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


                               FORM 10-KSB/A

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934


                For the fiscal year ended December 31, 2002

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934


          For the transition period from __________ to __________

                      Commission File Number 0-23812

                     ADVANCED RECYCLING SCIENCES, INC.
                    -----------------------------------
               (Name of small business issuer in its chapter)

     Nevada                                                  95-4255962
-------------------------------                  --------------------------
(State or other jurisdiction of                  (I.R.S. Employer I.D. No.)
 incorporation or organization)

2030 Main Street, Suite 1300, Irvine, California                   92614
------------------------------------------------                -----------
    (Address of principal executive offices)                     (Zip Code)

      Issuer's telephone number, including area code: (949) 260-4728

 Securities registered pursuant to section 12(b) of the Exchange Act: None

      Securities registered under Section 12(g) of the Exchange Act:
                   $.001 par value, common voting shares
                   -------------------------------------
                             (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 past 12 months (or for
such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the
past 90 days. (1) Yes [] No [X]

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is 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/A or any subsequent amendments to this Form 10-KSB.

The issuer's revenue for its most recent fiscal year was: $0.

The aggregate market value of the issuer's voting stock held as of April
15, 2002, by non-affiliates of the issuer was $1,935,587.

As of April 15, 2003, the date used in the original filing, issuer had
24,544,366 shares of its $.001 par value common stock outstanding.

Transitional Small Busines Disclosure Format. Yes [ ] No [X]

Documents incorporated by reference: None


                             TABLE OF CONTENTS

___________________________________________________________________________

                                   PART I

ITEM 1    DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . . . . .3

ITEM 2    DESCRIPTION OF PROPERTY. . . . . . . . . . . . . . . . . . . . .8

ITEM 3    LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . .8

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF
          SECURITIES HOLDERS . . . . . . . . . . . . . . . . . . . . . . .9

                                  PART II

ITEM 5    MARKET FOR COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . .9

ITEM 6    MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . . . . 11

ITEM 7    FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 15

ITEM 8    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . 38

                                  PART III

ITEM 9    DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND
          CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
          OF THE EXCHANGE ACT. . . . . . . . . . . . . . . . . . . . . . 38

ITEM 10   EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . 40

ITEM 11   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
          OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 43

ITEM 12   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . 44

                                  PART IV

ITEM 13   EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 44

ITEM 14   CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . . . . 44

          SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 45

___________________________________________________________________________






                                     2

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

                                   PART I

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

                                  FORWARD

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

This Form 10-KSB/A contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-KSB/A that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "hope,"
"will," "expect," "believe," "anticipate," "estimate" or "continue" or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainty,
and actual results may differ materially depending on a variety of factors,
many of which are not within the Company's control. These factors include
but are not limited to economic conditions generally and in the industries
in which the Company and its customers participate; competition within the
Company's industry, including competition from much larger competitors;
technological advances which could render the Company's products less
competitive or obsolete; failure by the Company to successfully develop new
products or to anticipate current or prospective customers' product needs;
price increase or supply limitations for components purchased by the
Company for use in its products; and delays, reductions, or cancellations
of orders previously placed with the Company.

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

                      ITEM 1. DESCRIPTION OF BUSINESS

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

Advanced Recycling Sciences, Inc., ("ARS " or the "Company") is in the
business of developing innovative products and technologies in the
environmental and recycling industries, with specific emphasis on
rubberized asphalt paving, scrap tire and industrial rubber recycling. The
principal offices of the Company are located at 2030 Main Street, Suite
1300, Irvine, California   92612. The Company was organized as a
corporation in 1968, under the laws of the State of California. In 1988 the
Company changed its domicile from California to the State of Nevada and has
operated as a Nevada corporation since that time. In March 2001, the
Company amended its articles of incorporation to change its name from The
Quantum Group, Inc., to Advanced Recycling Sciences, Inc.

Since March 2001, the Company has been pursuing a business development
strategy incorporating technology acquisition, innovation and development,
including rubberized asphalt paving, the patented Tires2Oil process, a
patented de-icing system for road surfaces and international sales of tire
shredding, granulating and aftermarket product manufacturing equipment.
The Company is registered and qualified to do business in the State of
California. Its corporate organization is as follows:

Advanced Surfacing Technologies, Inc. ("AST")
---------------------------------------------
AST was incorporated in Nevada in May 1997 as Quantum Modified Asphalt
Xcetera, Inc., a wholly owned subsidiary of the Company. The name was
changed to Advanced Surfacing Technologies, Inc., in March 2001.
The Company believes there are significant opportunities in the rubberized
asphalt paving industry. The Company, through AST intends to focus most of
its efforts in the upcoming year to exploiting the growing rubberized
asphalt paving, particularly in Europe. The Company has entered into an
exclusive agreement with a manufacturer to sell specialized mobile
equipment for blending rubber and asphalt at hot mix plants in Europe. The
Company will also oversee technology transfer programs to international
clients, on-site project management and seminars to educate both public and
private sector engineers about the Company's products and services. The
Company also intends to establish and operate its own rubberized asphalt
paving business in Germany. The AST website can be viewed at
http://www.ast-paving.com.

                                     3

                              Tires2Oil, Inc.
                             ------------------

Tires2Oil, Inc. is a 93% owned subsidiary of the Company. Tires2Oil (TM)
was formed as a Nevada corporation on January 17, 2001. The primary
responsibility of Tires2Oil(TM) is the continued research, development and
exploitation of certain super critical fluid ("SCF-Oil (TM)") tire
recycling technology. The SCF-Oil (TM) technology can be used to break down
tires into a form of oil and carbon. The oil can be easily upgraded in
existing oil refineries. This technology has been proven in the laboratory
at University of South Alabama.

Based on laboratory experiments, the Company believes the Tires2Oil process
can be applied to the surface of crumb rubber to de-vulcanize it. This
treated rubber will be suitable to incorporate into the production of new
tires and other molded rubber products, including new tires. When the
rubber is re-vulcanized it provides the same characteristics as original
rubber. The Tires2Oil website can be viewed at http://www.tires2oil.com.

