipment in their departments, which
gives Polychem additional flexibility in scheduling personnel to meet production
needs as they arise.

Marketing and Customers. Polychem was originally a manufacturer of a complete
line of industrial laminates, automotive timing gears, vulcanized fiber and
teflon and silicon tape. In the early 1980's, Polychem identified the wastewater
treatment industry as a potential market and began to shift its focus to
manufacturing products designed for such market. By 1992, wastewater products
became Polychem's dominant revenue producer and presently the revenues from
wastewater products comprise 85% of Polychem's annual sales volume. The
wastewater treatment market is global in nature, and Polychem presently sells
products internationally in Western Europe, Asia, South America, Eastern Europe,
the Middle East, Africa and Australia.

In addition to non-metallic clarifier component systems for wastewater
treatment, Polychem markets its traditional products (such as plastic chain,
compression molded phenolic and injection molded plastic components, "reaction
injection molded"-processed nylon buckets, phenolic bearings and corrugated
fiber products) to the food processing, electronics, steel, automotive,
chemical, printing, aerospace, and consumer products industries, among others.

Polychem markets its plastic chain, cast nylon buckets, steel mill bearings and
compression molded phenolics primarily through distributors. The balance of its
products, including its wastewater treatment component systems, are sold
primarily through Polychem's internal sales force, which consists of ten
employees. Domestic distributors are paid a percentage of sales ranging from 5%
to 15%. Internationally, distributors are compensated principally on a buy and
sell basis. In effect, Polychem sells to the distributor who, in turns, resells
to the ultimate buyer. The distributor earns the difference between its purchase
price and the sales price to the buyer. Polychem's internal sales force receives
a base salary and a bonus based on their individual and ConMat's overall
performance. In its most recent fiscal year, Polychem's sales force generated
approximately 42% of its annual sales revenue, international distributors
accounted for approximately 38% and domestic distributors accounted for
approximately 20%. Domestic revenues were approximately 62% and international
revenues were approximately 38% in the 2000 fiscal year.

                                       9
<PAGE>

Competition and Strategy. Polychem's competition tends to be fragmented. Many
other companies, domestically and internationally, produce one or more products
similar to one or more of Polychem's products. Experienced competition exists in
each of Polychem's major markets and many of Polychem's competitors enjoy
excellent working relationships with their customers, produce a variety of
quality products and have access to significant resources. Such resources,
including capital, labor and product support, can result in faster response time
and lower prices. These factors, along with product characteristics,
reliability, servicing, and pricing form the major competitive factors in
Polychem's markets.

Polychem believes that it has two significant competitors in the area of
non-metallic rectangular wastewater clarifier systems, of which it considers
Envirex to be the most significant. Polychem believes that it and Envirex each
possess approximately 30% of this market. However, while Polychem provides
products only to clarifier systems in wastewater plants, Envirex has a much
broader line of wastewater treatment products that encompasses all of the major
processes in a treatment plant. Envirex's broader line allows it to bid for
larger portions of projects and to use certain products as loss leaders. NRG is
Polychem's other competitor, and has a smaller share of the clarifier market.
Polychem believes that it has three competitors in the market for nylon buckets
and five competitors in the market for table-top chains. Polychem has an
approximate 40% share of the nylon bucket market, while its closest competitor
has an approximate 30% market share. The dominant competitor in the tabletop
chain market, Rexnard, holds an approximate 80% market share, while Polychem has
an approximate 5% share.

ConMat's long-term goals for Polychem include solidifying Polychem's reputation
as a leading provider of quality wastewater treatment equipment products;
increasing sales of its traditional products by improving existing product
lines; and seeking new wastewater treatment products to supplement its current
line. Additionally, ConMat seeks to make Polychem the low cost provider and is
evaluating outsourcing opportunities to achieve this goal.

Materials and Supplies. Polychem's business of manufacturing a broad line of
engineered plastic products requires the ability to obtain various sources of
raw materials. Polychem maintains approximately three to five suppliers for each
of its raw materials. Approximately 80% of the raw materials purchased by
Polychem are resins. Polychem also purchases capolactin and pultrusions for use
in manufacturing. Polychem's two largest suppliers of resins are Performance
Polymers and TP Composites. Its two largest suppliers of capolactin are Dutch
State Mines and BASF, while its two largest suppliers of pultrusions are
Creative Pultrusions and Plastic Center Inc. At present, Polychem does not
maintain more than one month's supply of raw materials beyond the amount
required for its scheduled production work.

Environmental Regulations. While no assurances can be given, Polychem does not
anticipate any material costs for environmental remediation projects. In the
ordinary course of its business, Polychem incurs some cost for oil reclamation,
hauling of waste products and normal energy costs associated with recycling and
waste disposal. Polychem spends approximately $50,000 annually to comply with
environmental laws, including hauling costs as well as general monitoring and
compliance costs. Polychem maintains two environmental permits, one for a dust
collection system and the other for its after burner heater. The collected dust
is transported by traditional waste management handlers to domestic landfills.
The after burner heater is used to mix cotton fabric with phenolic resins, which
are then processed into specific products. Methanol from the heater is processed
through an after burner and emits little in the way of contaminants. Polychem
maintains seven above ground storage tanks. Two are used to store phenolic
resins inside the plant; two store fuel oil; and three outside tanks are used to
store other chemicals. There are spill containment systems in place throughout
the facility.

Occasionally, there are minor and isolated spills of heat transfer oil,
capolactin and phenolic resins. The latter two quickly solidify at room
temperature and the hardened material is removed to an approved landfill. Spills
of heat transfer oil are cleaned and properly disposed of with other waste
products by a licensed outside processor. Polychem submitted a revised spill
prevention and response plan to the Pennsylvania Department of Environmental
Resources in May 1994 to which no comments have been received as to date.

Polychem has occupied its Phoenixville, Pennsylvania property since 1974. The
property was first used as a silk mill in the early part of this century and
then as a manufacturing site for felt carpet padding. Three environmental audits
that have been conducted since 1995 as part of customary due diligence in
financing transactions have not revealed contamination. An environmental audit
was commissioned by Congress Financial Corporation in conjunction with the
purchase of Polychem by The Eastwind Group in 1995. A second environmental study
was commissioned by Fidelity Funding in connection with a financing commitment
in 1997. A third environmental study was commissioned by GE Capital Corporation
in connection with their refinancing in 1998.

                                       10
<PAGE>

Employees. Polychem employs 76 employees, of whom 45 are employed on an hourly
basis. Hourly employees are members of United Textile Workers of America,
AFL-CIO, Phoenixville Plastic Makers' Union, Local No. 130. Most are
semi-skilled workers. The current union contract expires at the end of September
2002.

ConMat has assumed all of Polychem's continuing obligations under its collective
bargaining agreement with the Union, which includes assumption of obligations
under a defined benefit retirement plan for hourly rated employees at its
Phoenixville, Pennsylvania plant. The plan is fully funded in accordance with
certain actuarial assumptions and to meet ERISA funding requirements. However,
there can be no assurances that market performance of plan investments will be
sufficient to meet all plan liabilities as they arise.

Information Technology. ConMat is leading Polychem's information technology
advancement by providing guidance and direction in the development of a B2B
e-commerce platform that will be integrated with the primary ERP system Polychem
is installing. The B2B e-commerce platform is being designed to enable customers
to interact directly with Polychem and will include features that will automate
requests for quotes, order processing as well as order, invoice and payment
inquiries. The B2B e-commerce platform will also include a portal for vendors to
communicate with Polychem improving vendor performance and reducing costs.
ConMat and Polychem have selected an ERP system and expect to complete the
installation of the selected system in 2001. Management expects the ERP system
will reduce material costs, improve manufacturing efficiencies and provide
better information for decision making.

Equipment. Polychem owns or leases, through capital leases, all of the equipment
required to conduct its business. The equipment is comprised of compression
molding presses, transfer molding presses, injection molding presses, reactors,
dispensers and "reaction injection molded" press lines for nylon-6 operations, a
complete fabrication shop with computerized numerical control equipment and a
computer aided design center.

Research and Development. Polychem is the owner of a number of United States and
foreign patents and patent applications relating to water treatment plastic
products, chain conveyor links, conveyor chain bearings, sprockets with locking
mechanisms and a bucket grit elevator system. The ownership of such patents
helps Polychem from a marketing standpoint by securing its continued reputation
as an innovative competitor in its industry.

Polychem employs eight application engineers who use computer aided design
equipment to design custom wastewater treatment non-metallic rectangular
clarifier systems or to alter existing clarifiers to meet changing specification
requirements. All new products are evaluated for patent protection. Polychem was
granted a patent for a grit bucket system, which is now undergoing marketing
development. To date, five successful applications for the system have been
found, the most significant of which is to function as part of a grit collection
system in wastewater treatment where it will be used to remove sand and gravel
from effluent before it reaches the clarifier. Polychem incurred $225,000 and
$160,000 on product research, engineering and development costs during the years
ended December 31, 2000 and 1999, respectively.

Debt and Encumbrances. On September 30, 1998, Polychem entered into a Loan and
Security Agreement with General Electric Capital Corporation, which provides for
a three-year, $3,500,000 revolving line of credit and a three-year term loan of
$1,500,000. On August 25, 1999, the revolving line of credit was increased to
$5,000,000. The revolving line of credit and the term loan originally were
secured by a mortgage on Polychem's Phoenixville, Pennsylvania facility, which
mortgage lien was released in connection with the Public School Employees'
Retirement Board financing described below. The term loan is secured by
Polychem's equipment. The revolving line of credit is secured by accounts
receivable and inventory. Advances under the revolving line of credit are
subject to a lending formula limiting the availability of funds to the total of
(i) 80% of eligible accounts receivable, less the amount by which contractual
holdbacks (i.e., amounts that customers are entitled to hold back until
completion of a project) in favor of account debtors on eligible accounts
exceeding $250,000, plus (ii) the lesser of $750,000 or 50% of eligible
inventory (less a $300,000 reserve). Interest rates on the loan are at a rate of
4.75% in excess of the 30-day dealer commercial paper rate on the revolving line
of credit, 9.75% at April 1, 2001, and 6.50% in excess of the 30-day dealer
commercial paper rate for the term loan, 11.5% at April 1, 2001.

Interest on the revolving line of credit and term loan is payable monthly.
Polychem's collections of accounts receivable are deposited with General
Electric Capital Corporation under a lockbox arrangement and applied to reduce
the balance of the revolving line of credit, which then may be drawn against
subject to availability. The principal balance of, and all accrued interest on,
the revolving line of credit is due and payable September 30, 2001. In the event
that Polychem has cash flow for any fiscal year in excess of capital
expenditures paid for from operations, interest expense, taxes and scheduled
debt repayments, 25% of such excess must be applied first to repay the term loan

                                       11
<PAGE>

and then to reduce the outstanding balance under the revolving line of credit.
As of March 31, 2001, availability under the line of credit was $2,780,000 and
outstanding borrowings were $2,710,000. In connection with the Public School
Employees' Retirement Board financing described below, General Electric Capital
Corporation agreed to restructure the payment schedule on the remaining balance
of its term loan to provide for 25 monthly payments of $8,000 and a final
payment on September 30, 2001 of $212,000. As of March 31, 2001 the outstanding
balance of the General Electric Capital Corporation term loan was $252,000.

