<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

         (Mark One)

[ X ]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934.
         For the fiscal year ended   December 31, 2001
                                     -----------------

[   ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934.
         For the transition period from _____________ to ______________

                        Commission file number 000-30166
                                               ---------

                            ConMat Technologies, Inc.
                            -------------------------
                 (Name of Small Business Issuer in Its Charter)
<TABLE>
          <S>                                                                   <C>
                           Florida                                                         232999072
         -----------------------------------------------------------------         ---------------------------
         (State or Other Jurisdiction of  Incorporation or Organization)        (I.R.S. Employer Identification No.)

         Franklin Avenue and Grant Street, Phoenixville, PA                  19460
         -----------------------------------------------------         ------------------
         (Address of Principal Executive Offices)                          (Zip Code)
</TABLE>

                                 (610) 935-0225
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:            None.
Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 par value
--------------------------------------------------------------------------------
                                (Title of Class)

Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 ____

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 $12,289,424.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates as of March 31, 2002 was $123,533, 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, 2002, the Registrant had outstanding, 2,607,758 shares of common
stock.

Transitional Small Business Disclosure Format (check one).   YES ____ NO __X__


                       DOCUMENTS INCORPORATED BY REFERENCE


None.




<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 ConMat's business or management, 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.

                                     PART I

Item 1.  Description of Business.

General

ConMat Technologies, Inc., ("ConMat"), formerly known as EPL Systems, Inc. and
Phoenix Systems, Inc., was incorporated in Florida in 1986. 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 ("Polychem") from The
Eastwind Group, Inc. Polychem develops custom engineered plastic molded products
which are marketed to wastewater treatment plants and other industrial end
users. Product categories emphasized include those, which make the environment
cleaner, operations safer and improve operating efficiencies.

Polychem has agreed to outsource the manufacturing of its product lines to
Ensinger Vekton, Inc. and Putnam Precision Molding, Inc. (collectively,
"Supplier"), pursuant to a Supply and Equipment Purchase Agreement, dated March
20, 2002. Under the terms of the agreement, Polychem has agreed to purchase a
minimum of $2.5 million of products from Supplier each year and to sell to
Supplier certain of the equipment Polychem formerly used to manufacture its
products.

On March 20, 2002, ConMat entered into a License and Asset Purchase Agreement
(the "License and Asset Purchase Agreement") with Polychem and Ecesis LLC, a
business owned by former Polychem management ("Ecesis") which provides for the
sale of Polychem's specialty and water treatment product lines to Ecesis (the
"Sale"). The Sale is subject to the approval of ConMat's shareholders.

ConMat anticipates holding a special meeting of its shareholders in the near
future at which its shareholders will vote whether to approve the Sale and a
Plan of Liquidation for the remaining assets of Polychem (the "Liquidation").
ConMat believes that its shareholders will approve the Sale and the Liquidation.

Ecesis is a Delaware limited liability company which was formed to purchase
Polychem's specialty and water treatment lines. Two of ConMat's and Polychem's
former directors and officers, Paul A. DeJuliis and Richard R. Schutte, are
members of Ecesis. Messrs. DeJuliis and Schutte resigned as directors and
officers of ConMat and Polychem on March 13, 2002.




                                        1
<PAGE>

Pending the approval of the Sale by ConMat's shareholders, pursuant to the
License and Asset Purchase Agreement, Polychem has licensed its specialty and
water treatment product lines to Ecesis in exchange for all profits generated
from sales. In the event that the Sale is not approved by ConMat's shareholders,
the license will terminate and Polychem will resume developing and marketing its
product lines.

If ConMat's shareholders approve the Sale and Liquidation, ConMat will have no
assets (other than cash, if any, remaining after satisfaction of its and
Polychem's liabilities). In such event, the Board of Directors of ConMat will
seek to acquire an interest in one or more suitable operating businesses, which
may include assets or shares of another entity to be acquired by ConMat directly
or through a subsidiary, that the Board of Directors believes will be profitable
to ConMat and its shareholders.

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

ConMat

Business Strategy. If the Sale and Liquidation is approved by ConMat's
shareholders, ConMat's business strategy will be to acquire an interest in one
or more suitable operating businesses, which may include assets or shares of
another entity to be acquired by ConMat directly or through a subsidiary, that
the Board of Directors believes will be profitable to ConMat and its
shareholders.

If the Sale and Liquidation is not approved by ConMat's shareholders, ConMat's
business strategy will be to operate Polychem. The following is a description of
Polychem and its business.

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. Polychem, which has been in business since 1955, develops
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.





                                        2
<PAGE>

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.

Manufacturing. Polychem, Ecesis and Ensinger Vekton, Inc. and Putnam Precision
Molding, Inc. (collectively, "Supplier") entered into a Supply and Equipment
Purchase Agreement on March 20, 2002, pursuant to which Polychem has outsourced
the manufacturing of its product lines to Supplier. Under the terms of the
agreement, Polychem and Ecesis agreed to purchase a minimum of $2,500,000 of
products from Supplier during each year of the agreement. The term of the
agreement is five years and will renew automatically thereafter for successive
one year terms unless terminated by one of the parties. In addition, the
agreement also provides that Polychem will sell to Supplier certain of its
manufacturing assets for a purchase price of $287,000, which amount shall be
paid monthly by Supplier to Polychem's senior secured lender, on Polychem's
behalf, at the rate of 15% of the invoice amount of purchased products. Under
the terms of the License and Asset Purchase Agreement, Ecesis has agreed to
assume all of Polychem's rights (other than the right to receive the purchase
price of equipment) and obligations under this agreement upon the consummation
of the Sale.

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 four
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 62% of its annual sales revenue, international distributors
accounted for approximately 11% and domestic distributors accounted for
approximately 27%. Domestic revenues were approximately 57% and international
revenues were approximately 43% in the 2000 fiscal year.

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 four 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 35% 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.
Tropodyne and NRG are Polychem's other competitors, and have smaller shares 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 50% share of the nylon bucket market, while
its closest competitor has an approximate 30% market share. The dominant
competitor in the table top chain market, Rexnard, holds an approximate 80%
market share, while Polychem has an approximate 5% share.





                                        3
<PAGE>

In the event the Sale is not approved, 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 believes that the outsourcing of
manufacturing will help to achieve this goal.

Environmental Regulations. While no assurances can be given, Polychem does not
anticipate any material costs for environmental remediation projects. As a
result of its decision to cease manufacturing its products, it no longer will
incur such costs as oil reclamation, hauling of waste products and energy costs
associated with recycling and waste disposal. Polychem historically spent
approximately $50,000 annually to comply with environmental laws, including
hauling costs as well as general monitoring and compliance costs, and its costs
in the future should be significantly less. Polychem maintains seven above
ground storage tanks. Two were used to store phenolic resins inside the plant;
two stored fuel oil; and three outside tanks were 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 of the date of
this filing.

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 over the past five years 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.

Employees. Polychem employs 35 employees, of whom 8 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 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.

Equipment. Polychem has agreed to sell most of the equipment that it owns which
is required to manufacture its product lines to Supplier pursuant to the Supply
and Equipment Purchase Agreement. The purchase price for this equipment is
$287,000. Since Polychem has outsourced the manufacturing of its product lines
to Supplier, Polychem no longer has a use for this equipment.

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. If the Sale is approved and
consummated, all of Polychem's patents will be assigned to Ecesis.





                                        4
<PAGE>

Polychem employs six 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. Recently,
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
$226,000 and $225,000 on product research, engineering and development costs
during the years ended December 31, 2001 and 2000, respectively.

Debt and Encumbrances. On September 30, 1998, Polychem entered into a Loan and
Security Agreement with General Electric Capital Corporation ("GECC"), 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 $460,000 reserve). Interest rates on the loan are at a rate of
8.75% in excess of the 30 day dealer commercial paper rate on the revolving line
of credit, 10.77% at December 31, 2001, and 10.50% in excess of the 30 day
dealer commercial paper rate for the term loan, 12.52% at December 31, 2001.

Interest on the revolving line of credit and term loan is payable monthly.
Polychem's collections of accounts receivable are deposited with GECC 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. As of December
31, 2001, availability under the line of credit was $2,872,893 and outstanding
borrowings were $2,818,893. In connection with the Public School Employees'
Retirement Board financing described below, GECC agreed to restructure the
payment schedule on the remaining balance of its term loan to provide for
monthly payments of $8,000. As of December 31, 2001 the outstanding balance of
the GECC term loan was $180,000.