Poseidon Products GmbH. ("Poseidon")
------------------------------------
Poseidon is currently a wholly-owned subsidiary of the Company. For some
time, the Company has intended to finish construction of this state of the
art rubber recycling facility in Penkun, located in the state of
Mecklenburg-Vorpommern, Germany. This facility was to produce crumb rubber
and manufacture a wide range of value-added aftermarket products using
technologies licensed or developed by the Company.

The Company has fully impaired this facility. Due to difficulties in
securing financing to construct this facility, and the Company's belief
that its best opportunities lie in the rubberized asphalt paving industry,
the Company suspended its plans to finish construction of its Poseidon
facility. The property was originally purchased from the government.
However, under the terms of the original purchase contract the property had
covenants that required various benchmarks of development progress by the
Company or Poseidon. Since these benchmarks were not met, the Company was
unable to vest its title to the land and ownership ultimately reverted back
to the German government. The property and related costs have been treated
as abandoned.

Technology Development, Inc. ("TDI")
------------------------------------
TDI was acquired by the Company in February 2001. The primary purpose of
TDI is to research, develop and market its worldwide exclusive license to
certain ground surface applications of a novel ice adhesion modification or
"de-icing" technology the Company received when it acquired Technology
Development, Inc., from UTEK Corporation. TDI is a wholly owned subsidiary
of the Company. The TDI website can be found at http://www.no-ice.com.


                                     4

Company Products
----------------
                         Rubberized Asphalt Paving
                         --------------------------

The Company believes its best and fastest route to revenues and earnings in
the current economic environment lies in the rubberized asphalt paving
industry. Asphalt rubber can be used as a binder in various types of
asphalt paving construction including surface treatments and hot mixes. It
can also be used in crack sealants. Asphalt rubber products can be used
wherever conventional asphalt concrete or asphalt surface treatments are
used.

As compared to conventional paving grade asphalt, rubberized asphalt
provides significantly improved engineering properties. The benefits of
rubberized asphalt include:

-    increased elasticity and resilience at high temperatures;
-    reduced traffic noise;
-    improved durability;
-    improved resistance to surface initiated and fatigue/reflective
     cracking;
-    reduced temperature susceptibility;
-    improved aging and oxidation resistance;
-    reduced pavement maintenance costs; and
-    improved resistance to rutting.

The use of rubberized asphalt can also result in reduced construction times
and savings in energy and natural resources by recycling waste rubber.

The primary disadvantage to rubberized asphalt is the increased unit costs.
Typically, rubberized asphalt costs approximately $12 to $16 more per ton
than conventional mixes. As mobilization and set up of asphalt rubber
blending equipment costs as much for small jobs as big ones, larger
projects will result in lower per unit costs because the costs can be
spread over the greater tonnage.

The rubberized asphalt paving industry is still in the early stages of
development. Currently, the Company knows of seven states which have done
sufficient testing of CRM asphalt to no longer consider it experimental.
The testing performed by Arizona, California, Florida, New Mexico,
Nebraska, Tennessee and Texas has shown that the application of asphalt
rubber systems significantly increases the life of the roadway surface
while reducing the maintenance costs and life-cycle costs. These states are
all increasing their overall use of various CRM asphalt systems. The Rubber
Pavement Association believes that within the next three years, the number
U.S. of states specifying and using CRM asphalt paving could potentially
increase to as many as thirty.

The rubberized asphalt paving industry is also in the beginning stages of
development in Europe. Following more than two years of lobbying, the
Company convinced the German state government of Meklenberg-Vorpommern,
based on success with rubberized asphalt in the United States, to lay 11
kilometers of pilot rubberized road projects in Schwerin. The rubberized
asphalt road pilot project has been successful. The German state government
of Schwerin has independently identified numerous advantages to rubberized
asphalt including two to three times extended life expectancy, reduced
noise levels, improved traction and shorter braking distances. The Company
believes the success of the pilot project will prompt local governments
throughout Germany and other European countries to commit to the
installation of additional rubberized asphalt roadways.


                                     5

The Company has acquired an exclusive license from CEI Enterprises, Inc.,
of Albuquerque, New Mexico, to market specialized mobile rubberized asphalt
hot mix blending equipment throughout Europe. In accordance with the terms
of this license, the Company will receive a commission on each piece of CEI
equipment sold to a Company client. The Company has spent significant time
and effort researching and seeking to establish itself in the rubberized
asphalt paving industry. In addition to receiving commissions, the Company
will provide consulting and other services to clients for a fee. Finally,
the Company intends to generate revenue by acquiring equipment from CEI and
entering into the industry, initially in Germany, as a primary and/or
subcontractor and then expanding to other markets as demand justifies.

                 Tires2Oil(TM) Super Critical Fluid Process
                -------------------------------------------

In June 2000, the Company acquired the exclusive worldwide licensing rights
to certain Super Critical Fluid ("SCF-Oil(TM)") tire recycling technology
developed and patented by the University of South Alabama. Through a simple
one-step process, this technology can be used to produce synthetic crude
oil which can easily be upgraded in existing oil refineries. In addition to
synthetic crude oil, the process also produces carbon black, which has a
number of manufacturing uses or with further processing can be converted to
activated carbon used in water and air purification system technologies.
The Company believes this technology will provide another environmentally
conscious means of recycling scrap tires.

Based on preliminary laboratory results achieved at the University of South
Alabama, this SCF-Oil(TM) process appears to be capable of producing
significantly more oil per ton of processed tires than currently existing
processes such as pyrolysis. The Company believes this technology, unlike
currently existing technologies, represents the first commercially feasible
tires to oil recycling process. To date, this technology has been
demonstrated only in the laboratory.

The Tires2Oil(TM) process can also be applied to the surface of crumb
rubber to de-vulcanize and liquify it. The Company believes this treated,
liquified rubber can be used to produce new tires and other rubber
products.

The Company had hoped to construct a pilot plant to assist in the further
development of this technology. Due to a lack of funding, the Company has
not yet begun construction of a pilot plant. When the Company is able to
raise adequate funding, it anticipates that construction of a pilot plant
will take approximately three months. The pilot plant will be used to
develop firm criteria and product data for enabling the construction of
full scale production plants. The Company estimates that the cost of
establishing a pilot plant will be approximately $1,120,000.