On August 25, 1999, Polychem received a $1,880,000 term loan from the Public
Employes' Retirement Board, secured by a mortgage on Polychem's Phoenixville,
Pennsylvania facility. $813,000 of the net proceeds of the loan was applied to
reduce the outstanding balance of the General Electric Capital Corporation term
loan and the remaining $996,000 of net proceeds was applied to reduce the
outstanding balance of the General Electric Capital Corporation revolving line
of credit. The Public School Employes' Retirement Board loan is for a term of 10
years. The interest rate on the Public School Employes' Retirement Board loan is
8.5% for the first five years, and thereafter is 350 basis points above the 5
year U.S. Treasury Note Yield Rate as of the end of the first five years.
Principal and interest are payable in equal monthly installments based on a 25
year amortization schedule, with a balloon payment September 1, 2009 equal to
outstanding principal balance plus accrued interest. As of March 31, 2001, the
outstanding balance of the Public School Employes' Retirement Board term loan
was $1,843,092.

Polychem executed a $1,626,294 promissory note to The Budd Company on March 10,
1995 as part of the purchase price of the Polychem Division of Budd. The
outstanding principal balance of this note as of March 31, 2001 was $975,776.
The note accrues interest at 8%, payable quarterly. The principal balance is
payable in 20 equal quarterly installments, commencing March 31, 1998, provided
that Polychem may defer up to 25% of any payment if the payment would exceed
Polychem's net cash flow for the preceding fiscal quarter. The Budd note is
unsecured.

Item 2. Description of Properties.

Polychem operates from a 220,000 square foot facility in Phoenixville,
Pennsylvania, which it owns, subject to a mortgage. See "ConMat-Polychem-Debt
and Encumbrances." In July 1998, the property was appraised at $2.4 million by
AccuVal Associates Incorporated, an independent appraiser. Polychem uses
approximately 120,000 square feet for manufacturing and warehousing, and 20,000
square feet for offices. Polychem leases approximately 74,000 square feet of
warehouse space to three tenants at rental rates ranging from $2.90 through
$3.12 per square foot. Approximately 50,000 square feet is leased for five years
with the balance leased for one year. Polychem also leases a tower located on
the facility and approximately 1,000 square feet of warehouse space to three
cellular phone operators. Combined annual lease income from the tower is
$48,600. Two of the tower leases have ten-year terms and one lease has a
five-year term. An additional 5,000 square feet of warehouse space is available
for lease at the facility. Management believes that Polychem's properties are
adequately insured.

Item 3. Legal Proceedings.

ConMat is currently a defendant in an action originally filed on January 28,
1999, in Pennsylvania state court captioned John R. Thach v. The Eastwind Group,
et al. On October 27, 2000, co-defendant, The Eastwind Group, Inc., filed a
voluntary petition for relief under Chapter 11 of Title 11 of the Bankruptcy
Code (U.S.B.C., E.D. Pa. Bankruptcy No. 00-33372 SR). The plaintiff removed the
state court action to the United States Bankruptcy Court for the Eastern
District of Pennsylvania on November 29, 2000 (U.S.B.C., E.D. Pa. Adversary No.
00-906). Plaintiff maintains that Eastwind, his former employer, breached the
terms of his severance agreement and that the sale of Polychem to ConMat was
part of a conspiracy to avoid payments to him and has violated Pennsylvania's
Uniform Fraudulent Transfer Act. The plaintiff seeks damages of at least
$350,000 and punitive damages of at least $500,000. In addition, the plaintiff
seeks to have the December 8, 1998 acquisition of Polychem declared null and
void. Among the other named defendants is Paul A. DeJuliis, President of ConMat
and the former Chief Executive Officer of Eastwind. Initially, the plaintiff
sought a temporary restraining order and preliminary injunction seeking to set
aside the sale of Polychem to ConMat. By Order dated February 19, 1999, the
State Court denied plaintiff's request for injunctive relief. Currently the
plaintiff is seeking permission from the Bankruptcy Court to proceed with his
litigation.

On January 22, 2001 the Bankruptcy Court appointed a Chapter 11 trustee to
oversee and administer The Eastwind Group, Inc. bankruptcy. The bankruptcy
trustee may assert claims against ConMat, including the claim made in the Thach
case that the December 8, 1998 acquisition of Polychem was a fraudulent
conveyance. Management of ConMat is currently in discussions with the bankruptcy
trustee to resolve any potential claims.

                                       12
<PAGE>

ConMat is currently a defendant in a federal district court action filed on
April 11, 2000, in the United States District Court for the Eastern District of
Pennsylvania captioned Profutures Special Equities Fund, L.P. v. The Eastwind
Group, et al. (U.S.D.C., E.D. Pa. Civil Action No. 00-CV-1888). ProFutures
maintains that Eastwind and others violated federal and state securities laws
and committed common law fraud in connection with the June 1998 purchase by
ProFutures of $750,000 in Series C Convertible Preferred Stock of Eastwind.
ProFutures seeks damages in the amount of $750,000 and seeks to have the
acquisition of Polychem by ConMat declared null and void. Among other named
defendants is Paul A. DeJuliis, President of ConMat and former Chief Executive
Officer of Eastwind. ConMat, Paul A. DeJuliis and two other former officers of
Eastwind filed a Motion to Dismiss the Complaint on May 25, 2000 and ProFutures
responded. Before the court issued a ruling on that motion, co-defendant
Eastwind filed for bankruptcy in November 2000 and the case was stayed. Nothing
further has occurred in this case.

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

No matters were submitted to a vote of shareholders during the fourth quarter of
2000.

                                       13
<PAGE>

PART II

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

The common stock of ConMat has been quoted on the Nasdaq OTC Bulletin Board
since December 21, 1998 under the symbol "CNMT". The following table shows
quarterly low and high bid information for the common stock from December 21,
1998 through March 31, 2001:

                                            Low Bid           High Bid
                                            -------           --------
                  2001
                  ----

                  First Quarter              $0.12              $0.49

                  2000
                  ----

                  First Quarter              $3.125             $5.50
                  Second Quarter              2.00               5.75
                  Third Quarter               1.125              4.00
                  Fourth Quarter              0.25               1.625

                  1999
                  ----

                  Fourth Quarter             $3.50              $5.00
                  Third Quarter               3.03               5.00
                  Second Quarter              3.00               3.00
                  First Quarter               1.63               4.00

                  1998
                  ----

                  Fourth Quarter(1)          $1.50              $2.125

(1) Commencing December 21, 1998.

Market quotations reflect inter-dealer prices, without retail markups, markdown
or commissions and may not necessarily reflect actual transactions. As of
December 31, 2000, there were 2,963,083 shares of common stock outstanding held
by approximately 16 holders of record.

ConMat has never paid a cash dividend on its common stock and does not plan to
pay any cash dividends on its common stock in the foreseeable future.

Item 6. Management's Discussion and Analysis.

Background and Basis of Presentation
The following discussion and analysis should be read in conjunction with
ConMat's consolidated financial statements and the notes thereto contained
elsewhere in this report. The discussion of these results should not be
construed to imply any conclusion that any condition or circumstance discussed
herein will necessarily continue in the future.

                                       14
<PAGE>

Results of Operations

For the Fiscal Year Ended December 31, 2000 as compared to the Fiscal Year Ended
December 31, 1999.

The following table provides certain statement of operation items as a
percentage of net sales for the fiscal years indicated:

                                                         Twelve Months
                                                       Ended December 31
                                                      --------------------
                                                      2000           1999
                                                      -----          -----
Net Sales                                             100.0%         100.0%
Cost of Goods Sold                                     76.6           70.2
Gross Profit                                           23.4           29.8
Selling and Administration                             17.4           22.1
Interest Expense                                        3.8            4.4
Other Expense                                           2.0            0.5
Income Tax Expense                                      0.2            0.9
                                                      -----          -----
Net Income                                              0.0%           1.9%
                                                      =====         =====

Cost of goods sold is determined as the sum of material costs, direct
manufacturing labor costs and an allocation of utilities and other overhead
costs attributable to manufacturing activities.

Total revenues increased $1,774,000 or 14.9% to $13,695,000 for the year ended
December 31, 2000 from $11,921,199 for the year ended December 31, 1999.
Polychem ended the year 2000 with an order backlog of $7,700,000 compared to
$7,200,000 at the end of 1999, an increase of 6.9%.

Gross profit decreased by $353,000 or 17.4% to $3,201,000 for the year ended
December 31, 2000 from $3,555,000 for the comparable period in 1999. Gross
profit decreased as a percentage of sales to 23.4 % for the year ended December
31, 2000 from 29.8% from the year earlier period. The decrease in gross margin
is the direct result of several large customer orders with significant
unexpected manufacturing inefficiencies. These customer orders were from
projects bid in 1999 and anticipated the ability to develop special tooling and
molds to address certain customer requirements. However, as a result of time
pressures and technological difficulties, a significant amount of the production
process yielded extremely low material utilization as well as extensive
unfavorable variances in manufacturing labor and overhead. In addition, one
large international customer requested very specific manufacturing tolerances
that exceeded the Company's normal operating specifications and required
specialized processes, resulting in a lower gross profit margin. Lastly, in the
final stages of completing a large customer order for delivery to the west coast
of the U.S., a problem with one of ConMat's large vendors created cost over-runs
that were unanticipated.

There were also less significant increases in expenses as the result of
increased direct labor cost and associated overhead relating to the labor
agreement signed late in the last quarter of 1999 as well as the addition of
product design support personnel. Despite the negative impact of the unexpected
manufacturing inefficiencies and lower gross profit margins, ConMat continues to
focus on improving plant capacity utilization, increased plant mechanization
through new equipment purchases and other cost saving measures. An aggressive
procurement program was initiated earlier in the year that has helped to lower
material costs. Management views the results for the year ended December 31,
2000 as having been caused by one-time operating inefficiencies that have been
identified and are being addressed. The effect of these inefficiencies was to
decrease gross margins by approximately $250,000 during the year. While the
current year's results were negatively impacted by these situations, a
compensating factor was improvement in level of quality and customer
satisfaction, which management believes will lead to increased future orders
from the customers in question. Despite these negative factors that reduced the
overall year's profitability during the final three months of the year 2000
gross profit levels returned to the levels experienced during the first six
months of fiscal year 2000.

Selling and administrative expenses decreased by $252,000 or 9.6% to $2,381,000
for the year just ended from $2,632,000 for the comparable period in 1999. As a
percentage of revenues, selling and administrative expenses decreased to 17.4%

                                       15
<PAGE>

for the year ended December 31, 2000 from 22.1% of total revenues for the
comparable period in 1999. This decrease is primarily attributable to reduction
of administrative employees from earlier in 2000 with slight increases
associated with the development of ConMat's e-business platform and the costs
associated with ConMat's reporting obligations as a public company. ConMat has
also been increasing its expenditures in the cultivation of additional business
opportunities throughout the Pacific Rim. The expenses incurred in the fiscal
year 2000 are higher by approximately 15% from the year earlier period.
Management believes that Pacific Rim is an excellent market for its product line
and anticipates that these expenditures will produce significant future sales
orders.

There have also been significant increases in corporate expenses relating to
increases in professional fees associated with the ConMat's status as a publicly
traded company as well as legal expenses in the defense of several lawsuits that
relate to ConMat's acquisition of Polychem. Management believes that the
expenditures for professional fees in both of these areas will begin to decrease
over the next six months.