On August 25, 1999, Polychem received a $1,880,000 term loan from the Public
Employees' Retirement Board, secured by a mortgage on Polychem's Phoenixville,
Pennsylvania facility. $813,000 of the net proceeds of the loan were applied to
reduce the outstanding balance of the GECC term loan and the remaining $996,000
of net proceeds were applied to reduce the outstanding balance of the GECC
revolving line of credit. The Public School Employees' Retirement Board loan is
for a term of 10 years. The interest rate on the Public School Employees'
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 December 31, 2001, the outstanding balance of the Public School Employees'
Retirement Board term loan was $1,823,804.

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 December 31, 2001 was $813,148.
The note accrues interest at 8%, payable quarterly. Subsequent to December 31,
2001, Polychem was in default under this note for failure to make timely
payments. An agreement between the two parties provides for various payments of
principal and interest to be made during calendar year 2002.

                                  RISK FACTORS

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






                                        5
<PAGE>

RISKS FACTORS RELEVANT UPON SALE OF POLYCHEM

         If the sale of Polychem's specialty and water treatment product lines
pursuant to the License and Asset Purchase Agreement is approved by ConMat's
shareholders, ConMat will generate no income after the sale other than from
Polychem's collection of accounts receivable, sales of its remaining inventory
and income from the rental of its commercial property in Phoenixville,
Pennsylvania. Accordingly, ConMat's Board of Directors will liquidate and
dissolve Polychem and then will seek to acquire one or more suitable operating
business that the Board of Directors believes will be profitable to ConMat and
its shareholders. In such event, the following Risk Factors shall be applicable
with respect to an investment in ConMat's common stock.

         We will have no operating history and minimal assets and, as a result,
our prospects are difficult to evaluate.

         After the Sale, we will have no operating history or any revenues or
earnings from operations other than those of the business which we may acquire.
ConMat will have no significant assets or financial resources. We will incur
operating expenses without corresponding revenues, at least until the
consummation of a business combination. As a result we may incur a net operating
loss which will increase continuously until we can consummate a business
combination with a target entity. If we are unable to fund our business, we will
be forced to go out of business.

         Our proposed operations are speculative and our business may fail.

         The success of ConMat' proposed plan of operation will depend to a
great extent on the operations, financial condition and management of the target
entity. While management intends to seek business combinations with entities
having established operating histories, there can be no assurance that we will
be successful in locating candidates meeting our criteria. In the event we
complete a business combination, the success of our operations will be dependent
upon management of the target entity and numerous other factors beyond our
control. It is possible that our resources will be depleted prior to
consummating a business combination.

         Transactions involving "penny stocks" such as ConMat are highly
regulated.

         The Exchange Act of 1934, as amended (the "Exchange Act"), defines
"penny stock" as any equity security that has a market price of less than $5.00
per share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require: (i) that a broker or dealer approve a
person's account for transactions in penny stocks and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting forth
the identity and quantity of the penny stock to be purchased. In order to
approve a person's account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a disclosure schedule
prepared by the SEC relating to the penny stock market, which, in highlight
form, (i) sets forth the basis on which the broker or dealer made the
suitability determination and (ii) certify that the broker or dealer received a
signed, written agreement from the investor prior to the transaction. Disclosure
is also required to be made about the risks of investing in penny stocks in both
public offerings and in secondary trading, and about commissions payable to both
the broker or dealer and the registered representative, current quotations for
the securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.

         There is a scarcity of and tremendous competition for target candidates
and combinations.

         ConMat is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A large
number of established and well-financed entities, including venture capital
firms, are active in mergers and acquisitions of companies which may be merger
or acquisition target candidates for ConMat. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than ConMat and, consequently, ConMat will be at a competitive
disadvantage in identifying possible target entities and successfully completing
a business combination. In addition, ConMat will also compete with numerous
other small public companies in seeking merger or acquisition candidates.





                                        6
<PAGE>

         We are not currently a party to and cannot guarantee that we will
         become a party to any arrangement which would result in a business
         combination.

         We currently have no arrangement or agreement with respect to engaging
in a merger with or acquisition of any business entity. We have not established
a specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which we will require a target business opportunity
to have achieved, or without which we would not consider a business combination
with such business entity.

         We may be able to pursue only one business opportunity which would
restrict our ability to diversify into other areas.

         Our proposed operations, even if successful, will in all likelihood
result in us engaging in a business combination with only one business
opportunity. Consequently, our activities will be limited to those engaged in by
the business with which we merge or acquire. Our inability to diversify our
activities into a number of areas may subject us to economic fluctuations within
a particular business or industry and therefore increase the risks associated
with our operations.

         ConMat has, and will continue to have, minimal capital with which to
provide the owners of target entities.

         Although ConMat will not have sufficient capital to provide to target
entities, management believes that ConMat will be able to offer owners of target
entities the opportunity to acquire ownership interest in a publicly registered
company without incurring the cost and time required to conduct an initial
public offering. This, however, is no guarantee that the owners of a target
entity will enter into a business combination with ConMat.

         We depend on key individuals and they would be difficult to replace.

         Our officers and directors have not entered into written employment
agreements with us and are not expected to do so in the foreseeable future. We
have not obtained key man life insurance on our officers and directors. Loss of
the services of these individuals would adversely affect development of our
business and our likelihood of continuing operations.

         Our management may participate in other activities which may directly
         or indirectly conflict with the activities in which we are
         participating.

         Our officers and directors participate in other ventures which may
compete directly or indirectly with us. Additional conflicts of interest and
non-arms length transactions may also arise in the future. Management has
adopted a policy that requires full disclosure of any potentially conflicting
relationships.

         The reporting requirements of the Exchange Act may delay or preclude
the acquisition of some target entities.

         The Exchange Act requires companies whose securities are registered
under the Exchange Act to provide information about significant acquisitions
including audited financial statements for the acquired entity covering one or
two fiscal years, depending on the relative size of the acquisition. It is
likely that we will be required to prepare and file an information statement
with the SEC prior to the consummation of any transaction. Filing the
information statement will require us to prepare the financial statements for
any potential acquired company in conformity with generally accepted accounting
principles and to provide appropriate financial disclosure to ConMat
shareholders. The cost and effort of such an undertaking may make a potential
acquisition less attractive to us.

         The time and additional costs that may be incurred by some target
entities to prepare such audited financial statements may significantly delay or
essentially preclude our consummation of an otherwise desirable acquisition.
Acquisition prospects that do not have and are unable to obtain the required
audited financial statements will not be appropriate for acquisition.

         A business combination may result in a change in control and a change
in our management.

         A business combination involving the issuance of our common stock will,
in all likelihood, result in shareholders of a target entity obtaining a
controlling interest in us. Any such business combination may require our
officers and directors to sell or transfer all or a portion of our common stock
held by them, and to resign as members of the Board of Directors and as
officers. The resulting change in control could result in removal of our present
officers and directors and a corresponding reduction in or elimination of their
participation in our future affairs.





                                        7
<PAGE>

         There is no guarantee that a business combination would result in
tax-free treatment.

         Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination we may undertake. Currently, such
transactions may be structured so as to result in tax-free treatment to both
companies, pursuant to various federal and state tax provisions. We intend to
structure any business combination so as to minimize the federal and state tax
consequences to us and the target entity; however, we cannot assure you that any
business combination will meet the statutory requirements of a tax-free
reorganization or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A non-qualifying reorganization could result
in the imposition of both federal and state taxes which may have an adverse
effect on both parties to the transaction.

RISK FACTORS RELATING TO CURRENT OPERATION OF POLYCHEM.

         The following risk factors are relevant with respect to an investment
in ConMat's common stock in the event that the Sale and Liquidation are not
approved by ConMat's shareholders and ConMat resumes the operation of Polychem.

         We may not be able to obtain adequate financing for working capital.

         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
operations, we will 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 secured 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, 2001, our aggregate
amount of secured indebtedness was $4.3 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.






                                        8
<PAGE>

         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 "CNMT." As of
March 31, 2002, the last reported sale price of ConMat's common stock was $0.07
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, general industry conditions.

         The public sale of shares eligible for future sale may adversely affect
the price of our common stock. Future sales of shares by current stockholders,
including the selling stockholders, could cause the market price of our common
stock to decline.

         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.

         The prices at which we have agreed to purchase products under the
Supply and Equipment Purchase Agreement are subject to increase. Any increase in
price may adversely affect our operating results and financial condition.

         Under the terms of the Supply and Equipment Purchase Agreement,
Polychem has agreed to purchase a minimum of $2.5 million of products from
Supplier each year. The prices of the products that Polychem has agreed to
purchase, however, are subject to increase under the terms of the Supply and
Equipment Purchase Agreement. Accordingly, even if Polychem could purchase the
products for less from another supplier, it would first have to purchase the
$2.5 million minimum of products from Supplier. This restriction, as well as a
general increase in the cost of raw materials which comprise the products, could
have a material adverse effect on our financial condition and results of
operation.