If sufficient funds can be raised, development of the plant will occur in
two phases. The first phase will include construction and set up of the
pilot plant, as well as process development. The cost to complete the first
phase is approximately $700,000. The cost of the second phase, which will
focus on a liquid rubber testing and commercialization program, is
estimated at $420,000. The Company is currently in preliminary negotiations
with several parties regarding the possible acquisition of Tires2Oil(TM)
from the Company.

                                     6

Once the Company has a firm understanding of the criteria, data, and
production specifications, Tires2Oil(TM) will market and license this
technology worldwide.

In connection with the research and development efforts undertaken by
Tires2Oil(TM), it believes it has discovered a process to de-vulcanize
crumb rubber. When this rubber is re-vulcanized, it provides the product
with the same characteristics as original rubber. The Company believes this
de-vulcanized rubber can be used to produce a number of molded rubber
products, including new tires. The Company is in the initial stages of
research and development of this process to de-vulcanize crumb rubber and
does not know if this process can be proved up on a commercial scale.
Moreover, the Company does not at this time know whether the process can be
developed into economically viable uses.

                Crumbing and Aftermarket Product Equipment
                -------------------------------------------

For a number of years, the Company's primary business pursuit was the
development and sale of equipment and facilities capable of recycling tires
and other rubber scrap to crumb rubber that could in turn be used to create
value-added aftermarket products. For several years, the Company has
envisioned that its Poseidon Products facility would be the cornerstone of
this operation both in terms of operations and as a state of the art
facility for use in educating, marketing and demonstrating its full range
of tire recycling technologies. While the Company believes a market for
tire and waste rubber recycling exists, due to ongoing difficulties in
securing financing to construct this facility, the Company has determined
to suspend its tire crumbing and aftermarket product operations until such
time as market conditions, funding and demand justify the significant
expense associated with operating in this industry.

                    Roadway Surface De-Icing Technology
                    -----------------------------------

In February 2001, the Company acquired Technology Development, Inc. ("TDI")
TDI had two primary assets: a worldwide exclusive license for the ground
surface applications of a patented novel ice adhesion modification
technology developed at Dartmouth College's Thayer School of Engineering;
and a $200,000 pre-paid credit for additional research and development of
the technology by the Dartmouth College engineering professor who developed
the technology. Pursuant to the terms of the agreement the Company entered
into at the time it acquired TDI, Dartmouth College was to provide certain
information, data, samples, etc., by February 2002, that would allow the
Company to create a pilot and allow for real world simulation and testing.
To date, the required deliveries have not been made to the Company. The
Company is currently in discussion with Dartmouth College regarding this
matter. It is unclear at this time when delivery of the required
information will occur, if at all. Until such time as satisfactory delivery
of this information is made to the Company, the Company cannot proceed with
development and commercialization of this technology.

Research and Development
------------------------

During the past year the Company's primary research and development efforts
were employed in the development of the Tires2Oil technology. The Company
spent approximately $81,000 in research and development costs in the fiscal
year ended December 31, 2002. If the Company has funding, it anticipates
incurring significantly greater expenses for research and development
during fiscal year 2003.

                                     7

Employees
---------

The Company has a total for four employees, three of whom are part- time.
The Company relies heavily on the efforts of its President and Chief
Operating Officer, Keith J. Fryer. It also relies upon the services of John
F. Pope, the Company's Chief Financial Officer, a Vice President and
Treasurer, (Mr. Pope is deceased as of May 2004) and Ehrenfried Liebich,
the Company's Chief Executive Officer and Chairman of the Board.

Advisory Board and Scientific Advisory Board
--------------------------------------------

Consistent with the Company's goal to become a leader in the development
and commercialization of technologies for the scrap rubber recycling and
crumb rubber modified asphalt paving, the Company has established an
Advisory Board and a Scientific Advisory Board to assist it in the
evaluation and development of new business opportunities and technologies.
The following individuals currently serve on the Company's Advisory Board:
Wilhelm J. Burke; Bjorn Goosen; Cees Nader and Wolfgang W. Seiler. The
Company's Scientific Advisory Board is composed of the following
individuals: Pawan Agarwal, Ph.D.; Jagdish Dhawan, Ph.D.; Victor F.
Petrenko, Dr.Sci., Ph.D.and Nicholas D. Sylvester, Ph.D. The members of the
Advisory Board and the Scientific Advisory Board are not employees of the
Company, and each maintains full-time employment with other organizations.

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

                      ITEM 2. DESCRIPTION OF PROPERTY

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

The Company's principal executive offices are located at 2030 Main Street,
Suite 1300, Irvine, California 92614 . The Company leases an executive
suite at this location for $600 per month. The space is leased on a month
to month basis.

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

                         ITEM 3. LEGAL PROCEEDINGS

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

                         Veplas Manufacturing, Ltd.
                        ---------------------------

There have been no significant changes in the Company's litigation with
Veplas Manufacturing, Ltd., during the quarter ended December 31, 2002.


                        FDC Engineering Switzerland
                        ----------------------------

FDC Engineering Switzerland performed certain services relating to the
original design, engineering and permitting of the Company's proposed
Poseidon project facility. The Company's subsidiary Poseidon Products, GmbH
disputed these fees. FDC sued Poseidon regarding this matter. FDC recently
obtained a judgment against Poseidon Products in the amount of $46,000. The
Company is currently negotiating with FDC to extinguish this liability.


                                     8

                              Pauli & Partners
                              ----------------

Pauli & Partners performed certain business consulting services for the
Company's subsidiary, Poseidon. Poseidon disputed certain charges and was
unable to reach an amicable solution with Pauli & Partners. Pauli &
Partners recently received a judgment against Poseidon in the amount of
$7,500. Poseidon is currently assessing the cost of appealing this judgment
to determine the expediency of an appeal versus settlement of the judgment.

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

                  ITEM 4. SUBMISSION OF MATTERS TO A VOTE
                           OF SECURITIES HOLDERS
   ----------------------------------------------------------------------

No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year ending December 31, 2002.