Interest expense for the year ended December 31, 2000 decreased slightly by
$4,000 or 0.7%, to $526,000 from $530,000 for the comparable period in 1999.
Interest costs as a percentage of total revenues decreased to 3.8% in the year
ended December 31, 2000 compared to 4% in the year earlier period.

ConMat recognized a profit of $4,000 for fiscal year 2000 as compared to a
profit of $224,000 for the year ended December 31, 1999. As a percentage of net
revenues, net income decreased from 1.9% for the year ended December 31, 1999 as
compared to 0.0% for the year ended December 31, 2000. As previously stated,
Management believes that the operating results delivered during fiscal year 2000
are not indicative of the Company's prospective operations.

Liquidity and Capital Resources

ConMat's primary source of working capital is a credit facility of up to $5
million, subject to a lending formula limit, secured by Polychem's assets with
borrowings limited to a percent of eligible receivables and inventory. At
December 31, 2000 and December 31, 1999, ConMat was not in compliance with
certain financial covenants associated with the General Electric Capital
Corporation facility. These instances of noncompliance were waived by General
Electric Capital Corporation. ConMat expects to comply with these covenants as
sales and earnings are further developed in the business. However, there can be
no assurance that ConMat will remain in compliance or that General Electric
Capital Corporation will continue to waive any noncompliance. As of December 31,
2000, the maximum borrowing amount was $2,872,000 and the outstanding balance
was $2,469,031. Management believes that ConMat has sufficient assets, equipment
and facility to attain and absorb forecasted growth in revenues at Polychem.
ConMat has no commitments for significant capital expenditures in the
foreseeable future. Management believes that ConMat's cash and capital
resources, together with cash flow from operations, will be sufficient to
finance current and forecasted operations including its capital spending and
research and development needs. ConMat is, however, actively seeking potential
strategic acquisitions and, depending on the size and terms of any such
acquisitions, additional financing, including equity infusions, may be required.

In this section, the term "Current Ratio" means current assets divided by
current liabilities. "Working Capital" means current assets less current
liabilities. The company's current ratio at December 31, 2000 was 1.01 as
compared to 1.24 at December 31, 1999. Working capital at December 31, 2000 was
$59,000 as compared to $1,167,000 at December 31, 1999. The two primary factors
associated with the large decrease in working capital are the increased
expenditures in property, plant and equipment and an increase in the Company's
current portion of long-term debt.

ConMat's cash position increased $51,446 during fiscal year 2000. Net cash
provided by operating activities during fiscal year 2000 was $585,935 as
compared to net cash used in operating activities in fiscal year 1999 of
$836,071. The change is principally attributable to a much smaller increase in
accounts receivable as compared to fiscal year 1999. Net cash used in investing
activities increased from $41,910 in fiscal year 1999 to $447,218 during the
most recent fiscal year end as a result of higher levels of capital spending on
property and equipment at Polychem in fiscal year 2000. During fiscal year 2000,
net cash used in financing activities was $87,271 as compared to $950,143 net
cash provided by financing activities in fiscal year 1999. The primary cause of
the large increase in financing sources during fiscal 1999 related to the
mortgage obligation re-financing.

                                       16
<PAGE>

Item 7. Financial Statements.

ConMat's financial statements are attached to this report and begin on page F-1.

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

         On January 26, 2000, ConMat's board of directors approved the dismissal
of Grant Thornton LLP, the principal accountant previously engaged to audit
ConMat's financial statements. Neither of the reports provided by Grant Thornton
LLP for the past two years contained an adverse opinion or a disclaimer of
opinion, or was qualified or modified as to uncertainty, audit scope, or
accounting principles. During ConMat's two most recent fiscal years and the
subsequent period, there were no disagreements with the former accountant on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreement, if not resolved to the
satisfaction of the former accountant, would have caused it to make reference to
the subject matter of the disagreement in connection with its report.

On January 26, 2000, ConMat's board of directors of ConMat approved the
engagement of Cogen Sklar LLP as the principal accountant to audit ConMat's
financial statements. During ConMat's two most recent fiscal years and the
subsequent period prior to such appointment, ConMat has not consulted Cogen
Sklar LLP regarding either the application of accounting principles to a
specified transaction or the type of audit opinion that might be rendered on the
Company's financial statements, nor on any matter that was either the subject of
a disagreement or a reportable event.

                                    PART III


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

         Certain information concerning the present directors and executive
officers of ConMat is set forth below. The term of office for each director is
one year or until the date of ConMat's next meeting of shareholders, at which
time elections are held for each seat on the Board of Directors.
<TABLE>
<CAPTION>
Name and Age                                                  Description
------------                                                  -----------
<S>                                                           <C>
Paul A. DeJuliis, 45................Mr. DeJuliis has been Chairman of the Board of Directors and Chief Executive Officer of ConMat
                                    and Polychem since December, 1998. Prior to such time and since 1991, Mr. DeJuliis was Chairman
                                    and Chief Executive Officer of The Eastwind Group, Inc., a publicly traded holding company.
                                    Previously, Mr. DeJuliis was a partner in Phoenix Management Services, Inc., a turnaround
                                    consulting firm (1989-91), Vice-President, Corporate Finance for Colmen & Co., a national
                                    investment banking firm (1987-89), and Manager, Corporate Turnaround Consulting Group for
                                    Coopers & Lybrand (1986-87). Mr. DeJuliis has a B.S. in finance and accounting from the
                                    University of Delaware. He is also a certified public accountant.

Richard R. Schutte, 52..............Mr. Schutte has served in his current position as President, Chief Operating Officer of ConMat
                                    and Polychem since April, 2000 and has been a member of the Board of Directors since June, 2000.
                                    From May, 1999 until such time, Mr. Schutte was Vice President of Marketing and Business
                                    Development of Polychem. From 1998 until May, 1999 Mr. Schutte was a principal in Skipping
                                    Stone, Inc., a consulting firm. From 1996 to 1997, Mr. Schutte was President of Cot'nWash, Inc.
                                    , a start-up consumer products company. From 1995 to 1996, Mr. Schutte was a principal of
                                    Cheswold Group, Inc., a consulting firm. Prior to such time and since 1973, Mr. Schutte held
                                    various positions at Kimberly-Clark Company (formerly Scott Paper Company), most recently Global
                                    Category Leader, Wet Wipes Division.

Edward F. Sager, Jr., 53............Mr. Sager has been a member of the Board of Directors of ConMat since December, 1998. Mr. Sager
                                    has been the President of Mentor Management Company, general partner of Mentor Special Situation
                                    Fund LP, an investment fund, and President of Mentor Capital Partners Ltd., a venture capital
                                    firm, since 1994.  From 1985 to 1994 Mr. Sager was President of Sager & Associates, a merchant
                                    banking firm providing access to venture capital for small to medium size companies.  He is a
                                    graduate of Lafayette College with a B.S. degree in Mechanical Engineering and he received an
                                    MBA in finance from New York University.


Thomas C. Morral, Jr., 40...........Mr. Morral has served in his current position as Vice President, Chief Financial Officer of
                                    ConMat and Polychem since October, 2000. Prior to joining ConMat, Mr. Morral held several
                                    long-term interim assignments. From January, 2000 through September 2000, Mr. Morral was acting
                                    Chief Financial Officer for Physician Verification Services, Inc., a start-up Internet company.
                                    From January, 1999 through January, 2000, Mr. Morral was interim Chief Financial Officer for
                                    KVB-Enertec, Inc., a systems integrator in emissions monitoring. From May, 1997 through
                                    December, 1998, Mr. Morral was interim Director of Accounting for BetzDearborn, Inc., a leader
                                    in the area of specialty chemicals. From July, 1996 through May, 1997, Mr. Morral was Vice
                                    President, Corporate Controller for National Media Corporation, a publicly traded infomercial
                                    company. Prior to such time, Mr. Morral had been Corporate Controller for DecisionOne
                                    Corporation, a publicly traded computer service and maintenance company and spent five years
                                    with Betz Laboratories, Inc., a publicly traded manufacturer of specialty chemicals, most
                                    recently as Assistant Vice President, Finance & Administration for the company's international
                                    based operations. Mr. Morral is a graduate of Elizabethtown College with a B.S. in Accounting
                                    and concentrations in computer science and economics. He is also a certified public accountant.
</TABLE>
                         Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Exchange Act requires ConMat's directors, certain
of its officers and persons who own more than ten percent (10%) of ConMat's
Common Stock (collectively the "Reporting Persons") to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and to
furnish ConMat with copies of these reports.

         Based on ConMat's review of the copies of these reports received by it,
and representation received from Reporting Persons, ConMat believes that, all
filings required to be made by the Reporting Persons for the period January 1,
2000 through December 31, 2000 were made on a timely basis.




                                       17
<PAGE>



Item 10. Executive Compensation

         The following summary compensation table sets forth the total annual
compensation for the periods indicated paid to Paul A. DeJuliis, ConMat's Chief
Executive Officer, the only executive officer who earned over $100,000 during
the fiscal year ended December 31, 2000.
<TABLE>
<CAPTION>
                                                                                                    Securities
                                               Fiscal                                Other          Underlying
         Name and Position                   Year Ended            Salary ($)     Compensation        Options
         -----------------                   ----------            ----------     ------------      ----------
<S>                                      <C>                       <C>            <C>               <C>
Paul A. DeJuliis, Chairman & Chief       December 31, 2000          $178,680         9,504(2)           --
Executive Officer of ConMat and          December 31, 1999          $170,240         4,072(3)           --
Polychem                                 January 2, 1999              14,167(1)         --            250,000
</TABLE>

-----------------

(1) Represents one month of salary at $170,000 per year.
(2) Consists of an automobile allowance and 401(k) matching contributions.
(3) Consists of an automobile allowance.


                                  Stock Options

         No options to purchase common stock of ConMat were granted to or
exercised by Mr. DeJuliis during the fiscal year ended December 31, 2000. Based
upon the closing market price of a share of ConMat's common stock on December
31, 2000 of $0.38, no options held by Mr. DeJuliis were "in the money" as of the
end of the fiscal year. As of December 31, 2000, Mr. DeJuliis held options to
purchase 250,000 shares of the ConMat's Common Stock, 50,000 of which were
exercisable.

                              Employment Agreements


         On December 8, 1998, ConMat entered into a five-year Employment
Agreement with Mr. DeJuliis. Under the agreement, Mr. DeJuliis is paid an annual
base salary ranging from $170,000 to $250,000 depending on ConMat's annual net
income. As additional incentive compensation, upon executing the Employment
Agreement, Mr. DeJuliis received (i) 250,000 shares of common stock for an
aggregate purchase price of $50,000, paid by delivery of a two-year promissory
note at 5% interest and (ii) 250,000 options to purchase shares of common stock
at an exercise price of $3.00 per share. 50,000 of the options are currently
exercisable, 100,000 of the options are exercisable if ConMat realizes $750,000
in pre-tax income during a fiscal year and the remaining 100,000 options are
exercisable if ConMat realizes $1,000,000 in pre-tax income during a fiscal
year. All of the options are immediately exercisable upon a merger, sale of
assets or other transaction resulting in a change of control in which the
holders of shares of common stock receive not less than $5.00 per share.