                                        9
<PAGE>

         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 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.

         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 and 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.

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. Since Polychem began
outsourcing the manufacturing of its products as of March 20, 2002, it presently
uses only approximately 15,000 square feet for warehousing, and 12,000 square
feet for offices. Polychem leases approximately 72,000 square feet of warehouse
space to three tenants at rental rates ranging from $3.01 through $3.24 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
$51,000. 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.





                                       10
<PAGE>

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
Corporation 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. 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.

         On January 22, 2001 the Bankruptcy Court appointed a Chapter 11 trustee
to oversee and administer The Eastwind Group, Inc. bankruptcy. On May 24, 2001,
the bankruptcy trustee filed a substituted Complaint against ConMat. In his
complaint, the bankruptcy trustee asserted claims against ConMat, including
those originally raised in the John Thach complaint that the December 8, 1998
acquisition of Polychem was a fraudulent transaction.

         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. 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 and the case
was stayed. Nothing further has occurred in this case since November 2000.

         To resolve the claims asserted by the bankruptcy trustee, John Thach
and ProFutures, management of ConMat negotiated the terms of a settlement
agreement with the bankruptcy trustee, which was filed with the bankruptcy court
on October 25, 2001. Thereafter, on December 13 and 17, 2001, the bankruptcy
court held a two-day hearing on the approval of the settlement agreement. On
February 27, 2002, the bankruptcy court approved the settlement agreement. The
settlement agreement requires the payment by ConMat of $1,500,000 to the
bankruptcy trustee, including $500,000 in cash and a promissory note in the
amount of $1,000,000. ConMat intends to fund the obligations under the
settlement agreement through the Sale and Liquidation.

         Subject to payment by ConMat of $1,500,000 to the bankruptcy trustee
pursuant to the settlement agreement and payment by Polychem of an IRS claim,
John Thach's claims will be released against, among others, ConMat. In addition,
the bankruptcy trustee has agreed to allocate and set aside a portion of the
settlement proceeds, not to exceed $200,000, to fund the indemnification
obligations from ConMat's share of liability, if any, in the ProFutures' action.
ConMat's wholly owned subsidiary, Polychem Corporation, is also a defendant in
the actions brought by the bankruptcy trustee and Thach and is also a party to
the various settlement agreements referenced above.

         In addition to the litigation arising out of the Eastwind bankruptcy
and the claims asserted by Thach, Polychem is a defendant in an action filed by
The Budd Company in the Court of Common Pleas of Chester County. The Budd
Company confessed judgment against Polychem under a note given by Polychem to
The Budd Company. At present, The Budd Company has taken no steps to execute on
its confession of judgment. The Budd Company has agreed to forbear from
executing on its judgment and has accepted periodic payments from Polychem. The
current balance due to The Budd Company is approximately $700,000.

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
2001.

                                    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, 2002:

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

                  2002
                  ----

                  First Quarter               $0.04            $0.15

                  2001
                  ----

                  Fourth Quarter                .02              .07
                  Third Quarter                 .07              .30
                  Second Quarter                .06              .78
                  First Quarter               $0.12            $0.49

                                       11
<PAGE>

                  2000
                  ----
                  Fourth Quarter               0.25                1.625
                  Third Quarter                1.125               4.00
                  Second Quarter               2.00                5.75
                  First Quarter               $3.125              $5.50

                  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 March
31, 2001, there were 2,607,758 shares of common stock outstanding held by
approximately 20 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.

Results of Operations

For the Fiscal Year Ended December 31, 2001 as compared to the Fiscal Year Ended
December 31, 2000.

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
                                                 ------------------------
                                                   2001           2000
                                                 --------      ---------
Net Sales                                           100.0%        100.0%
Cost of Goods Sold                                   81.6          76.6
Gross Profit                                         18.4          23.4
Selling and Administration                           25.8          17.4
Interest Expense                                      4.0           3.8
Other Expense                                        18.5           2.0
Income Tax (Benefit) Expense                        (9.4)           0.2
                                                 --------      --------
Net Income                                         (20.5)%        (0.0)%
                                                 ========      ========

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.






                                       12
<PAGE>

Total revenues decreased $1,406,000 or 10.3% from $13,695,000 for the year ended
December 31, 2000 to $12,289,000 for the year ended December 31, 2001. Polychem
ended the year 2001 with an order backlog of $7,200,000 compared to $7,700,000
at the end of 2000, a decrease of 6.5%.

Gross profit decreased by $934,000 or 29.2% to $2,267,000 for the year ended
December 31, 2001 from $3,201,000 for the comparable period in 2000. Gross
profit decreased as a percentage of sales to 18.4 % for the year ended December
31, 2001 from 23.4% from the year earlier period. The degradation in gross
margin is the result of lower revenues for the year ended December 31, 2001 and
not being unable to cover fixed manufacturing overheads. The decrease is also
the result of increased pricing pressures both domestically and internationally.
In the international marketplace, the strong US Dollar has created even more
pressure to lower selling price to compete with local manufacturers. Polychem
bids and invoices almost exclusively in US Dollars. Other factors causing
increases in the cost of sales are higher freight costs associated with partial
shipments and some unexpected inefficiencies in manufacturing labor.

Selling and administrative expenses increased by $792,000 or 33.3% to $3,172,000
for the year just ended from $2,380,000 for the comparable period in 2000. As a
percentage of revenues, selling and administrative expenses increased from 17.4%
for the year ended December 31, 2000 to 25.8% of total revenues for the year
ended December 31, 2001. This increase is the result of additions to the
administrative staff and increased travel related expenses. Polychem has been
increasing its expenditures in the cultivation of additional business
opportunities throughout the Pacific Rim. The administrative staff increases
resulted from strategic replacements of individuals who left the organization
during the preceding year. Also responsible for the increase was the provision
of an additional $220,000 for potential accounts receivable write-offs. Selling
and administrative expenses have also increased in comparison to prior years as
a result of the discontinuance of certain inter-departmental billings from
administration to the manufacturing departments.

Corporate expenses increased in excess of 100% from $526,000 for the year ended
December 31, 2000 to $1,051,000 for the year ended December 31, 2001. The
primary reason for this large change is an increase in professional fees
associated with the finalization of the legal actions relating to ConMat's
original acquisition of Polychem. During the twelve months ended December 31,
2001, the Company also wrote off the $193,000 receivable relating to the
Eastwind bankruptcy as it is now deemed to be unrecoverable. Additionally there
were also approximately $270,000 of prepaid expenses and advances that related
to certain acquisitions and stock-related activities that have been discontinued
and were therefore expensed.

The Company has accrued an expense of $1.5 million relating to the settlement of
the litigation associated with ConMat's acquisition of Polychem.

Interest expense for the year ended December 31, 2001 decreased slightly by
$31,000 or 6.0%, to $495,000 from $526,000 for the comparable period in 2000.
Interest costs as a percentage of total revenues increased to 4.0% in the year
ended December 31, 2001 compared to 3.8% in the year earlier period.

ConMat recognized a loss of $2,514,000 for fiscal year 2001 as compared to a
profit of $4,000 for the year ended December 31, 2000.

Liquidity and Capital Resources

ConMat's primary source of working capital is a credit facility of up to $3
million (as of December 31, 2001; since reduced to $1 million), subject to a
lending formula limit, secured by Polychem's receivables and inventory. As of
December 31, 2001, the maximum borrowing amount was $2,872,893 and the
outstanding balance was $2,818,893. The Company's credit facility expired on
September 30, 2001. The Company has been granted an interim extension of the
previous credit facility with GE Capital Corporation, the lender, through May
31, 2002. The extension has imposed some additional financial restrictions and
limitations on the Company generally in the form of additional reserves against
maximum borrowing amount. GE Capital Corporation's discontinuance of this
extension would have a material adverse effect on the Company's financial
condition.

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 for at December 31, 2001 was .64 as
compared to 1.01 at December 31, 2000. Working capital deficit at December 31,
2001 was ($3,301000) as compared to $59,000 at the end of the prior year. The
primary factors associated with the large decrease in working capital are the
degradation of accounts receivable, the legal settlement payable and an increase
in the Company's current portion of long-term debt.