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

                                  PART II

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

                   ITEM 5. MARKET FOR COMMON EQUITY AND
                        RELATED STOCKHOLDER MATTERS

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

The Company's common stock was listed on the NASD OTC Bulletin Board under
the symbol "ARYC". It has subsequently been delisted from the OTC and is
now listed on the Pink Sheets under the symbol "ARYC.PK". The Company's
common stock is also listed on the Third Segment of the Frankfurt Stock
Exchange under German Securities Code Number 882879. As of April 15, 2003,
the Company had 771 shareholders holding 24,554,366 common shares. Of the
issued and outstanding common stock, 6,164,305 are free trading, the
balance are "restricted securities" shares as that term is defined in Rule
144 promulgated by the Securities and Exchange Commission . The Company has
never declared a dividend on its common shares.

The published bid and ask quotations for the previous two fiscal years are
included in the chart below. These quotations represent prices between
dealers and do not include retail markup, markdown or commissions. In
addition, these quotations do not represent actual transactions.

<Table>
<Caption>

                                    BID PRICES            ASK PRICES
                                  HIGH       LOW       HIGH         LOW
                               ---------- ---------- ----------  ----------
<S>                            <C>        <C>       <C>          <C>
2001
First Quarter ended March 31      1.625       .5625     1.71875      .71875
Second Quarter ended June 30      1.30        .70       1.55        1.00
Third Quarter ended Sept. 30      1.50        .70       1.70         .87
Fourth Quarter ended Dec. 31       .75        .37        .95         .51

2002
First Quarter ended March 31       .70        .40        .85         .60
Second Quarter ended June 30       .51        .15        .60         .21
Third Quarter ended Sept. 30       .45        .13        .62         .175
Fourth Quarter ended Dec. 31       .43        .14        .51         .16

</Table>


The foregoing figures were furnished to the Company by Pink Sheets, LLC.,
304 Hudson Street, 2nd Floor, New York, New York 10013.

                                     9

                  Recent Sales of Unregistered Securities
                  ---------------------------------------

No instruments defining the rights of the holders of any class of
registered securities have been materially modified, limited or qualified.

The following securities, which are not registered under the Securities Act
of 1933, were issued since the Company's last quarterly report for the
quarter ended December 31, 2002.

During the quarter ended December 31, 2002, the Company sold 1,022,736
shares of its common stock to non United States citizens in Europe and
Asia. The Company received $157,243. These shares were sold pursuant to
Regulation S promulgated by the Securities and Exchange Commission under
the Securities Act of 1933. The Company did not offer the securities to any
person in the United States, any identifiable groups of U.S. citizens
abroad, or to any U.S. Person as that term is defined in Regulation S. At
the time the buy orders were originated, the Company reasonably believed
the Buyers were outside of the United States and were not U.S. Persons. The
Company reasonably believed that the transaction had not been pre-arranged
with a buyer in the United States. The Company has not nor will engage in
any "Directed Selling Efforts" and reasonably believes the Buyers have not
nor will engage in any "Directed Selling Efforts." The Company reasonably
believed the Buyers purchased the securities for their own accounts and for
investment purposes and not with the view towards distribution or for the
account of a U.S. Person.

During the quarter, Keith J. Fryer exercised certain stock options granted
to him in 1997 to purchase 266,667 common shares. The shares were purchased
a $.06 per share for a total purchase price of $16,000. The shares were
issued without registration under the Securities Act of 1933 in reliance on
an exemption from registration provided by Section 4(2) of the Securities
Act, and from similar applicable state securities laws, rules and
regulations exempting the offer and sale of these securities by available
state exemptions.

During the quarter the Company issued 150,000, 73,333 and 102,670
restricted common shares to three members of its Advisory Board, Wilhelm J.
Burke, Bjorn Goosen and Cees Nader, respectively for services rendered to
the Company. The shares were valued at $.05 per share. The shares were
issued without registration under the Securities Act of 1933 in reliance on
an exemption from registration provided by Section 4(2) of the Securities
Act, and from similar applicable state securities laws, rules and
regulations exempting the offer and sale of these securities by available
state exemptions. No general solicitation was made in connection with the
offer or sale of these securities. No funds were received by the Company
for these shares.

                                     10

During the quarter the Company issued 75,000 restricted common shares to
three other consultants for services rendered to the Company. The shares
were issued without registration under the Securities Act of 1933 in
reliance on an exemption from registration provided by Section 4(2) of the
Securities Act, and from similar applicable state securities laws, rules
and regulations exempting the offer and sale of these securities by
available state exemptions. No general solicitation was made in connection
with the offer or sale of these securities. No funds were received by the
Company for these shares.

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

                    ITEM 6. MANAGEMENT'S DISCUSSION AND
         ANALYSIS OF FINANCIAL STATEMENTS AND RESULTS OF OPERATIONS

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

Liquidity and Capital Resources
-------------------------------

As of December 31, 2002, the Company had cash on hand of $24,468. The
Company raised a total of $915,473 during 2002 in a Regulation S offering.
The Company has received an additional $56,224 during the first quarter of
2003, as continuing receipts from the Regulation S offering.

A depressed stock market in general and a declining market price for the
Advanced Recycling Sciences, Inc. shares in particular led to disappointing
results in the 2002 Regulation S offering. The results achieved in the
beginning of 2003 have caused management to believe that the 2003
Regulation S offering will generate significantly less than the 2002
offering. Banking conditions in Germany have also added to the Company's
inability to secure the financing required to begin construction of the
Poseidon plant. Covenants associated with the initial purchase of the
property required various benchmarks for improvement on the property. Since
the Company was unable to meet these benchmarks it was unable to secure
permanent title and the government was able to ultimately take back title
to the property. Consequently, the Company has abandoned the property and
fully impaired the cost of the land and improvements. The Company's
Advanced Surfacing Technology, Inc., ("AST") subsidiary sponsored Crumb
rubber modified asphalt tests conducted in August 2002 in Germany were very
successful. Management believes that the use of crumb rubber in asphalt
will generate substantial demand for crumb rubber and ultimately assist in
the ability to finance a plant. This will, however, take time.