                                       18
<PAGE>


Item 11.  Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth information concerning the beneficial
ownership of ConMat's common stock as of April 30, 2001, by each director and
ConMat's Chief Executive Officer, all directors and the Chief Executive Officer
as a group, and each person known to ConMat to beneficially own 5% or more of
its outstanding common stock.
<TABLE>
<CAPTION>
              Name and Address of                    Amount and Nature of               Percentage of
                Beneficial Owner                   Beneficial Ownership (1)           Common Stock (1)
                ----------------                   ------------------------           ----------------
<S>                                                <C>                                <C>
Paul A. DeJuliis                                          1,273,333 (2)                      41.9%
Franklin Avenue & Grant Street
Phoenixville, PA 19460

Edward F. Sager, Jr.                                        196,667 (3)                       6.2%
P.O. Box 560
Yardley, PA  19067

Richard R. Schutte                                           15,000 (4)                       *
Franklin Avenue & Grant Street
Phoenixville, PA 19460

Directors and Chief Executive Officer                     1,500,000 (2)(3)(4)                46.4%
(3 persons)

The Eastwind Group, Inc.                                    735,000 (5)                      19.7%
275 Geiger Road
Philadelphia, PA  19115

Odyssey Capital Group, L.P.                                 382,500 (6)                      11.3%
950 West Valley Rd., Suite 2902
Wayne, PA 19087

The Eastwind Group, Inc.                                    925,000                          31.0%
     Shareholder Trust
c/o Paul A. DeJuliis
Franklin Avenue & Grant Street
Phoenixville, PA 19460

Mentor Special Situation Fund, L.P. (7)                     166,667(8)                        5.3%
P.O. Box 560
Yardley, PA  19067

The DAR Group, Inc.                                         240,000                           8.0%
30 Broad Street, 43rd Floor
New York, NY
</TABLE>


------------------
* Less than 1%

(1)      Based upon 2,988,083 shares of common stock issued and outstanding as
         of April 30, 2001, calculated in accordance with Rule 13d-3 promulgated
         under the Exchange Act. It also includes shares owned by (i) a spouse,
         minor children or by relatives sharing the same home, (ii) entities
         owned or controlled by the named person and (iii) other persons if the
         named person has the right to acquire such shares within 60 days by the
         exercise of any right or option. Unless otherwise noted, shares are
         owned of record and beneficially by the named person.



                                       19
<PAGE>

(2)      Includes 50,000 shares issuable upon the exercises of options.
         Includes 925,000 shares held by The Eastwind Group, Inc. Shareholder
         Trust, of which Mr. DeJuliis is Trustee, as to which he disclaims
         beneficial ownership. If such 925,000 shares were not included in
         calculating Mr. DeJuliis' beneficial ownership, Mr. DeJuliis would be
         deemed to beneficially own 11.5% of ConMat's common stock.

(3)      Includes 22,500 shares issuable upon the exercise of warrants held by
         Mr. Sager, 166,667 shares issuable upon the exercise of warrants held
         by Mentor Special Situation Fund, L.P., of which Mr. Sager is a general
         partner, and 7,500 shares of common stock issuable upon exercise of
         warrants held by George Stasen, a partner of Mr. Sager.

(4)      Consists of shares of common stock jointly owned with Mr. Schutte's
         spouse.

(5)      Consists of shares issuable upon conversion of Series A convertible
         preferred stock.

(6)      Consists of shares of common stock issuable upon exercise of warrants.

(7)      Edward F. Sager, Jr., a director of ConMat, is a general partner of
         Mentor Special Situation Fund, L.P.

(8)      Consists of shares of common stock issuable upon exercise of warrants.


Item 12. Certain Relationship and Related Transactions.

         In connection with the December 8, 1998 acquisition of Polychem by
ConMat, The Eastwind Group, Inc. issued to Polychem a promissory note in the
amount of $940,000, secured by the pledge of 313,333 shares of Series A
convertible preferred stock. This note accrued interest at 8% per year and
principal and interest were due and payable November 30, 2000. Eastwind
defaulted under the terms of the note as a result of a default by Eastwind on a
guarantee of an unrelated debt obligation and as a result of a material adverse
change in Eastwind's financial condition. Following such default, ConMat sought
to foreclose on the pledged shares. Pursuant to a Settlement Agreement dated
June 29, 1999, Eastwind transferred the pledged shares to Polychem in exchange
for cancellation of the note. The amounts previously paid to Eastwind have been
accounted for as distributions by Polychem to Eastwind in the form of dividends.
For financial accounting purposes, the return of the pledged shares was treated
as a reduction in the number of shares of Series A convertible preferred stock
issued to Eastwind in connection with the acquisition of Polychem and in the
number of Series A convertible preferred stock outstanding.

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

(A) Exhibits

The following exhibits are filed as part of this report. Exhibit numbers
correspond to the exhibit requirements of Regulation S-B.

Exhibit
Number     Description
------     -----------
3.1        Articles of Incorporation of ConMat Technologies, Inc.***
3.2        By-laws of ConMat Technologies, Inc.*
4.1        Specimen common stock certificate.*

                                       20
<PAGE>

4.2        Specimen series A preferred stock certificate.*
4.3        Specimen series B preferred stock certificate.*
4.4        Series A warrant from ConMat to Mentor Special Situation Fund, L.P.
           dated December 8, 1998.*
4.5        Series B warrant from ConMat to Mentor Management Company dated
           December 8, 1998.*
4.6        Option Agreement between ConMat and Paul A. DeJuliis dated December
           8, 1998.*
10.1       Employment Agreement between ConMat and Paul A. DeJuliis dated
           December 8, 1998.*
10.2       Loan and Security Agreement between Polychem and General Electric
           Capital Corporation dated September 30, 1998.*
10.3       $3,500,000 Revolving Credit Note payable by Polychem to General
           Electric Capital Corporation dated September 30, 1998.*
10.4       $1,500,000 Term Note payable by Polychem to General Electric Capital
           Corporation dated September 30, 1998.*
10.5       Stock Pledge Agreement between ConMat and General Electric Capital
           Corporation dated December 8, 1998.*
10.6       Guarantee dated December 8, 1998 between ConMat and General Electric
           Capital Corporation.*
10.7       Waiver and Amendment Agreement among General Electric Capital
           Corporation, ConMat, Polychem and Eastwind.*
10.8       $1,626,294 Term Note payable by Polychem to The Budd Company dated
           March 10, 1995.*
10.9       Mortgage and Security Agreement between Polychem and General Electric
           Capital Corporation.*
10.10      Share Exchange Agreement between ConMat and Eastwind dated December
           8, 1998.**
10.11      Eastwind Stockholder Trust Agreement between Eastwind and Paul A.
           DeJuliis dated December 7, 1998.**
10.12      Waiver and Amendment Agreement between General Electric Capital
           Corporation and Polychem dated August 25, 1999.**
10.13      Amended and Restated Term Note dated August 25, 1999 payable by
           Polychem to General Electric Capital Corporation.**
10.14      Amended and Restated Revolving Credit Note dated August 25, 1999
           payable by Polychem to General Electric Capital Corporation.**
10.15      Guarantor Reaffirmation Agreement dated August 25, 1999 between
           ConMat and General Electric Capital Corporation.**
10.16      Balloon Mortgage Note dated August 25, 1999 payable to Public School
           Employes' Retirement Board by Polychem.**
10.17      Open End Mortgage and Security Agreement between Polychem and Public
           School Employes' Retirement Board dated August 24, 1999.**
10.18      Loan Guaranty and Suretyship Agreement between Polychem and Public
           School Employes' Retirement Board dated August 24, 1999.**
10.19      Mortgagee's Waiver and Consent dated August 25, 1999 between Public
           School Employes' Retirement System, Polychem and General Electric
           Capital Corporation.**
11         Computation of Per Share Earnings (included in Financial Statements
           on Pages F-5, F-12 and F-13)
21         Subsidiaries of ConMat.***

----------
*          Incorporated by reference to Form 10-SB file no. 0-30114 filed April
           27, 1999 and Amendment No. 1 filed June 16, 1999.

**         Incorporated by reference to Amendment No. 1 to Form 10-SB file no.
           0-30166 filed August 30, 1999.

***        Incorporated by reference to Registration Statement on Form SB-2
           (File No. 333-91753) filed on November 30, 1999.

           (B) Reports on Form 8-K

           None

                                       21
<PAGE>

SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania on April 26, 2001.

                             CONMAT TECHNOLOGIES, INC.

                             By: /s/ Paul A. De Juliis
                                 Paul A. De Juliis, Chairman of the Board of
                                 Directors and Chief Executive Officer


                             By: /s/ Thomas C. Morral, Jr.
                                 Thomas C. Morral, Jr., Vice President and Chief
                                 Financial Officer
                                 (Principal Accounting and Financial Officer)

         In accordance with the Securities Exchange Act of 1934, this Report has
been duly signed below by the following persons on behalf of the Registrant in
the capacities and on April 26, 2001.

/s/ Paul A. De Juliis        Chairman of the Board of Directors and
---------------------        Chief Executive Officer
Paul A. De Juliis


/s/ Edward F. Sager, Jr.     Director
--------------------------
Edward F. Sager, Jr.

/s/ Richard R. Schutte       Director
--------------------------
Richard R. Schutte

                                       22
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Index to Consolidated Financial Statements
                     Years ended December 31, 2000 and 1999
                       With Report of Independent Auditor

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                        <C>
Report of Independent Auditor                                                              F-1

Consolidated Financial Statements

   Consolidated Balance Sheets                                                             F-2
   Consolidated Statements of Operations                                                   F-3
   Consolidated Statements of Changes in Stockholders' Equity (Deficiency)              F-4 - F-5
   Consolidated Statements of Cash Flows                                                   F-6
   Notes to Consolidated Financial Statements                                              F-7
</TABLE>
<PAGE>

               Report of Independent Certified Public Accountants

Board of Directors
ConMat Technologies, Inc.

We have audited the accompanying consolidated balance sheets of ConMat
Technologies, Inc. and Subsidiary as of December 31, 2000 and 1999 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years then ended. The consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ConMat
Technologies, Inc. and Subsidiary as of December 31, 2000 and 1999 and the
results of their operations and cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States.