                                       13
<PAGE>

ConMat's cash position decreased $69,000 during fiscal year 2001. Net cash used
in operating activities during fiscal year 2001 was $127,000 as compared to net
cash provided by operating activities in fiscal year 2000 of $586,000. The
change is principally attributable to the large operating loss incurred by the
Company. Net cash used in investing activities decreased from $447,000 in fiscal
year 2000 to $5,000 during the most recent fiscal year end as a result of very
limited capital spending on property and equipment at Polychem in fiscal year
2001. During fiscal year 2001, net cash provided by financing activities was
$63,000 as compared to $87,000 net cash used in financing activities in fiscal
year 2000.

The Company's financial condition is weak. Management is presently evaluating
various alternatives to improve the financial condition of the Company. Asset
sales, cost reductions and possible reorganizations are among those alternatives
being considered at this time. Failure of the occurrence of these events would
have a material adverse effect on the Company's financial condition. ConMat has
no commitments for significant capital expenditures in the foreseeable future.

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.

             Name and Age                             Description
             ------------                             ------------
 Edward F. Sager, Jr., 55.............  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, and a
                                        general partner of Mentor Partners, the
                                        General Partner of Mentor Special
                                        Situation Fund LP, an investment fund,
                                        and President of Mentor Capital Partners
                                        Ltd., a venture capital firm, since
                                        1994. 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.

 Kenneth W. Evans, Jr., 56............  Mr. Evans has been a member of the Board
                                        of Directors of ConMat since March,
                                        2002. Mr. Evans is the founder and
                                        managing director of Concordia Financial
                                        Group, Inc., which provides advisory
                                        services for mergers, acquisitions and
                                        divestitures and private placements and
                                        debt and equity for lower middle market
                                        firms. Mr. Evans founded Concordia
                                        Financial Group, Inc. in 1989. Mr. Evans
                                        is a graduate of Wasburn University with
                                        a B.S. degree in Political Science and
                                        History and attended Washburn University
                                        School of Law.






                                       14
<PAGE>

 John R. Toedtman, 57.................  Mr. Toedtman has been a member of the
                                        Board of Directors of ConMat since
                                        March, 2002. Mr. Toedtman is a seasoned
                                        senior executive with full profit and
                                        loss responsibilities in various markets
                                        and in companies ranging from start-ups
                                        to Fortune 100. From November 2001 to
                                        present, he has been a partner of
                                        Landmark Financial Corp., a merger and
                                        acquisition advisory firm for healthcare
                                        market companies. From October 2000 to
                                        September 2001, Mr. Toedtman served as
                                        the CEO of Albert, Inc. (Americas), the
                                        American subsidiary of a Swiss company,
                                        engaged in the start up and launch of
                                        highly advanced search and information
                                        retrieval software. From October 1998 to
                                        October 2000, Mr. Toedtman was the Chief
                                        Operating Officer and a Director of In
                                        Sage, Inc., which is engaged in the
                                        business of language translation
                                        services. From May 1997 to October 1998,
                                        Mr. Toedtman was the Managing Director
                                        of Corporate Finance of Blue Stone
                                        Capital Partners, LLC, which provides a
                                        full range of investment banking
                                        activity to small cap companies. Prior
                                        to that, from January 1990 to January
                                        1997, Mr. Toedtman served as the
                                        Chairman, CEO and Director of Gen/Rx,
                                        Inc., a company engaged in manufacturing
                                        generic injectible drugs for the
                                        veterinary and human markets. He is a
                                        graduate of Georgetown University with
                                        an A.B. in International Economics.

 Thomas C. Morral, Jr., 41............  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.


         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.




                                       15
<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 $100,000 during
the fiscal year ended December 31, 2001.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                                      Securities
                                                Fiscal                                 Other          Underlying
          Name and Position                   Year Ended           Salary ($)      Compensation        Options
          -----------------                   ----------           ----------      ------------       ----------
-----------------------------------------------------------------------------------------------------------------
<S>                                     <C>                     <C>                <C>             <C>
Paul A. DeJuliis, Chairman & Chief      December 31, 2001           $192,000           9,006 (3)          - -
Executive Officer of ConMat and         December 31, 2000           $178,680           9,504 (3)          - -
Polychem(1)                             December 31, 1999           $170,240           4,072 (2)          - -

-----------------------------------------------------------------------------------------------------------------
Richard R. Schutte, President of        December 31, 2001           $124,914         9,588 (3)            - -
ConMat and Polychem(1)                  December 31, 2000           $ 95,593         6,044 (3)            - -
                                        December 31, 1999(4)        $ 52,641         1,250 (3)            - -

-----------------------------------------------------------------------------------------------------------------
Thomas C. Morral, Jr., Vice             December 31, 2001           $111,928         4,800 (3)            - -
President, Chief Financial Officer of   December 31, 2000(5)        $ 25,357         1,200 (3)            - -
ConMat and Polychem                     December 31, 1999             - -               - -               - -
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(1)     Mr. DeJuliis and Mr. Schutte each resigned from the respective positions
        on March 13, 2002.
(2)     Consists of an automobile allowance.
(3)     Consists of an automobile allowance and 401(k) matching contributions.
(4)     Mr. Schutte began his employment with ConMat in May, 1999.
(5)     Mr. Morral began his employment with ConMat in October, 2000.


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 May 22, 2002, 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>
Kenneth W. Evans, Jr.                                         90,000                          3.01%
Franklin Avenue & Grant Street
Phoenixville, PA 19460
-----------------------------------------------------------------------------------------------------------------
Edward F. Sager, Jr.                                         397,492(2)                      12.48%
Franklin Avenue & Grant Street
Phoenixville, PA 19460
-----------------------------------------------------------------------------------------------------------------
John R. Toedtman                                              90,000                          3.01%
Franklin Avenue & Grant Street
Phoenixville, PA 19460
-----------------------------------------------------------------------------------------------------------------
Directors and Chief Executive Officer                        577,492(2)                      18.13%
(3 persons)
-----------------------------------------------------------------------------------------------------------------
The Eastwind Group, Inc.                                     735,000(3)                      19.74%
1525 Locust Street
17th Floor
Philadelphia, PA  19102
-----------------------------------------------------------------------------------------------------------------
Ecesis, LLC
Franklin Avenue & Grant Street                               382,500(4)                      11.35%
Phoenixville, PA  19460
-----------------------------------------------------------------------------------------------------------------
</TABLE>






                                       16
<PAGE>



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

              Name and Address of                    Amount and Nature of               Percentage of
                Beneficial Owner                   Beneficial Ownership (1)           Common Stock (1)
                ----------------                   ------------------------           ----------------
-----------------------------------------------------------------------------------------------------------------
<S>                                               <C>                          <C>
The Eastwind Group, Inc.                                     925,000                           31.29%
     Shareholder Trust
c/o Paul A. DeJuliis
Franklin Avenue & Grant Street
Phoenixville, PA  19460
-----------------------------------------------------------------------------------------------------------------
Mentor Special Situation Fund, L.P.                          166,667(5)                         5.28%
P.O. Box 560
Yardley, PA  19067
-----------------------------------------------------------------------------------------------------------------
The DAR Group, Inc.                                          240,000                            8.03%
30 Broad Street, 43rd Floor
New York, NY
-----------------------------------------------------------------------------------------------------------------
Paul A. DeJuliis                                             348,333(6)                        11.47%
1110 David Davis lane
West Chester, PA  19382
-----------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%

(1)       Based upon 2,988,083 shares of common stock issued 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.


(2)       Includes 22,500 shares issuable upon the exercise of warrants held by
          Mr. Sager, 200,825 shares of common stock 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.

(3)       Consists of shares issuable upon conversion of Series A Convertible
          Preferred Stock.

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

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

(6)       Includes 50,000 Shares issuable upon the exercise of options.

Item 12. Certain Relationships and Related Transactions.

         None.




                                       17
<PAGE>

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.*
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.*
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, 1996.**
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
           Employees' Retirement Board by Polychem.**
10.17      Open End Mortgage and Security Agreement between Polychem and Public
           School Employees' Retirement Board dated August 24, 1999.**
10.18      Loan Guaranty and Suretyship Agreement between Polychem and Public
           School Employees' Retirement Board dated August 24, 1999.**
10.19      Mortgagee's Waiver and Consent dated August 25, 1999 between Public
           School Employees' Retirement System, Polychem and General Electric
           Capital Corporation.**
10.20      License and Asset Purchase Agreement, dated March 20, 2002, by and
           among ConMat, Polychem and Ecesis.
10.21      Supply and Equipment Purchase Agreement, dated March 20, 2002, by and
           among Polychem, Ecesis, Ensinger Vekton, Inc. and Putman Precision
           Molding, Inc.
10.22      Settlement Agreement, dated October 25, 2001 and modified December 5,
           2001, among John W. Morris as the Chapter 11 Trustee for The Eastwind
           Group, Inc., Paul A. DeJuliis, ConMat and Polychem.
10.23      Seventh Amendment and Forbearance Agreement, dated September 21,
           2001, by and between 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.