The Company believes there are significant opportunities in the rubberized
asphalt paving industry. The Company, through AST intends to focus most of
its efforts in the upcoming year to exploiting the growing demand for
rubberized asphalt paving, particularly in Europe. The Company has entered
into an exclusive European distribution agreement with a manufacturer to
sell specialized mobile equipment for blending rubber and asphalt at hot
mix plants. The Company will also oversee technology transfer programs to
international clients, on-site project management and seminars to educate
both public and private sector engineers about the Company's products and
services. The Company also intends to establish and operate its own
rubberized asphalt paving business in Germany and later in other parts of
Europe. The Company has begun private placement discussions with firms
associated with the industry in Germany to raise the funds to support this
effort.



                                     11

At this point in time, the Company has no ongoing revenue and its ability
to raise sufficient capital to meet its cash flow needs is in question. If
capital in not raised, it is unlikely the Company will be able to remain in
business for the next twelve months.

The Company's financial statements are prepared using generally accepted
accounting principles in the United States of America, applicable to a
going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. Currently, the Company
does not have sufficient cash or other liquid assets, nor does it have an
established source of revenues to cover its operating costs and to allow it
to continue in business as a going concern, therefore, the Company is
taking the following approach to meet its liquidity requirements. The
Company has an inventory of tire recycling processing and product
manufacturing equipment in storage following the closure of the San Diego
facility. This equipment was going to be used in the Poseidon project in
Germany. The Company is now in the process of selling portions of that
inventory to generate cash. The Company does not believe that the cash so
generated will be sufficient to meet its overall ongoing needs. The Company
is endeavoring to dispose of these assets for the highest valuation it can
negotiate. Should the Company be unable to continue in operation, the
forced liquidation values for these assets will be less than might be
obtained over time. In some cases, the Company has received advances in
anticipation of the asset sales. These short-term borrowings will be repaid
from the proceeds of the asset sale or the possible sale of a subsidiary.
The Company has received an offer (subject to due diligence) to sell its
Tires2Oil, Inc., subsidiary. The Company believes that the offered price is
sufficient to allow the Company to meet its existing obligations and remain
in operation while it develops the AST European business to a point of
self-sufficiency the company is also negotiating with a second group where
an offer is anticipated. Although the Company is negotiating these
transactions in good faith, no assurance can be given that the transaction
will be successfully concluded and the anticipated cash will be received.

Results of Operations
---------------------

Comparison of the year ended December 31, 2002, and the year ended December
31, 2001

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


The Company generated a loss of $7,250,024 in the year ended December 31,
2002, compared to a loss of $2,042,416 for the year ended December 31,
2001. This $5,207,608 increased loss is substantially due to the impairment
of the following: Land (Poseidon) $655,845, Patents and license rights of
$4,3,94,609 and Construction in Progress $507,536. After considering these
one time charges, there was a $350,382 (17.15%) decrease from last year as
a result of decreases in Depreciation, Travel, Professional Fees, Office
Expense and Consulting Fees, partially offset by R&D expenditures and
Interest expenses.


                                     12

The Company had no significant sales in 2001 and no sales in 2002. The
Company had equipment sales of $38,897 in the year ended December 31, 2001.
There were no equipment sales in 2002. Crumb rubber sales in 2001 were
$48,662. This sale was the final disposition of crumb rubber inventory and
was not repeated in 2002.

Net cash used in operations was $818,061 during the year ended December 31,
2002 compared to $1,212,089 in the year ended December 31, 2001.
Substantially all of the change is due to the reduction of net loss of
$350,382 exclusive of the impairment and abandonment of asset charges of
$5,557,990, collectivley. Additionally, during 2002, Notes and Interest
Receivable decreased $11,430, and Employee Receivables increased $21,520
Deposits increased $2,950. Interest on Notes Payable increased $5,935 and
Prepaid Expenses decreased $3,791. During the twelve months ended December
31, 2001, Accounts Payable increased $66,495, Accrued Expenses increased
$52,329, Accounts Receivable decreased by $59,949, Notes Receivable
decreased $22,570, and Inventory decreased $37,528. Prepaid Expenses
decreased $129,868.

Accrued Expenses increased in the year ended December 31, 2002 by $124,093
compared to an increase of $52,329 in the year ended December 31, 2001.
Accounts Payable increased $308,948 in the year ended December 31, 2002
compared to an increase of $66,495 in the twelve mouths ended December 31,
2001. Officers and Directors of the Company continued to defer salary
payments during 2002. The Company recorded the unpaid liability as Accounts
Payable. The officers and directors were owed $233,990 for salaries at
December 31, 2002 compared to $71, 720 at December 31, 2001.

Depreciation Expense of $298,510 for the year ended December 31, 2002, is a
reduction of the 2001 expense of $324,826 by $26,316. This is due to the
disposition of a delivery vehicle and the sale of a portion of the
Company's equipment inventory

Travel expenses of $61,406 for the year ended December 31, 2002, decreased
by $26,406 compared to $87,812 for the year ended December 31, 2001. This
is due to an overall restriction in travel as part of an overall cost
reduction program as well as staff downsizing.

Professional fees decreased to $86,269 in the twelve months ended December
31, 2002 from $175,032 for the twelve months ended December 31, 2001. This
reduction is from a greater reliance on in house services with conservative
use of outside professionals.

Office expense of $30,884 for the twelve months ended December 31, 2002, is
a decrease of $51,337 from the 2001 expenses of $82,221. This decrease is
also a result of a general expense reduction program.

Rent and Utilities expense of $116,413 in the twelve months ended December
31, 2002 is $3,422 less that the $119,835 incurred in 2001. This reduction
is due to relocating to a smaller office location in September 2002.

Administrative expenses of $303,623 for the year ended December 31, 2002 is
a $178,735 decrease from the $482,358 for the comparable 2001 period.
Salaries expense decreased $68,400 due staff reductions. Payroll Tax,
Insurance and Vacation expenses reduced accordingly. Other elements of
Administrative expense include Promotion and Trade Show expenses which were
reduced from $17,869 for the twelve months ended December 31, 2001 to
$1,342 in the 2002 year and Freight expenses which were reduced from
$15,183 in 2001 to $630 in the twelve moths ended December 31, 2002.
Consulting expenses of $555,580 for the year ended December 31, 2002
decreased from the year ended December 31, 2001 expense of $674,731 by
$119,151. This expense was reduced with the completion of the Business plan
for the Poseidon project in Germany in late 2001.