                                 COGEN SKLAR LLP

Bala Cynwyd, Pennsylvania
March 7, 2001

                                      F-1
<PAGE>

ConMat Technologies, Inc. and Subsidiary
Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                             December 31            December 31
                               ASSETS                                           2000                   1999
                                                                             -----------           ------------
<S>                                                                         <C>                     <C>
Current Assets:
   Cash and cash equivalents                                                   $   153,038            $   101,592
   Accounts receivable - net                                                     4,744,077              4,569,426
   Inventories                                                                   1,478,185              1,275,042
   Prepaid expenses                                                                269,178                 58,341
                                                                               -----------            -----------
                                                 Total Current Assets            6,644,478              6,004,401
Property, Plant & Equipment - net                                                1,227,409              1,010,748
Deferred Income Taxes                                                               78,493                 78,493
Other Assets                                                                       270,858                264,696
                                                                               -----------            -----------
                                                         Total Assets          $ 8,221,238            $ 7,358,338
                                                                               ===========            ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Line of credit                                                              $ 2,469,031            $ 2,127,628
   Current portion of long-term debt                                               789,338                444,641
   Current portion of capital lease obligations                                     64,743                 95,461
   Accounts payable                                                              2,711,097              1,722,364
   Accrued expenses                                                                551,219                447,778
                                                                               -----------            -----------
                                            Total Current Liabilities            6,585,428              4,837,872

Long-Term Debt                                                                   2,149,064              2,775,771
Obligations Under Capital Leases                                                    33,818                 86,625
Other Liabilities                                                                  168,969                176,900
                                                                               -----------            -----------
                                                    Total Liabilities            8,937,279              7,877,168

Stockholders' Equity (Deficiency):
   Series A preferred stock - $.001 par value,
      1,500,000 shares authorized,
      713,250 and 1,073,333 shares
      issued and outstanding                                                           713                  1,073
   Series B Preferred Stock - $.001 par value,
      166,667 shares authorized, issued and outstanding                            500,000
                                                                                                          500,000
   Series C preferred stock - $.001 par value, 446,150
      shares authorized,  382,500 issued and outstanding                               383
                                                                                                                -
   Common stock - $.001 par value, 40,000,000 shares
      authorized, 2,963,083 and 2,250,000 shares issued,
      2,742,258 and 2,250,000 outstanding                                            2,963                  2,250
   Additional paid-in capital                                                      195,687               (666,986)
   Accumulated deficit                                                            (300,949)              (305,167)
   Cost of common shares in treasury - 220,825 shares                              (96,838)
                                                                                                                -
   Less: Receivables for shares sold                                              (900,000)               (50,000)
         Receivable relating to Eastwind claim                                    (118,000)
                                                                               -----------            -----------
                                       Total Stockholders' Deficiency             (716,041)              (518,830)
                                                                               -----------            -----------
                       Total Liabilities and Stockholders' Deficiency          $ 8,221,238            $ 7,358,338
                                                                               ===========            ===========
</TABLE>

The accompanying notes are an integral part of these financial statements

                                      F-2
<PAGE>

ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
                                                                           Twelve Months Ended December 31
                                                                                2000              1999
                                                                           -------------      ------------
<S>                                                                              <C>              <C>
Net Sales to Customers                                                       $13,695,058      $11,921,199
Cost of Goods Sold                                                            10,493,578        8,366,225
                                                                             -----------      -----------
                                                            Gross Profit       3,201,480        3,554,974

Selling, General and Administrative Expenses                                   2,380,637        2,632,628
Corporate Expenses                                                               510,059          265,895
                                                                             -----------      -----------
                                                        Operating Income         310,784          656,451

Other Income (Expense):
   Interest expense                                                             (526,462)        (530,178)
   Rental income                                                                 247,096          206,042
                                                                             -----------      -----------
                                               Income Before Tax Expense          31,418          332,315

Income Tax Expense                                                                27,200          108,000
                                                                             -----------      -----------
                                                              Net Income           4,218          224,315

Dividends on preferred shares                                                    (87,754)         (40,000)
                                                                             -----------      -----------
                    Net (loss) earnings available to common shareholders     $   (83,536)     $   184,315
                                                                             ===========      ===========

Net (loss) earnings per Common Share:
      Basic                                                                  $     (0.04)     $      0.08
                                                                             ===========      ===========

      Diluted                                                                $     (0.04)     $      0.07
                                                                             ===========      ===========

Weighted average number of common shares outstanding:

      Basic                                                                    2,365,371        2,250,000
                                                                             ===========      ===========

      Diluted                                                                  2,365,371        3,211,912
                                                                             ============     ===========
</TABLE>
The accompanying notes are an integral part of these financial statements

                                      F-3


<PAGE>

ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                              Common stock            Series A preferred stock   Series B preferred stock
                                        --------------------------  ---------------------------  --------------------------
                                          Shares        Amount        Shares         Amount        Shares        Amount
                                        ------------  ------------  ------------  -------------  ------------  ------------
<S>                                       <C>             <C>         <C>              <C>        <C>             <C>
Balance, January 2, 1999                  2,250,000       $ 2,250     1,386,666        $ 1,386             -      $      -

Return of pledged Series A
   preferred stock                                                     (313,333)          (313)
Reclassification of Series B
   preferred stock                                                                                   166,667       500,000
                                          ---------       -------     ---------        -------       -------      --------
Balance, December 31, 1999                2,250,000                   1,073,333                      166,667
                                                            2,250                        1,073                     500,000
Conversion of common shares
   and series A preferred shares
   for series C preferred shares            (75,000)          (75)     (285,000)          (285)
Conversion of series A preferred
   shares into common shares                313,000           313
Conversion of series A preferred
   shares into common shares                 75,083            75       (75,083)           (75)
Issuance of common shares
   in exchange for note                     400,000           400
                                          ---------       -------     ---------        -------       -------      --------
Balance, December 31, 2000                2,963,083       $ 2,963       713,250        $   713       166,667      $500,000
                                          =========       =======     =========        =======       =======      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                          Cost of common
                                         Series C preferred stock       shares in treasury
                                        --------------------------  ---------------------------
                                          Shares        Amount        Shares         Amount
                                        ------------  ------------  ------------  -------------
<S>                                      <C>            <C>           <C>           <C>
Balance, January 2, 1999                          -        $    -             -     $        -

Return of pledged Series A
   preferred stock
Reclassification of Series B
   preferred stock
                                           --------        ------       -------     ----------
Balance, December 31, 1999                        -             -             -              -

Conversion of common shares
   and series A preferred shares
   for series C preferred shares            382,500           383
Purchase of treasury shares                                             220,825        (96,838)
                                           --------        ------       -------     ----------
Balance, December 31, 2000                  382,500        $  383       220,825     $  (96,838)
                                            =======        ======       =======     ==========
</TABLE>

The accompanying notes are an integral part of these financial statements

                                      F-4
<PAGE>

ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) -
  Continued
Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                      Notes       Receivable       Total
                                        Additional    Accumulated   receivable    relating to    stockholders'
                                          paid-in      earnings     for shares      Eastwind        equity
                                        capital, net   (deficit)       sold          claim       (deficiency)
                                        ------------  ------------  ------------  -------------  -------------
<S>                                      <C>           <C>           <C>           <C>            <C>
Balance, January 2, 1999                 $(472,488)    $(489,482)    $ (50,000)    $        -     $(1,008,334)
Cash dividend on series B
   preferred stock                                       (40,000)                                     (40,000)
Return of pledged Series A
   preferred stock                             313                                                          -
Reclassification of Series B
   preferred stock                                                                                    500,000
Recapitalization costs                    (194,811)                                                  (194,811)
Net income                                               224,315                                      224,315
                                         ---------     ---------     ---------     ----------     -----------
Balance, December 31, 1999                (666,986)     (305,167)      (50,000)             0        (518,830)
Conversion of common shares
   and series A preferred shares
   for series C preferred shares               (23)
Conversion of series A preferred
   shares into common shares                  (313)
Sale of common stock                       297,500                    (250,000)                       47,500
Purchase of treasury shares                                                                          (96,838)
Expenses associated with
   equity transactions                     (34,091)                                                  (34,091)
Issuance of common shares
   in exchange for note                    599,600                    (600,000)
Eastwind claim receivable                                                           (118,000)       (118,000)
Net income                                                 4,218                                       4,218
                                         ---------     ---------     ---------     ----------     -----------
Balance, December 31, 2000               $ 195,687     $(300,949)    $(900,000)    $(118,000)     $ (716,041)
                                         =========     =========     =========     =========      ==========
</TABLE>

The accompanying notes are an integral part of these financial statements

                                      F-5

<PAGE>

ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                     Year Ended December 31
                                                                   ---------------------------
                                                                      2000            1999
                                                                   ----------      -----------
<S>                                                                   <C>             <C>
Cash Flows from Operating Activities:
   Net income                                                      $    4,218      $   224,315
   Adjustments to reconcile to net cash provided by (used in)
      operating activities:
         Depreciation and amortization                                263,116          308,210
   Changes in assets and liabilities:
      (Increase) decrease in assets
         Accounts receivable                                         (174,651)      (1,794,144)
         Receivable relating to Eastwind claim                       (118,000)               -
         Inventories                                                 (203,138)        (115,497)
         Prepaid expenses                                            (210,837)          (7,996)
         Other assets                                                 (59,013)        (119,814)
      Increase (decrease) in liabilities
         Accounts payable                                             988,734          673,855
         Accrued expenses                                              95,506           (5,000)
                                                                   ----------      -----------
           Net Cash Provided By (Used In) Operating Activities        585,935         (836,071)

Cash Flows from Investing Activities:
   Purchase of property and equipment                                (403,397)         (34,153)
   Patent costs                                                       (43,821)          (7,757)
                                                                   ----------      -----------
                         Net Cash Used In Investing Activities       (447,218)         (41,910)

Cash Flows from Financing Activities:
   Net borrowings (repayments) under lines of credit                  341,403          728,996
   Repayments of term notes                                          (282,011)      (1,353,259)
   Repayments of capital lease obligations                            (83,526)        (118,419)
   Purchases of treasury stock                                        (96,838)               -
   Proceeds from sale of common stock                                  47,500                -
   Offering costs associated with equity transactions                 (34,091)               -
   Payments of Series B preferred dividends                                 -          (30,000)
   Proceeds from mortgage obligation                                        -        1,880,000
   Proceeds from capital lease obligations                             20,292           45,000
   Recapitalization costs                                                   -         (194,811)
   Other                                                                    -           (7,364)
                                                                   ----------      -----------
           Net Cash (Used In) Provided By Financing Activities        (87,271)         950,143

                       Net Increase in Cash & Cash Equivalents         51,446           72,162

Cash and Cash Equivalents at Beginning of Period                      101,592           29,430
                                                                   ----------      -----------
Cash and Cash Equivalents at End of Period                         $  153,038      $   101,592
                                                                   ==========      ===========

Supplemental Cash Flow Information:
   Cash paid for interest                                          $  520,862      $   527,155
                                                                   ==========      ===========
   Cash paid for income taxes                                      $   40,000      $         -
                                                                   ==========      ===========
</TABLE>
The accompanying notes are an integral part of these financial statements

                                      F-6
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

NOTE 1- NATURE OF BUSINESS

ConMat Technologies, Inc. (ConMat or the Company), organized under the laws of
the State of Florida, is engaged in the development and manufacture of
proprietary custom engineered plastics and composite products for industrial end
users with a special emphasis on the wastewater treatment marketplace. ConMat
conducts its operations through its wholly owned subsidiary, the Polychem
Corporation (Polychem), located in Phoenixville, Pennsylvania. Polychem
manufactures and sells clarifier components for wastewater treatment
applications and other plastic-molded products, including buckets, sprockets and
bearings. The wastewater treatment market is global in nature, and Polychem
presently sells products internationally in Western Europe, the Middle East,
Asia and South America, as well as in the United States.

NOTE 2 - BASIS OF PRESENTATION

The consolidated financial statements include the accounts of ConMat and its
wholly owned subsidiary, Polychem. Certain reclassifications to prior year
amounts, none of which effect the net loss, have been made to conform to the
current year presentation.

On December 8, 1998, ConMat, a non-operating public company with 1,000,000
common shares outstanding and immaterial net assets, acquired 100% of the
outstanding common stock of Polychem from The Eastwind Group, Inc. (Eastwind)
(the Acquisition). The Acquisition resulted in the owners and management of
Polychem having effective operating control of the combined entity.

Under generally accepted accounting principles, the Acquisition is considered to
be a capital transaction in substance, rather than a business combination. That
is, the Acquisition is equivalent to the issuance of stock by Polychem for the
net monetary assets of ConMat, accompanied by a recapitalization, and is
accounted for as a change in capital structure. Accordingly, the accounting for
the Acquisition is identical to that resulting from a reverse acquisition,
except that no goodwill is recorded. Under reverse takeover accounting, the post
reverse-acquisition comparative historical financial statements of the "legal
acquirer" (ConMat), are those of the "legal acquiree" (Polychem) (i.e. the
accounting acquirer).