                                       18
<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 May 23, 2002.

                              CONMAT TECHNOLOGIES, INC.



                              By:    /s/ Edward F. Sager, Jr.
                                     -------------------------------------------
                                     Edward F. Sager, Jr., President


                              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 May 23, 2002.




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



 /s/ Kenneth W. Evans, Jr.                Director
--------------------------------
Kenneth W. Evans, Jr.


/s/ John R. Toedtman                      Director
--------------------------------
John R. Toedtman












                                       19
<PAGE>


<TABLE>
<CAPTION>
                                Table of Contents
                                -----------------
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
PART  I..........................................................................................................1
  Item 1.  Description of Business...............................................................................1
  Item 2.  Description of Properties............................................................................10
  Item 3.  Legal Proceedings....................................................................................11
  Item 4.  Submission of Matters to a Vote of Security Holders..................................................11
PART II.........................................................................................................11
  Item 5.  Market for Common Equity and Related Stockholder Matters.............................................11
  Item 6.  Management's Discussion and Analysis.................................................................12
  Item 7.  Financial Statements.................................................................................14
  Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................14
PART III........................................................................................................14
  Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
                  Exchange Act..................................................................................14
  Item 10.  Executive Compensation..............................................................................16
  Item 11.  Security Ownership of Certain Beneficial Owners and Management......................................16
  Item 12.  Certain Relationships and Related Transactions......................................................18
  Item 13.  Exhibits List and Reports on Form 8-K...............................................................18
</TABLE>



                                       (i)


<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Index to Consolidated Financial Statements
                     Years ended December 31, 2001 and 2000
                       With Report of Independent Auditors

<TABLE>
<CAPTION>
                                                                                                Page
                                                                                                ----
<S>                                                                                             <C>
Report of Independent Auditors                                                                   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, 2001 and 2000 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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, 2001 and 2000 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.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company was informed by its primary lender that it was
no longer willing to provide working capital financing to support the Company's
operations. This coupled with the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.



                                                          COGEN SKLAR LLP

Bala Cynwyd, Pennsylvania
May 10, 2002








                                       F-1


<PAGE>



ConMat Technologies, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                        December 31       December 31
                               ASSETS                                      2001              2000
                                                                       ------------      ------------
<S>                                                                      <C>                     <C>
Current Assets:
   Cash and cash equivalents                                            $    84,315      $   153,038
   Accounts receivable - net                                              4,512,093        4,744,077
   Inventories                                                            1,048,607        1,478,185
   Prepaid expenses                                                         142,415          269,178
                                                                        -----------      -----------
                                                 Total Current Assets     5,787,430        6,644,478
Property, Plant & Equipment - net                                                 -        1,227,409
Property, Plant & Equipment - held for sale                               1,046,978                -
Deferred Income Taxes                                                     1,125,493           78,493
Other Assets                                                                216,285          270,858
                                                                        -----------      -----------
                                                         Total Assets   $ 8,176,186      $ 8,221,238
                                                                        ===========      ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Line of credit                                                       $ 2,818,893      $ 2,469,031
   Current portion of long-term debt                                      1,020,846          789,338
   Current portion of capital lease obligations                              28,229           64,743
   Accounts payable                                                       3,227,633        2,711,097
   Legal settlement payable                                               1,500,000                -
   Accrued expenses                                                         492,490          551,219
                                                                        -----------      -----------
                                            Total Current Liabilities     9,088,091        6,585,428

Long-Term Debt                                                            1,796,106        2,149,064
Obligations Under Capital Leases                                             14,259           33,818
Other Liabilities                                                           479,095          168,969
                                                                        -----------      -----------
                                                    Total Liabilities    11,377,551        8,937,279

Stockholders' Equity (Deficiency):
   Series A preferred stock - $.001 par value, 1,500,000
      shares authorized, 713,250 shares issued and outstanding                  713              713
   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              383
   Common stock - $.001 par value, 40,000,000 shares
      authorized, 2,988,083 and 2,963,083 shares issued,
      2,607,758 and 2,742,258 outstanding                                     2,988            2,963
   Additional paid-in capital                                              (649,838)         195,687
   Accumulated deficit                                                   (2,839,471)        (300,949)
   Cost of common shares in treasury - 380,325 and 220,825 shares          (166,140)         (96,838)
   Less: Receivables for shares sold                                        (50,000)        (900,000)
              Receivable relating to Eastwind claim                               -         (118,000)
                                                                        -----------      -----------
                                       Total Stockholders' Deficiency    (3,201,365)        (716,041)
                                                                        -----------      -----------
                       Total Liabilities and Stockholders' Deficiency   $ 8,176,186      $ 8,221,238
                                                                        ===========      ===========
</TABLE>


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






                                       F-2
<PAGE>


ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>

                                                                               Year Ended December 31
                                                                                 2001             2000
                                                                            -------------     ------------
<S>                                                                             <C>                 <C>
Net Sales to Customers                                                      $ 12,289,424      $ 13,695,058
Cost of Goods Sold                                                            10,022,205        10,493,578
                                                                            ------------      ------------
                                                            Gross Profit       2,267,219         3,201,480

Selling, General and Administrative Expenses                                   3,172,381         2,380,637
Corporate Expenses                                                             1,051,042           510,059
                                                                            ------------      ------------
                                                 Operating (Loss) Income      (1,956,204)          310,784

Other Income (Expense):
   Interest expense                                                             (495,106)         (526,462)
   Legal settlement                                                           (1,500,000)                -
   Rental income                                                                 282,748           247,096
                                                                            ------------      ------------
                              (Loss) Income Before Tax (Benefit) Expense      (3,668,562)           31,418

Income Tax (Benefit) Expense                                                  (1,155,000)           27,200
                                                                            ------------      ------------
                                                       Net (Loss) Income      (2,513,562)            4,218

Dividends on preferred shares
                                                                                (135,508)          (87,754)
                                                                            ------------      ------------
                             Net (loss) available to common shareholders    $ (2,649,070)     $    (83,536)
                                                                            ============      ============


Net loss per Common Share:
      Basic                                                                 $      (1.01)     $      (0.04)
                                                                            ============      ============
      Diluted                                                               $      (1.01)     $      (0.04)
                                                                            ============      ============

Weighted average number of common shares outstanding:

      Basic                                                                    2,613,286         2,365,371
                                                                            ============      ============
      Diluted                                                                  2,613,286         2,365,371
                                                                            ============      ============
</TABLE>






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




                                       F-3
<PAGE>



ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
Years Ended December 31, 2001 and 2000
<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, December 31, 1999                2,250,000       $ 2,250     1,073,333        $ 1,073       166,667      $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
Issuance of common shares                    25,000            25
                                        ------------  ------------  ------------  -------------  ------------  ------------
Balance, December 31, 2001                2,988,083       $ 2,988       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, 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)
Purchase of treasury shares                                             159,500        (69,302)
                                        ------------  ------------  ------------  -------------
Balance, December 31, 2001                  382,500        $  383       380,325    $  (166,140)
                                        ============  ============  ============  =============
</TABLE>







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






                                       F-4
<PAGE>


<TABLE>
<CAPTION>
ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) - Continued
Years Ended December 31, 2001 and 2000



                                                                         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, December 31, 1999              $   (666,986)  $   (305,167)  $   (50,000)   $         -   $    (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)

Issuance of common shares                      9,475                                                       9,500
Net loss                                                 (2,513,562)                                  (2,513,562)
Expenses associated with
   equity transactions                        (5,000)                                                     (5,000)
Payment of series C preferred
   dividends                                                (24,960)                                     (24,960)
Write-off of note receivable for shares
   sold                                     (850,000)                     850,000
Reversal of Eastwind claim receivable                                                    118,000         118,000
Purchase of treasury shares                                                                              (69,302)
                                        ------------   ------------   -----------    -----------   -------------
Balance, December 31, 2001              $   (649,838)  $ (2,839,471)  $   (50,000)   $         -   $  (3,201,365)
                                        ============   ============   ===========    ===========   =============
</TABLE>