                                     13

Interest expense of $82,700 in the twelve months ended December 31, 2002,
is an increase of $73,642 over 2001. This increase is due to a number of
short term borrowings during the course of 2002 to cover gaps in the
receipts of the Regulation S proceeds and the shortfall of the Regulation S
offering.

Research and Development Expenses of $88,810 were incurred during the
twelve months ending December 31, 2002 on the Company's Tires2Oil project.
$65,000 of comparable expenses were included in 2001.

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





                                     14

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

                       ITEM 7. FINANCIAL STATEMENTS

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

/Letterhead/
Independent Auditors' Report
----------------------------

To the Board of Directors and Shareholders of
Advanced Recycling Sciences, Inc.

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

We conducted our audits in accordance with generally accepted auditing
standards, in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatements. 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 the significant estimates made by
management, as well as evaluating the overall financial statements
presentation. We believe that our audits provide a reasonable basis for our
opinion.

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

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As disclosed in
Note 19, the Company has incurred significant operating losses over the
last four years, and has an accumulated deficit. These conditions raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in
Note 19. These consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/S/ Chisholm, Bierwolf & Nilson

Chisholm, Bierwolf & Nilson
Bountiful, Utah
March 31, 2003, except for Notes 5, 12, 13, 14, 15, 18 and 21 dated March
13, 2006

                                     15

                     Advanced Recycling Sciences, Inc.
                               Balance Sheets
                                December 31
<Table>
<Caption>
                                                     2002          2001
                                                 ------------  ------------
                                   Assets          (Restated)
<S>                                              <C>           <C>
Current Assets
--------------
 Cash                                             $   24,468   $     3,785
 Employee Receivable                                  21,520           -
 Deposits                                              2,950        14,281
 Note Receivable                                         -          11,430
 Prepaid Expenses                                      2,785         6,576
                                                 ------------  ------------
   Total Current Assets                               51,723        36,072

Property & Equipment (Note 5)
--------------------
 Land (Note 15)                                         -          617,840
 Furniture & Fixtures                                 38,711        38,550
 Equipment                                            81,087     1,504,870
 Vehicles                                                -          39,402
 Websites                                             27,123        25,728
                                                 ------------  ------------
   Total Property & Equipment                        146,921     2,226,390
   Less Accumulated Depreciation                     (52,863)     (768,861)
                                                 ------------  ------------
   Net Property & Equipment                           94,058     1,457,529

Equipment Held for Disposal, net (Note 6)            415,987          -

Other Assets
------------
 Construction in Progress (Note 13)                      -         535,553
 License Rights, net (Note 18)                           -         313,104
 Patent Rights (Note 14)                                 -       4,065,000
                                                 ------------  ------------
   Total Other Assets                                    -       4,913,657
                                                 ------------  ------------
   Total Assets                                  $   561,768   $ 6,407,258
                                                 ============  ============

</Table>
The accompanying notes are an integral part of these financial statements.

                                     16

                     Advanced Recycling Sciences, Inc.
                               Balance Sheets
                                December 31
<Table>
<Caption>
                                                     2002          2001
                                                 ------------  ------------
                                                   (Restated)
                     Liabilities & Stockholders' Equity
<S>                                              <C>           <C>
Current Liabilities
-------------------
 Accounts Payable                                $   834,204   $   526,123
 Accrued Expenses                                    185,654        61,561
 Notes Payable (Current Portion) (Note 3)             48,173        41,282
 Notes Payable - Related Party (Note 7)              196,694       185,130
 Capital Lease (Current Portion) (Note 11)               -          17,178
 Interest on Note Payable (Note 3)                    13,844         7,909
                                                 ------------  ------------
   Total Current Liabilities                       1,278,569       839,183

Long Term Liabilities
---------------------
 Capital Lease (Note 11)                                 -          12,477
 Note Payable (Note 3)                                   -           6,891
                                                 ------------  ------------
   Total Long Term Liabilities                           -          19,368

 Minority Interest                                    38,057        44,738
 Commitments                                             -             -

Stockholders' Equity
--------------------
 Preferred Stock, 5,000,000 Shares Authorized;
  Par Value of $.001 per Share;
  Zero Shares Issued and Outstanding                     -             -
 Common Stock 50,000,000 Shares Authorized;
  Par Value of $.001 Per Share;
  23,798,579 & 17,176,913 Shares Issued
  & Outstanding Respectively                          23,799        17,177
 Additional Paid In Capital                       15,231,076    14,230,009
 Paid-in Capital Stock Options                        25,543        25,543
 Accumulated Deficit                             (15,931,713)   (8,681,689)
 Accumulated Other Comprehensive Income
  (Note 10)                                         (103,563)      (87,071)
                                                 ------------  ------------
   Total Stockholders' Equity                       (754,858)    5,503,969
                                                 ------------  ------------
   Total Liabilities & Stockholders' Equity      $   561,768   $ 6,407,258
                                                ============   ============
</Table>

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

                                     17

                     Advanced Recycling Sciences, Inc.
                          Statements of Operations
                      For the Years Ended December 31
<Table>
<Caption>
                                                     2002          2001
                                                 ------------  ------------
                                                   (Restated)
<S>                                              <C>           <C>
Revenues
--------
 Equipment Sales                                 $      -      $    38,897
 Other Sales                                            -           48,662
                                                 ------------  ------------
   Total Revenues                                       -           87,559
   Cost of Sales                                        -           37,287
                                                 ------------  ------------
   Gross Profit                                         -           50,272

Expenses
--------
 Depreciation                                        298,510       324,826
 Amortization                                         64,756        64,756
 Travel                                               61,406        87,812
 Professional Fees                                    86,269       175,032
 Office                                               30,884        82,221
 Rent & Utilities                                    116,413       119,835
 Administrative Expenses                             303,623       482,358
 Consultant Fees                                     555,580       674,731
 Research & Development                               88,810        65,000
                                                 ------------  ------------
   Total Expenses                                  1,606,251     2,076,571
                                                 ------------  ------------
   Net Income (Loss) from Operations              (1,606,251)   (2,026,299)