Accordingly, the consolidated financial statements of ConMat as of December 31,
1999 and January 2, 1999, and for the fiscal years then ended, are the
historical financial statements of Polychem for the same periods adjusted for
the following transactions contained in the Share Exchange Agreement executed at
consummation of the Acquisition. The basic structure and terms of the
Acquisition, together with the applicable accounting effects, were as follows:

     o ConMat acquired all of the outstanding shares of common stock of Polychem
       from Eastwind in exchange for (i) 1,000,000 shares of newly issued common
       stock of ConMat and (ii) 1,333,333 shares of newly issued series A
       convertible preferred stock of ConMat (series A preferred stock). The
       common stock and series A preferred stock exchanged, in addition to the
       existing ConMat shares outstanding, collectively resulted in the
       recapitalization of the Company. Earnings per share (EPS) calculations
       include the Company's change in capital structure for all periods
       presented.

     o ConMat assumed and, in certain instances, discharged the following
       liabilities of Eastwind: (i) $160,000 owed to Eastwind's former Chairman
       and Chief Executive Officer, who is the current Chairman and Chief
       Executive Officer of ConMat, discharged by the issuance of 53,333 shares
       of series A preferred stock; (ii) $100,000 owed to Clifton Capital, Ltd.,
       discharged by the payment to Clifton Capital, Ltd. of $100,000; and (iii)
       $500,000 owed to Mentor Special Situation Fund, L.P., discharged by the
       issuance to Mentor Special Situation Fund, L.P. of 166,667 shares of
       newly issued cumulative, 8%, series B preferred stock of ConMat plus
       warrants to purchase 166,667 shares of ConMat common stock, at $3.00 per
       share. The general partner of Mentor Special Situation Fund, L.P. is a
       member of ConMat's Board of Directors. ConMat issued an option to
       purchase 30,000 shares of common stock to this director for $1.00 per
       share.

                                      F-7
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

     o At closing, Eastwind issued to Polychem a promissory note in the amount
       of $940,000 to evidence certain outstanding amounts owed by Eastwind to
       Polychem for prior advances, secured by the pledge of 313,333 shares of
       series A preferred stock. This amount, in addition to other amounts owed
       to Polychem by Eastwind, was accounted for as distributions in the form
       of dividends on common stock to Eastwind in the periods the distributions
       were made. Eastwind defaulted under the terms of the note as a result of
       a default by Eastwind on a guarantee of an unrelated debt obligation and
       as a result of a material adverse change in Eastwind's financial
       condition. Following such default, ConMat sought to foreclose on the
       pledged shares. Pursuant to a Settlement Agreement dated June 29, 1999,
       Eastwind transferred the pledged shares to Polychem in exchange for
       cancellation of the note. For financial accounting purposes, the return
       of the pledged shares was treated as a reduction in the number of shares
       of Series A convertible preferred stock issued to Eastwind in connection
       with the acquisition of Polychem and in the number of Series A preferred
       stock outstanding.

The Company incurred costs of $194,811 in 1999 related to the Acquisition. These
costs were recorded as reductions to additional paid-in capital in connection
with the reclassification of equity resulting from the recapitalization.


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Comprehensive Income

The company adopted Statement of Financial Accounting Standard (SFAS No. 130,
"Reporting Comprehensive Income") beginning January 4, 1998. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income (loss). Since the company had no
items of other comprehensive income (loss), no separate statement of
comprehensive income (loss) has been presented.

Cash and Cash Equivalents

The Company's cash management system provides for the short-term investment of
cash and the transfer or deposit of sufficient funds to cover checks as they are
submitted for payment. The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.

Concentration of Credit Risk Involving Cash

At December 31, 2000, the Company has no deposits with major financial
institutions that exceed Federal Depository Insurance limits.

Inventories

Inventories consist of raw materials, work-in-process, and finished goods.
Work-in-process and finished goods include raw materials, direct labor, and a
portion of manufacturing overhead. The Company's inventory is stated at the
lower of cost or market, with cost determined by the first-in, first-out (FIFO)
method.

                                      F-8
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is recorded using the straight-line and accelerated depreciation
methods over the estimated useful lives of the assets. Leasehold improvements
are amortized over the term of the lease or estimated useful life, whichever is
shorter.

Research and Development Costs

The Company expenses research and development costs as incurred. Research and
development costs were approximately $225,000 for the year ended December 31,
2000 and $160,000 for the year ended December 31, 1999.

Income Taxes

The Company accounts for its income taxes under the liability method specified
by Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect when
these differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities.

Shipping Costs

In September 2000, the Emerging Issues Task Force reached a consensus on Issue
00-10, "Accounting for Shipping and Handling Fees and Costs" (Issue 00-10).
Issue 00-10 requires that all amounts billed to customers related to shipping
and handling should be classified as revenues. In addition, Issue 00-10
specifies that the classification of shipping and handling cost is an accounting
policy decision that should be disclosed pursuant to APB #22, "Disclosure of
Accounting Policies". The Company's product costs includes amounts for shipping
and handling, therefore, it charges its customers shipping and handling fees at
the time the products are shipped or when services are performed. The cost of
shipping products to the customer is recognized at the time the products are
shipped to the customer and is included in Cost of Goods Sold.

Recent Accounting Pronouncements

In June 1998 SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" was issued period. Subsequent to this statement, SFAS No. 137 was
issued, which amended the effective date of SFAS No. 133 to be all fiscal
quarters of all fiscal years beginning after June 15, 2000. In June 2000 SFAS
No. 138 was issued, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an Amendment of SFAS No. 133". SFAS No. 133 as amended by
SFAS No. 138 requires that all derivative instruments be recorded on the balance
sheet at their respective fair values. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on the designation of the hedge transaction period. The Company will
adopt SFAS No. 133, as amended by SFAS No. 138, in the first quarter of fiscal
year 2001. The Company does not use derivatives at the current time, and
management does not anticipate the adoption of this standard to have a
significant impact on earnings or financial position of the Company. However,
the impact from adopting SFAS No. 133, as amended by SFAS No. 138, will depend
on the nature and purpose of the derivatives instruments in use by the Company
at that time.

In December 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101) which
addresses certain criteria for revenue recognition. SAB 101, as amended by SAB
101A and SAB 101B, outlines the criteria that must be met to recognize revenue
and provides guidance for disclosures related to revenue recognition policies.
The Company must implement any applicable provisions of SAB 101 no later than
the first quarter of fiscal year 2001. Management believes the Company's revenue
recognition policies comply with the guidance contained in SAB 101 and
therefore, the Company's results of operations will not be materially affected.

                                      F-9
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

Earnings (Loss) Per Share

The Company reports earnings per share in accordance with the provisions of SFAS
No. 128, Earnings Per Share. SFAS No. 128 requires presentation of basic and
diluted earnings per share in conjunction with the disclosure of the methodology
used in computing such earnings per share. Basic earnings per share excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average common shares outstanding during the period. Diluted
earnings per share takes into account the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock.

The following are the basic and diluted earnings per share (EPS) computations
for the periods presented:
<TABLE>
<CAPTION>
                                                                  Year Ended December 31
                                                                ---------------------------
                                                                   2000             1999
                                                                -----------     -----------
<S>                                                                <C>             <C>
Earnings per Share - Basic:
   Net income                                                   $    4,218      $  224,315
   Dividends on preferred shares                                   (87,754)        (40,000)
                                                                ----------      ----------
   Net (loss) income available to common shareholders           $  (83,536)     $  184,315
                                                                ==========      ==========

   Weighted average shares outstanding                           2,365,371       2,250,000
                                                                ==========      ==========

                            Basic (Loss) Earnings Per Share     $    (0.04)     $     0.08
                                                                ==========      ==========

Earnings per Share - Diluted:
   Net (loss) income available to common shareholders           $  (83,536)     $  184,315
   Dividends on preferred shares                                        --          40,000
                                                                ----------      ----------
   Income on common shares after
      assumed conversions                                       $  (83,536)     $  224,315
                                                                ==========      ==========

   Weighted average shares outstanding                           2,365,371       2,250,000
   Dilutive effect of preferred stock                                   --         883,332
   Dilutive effect of stock options and warrants                        --          78,580
                                                                ----------      ----------
      Diluted average shares outstanding                         2,365,371       3,211,912
                                                                ==========      ==========

                          Diluted (Loss) Earnings Per Share     $    (0.04)     $     0.07
                                                                ==========      ==========
</TABLE>
Series A preferred stock, convertible into 798,875 and 1,073,333 shares of
common stock was outstanding during the fiscal years ended December 31, 2000 and
1999, respectively. Common stock warrants associated with the Series B and
Series C preferred stock providing for the purchase of 579,167 and 196,667
common shares were outstanding at December 31, 2000 and 1999, respectively. The
exercise price of the warrants is $3.00 per warrant. The Company had stock
options for the purchase of 375,000 and 425,000 common shares outstanding at
December 31, 2000 and 1999, respectively. The Series A preferred stock,
preferred stock warrants and the stock options were excluded from the
computation of diluted earnings per share for the year ended December 31, 2000,
since these securities were antidilutive as a result of the Company's loss
available to common shareholders in that year.

                                      F-10
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

NOTE 4 - ACCOUNTS RECEIVABLE

                                                            December 31
                                                     --------------------------
                                                        2000            1999
                                                     ----------      ----------

Accounts receivable                                  $ 4,239,826    $ 4,122,248
Retainage receivables                                    564,251        507,178
Allowance for doubtful accounts                          (60,000)       (60,000)
                                                     -----------    -----------
                                                     $ 4,744,077    $ 4,569,426
                                                     ===========    ===========

The Company sells clarifier components to general contractors for use in
building and maintaining wastewater treatment facilities operated by government
municipalities. Sales of these components under contracts generally require
retainage provisions, which become due upon completion of the entire contract.
Retainage receivables with terms due in over one year are included in other
assets in the accompanying balance sheets.


NOTE 5 - INVENTORIES
                                                           December 31
                                                --------------------------------
                                                    2000                 1999
                                                ----------            ----------

Raw Materials                                   $  581,554            $  445,041
Work-in-process                                    630,314               497,332
Finished goods                                     266,317               332,669
                                                ----------            ----------
                                                $1,478,185            $1,275,042
                                                ==========            ==========

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

                                                             December 31
                                      Estimated     ---------------------------
                                    Useful Lives         2000           1999
                                   -------------    -----------      ----------

Land                                    --          $    56,000      $   56,000
Buildings and equipment            10 - 15 years        968,826         968,826
Machinery and equipment             3 - 7 years         938,283         878,514
Construction in progress                                346,917          23,580
                                                    -----------      ----------
                                                      2,310,026       1,926,920
 Less accumulated depreciation                       (1,082,617)       (916,172)
                                                    -----------      ----------
                                                    $ 1,227,409      $1,010,748
                                                    ===========      ==========

Depreciation expense was $166,444 and $212,228 for the fiscal years ended
December 31, 2000 and 1999, respectively.

Machinery and equipment as of December 31, 2000 and 1999, includes $514,569 and
$493,236, respectively, of equipment under capital leases, with accumulated
depreciation of $344,976 and $266,701, respectively.