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






                                       F-5
<PAGE>




ConMat Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                    Year Ended December 31
                                                                  --------------------------
                                                                      2001            2000
                                                                  -----------      ---------
<S>                                                               <C>                 <C>
Cash Flows from Operating Activities:
   Net (loss) income                                              $(2,513,562)     $   4,218
   Adjustments to reconcile to net cash provided by (used in)
     operating activities:
         Depreciation and amortization                                269,983        263,116
         Provision for bad debt expense                               335,839              -
         Legal settlement expense                                   1,500,000              -
         Receivable relating to Eastwind claim                        118,000       (118,000)
         Provision for pension expense                                302,860              -
         Income tax benefit                                        (1,155,000)             -
   Changes in assets and liabilities:
      (Increase) decrease in assets
         Accounts receivable                                         (103,855)      (174,651)
         Inventories                                                  429,578       (203,138)
         Prepaid expenses                                             133,888       (210,837)
         Other assets                                                 (27,315)       (59,013)
      Increase (decrease) in liabilities
         Accounts payable                                             516,535        988,734
         Accrued expenses                                              66,537         95,506
                                                                  -----------      ---------
           Net Cash (Used In) Provided By Operating Activities       (126,512)       585,935

Cash Flows from Investing Activities:
   Purchase of property and equipment                                  (5,289)      (403,397)
   Patent costs                                                             -        (43,821)
                                                                  -----------      ---------
                         Net Cash Used In Investing Activities         (5,289)      (447,218)

Cash Flows from Financing Activities:
   Net borrowings under lines of credit                               349,862        341,403
   Repayments of term notes                                          (121,450)      (282,011)
   Repayments of capital lease obligations                            (56,073)       (83,526)
   Purchases of treasury stock                                        (69,302)       (96,838)
   Proceeds from sale of common stock                                       -         47,500
   Offering costs associated with equity transactions                       -        (34,091)
   Payments of Series B preferred dividends                           (10,000)             -
   Payments of Series C preferred dividends                           (24,959)             -
   Proceeds from capital lease obligations                                            20,292
   Recapitalization costs                                              (5,000)
                                                                  -----------      ---------
           Net Cash Provided By (Used In) Financing Activities         63,078        (87,271)

            Net (Decrease) Increase in Cash & Cash Equivalents        (68,723)        51,446

Cash and Cash Equivalents at Beginning of Period                      153,038        101,592
                                                                  -----------      ---------
Cash and Cash Equivalents at End of Period                        $    84,315      $ 153,038
                                                                  ===========      =========

Supplemental Cash Flow Information:
   Cash paid for interest                                         $   495,106      $ 520,862
                                                                  ===========      =========
   Cash paid for taxes                                            $         -      $  40,000
                                                                  ===========      =========
</TABLE>



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







                                       F-6
<PAGE>



                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000


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. Subsequent to December 31, 2001, Polychem entered into an agreement to
outsource all of its manufacturing operations. 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 income, 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).


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.


                                      F-7
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

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, 2001, 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.


Revenue Recognition

The Company recognizes operating revenue when title and risk of loss pass to
customers in accordance with Staff Accounting Bulletin No. 101, "Revenue
Recognition," issued by the Securities and Exchange Commission.

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. Property, Plant & Equipment has been classified as "held for sale" as
of December 31, 2001. See Note 4 and Note 7 for further discussion.

Research and Development Costs

The Company expenses research and development costs as incurred. Research and
development costs were approximately $226,000 for the year ended December 31,
2001 and $225,000 for the year ended December 31, 2000.

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.

                                       F-8
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

Recent Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("Statement
144"), effective in fiscal years beginning after December 15, 2001, with early
adoption permitted, and in general are to be applied prospectively. Statement
144 establishes a single accounting model for the impairment or disposal of
long-lived assets, including discontinued operations. Statement 144 superseded
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The Company expects that the provisions of Statement 144 will not
have a material impact on its results of operations and financial position upon
adoption.

The following recently issued accounting pronouncements are currently not
applicable to the Company.

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" ("Statement 141"), effective for all business
combinations initiated after June 30, 2001. Statement 141 requires all business
combinations to be accounted for under the purchase method. Statement 141
supersedes APB Opinion No. 16, "Business Combinations," and Statement No. 38,
"Accounting for Preacquisition Contingencies of Purchased Enterprises."

In July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets" ("Statement 142"), effective October 1,
2001. Statement 142 addresses the financial accounting and reporting for
acquired goodwill and other intangible assets. Under the new rules, the Company
is no longer required to amortize goodwill and other intangible assets with
indefinite lives, but will be subject to periodic testing for impairment.
Statement 142 supersedes APB No. 17, "Intangible Assets."

In August 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Obligations Associated With the Retirement of Long-Lived Assets"
("Statement 143"), effective in fiscal years beginning after June 15, 2002, with
early adoption permitted. Statement 143 establishes accounting standards for the
recognition and measurement of an asset retirement obligation and its associated
asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets.

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:

                                      F-9
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000


<TABLE>
<CAPTION>


                                                                          Year Ended December 31
                                                               ------------------------------------------
                                                                     2001                     2000
                                                               -----------------        -----------------
<S>                                                                <C>                         <C>
Earnings per Share - Basic:
   Net income                                                      $(2,513,562)              $     4,218
   Dividends on preferred shares                                      (135,508)                  (87,754)
                                                               -----------------        -----------------
   Net (loss) income available to common shareholders              $(2,649,070)              $   (83,536)
                                                               =================        =================

   Weighted average shares outstanding                                2,613,286                2,365,371
                                                               =================        =================

                            Basic (Loss) Earnings Per Share        $      (1.01)             $     (0.04)
                                                               =================        =================

Earnings per Share - Diluted:
   Net (loss) income available to common shareholders              $ (2,649,070)             $   (83,536)
   Dividends on preferred shares
                                                                              -                        -
   Income on common shares after
                                                               -----------------        -----------------
      assumed conversions                                          $ (2,649,070)             $   (83,536)
                                                               =================        =================

   Weighted average shares outstanding                                2,613,286                2,365,371
   Dilutive effect of preferred stock
                                                                              -                        -
   Dilutive effect of stock options and warrants
                                                                              -                        -
                                                               -----------------        -----------------
      Diluted average shares outstanding                              2,613,286                2,365,371
                                                               =================        =================

                          Diluted (Loss) Earnings Per Share        $      (1.01)             $     (0.04)
                                                               =================        =================

</TABLE>

Series A preferred stock, convertible into 798,875 shares of common stock was
outstanding during the fiscal years ended December 31, 2001 and 2000. 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, 2001 and 2000, respectively. The exercise price of the warrants
is $3.00 per warrant. The Company had stock options for the purchase of 375,000
common shares outstanding at December 31, 2001 and 2000. 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, 2001
and 2000, since these securities were antidilutive as a result of the Company's
loss available to common shareholders.


NOTE 4 - MANAGEMENT'S PLAN

As shown in the accompanying financial statements, the Company incurred a net
loss of ($2,514,000) during the year ended December 31, 2001, and as of that
date, the Company's current liabilities exceeded its current assets by
$3,301,000 and its total liabilities exceeded its total assets by $3,201,000.
Those factors, as well as the inability of the Company to either restructure or
replace its financing (as discussed in Note 9), create an uncertainty about the
Company's ability to continue as a going concern. Management of the Company has
developed a plan that includes outsourcing the manufacturing of its product
lines to a supplier as well as plans to reduce its liabilities through the sale
of all of Polychem's assets. The ability of the Company to continue as a going
concern is dependent on acceptance of the plan by the Company's stockholders.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.

Polychem has agreed to outsource the manufacturing of its product lines to
Ensinger Vekton, Inc. and Putnam Precision Molding, Inc. (collectively,
"Supplier"), pursuant to a Supply and Equipment Purchase Agreement, dated March
20, 2002. Under the terms of the agreement, Polychem has agreed to purchase a
minimum of $2.5 million of products from Supplier each year and to sell to
Supplier the equipment Polychem formerly used to manufacture its products.

                                      F-10
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

On March 20, 2002, ConMat entered into a License and Asset Purchase Agreement
(the "License and Asset Purchase Agreement") with Polychem and Ecesis LLC
("Ecesis") which provides for the sale of Polychem's specialty and water
treatment product lines to Ecesis (the "Sale"). The Sale is subject to the
approval of ConMat's shareholders. The contemplated purchase price will be
$1,600,000, which has been supported by an appraisal of the business by an
independent third party.

ConMat anticipates holding a special meeting of its shareholders in the near
future at which its shareholders will vote whether to approval the Sale and a
Plan of Liquidation for the remaining assets of Polychem (the "Liquidation").
ConMat believes that its shareholders will approve the Sale and the Liquidation.
Ecesis is a Delaware limited liability company which was formed to purchase
Polychem's specialty and water treatment lines. Two of ConMat's and Polychem's
former directors and officers, Paul A. DeJuliis and Richard R. Schutte, are
members of Ecesis. Messrs. DeJuliis and Schutte resigned as directors and
officers of ConMat and Polychem on March 13, 2002.