Other Income (Expenses)
-----------------------
 Interest Income                                          52         1,215
 Interest Expense                                    (82,700)       (9,058)
 Other Income                                            250          -
 Abandonment of Assets                            (1,163,381)         -
 Impairment of Intangible Assets                  (4,394,609)         -
 Gain (Loss) on Sale of Assets                         3,296           988
                                                 ------------  ------------
   Total Other Income (Expense)                   (5,637,092)       (6,855)
   Minority Interest                                   6,681         9,262
                                                 ------------  ------------
   Net Income (Loss)                             $(7,250,024)  $(2,042,416)
                                                 ============  ============
   Net (Loss) per Share                          $      (.36)  $     (0.13)
   Weighted Average Shares Outstanding            20,353,544    15,873,294

Comprehensive Income
--------------------
 Net Loss                                        $(7,250,024)  $(2,042,416)
 Other Comprehensive Income:
  Foreign Currency Translation                       (16,492)       (6,710)
                                                 ------------  ------------
   Comprehensive Income (Loss)                   $(7,266,516)  $(2,049,126)
                                                 ============  ============

</Table>
The accompanying notes are an integral part of these financial statements.

                                     18

                     Advanced Recycling Sciences, Inc.
                     Statements of Stockholders' Equity
                 From January 1, 2001 to December 31, 2002
<Table>
<Caption>
                             Common Stock       Paid-in  Comprehensive    Accumulated
                            Stock    Amount     Capital        Income         Deficit
                      ---------------------------------------------------------------
<S>                   <C>           <C>      <C>          <C>            <C>
Balance,
January 1, 2001         12,752,128   $12,751 $11,487,815     $ (80,361)  $(6,639,273)

Shares Issued for
 Patent Rights at
 $1.625 per Share        1,446,153     1,446   2,348,554

Shares Issued for
 Services at $.80
 per Share                  85,000        85      67,915

Shares Issued for
 Cash (Asian Reg-S)
 at $.54 per Share       1,457,464     1,458     782,373

Share Issued for
 Cash (Euro Reg-S)
 at $.48 per Share       1,311,250     1,311     623,689

Shares Issued for
 Debt at $.40 per
 Share                     765,385       766     305,388

Shares Canceled
 for Asset Return         (640,467)     (640) (1,360,365)

Foreign Currency
 Translation                                                    (6,710)

Net Loss for
 Year Ended
 December 31, 2001                                                        (2,042,416)
                      ---------------------------------------------------------------
Balance,
 December 31, 2001      17,176,913    17,177  14,255,369       (87,071)   (8,681,689)

Shares Issued for
 Cash at prices from
 $.478 to $.310 per
 Share                     457,833       458     165,791

Shares Issued for
 Cash at prices from
 $.285 to $.200 per
 Share                   1,481,300     1,481     344,595


</Table>
The accompanying notes are an integral part of these financial statements.
                                     19

                     Advanced Recycling Sciences, Inc.
                    Statements of Stockholders' Equity
                      For the Years Ended December 31
                                (continued)
<Table>
<Caption>
                             Common Stock       Paid-in  Comprehensive    Accumulated
                            Stock    Amount     Capital        Income         Deficit
                      ---------------------------------------------------------------
<S>                   <C>           <C>      <C>          <C>            <C>
Shares Issued for
 Cash at prices from
 $.190 to $.100 per
 Share                   2,408,040   $ 2,408  $  311,260

Shares Issued for
 Cash at prices from
 $.099 to $.075 per
 Share                     927,300       927      80,676

Shares Issued for
 Exercise of 1987
 Stock Option at
 $.060 per Share           266,670       267      15,733

Shares Issued for
 Debt at $.094 per
 Share                     650,000       650      60,600

Shares Issued for
 Services at $.05
 per Share                 430,523       431      22,595

Foreign Currency
 Translation                                                   (16,492)

Net Loss for the
 Year Ended
 December 31, 2002                                                        (7,250,024)
                      ---------------------------------------------------------------
Balance,
 December 31, 2002      23,798,579   $23,799 $15,256,619     $(103,563) $(15,931,713)
 (Restated)           ===============================================================

</Table>
The accompanying notes are an integral part of these financial statements.

                                     20

                     Advanced Recycling Sciences, Inc.
                          Statements of Cash Flows
                      For the Years Ended December 31

<Table>
<Caption>
                                                     2002          2001
                                                 ------------  ------------
                                                   (Restated)
<S>                                              <C>           <C>
Cash Flows from Operating Activities
------------------------------------
 Net Profit or (Loss)                            $(7,250,024)  $(2,042,416)
 Adjustments to Reconcile Net Profit
  or (Loss) to Net Cash:
   Amortization & Depreciation                       363,266       389,582
   Gain on Sale of Fixed Assets                       (3,296)         (988)
   Abandonment of Assets                           1,163,381          -
   Impairment of Intangibles                       4,394,609          -
   Non Cash Transactions                              61,250          -
   Stock Issued for Services                          23,026        68,000
 Changes in Operating Assets & Liabilities:
  (Increase) Decrease in Accounts Receivable            -           59,949
  (Increase) Decrease in Employee Receivable         (21,520)         -
  (Increase) Decrease in Interest Receivable            -              722
  (Increase) Decrease in Inventory                       -          37,528
  (Increase) Decrease in Notes & Interest
   Receivable                                         11,430        22,570
  (Increase) Decrease in Prepaid Expense               3,791       129,868
  (Increase) Decrease in Deposits                     (2,950)         -
  Increase (Decrease) in Accrued Expenses            124,093        52,329
  Increase (Decrease) in Accounts Payable            308,948        66,495
  Increase (Decrease) in Interest on Notes
   Payable                                             5,935         4,272
                                                 ------------  ------------
   Net Cash (Used) by Operating Activities          (818,061)   (1,212,089)