                                      F-11
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

NOTE 7 - OTHER ASSETS

                                                             December 31
                                                     ---------------------------
                                                       2000               1999
                                                     --------           --------

Deferred financing, net                              $145,794           $173,854
Patents, net                                          125,064             90,842
                                                     --------           --------
                                                     $270,858           $264,696
                                                     ========           ========

NOTE 8 - LINE OF CREDIT AND LONG-TERM DEBT

On September 30, 1998, Polychem entered into a three year loan and security
agreement (the Agreement) with a commercial lender which provided to Polychem a
revolving credit line up to $3,500,000 based upon eligible accounts receivable
and inventory, as defined. On August 25, 1999, the revolving credit line was
increased to $5,000,000. The revolving credit line bears interest at the index
rate, based on the rate for 30-day dealer paper, plus 4.75% (11.4% at December
31, 2000). The Agreement also provided for a term loan for $1,500,000, secured
by equipment, with interest at the index rate plus 6.5% (13.15% at December 31,
2000). As of December 31, 2000 the outstanding balance on the revolving line of
credit was $2,469,031. The Agreement expires on September 30, 2001 and the
Company is in discussion with the lender to extend the credit facility.

On August 25, 1999, Polychem received proceeds of $1,880,000 pursuant to a
10-year mortgage loan containing a 25 year amortization schedule and a balloon
payment due September 1, 2009, secured by Polychem's land and building in
Phoenixville, Pennsylvania. The mortgage loan bears interest at 8.5% for the
first five years and is adjusted to 3.5% above the 5-year U.S. Treasury Note
Yield Rate at the end of the first five years. Polychem used $813,000 of the
mortgage proceeds to reduce the term loan and $996,000 to reduce the revolving
credit line. At December 31, 2000 and 1999, the Company was not in compliance
with certain financial covenants contained in the Agreement with respect to
$2,745,031 of obligations. These instances of noncompliance were waived by the
commercial lender.

At December 31, 2000, there was approximately $400,000 available for advances
under the revolving line of credit.
<TABLE>
<CAPTION>
                                                                           December 31
                                                                   ----------------------------
                                                                      2000             1999
                                                                   ----------      ----------
<S>                                                                     <C>             <C>
Polychem term note payable to the Budd Company, interest
at 8%, principle payable in quarterly installments of $81,315
plus interest, commencing March 1998 through March 2003            $  813,148      $  975,776

Polychem note payable, interest at index rate plus 6.5%
(13.15% and 12.1% at December 31, 2000 and 1999,
respectively) in monthly installments of $8,000 plus interest,
with a final payment in September 2001 of $212,000                    276,000         372,000

Polychem 10-year mortgage note payable, interest at 8.5%
for the first five years, thereafter, 3.5% above the 5-year
Treasury Note yield at August 25, 2004, monthly payments
based upon a 25-year amortization schedule with a balloon
payment due September, 2009 of outstanding principal and
Interest                                                            1,849,254       1,872,636
                                                                   ----------      ----------
                                                                    2,938,402       3,220,412
Less current portion                                                 (789,338)       (444,641)
                                                                   ----------      ----------
                                                                   $2,149,064      $2,775,771
                                                                   ==========      ==========
</TABLE>

                                      F-12
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

Maturities on these obligations at December 31, 2000 are as follows:

              2001                                   $ 789,338
              2002                                     352,957
              2003                                      30,147
              2004                                      32,811
              2005                                      35,712
              Thereafter                             1,697,437
                                                    ----------
                                                    $2,938,402
                                                    ==========

The carrying amounts of the Company's long-term debt approximate their fair
value as of December 31, 2000 and 1999. The fair value of the Company's
long-term debt is estimated using discounted cash flow analyses based on the
Company's incremental borrowing rate for similar types of borrowing
arrangements.

Interest expense of $502,045 and $505,126 related to the line of credit and
long-term debt was charged to operations for the years ended December 31, 2000
and 1999, respectively.


NOTE 9 - CAPITALIZED LEASE OBLIGATIONS

The Company leases certain equipment under capital leases. The weighted average
interest rate related to these capital leases was 10% in both fiscal 2000 and
1999. Interest expense of $13,836 and $21,944 on the capitalized lease
obligations was charged to operations for the years ended December 31, 2000 and
1999, respectively. Future minimum lease payments as of December 31, 2000, are
as follows:

                     2001                                 $  70,136
                     2002                                    25,439
                     2003                                    10,600
                     2004                                         -
                     2005                                         -
                     Thereafter                                   -
                                                          ---------
         Total minimum lease payments                       106,175
         Less amounts representing interest                  (7,614)
                                                          ---------
                                                             98,561
         Less current portion                               (64,743)
                                                          ---------
                                                          $  33,818
                                                          =========

NOTE 10 - EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

Management and nonunion employees of Polychem participate in a qualified 401(k)
savings plan. Participants can contribute a portion of their pretax
compensation, and Polychem matches 50% of the first 4% of compensation
contributed by the employee. Contributions to the plan for the years ended
December 31, 2000 and 1999, were $37,889 and $33,291, respectively. Participants
vest in Polychem's contributions pro rata over two to five years. At the
direction of the Board of Directors, Polychem may elect to contribute a maximum
of 9% of each employee's compensation, in addition to the regular match, if
sufficient profits are generated. There were no discretionary contributions made
in fiscal years 2000 or 1999.

                                      F-13
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

Defined Benefit Pension Plan

Polychem maintains a non-contributory defined benefit pension plan for hourly
union employees. The pension benefits are based on years of service and the
benefit rate in effect at the date of retirement.

         The plan status was as follows:
<TABLE>
<CAPTION>
                                                                  Year Ended December 31
                                                                ---------------------------
                                                                   2000            1999
                                                                ----------       ----------
<S>                                                                <C>              <C>
Change in benefit obligation:
   Benefit obligation at beginning of year                      $2,413,507       $2,328,779
   Service cost                                                     30,559           31,057
   Interest cost                                                   158,541          147,497
   Actual gain                                                    (191,293)         137,773
   Benefits paid                                                  (200,353)        (231,599)
                                                                ----------       ----------
                          Benefit obligation at end of year      2,210,961        2,413,507

Change in plan assets:
   Fair value of plan assets at beginning of year                2,317,283        2,288,813
   Actual return on plan assets                                    (97,685)         260,069
   Employer contribution                                                 0                0
   Benefits paid                                                  (200,353)        (231,599)
                                                                ----------       ----------
                   Fair value of plan assets at end of year      2,019,245        2,317,283

   Funded status                                                  (191,716)         (96,224)
   Unrecognized net actuarial gain                                (143,792)        (268,444)
   Unrecognized prior service cost                                 148,127          164,221
   Minimum liability adjustment                                     (4,335)               -
                                                                ----------       ----------
                             Prepaid (accrued) benefit cost     $ (191,716)      $ (200,447)
                                                                ==========       ==========

Weighted average assumptions as of end of year:
   Discount rate                                                      7.50%            6.75%
   Expected return on plan assets                                     9.00%            9.00%

Components of net periodic benefit (cost) income:
   Service cost                                                 $  (30,559)      $  (31,057)
   Interest cost                                                  (158,541)        (147,497)
   Actual return on plan assets                                    (97,685)         260,069
   Amortization of prior service cost                              (16,094)         (16,094)
   Recognized net actuarial gain (loss)                            315,945          (48,455)
                                                                ----------       ----------
                                Net periodic benefit income     $   13,066       $   16,966
                                                                ==========       ==========
</TABLE>
Postretirement Life Insurance Benefits

Polychem provides postretirement life insurance benefits to all union employees.
The life insurance plan provides coverage ranging from $3,000 to $6,000 for
qualifying retired employees. A discount rate of 7% was used in determining the
present value of the obligations as of December 31, 2000 and 1999. The unfunded
accumulated postretirement benefit obligation as of December 31, 2000 and 1999,
was $15,000. The net periodic postretirement benefit cost for the years ended
December 31, 2000 and 1999, was not material.

                                      F-14
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

NOTE 11 - INCOME TAXES

The components of income tax expense are as follows:

                                                      Year Ended December 31
                                                  -----------------------------
                                                   2000                  1999
                                                  -------              --------
Current
   Federal                                        $20,000              $108,000
   State                                            4,000                    --
                                                  -------              --------
                                                   24,000               108,000
Deferred
   Federal                                          3,200                    --
   State                                               --                    --
                                                  -------              --------
                                                    3,200                    --
                                                  -------              --------
                                                  $27,200              $108,000
                                                  =======              ========

The reconciliation of the statutory federal rate to the Company's effective
income tax rate is as follows:
<TABLE>
<CAPTION>
                                                           Year Ended December 31
                                                           -----------------------
                                                             2000          1999
                                                           --------      ---------
<S>                                                            <C>           <C>
Statutory tax provision                                      10,682        112,987
State income tax provision, net of federal tax benefit        2,640
Reduction of net operating loss carryforwards, net                         151,671
Increase (decrease) in valuation allowance                    7,468       (163,210)
Nondeductible expense                                         8,500          6,947
Other                                                        (2,090)          (395)
                                                           --------      ---------
                                                           $ 27,200      $ 108,000
                                                           ========      =========
</TABLE>
Under SFAS No. 109, Accounting for Income Taxes, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates.

The tax effect of temporary differences that give rise to deferred income taxes
is as follows:

                                                        Year Ended December 31
                                                        -----------------------
                                                          2000           1999
                                                        --------       --------
Deferred tax assets
   Accounts receivable                                  $ 20,400       $ 20,400
   Inventory                                              43,627         43,627
   Property, plant and equipment                          37,438         23,496
   Employee benefit plans                                 57,722         60,416
   Net operating loss carryforwards                            -          3,780
   Valuation allowance on deferred tax asset             (80,694)       (73,226)
                                                        --------       --------
                                                        $ 78,493       $ 78,493
                                                        ========       ========

A valuation allowance has been recorded to reduce the net deferred tax asset to
an amount that management believes is realizable in future tax years from income
from operations.

                                      F-15
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

NOTE 12 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases certain facilities and equipment under noncancellable
operating leases that expire through May 2001. Rent expense of $30,007 and
$27,956 has been charged to operations for the years ended December 31, 2000 and
1999, respectively. Minimum future rental payments under leases as of December
31, 2000, are as follows:

                        2001                    $35,386
                        2002                     27,840
                        2003                     15,038
                                                -------
                                                $78,264
                                                =======

Litigation

ConMat is currently a defendant in an action originally filed on January 28,
1999, in Pennsylvania state court captioned John R. Thach v. The Eastwind Group,
et al. On October 27, 2000, co-defendant, The Eastwind Group, Inc., filed a
voluntary petition for relief under Chapter 11 of Title 11 of the Bankruptcy
Code (U.S.B.C., E.D. Pa. Bankruptcy No. 00-33372 SR). The plaintiff removed the
state court action to the United States Bankruptcy Court for the Eastern
District of Pennsylvania on November 29, 2000 (U.S.B.C., E.D. Pa. Adversary No.
00-906). Plaintiff maintains that Eastwind, his former employer, breached the
terms of his severance agreement and that the sale of Polychem to ConMat was
part of a conspiracy to avoid payments to him and has violated Pennsylvania's
Uniform Fraudulent Transfer Act. The plaintiff seeks damages of at least
$350,000 and punitive damages of at least $500,000. In addition, the plaintiff
seeks to have the December 8, 1998 acquisition of Polychem declared null and
void. Among the other named defendants is Paul A. DeJuliis, President of ConMat
and the former Chief Executive Officer of Eastwind. Initially, the plaintiff
sought a temporary restraining order and preliminary injunction seeking to set
aside the sale of Polychem to ConMat. By Order dated February 19, 1999, the
State Court denied plaintiff's request for injunctive relief. Currently the
plaintiff is seeking permission from the Bankruptcy Court to proceed with his
litigation.