Pending the approval of the Sale by ConMat's shareholders, pursuant to the
License and Asset Purchase Agreement, Polychem has licensed its specialty and
water treatment product lines to Ecesis in exchange for royalties based on
sales. In the event that the Sale is not approved by ConMat's shareholders, the
license will terminate and Polychem will resume developing and marketing its
product lines.

If ConMat's shareholders approve the Sale and Liquidation, ConMat will have no
assets (other than cash, if any, remaining after satisfaction of its and
Polychem's liabilities). In such event, the Board of Directors of ConMat will
seek to acquire an interest in one or more suitable operating businesses, which
may include assets or shares of another entity to be acquired by ConMat directly
or through a subsidiary, that the Board of Directors believes will be profitable
to ConMat and its shareholders. In the event the Sale and Liquidation is not
approved by ConMat's shareholders, the license to Ecesis shall terminate and
ConMat shall resume operation of Polychem.


NOTE 5 - ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>

                                                                        Year Ended December 31
                                                               ------------------------------------------
                                                                     2001                     2000
                                                               -----------------        -----------------

<S>                                                                 <C>                      <C>
Accounts receivable                                                 $ 3,947,058              $ 4,239,826
Retainage receivables                                                   960,874                  564,251
Allowance for doubtful accounts                                        (395,839)                 (60,000)
                                                               -----------------        -----------------
                                                                    $ 4,512,093              $ 4,744,077
                                                               =================        =================

</TABLE>

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.


NOTE 6 - INVENTORIES
<TABLE>
<CAPTION>

                                                                        Year Ended December 31
                                                               ------------------------------------------
                                                                     2001                     2000
                                                               -----------------        -----------------

<S>                                                                   <C>                      <C>
Raw Materials                                                       $   329,103              $   581,554
Work-in-process                                                         427,940                  630,314
Finished goods                                                          291,564                  266,317
                                                               -----------------        -----------------
                                                                    $ 1,048,607              $ 1,478,185
                                                               =================        =================

</TABLE>


                                      F-11

<PAGE>



                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>

                                                                               Year Ended December 31
                                                 Estimated            ------------------------------------------
                                               Useful Lives                 2001                     2000
                                            --------------------      -----------------        -----------------

<S>                                            <C>                            <C>                        <C>
Land                                                                       $    56,000              $    56,000
Buildings and equipment                        10 - 15 years                 1,058,325                  968,826
Machinery and equipment                         3 - 7 years                  1,091,397                  938,283
Construction in progress                                                       109,592                  346,917
                                                                      -----------------        -----------------
                                                                      -----------------        -----------------
                                                                             2,315,314                2,310,026
   Less accumulated depreciation                                            (1,268,336)              (1,082,617)
                                                                      -----------------        -----------------
                                                                      -----------------        -----------------
                                                                           $ 1,046,978              $ 1,227,409
                                                                      =================        =================
</TABLE>


Pursuant to the discussion in "Note 4 - Management's Plan" for the Polychem
operations, the Property, Plant & Equipment amounts as of December 31, 2001 have
been identified as "Held for Sale". Management estimates that the fair value
less costs to sell will be in excess of the carrying value of the assets.

Depreciation expense was $185,720 and $166,444 for the fiscal years ended
December 31, 2001 and 2000, respectively.

Machinery and equipment as of December 31, 2001 and 2000, includes $529,380 and
$514,569, respectively, of equipment under capital leases, with accumulated
depreciation of $427,547 and $344,976, respectively.


NOTE 8 - OTHER ASSETS
<TABLE>
<CAPTION>
                                                                        Year Ended December 31
                                                               ------------------------------------------
                                                                     2001                     2000
                                                               -----------------        -----------------

<S>                                                                   <C>                      <C>
Deferred financing, net                                               $  71,131                $ 145,794
Patents, net                                                            145,154                  125,064
                                                               -----------------        -----------------
                                                                      $ 216,285                $ 270,858
                                                               =================        =================
</TABLE>


NOTE 9 - 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 8.75% (10.77% at December
31, 2001). The Agreement also provided for a term loan for $1,500,000, secured
by equipment, with interest at the index rate plus 10.5% (12.52% at December 31,
2001). As of December 31, 2001 the outstanding balance on the revolving line of
credit was $2,818,893. The Agreement expired on September 30, 2001 as a result
of the unwillingness by GE Capital Corporation, the lender, to provide continued
working capital financing to Polychem to support its operations. Management does
not anticipate that Polychem will be able to obtain sufficient capital financing
on reasonable terms from another lender to replace the GE Capital financing. The
Company has been granted an interim extension of the previous credit facility by
the lender, through May 31, 2002. The extension has imposed some additional
financial restrictions and limitations on the Company generally in the form of
additional reserves against maximum borrowing amount.

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

                                      F-12
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

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.

Subsequent to December 31, 2001, Polychem was in default of the provisions of
the term note payable to the Budd Company. An agreement between the two parties
provides for various payments of principal and interest to be made during the
period of January 1, 2002 through December 31, 2002.

At December 31, 2001, there was approximately $54,000 available for advances
under the revolving line of credit.
<TABLE>
<CAPTION>

                                                                               Year Ended December 31
                                                                      -----------------------------------------
                                                                           2001                     2000
                                                                      ----------------         ----------------
<S>                                                                            <C>                      <C>
Polychem term note payable to the Budd Company, interest
at 8%, principle payable in various installments during
Calendar year 2002.                                                       $   813,148              $   813,148

Polychem note payable, interest at index rate plus 10.5% at
December 31, 2001 (12.52%) plus 6.5% at December 31,
2000 (13.15%) in monthly installments of $8,000 plus interest,
with remaining balance to be paid during calendar year 2002.                  180,000                  276,000

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                       1,823,804                1,849,254
                                                                      ----------------         ----------------
                                                                            2,816,952                2,938,402
Less current portion                                                      (1,020,846)                 (789,338)
                                                                      ----------------         ----------------
                                                                          $ 1,796,106              $ 2,149,064
                                                                      ================         ================
</TABLE>


Maturities on these obligations at December 31, 2001 are as follows:

                                2002                           $ 1,020,846
                                2003                                30,147
                                2004                                32,811
                                2005                                35,712
                                2006                                38,868
                                Thereafter                       1,658,568
                                                           ----------------
                                                               $ 2,816,952
                                                           ================

The carrying amounts of the Company's long-term debt approximate their fair
value as of December 31, 2001 and 2000. 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 $481,767 and $502,045 related to the line of credit and
long-term debt was charged to operations for the years ended December 31, 2001
and 2000, respectively.


                                      F-13
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

NOTE 10 - 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 2001 and
2000. Interest expense of $5,614 and $13,836 on the capitalized lease
obligations was charged to operations for the years ended December 31, 2001 and
2000, respectively. Future minimum lease payments as of December 31, 2001, are
as follows:

                                2002                         $  30,840
                                2003                            14,636
                                2004
                                2005                                 -
                                2006                                 -
                                Thereafter                           -
                                                             ----------
            Total minimum lease payments
                                                                45,476
            Less amounts representing interest                  (2,988)
                                                             ----------
                                                                42,488
            Less current portion                               (28,229)
                                                             ----------
                                                             $  14,259
                                                             ==========


NOTE 11 - 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, 2001 and 2000, were $34,276 and $37,889, 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 2001 or 2000.

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
                                                               --------------------------------
                                                                  2001                2000
                                                               ------------        ------------
<S>                                                            <C>                 <C>
Change in benefit obligation:
   Benefit obligation at beginning of year                     $ 2,210,961         $ 2,413,507
   Service cost                                                     32,104              30,559
   Interest cost                                                   154,004             158,541
   Actual gain                                                     (49,495)           (191,293)
   Benefits paid                                                  (199,521)           (200,353)
                                                               ------------        ------------
                          Benefit obligation at end of year      2,148,053           2,210,961

</TABLE>


                                      F-14
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000
<TABLE>
<CAPTION>


<S>                                                                   <C>               <C>
Change in plan assets:
   Fair value of plan assets at beginning of year               2,019,244           2,317,283
   Actual return on plan assets                                  (135,765)            (97,685)
   Employer contribution                                                0                   0
   Benefits paid                                                 (199,521)           (200,353)
                                                              ------------        ------------
                   Fair value of plan assets at end of year     1,683,958           2,019,245

   Funded status                                                 (464,095)           (191,716)
   Unrecognized net actuarial gain                                114,484            (143,792)
   Unrecognized prior service cost                                132,033             148,127
   Miniumum liability adjustment                                 (246,517)             (4,335)
                                                              ------------        ------------
                             Prepaid (accrued) benefit cost   $  (464,095)        $  (191,716)
                                                              ============        ============

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

Components of net periodic benefit (cost) income:
   Service cost                                               $   (32,104)        $   (30,559)
   Interest cost                                                 (154,004)           (158,541)
   Actual return on plan assets                                  (135,765)            (97,685)
   Amortization of prior service cost                             (16,094)            (16,094)
   Recognized net gain (loss)                                     307,770             315,945
                                                              ------------        ------------
                         Net periodic benefit (cost) income   $  (30,197)         $    13,066
                                                              ============        ============

</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, 2001 and 2000. The unfunded
accumulated postretirement benefit obligation as of December 31, 2001 and 2000,
was $15,000. The net periodic postretirement benefit cost for the years ended
December 31, 2001 and 2000, was not material.