On January 22, 2001 the Bankruptcy Court appointed a Chapter 11 trustee to
oversee and administer The Eastwind Group, Inc. bankruptcy. The bankruptcy
trustee may assert claims against ConMat, including the claim made in the Thach
case that the December 8, 1998 acquisition of Polychem was a fraudulent
conveyance. Management of ConMat is currently in discussions with the bankruptcy
trustee to resolve any potential claims.

ConMat is currently a defendant in a federal district court action filed on
April 11, 2000, in the United States District Court for the Eastern District of
Pennsylvania captioned Profutures Special Equities Fund, L.P. v. The Eastwind
Group, et al. (U.S.D.C., E.D. Pa. Civil Action No. 00-CV-1888). ProFutures
maintains that Eastwind and others violated federal and state securities laws
and committed common law fraud in connection with the June 1998 purchase by
ProFutures of $750,000 in Series C Convertible Preferred Stock of Eastwind.
ProFutures seeks damages in the amount of $750,000 and seeks to have the
acquisition of Polychem by ConMat declared null and void. Among other named
defendants is Paul A. DeJuliis, President of ConMat and former Chief Executive
Officer of Eastwind. ConMat, Paul A. DeJuliis and two other former officers of
Eastwind filed a Motion to Dismiss the Complaint on May 25, 2000 and ProFutures
responded. Before the court issued a ruling on that motion, co-defendant
Eastwind filed for bankruptcy in November 2000 and the case was stayed. Nothing
further has occurred in this case.

From time to time, ConMat and its subsidiary are parties to routine litigation,
which arises in the normal course of business. In the opinion of management, the
resolution of these lawsuits would not have a material adverse effect on the
Company's consolidated financial position or consolidated results of operations.

                                      F-16
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

NOTE 13 - INCENTIVE BASED COMPENSATION

In conjunction with the Acquisition, ConMat entered into an Employment Agreement
with ConMat's Chief Executive Officer and Chairman of the Board of Directors.
Under the agreement, he will be paid an annual base salary ranging from $170,000
to $250,000, depending on ConMat's annual net income. As additional incentive
compensation, upon executing the Employment Agreement, he received (i) 250,000
shares of common stock for an aggregate purchase price of $50,000, paid by
delivery of a two-year promissory note at 5% interest; and (ii) 250,000 options
to purchase shares of common stock at an exercise price of $3.00 per share (the
Stock Option Award). 50,000 of the options were exercisable as of November 30,
1999. Another 100,000 options vest when ConMat realizes $750,000 in pre-tax
income during a fiscal year. The remaining 100,000 options are exercisable after
when ConMat realizes $1,000,000 in pre-tax income during a fiscal year. All of
the options expire ten years from the grant date and are immediately exercisable
upon a merger, sale of assets, or other transaction resulting in a change of
control in which the holders of shares of common stock receive not less than
$5.00 per share. During fiscal 1999 ConMat granted 175,000 employee stock
options at a price of $3.00 per share, with 87,500 options vesting if ConMat
realizes $750,000 in pre-tax income during a fiscal year. The balance of 87,500
options vest if ConMat realizes $1,000,000 in pre-tax income during a fiscal
year. During fiscal 2000, 75,000 of these options were forfeited. Also during
fiscal 2000 another 25,000 options at a price of $0.875, were granted with
similar vesting options as described above. No employee stock options were
exercised during fiscal 2000 or 1999.

All stock option awards are accounted for under Accounting Principles Board
(APB) Opinion No. 25 and related interpretations. Had compensation cost for the
options been determined based on the fair value of the options on the grant date
consistent with the method of SFAS No. 123, Accounting for Stock Based
Compensation, the Company's net loss per share for the fiscal year ended
December 31, 2000 and 1999, would not be materially different from the amounts
reported.

NOTE 14 - INDUSTRY SEGMENT AND FOREIGN SALES INFORMATION

Management has determined that it operates in one industry segment (see note 1).

For the year ended December 31, 2000, Polychem's sales to foreign customers were
$5,224,523 or 38% of consolidated net sales, and consist principally of sales to
customers in Asia (23%) and Europe (10%). Receivables from foreign customers
were $2,230,608 as of December 31, 2000. For the year ended December 31, 1999,
Polychem's sales to foreign customers were $3,018,761 or 26% of consolidated net
sales, and consist principally of sales to customers in Asia (12%) and Europe
(11%). Receivables from foreign customers were $928,603 as of December 31, 1999.

NOTE 15 - MAJOR CUSTOMER

The Company sells a substantial portion of its products to one customer. During
fiscal 2000 and 1999, net revenue from that one customer aggregated
approximately $1,566,000 and $694,000, respectively. At December 31, 2000 and
1999 amounts due from that customer included in trade accounts receivable were
approximately $443,000 and $177,000, respectively.

NOTE 16- EQUITY

Description of Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock. Of this
amount, 1,500,000 shares have been designated for Series A convertible preferred
stock, 166,667 shares have been designated for Series B preferred stock and
446,150 shares have been designated for Series C preferred stock.

                                      F-17
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

Series A Preferred - Shares of the Series A convertible preferred stock rank
prior to the common stock and pari passu with the Series B preferred stock and
Series C preferred stock. The creation of any class or series of capital stock
ranking senior or pari passu with the Series A convertible preferred stock or
the Series C preferred stock requires the consent of a majority of the holders
of Series A convertible preferred stock. The holders of the shares of the Series
A convertible preferred stock are entitled to receive non-cumulative, cash
dividends at a rate of 2% per year, which dividends are payable in equal,
quarterly installments, as and if declared by the Board of Directors out of
funds legally available for the payment of dividends. The Company may, at its
sole discretion, pay any or all dividends in common stock rather than in cash.
Shares of Series A convertible preferred stock are convertible at the option of
the holder. The conversion price is equal to the greater of $3.00 or 80% of the
closing bid price of the common stock on the conversion date, subject to
adjustments due to stock splits, stock dividends, mergers, consolidations and
other events. The Company has the right, by written notice to each of the
holders of the Series A convertible preferred stock into shares of common stock
at any time on or after the first day on which the closing bid price has been
equal to or in excess of the conversion price for 45 consecutive calendar days.
The holders of the Series A convertible preferred stock have no voting rights,
except as otherwise required by the Florida Business Corporation Act.

Series B Preferred - Shares of the Series B preferred stock rank prior to the
common stock and pari passu with the Series A convertible preferred stock and
Series C preferred stock. The creation of any class or series of capital stock
ranking senior or pari passu with the Series B preferred stock or the Series C
preferred stock requires the consent of a majority of the holders of Series B
preferred stock. The holders of the shares of the Series B preferred stock are
entitled to receive cash dividends at a rate of 8% per year, which dividends are
payable in equal, quarterly installments, as and if declared by the Board of
Directors out of funds legally available for the payment of dividends. Such
dividends will begin to accrue on the outstanding shares of the Series B
preferred stock from the date of issuance and will accrue from day to day,
whether or not earned or declared, until paid and shall be cumulative. The
Company may redeem the Series B preferred stock any time for a redemption price
of $3.00 per share, plus all accrued but unpaid dividends. The holders of the
Series B preferred stock have the right to elect one member of ConMat's Board of
Directors. Except as otherwise required by the Florida Business Corporation Act,
the holders of the Series B preferred stock have no other voting rights. As of
December 31, 2000 there were $40,000 of dividends in arrears on the Series B
preferred stock. The Series B preferred stock has been reclassified as part of
the equity section of the Company's balance sheet to reflect the elimination of
certain shareholder redemption provisions. The provisions were revised and
eliminated in November 1999 in the filing of revised Articles of Incorporation
for ConMat.

Series C Preferred - Shares of the Series C preferred stock rank prior to the
common stock and pari passu with the Series A convertible preferred stock and
Series B preferred stock. The creation of any class or series of capital stock
ranking senior or pari passu with the Series C preferred stock or the Series B
preferred stock requires the consent of a majority of the holders of Series C
preferred stock. The holders of the shares of the Series C preferred stock are
entitled to receive cash dividends at a rate of 8% per year for three years and
increasing 2% per year up to a maximum of 16%, which dividends are payable in
equal, quarterly installments, as and if declared by the Board of Directors out
of funds legally available for the payment of dividends. Such dividends will
begin to accrue on the outstanding shares of the Series C preferred stock from
the date of issuance and will accrue from day to day, whether or not earned or
declared, until paid and shall be cumulative. Through June 30, 2000, dividends
on the Series C preferred stock may be paid in additional shares of Series C
preferred stock. The Company may redeem the Series C preferred stock any time
for a redemption price of $3.00 per share, plus all accrued but unpaid
dividends. Except as otherwise required by the Florida Business Corporation Act,
the holders of the Series C preferred stock have no other voting rights. For the
period January 1, 2000 through June 30, 2000 the shareholders of Series C
preferred stock were entitled to 15,453 additional shares of Series C preferred
stock as a stock dividend. For the period July 1, 2000 through December 31, 2000
there were $47,754 of dividends in arrears on the Series C preferred stock.

Warrants - As of December 31, 2000, there were outstanding warrants to purchase
579,167 shares of ConMat common stock at an exercise price of $3.00 per share,
subject to adjustment in the case of stock splits, stock dividends, below market
issuances or a merger or consolidation. The warrants are exercisable until
December 31, 2005. The warrants are associated with the Series B and Series C
preferred stock (196,667 and 382,500 warrants respectively).

                                      F-18
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2000 and 1999

Receivables from Sales of Stock

In addition the to $50,000 note receivable discussed in "Note 13 - Incentive
Based Compensation", the Company has two other receivables relating to the sale
of Company stock. During the fourth quarter of fiscal 2000 the Company entered
into an agreement to have its wholly-owned subsidiary, Polychem, sell 250,000
shares of ConMat Technologies stock for proceeds totaling $250,000. Polychem
held these shares as a result of Eastwind's default on a note payable to
Polychem. The note payable from Eastwind had been collaterized by shares of
ConMat Technologies, Inc. As of December 31, 2000, this receivable remained
outstanding. The Company anticipates the receipt of these funds by no later than
May 31, 2001.

Additionally, on September 28, 2000, the Company entered into an option
agreement for the issuance of up to 400,000 shares of common stock in exchange
for a purchase price of approximately $600,000. The option was exercised on
November 06, 2000 and in exchange the Company accepted a note receivable for
$600,000 to be satisfied on or before May 31, 2001. The note is collateralized
by the Company's shares and should the note not be satisfied, the shares would
be returned to the Company. As of December 31, 2000, this note receivable
remained outstanding.

Receivable Relating to Eastwind Bankruptcy Claim

In conjunction with bankruptcy proceedings initiated by Eastwind, the Company
has made various claims for financial reimbursement of certain expenses incurred
by the Company that are directly related to Eastwind's activities. One of the
primary assets held by Eastwind are preferred and common shares of ConMat
Technologies, Inc. The Company believes that it will receive cash reimbursement
for these claims. If however, cash is not made available through final
settlement, the Company anticipates that it will in return receive back all or a
portion of the ConMat shares held by Eastwind. As a result, the receivable of
$118,000 relating to the Company's claims has been classified as a reduction of
stockholders' equity.

                                      F-19