NOTE 12 - INCOME TAXES

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 components of income tax expense are as follows:

                                           Year Ended December 31
                                     ------------------------------
                                         2001              2000
                                     -----------        -----------
Current
   Federal                           $ (108,000)         $  20,000
   State                                      0              4,000
                                     -----------        -----------

                                       (108,000)            24,000


                                      F-15
<PAGE>


                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

Deferred
   Federal                     (827,000)              3,200
   State                       (220,000)                  -
                            -------------         ----------
                             (1,047,000)              3,200
                            -------------         ----------
                            $(1,155,000)          $  27,200
                            =============         ==========



The reconciliation of the statutory federal rate to the Company's effective
income tax rate is as follows:
<TABLE>
<CAPTION>

                                                                          Year Ended December 31
                                                                 -----------------------------------------
                                                                      2001                     2000
                                                                 ----------------         ----------------

<S>                                                                  <C>                           <C>
Statutory tax provision                                               (1,247,311)                  10,682
State income tax provision, net of federal tax benefit                  (220,000)                   2,640
Increase (decrease) in valuation allowance                               306,974                    7,468
Nondeductable expense                                                      5,337                    8,500
Other                                                                          -                   (2,090)
                                                                 ----------------         ----------------
                                                                    $ (1,155,000)               $  27,200
                                                                 ================         ================
</TABLE>

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

                                                                          Year Ended December 31
                                                                 -----------------------------------------
                                                                      2001                     2000
                                                                 ----------------         ----------------
<S>                                                                    <C>                      <C>
Deferred tax assets
   Accounts receivable                                               $   161,452                $  20,400
   Inventory                                                              83,550                   43,627
   Property, plant and equipment                                          58,438                   37,438
   Employee benefit plans                                                184,923                   57,722
   Legal settlement                                                      630,000                        -
   Net operating loss carryforwards                                      406,000                        0
   Valuation allowance on deferred tax asset                            (398,870)                 (80,694)
                                                                 ----------------         ----------------
                                                                     $ 1,125,493                $  78,493
                                                                 ================         ================
</TABLE>

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. The Company will have a net operating loss of approximately
$1,000,000 which will expire in 2021.


NOTE 13 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases certain facilities and equipment under noncancellable
operating leases that expire through May 2009. Rent expense of $21,980 and
$30,007 has been charged to operations for the years ended December 31, 2001 and
2000, respectively. Minimum future rental payments under leases as of December
31, 2001, are as follows:

                  2002                       $  34,749
                  2003                          27,828
                  2004                          12,789
                  2005                          12,789
                  2006                          12,789
                                             ----------
                                             $ 100,944
                                             ==========

                                      F-16
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

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 Corporation 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. 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.

On January 22, 2001 the Bankruptcy Court appointed a Chapter 11 trustee to
oversee and administer The Eastwind Group, Inc. bankruptcy. On May 24, 2001, the
bankruptcy trustee filed a substituted Complaint against ConMat. In his
complaint, the bankruptcy trustee asserted claims against ConMat, including
those originally raised in the John Thach complaint that the December 8, 1998
acquisition of Polychem was a fraudulent transaction.

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. 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 and the case
was stayed.

To resolve the claims asserted by the bankruptcy trustee, John Thach and
ProFutures, management of ConMat negotiated the terms of a settlement agreement
with the bankruptcy trustee, which was filed with the bankruptcy court on
October 25, 2001. Thereafter, on December 13 and 17, 2001, the bankruptcy court
held a two-day hearing on the approval of the settlement agreement. On February
27, 2002, the bankruptcy court approved the settlement agreement. The settlement
agreement requires the payment by ConMat of $1,500,000 to the bankruptcy
trustee, including $500,000 in cash and a promissory note in the amount of
$1,000,000. ConMat is funding its obligations under the settlement agreement in
part by selling assets and effecting a management led buyout of Polychem's
specialty and water treatment product lines.

Subject to payment by ConMat of $1,500,000 to the bankruptcy trustee pursuant to
the settlement agreement and payment by Polychem of an IRS claim, John Thach's
claims will be released against, among others, ConMat. In addition, the
bankruptcy trustee has agreed to allocate and set aside a portion of the
settlement proceeds, not to exceed $200,000, to fund the indemnification
obligations from ConMat's share of liability, if any, in the ProFutures' action.
The $1,500,000 settlement payment has been accrued and reflected in the
Company's results of operations for the year ended December 31, 2001. ConMat's
wholly owned subsidiary, Polychem Corporation, is also a defendant in the
actions brought by the bankruptcy trustee and Thach and is also a party to the
various settlement agreements referenced above.

In addition to the litigation arising out of the Eastwind bankruptcy and the
claims asserted by Thach, Polychem is a defendant in an action filed by The Budd
Company in the Court of Common Pleas of Chester County. The Budd Company
confessed judgment against Polychem under a note given by Polychem to The Budd
Company. At present, The Budd Company has taken no steps to execute on its
judgment and has accepted periodic payments from Polychem. As of December 31,
2001, the balance due to The Budd Company was approximately $813,000.

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.

NOTE 14 - 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

                                      F-17
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

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 2001 or 2000. There were no stock options granted during
2001.

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, 2001 and 2000, would not be materially different from the amounts
reported.


NOTE 15 - 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, 2001, Polychem's sales to foreign customers were
$5,295,258 or 43.1% of consolidated net sales, and consist principally of sales
to customers in Asia (27%) and Europe (10%). Receivables from foreign customers
were $2,034,000 as of December 31, 2001. 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.


NOTE 16 - MAJOR CUSTOMER

The Company sells a substantial portion of its products to one customer. During
fiscal 2001 and 2000, net revenue from that one customer aggregated
approximately $2,437,000 and $1,566,000, respectively. At December 31, 2001 and
2000 amounts due from that customer included in trade accounts receivable were
approximately $1,384,000 and $443,000, respectively.

NOTE 17 - 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.

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



                                      F-18
<PAGE>

                 ConMat Technologies, Inc. and Subsidiary Notes
                      to Consolidated Financial Statements
             For the fiscal years ended December 31, 2001 and 2000

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, 2001 and 2000, there were $80,000 and $40,000, respectively of
dividends in arrears on the Series B preferred stock. The Series B preferred
stock has been reclassified as a part of the equity section of the Company's
balance sheet to reflect the elimination of certain shareholder redemption
provisions. These 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.

As of December 31, 2001 and December 31, 2000 there were $118,304 and $47,754,
respectively of dividends in arrears on the Series C preferred stock.

Warrants - As of December 31, 2001, 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).

Receivables from Sales of Stock

In addition the to $50,000 note receivable discussed in "Note 14 - 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


                                      F-19
<PAGE>

                    ConMat Technologies, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
              For the fiscal years ended December 31, 2001 and 2000

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.

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 6, 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, 2001 the receivables relating to the 250,000 shares and the
400,000 shares remained outstanding. Management has determined that the
likelihood of collecting on these receivables is remote. Therefore, the
receivables have been written off and charged to additional paid-in capital. The
Company is attempting to have these shares returned and cancelled. If the shares
are not returned, the Company will pursue legal action since the notes were
collateralized by the shares in question. Also, since the notes receivable were
reflected as a contra-equity account, there is no dollar effect to the equity
position of the Company. However, the loss per share for the year ended December
31, 2001 reflects the shares as outstanding. If the 650,000 shares were
excluded, the basic and diluted loss per share would be $1.35.

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. During the year ended December
31, 2000, a $118,000 receivable relating to the Company's claims was classified
as a reduction of stockholders' equity. As a result of the final settlement
reached in the Eastwind Bankruptcy, this receivable was written off during the
year ended December 31, 2001.