Cash Flows from Investing Activities
------------------------------------
 Land Preparation and Costs                          (38,005)     (218,803)
 Purchase of Equipment                                   -         (70,087)
 Purchase of Furniture & Fixtures                       (161)         (772)
 Purchase of Website                                  (1,395)      (16,078)
 Proceeds from Sale of Equipment                      47,393        31,054
 Increase Costs from Patent Rights                   (81,274)         -
                                                 ------------  ------------
   Net Cash (Used) by Investing Activities           (73,442)     (274,686)

</Table>

The accompanying notes are an integral part of these financial statements.
                                     21

                    Advanced Recycling Sciences, Inc.
                        Statements of Cash Flows
                     For the Years Ended December 31
                               (continued)
<Table>
<Caption>
                                                     2002          2001
                                                 ------------  ------------
                                                   (Restated)
<S>                                              <C>           <C>
Cash Flows from Financing Activities
------------------------------------
 Proceeds from the Sale of Common Stock (Net)    $   915,473   $ 1,432,321
 Payment on Long Term Debt                               -          (1,820)
 Proceeds from Notes Payable                          11,564          -
 Increase (Decrease) in Capital Lease                (29,655)         -
 Proceeds from Stock Option Exercise                   8,123          -
 Increase (Decrease) in Minority Interest              6,681        44,738
                                                 ------------  ------------
   Net Cash Provided by Financing Activities         912,186     1,475,239
                                                 ------------  ------------
   Increase (Decrease) in Cash                        20,683       (11,536)
   Cash at Beginning of Period                         3,785        15,321
                                                 ------------  ------------
   Cash at End of Period                         $    24,468   $      3,785
                                                 ============  ============
Disclosures from Operating Activities
-------------------------------------
 Interest                                        $    82,700   $      9,058
 Taxes                                                  -             -

Significant Non Cash Transactions
---------------------------------

During 2002, the Company issued 430,523 shares of common stock in exchange
for consulting services rendered.  The cost of the services has been
charged to operations, and additional paid-in-capital has been increased by
$22,595, representing the excess of the cost of the services over the par
value of the common stock issued.

During 2001, the Company issued 85,000 shares of common stock in exchange
for consulting services rendered.  The cost of the services has been
charged to operations, and additional paid-in capital has been increased by
$67,915, representing the excess of the cost of the services over the par
value of the common stock issued.

During 2001, the company issued 1,446,153 shares of common stock to
purchase patent rights for "de-icing" technology.  Additional paid-in
capital has been increased by $2,348,554, representing the excess of the
cost of the assets over the par value of the common stock.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", in summary requires a Company to review its assets to determine
whether or not to recognize an impairment loss. An impairment loss will be
provided in the case where the carrying amount of a long-lived asset is not
recoverable from its undiscounted cash flows. The impairment loss is
measured as the difference between the carrying amount and the fair value
of the asset and its undiscounted cash flows. Without any foreseeable cash
flows anticipated from the de-icing technology, the cost has been fully
impaired.

</Table>

The accompanying notes are an integral part of these financial statements.
                                     22

                     Advanced Recycling Sciences, Inc.
                         Statements of Cash Flows
                      For the Years Ended December 31
                                (continued)

A stockholder of the company converted a note due to him of $306,153, for
765,385 shares of common stock.  Accordingly, $305,388, has been charged to
additional paid-in capital.

During November 2001, the Company rescinded a transaction where stock was
issued for fixed assets.  The fixed assets did not meet Company
specifications, and the related shares were returned to the Company and
canceled.  The number of shares returned was 640,467 which resulted in a
reduction of additional paid-in capital of $1,360,365.




































The accompanying notes are an integral part of these financial statements.
                                     23


                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 1 - Corporate History
--------------------------

The Company was organized on December 2, 1968, under the laws of the state
of California as Acquatic Systems, Inc. On June 27, 1989, the Company
merged with Country Maid, Inc., a Nevada Corporation, the Corporate
domicile was changed to the state of Nevada. On September 18, 1992, the
name of the Company was changed to The Quantum Group, Inc. On March 26,
2001, the Company filed an Amendment to the Articles of Incorporation
changing its name to Advanced Recycling Sciences, Inc. The Company is
registered and qualified to do business in the state of California.

NOTE 2 - Significant Accounting Policies
----------------------------------------
Basis of Accounting
-------------------
The Company uses the accrual method of accounting.

Revenue Recognition
-------------------
Revenues and directly related expenses are recognized in the period when
the goods are shipped to the customer.

Cash and Cash Equivalents
-------------------------
The Company considers all short term, highly liquid investments that are
readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.

Earnings per Share
------------------
Primary Earnings Per Share amounts are based on the weighted average number
of shares outstanding at the dates of the financial statements. Fully
Diluted Earnings Per Shares shall be shown on stock options and other
convertible issues that may be exercised within ten years of the financial
statement dates.

Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of
the company and its majority - owned subsidiaries. Intercompany
transactions and balances have been eliminated in consolidation.

Foreign Currency Translation
----------------------------
Assets and liabilities that occur in foreign countries are recorded at
historical cost and translated at exchange rates in effect at the end of
the year. Income Statement accounts are translated at the average exchange
rates for the year. Translation gains and losses shall be recorded as a
separate line item in the equity section of the financial statements.

Depreciation
------------
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. The cost of leasehold improvements is
depreciated (amortized) over the lesser of the length of the related assets
or the estimated lives of the assets. Depreciation is computed on the
straight line method for reporting purposes and for tax purposes.

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 and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

                                     24


                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 2 - Significant Accounting Policies - continued
----------------------------------------------------

Share-based Compensation
------------------------
As permitted by SFAS #123 "Accounting for Stock-Based Compensation," the
Company has elected to account for the stock option plans as a compensation
cost when options were issued at equal to or more than fair market value.

Research and Development
------------------------
Research and development costs are charged to expense as incurred.

NOTE 3 - Notes Payable
----------------------
<Table>
<Caption>
The Company has the following notes payable obligations          2002         2001
                                                             -----------  -----------
<S>                                                          <C>          <C>
Note payable to bank due April 29, 2003, plus interest
  payable annually at 12.32%, secured by the equipment.      $  35,649    $   35,649
Note payable to bank due April 29, 2002, plus interest
  payable annually at 12.32%, secured by the equipment.         12,524        12,524
Various unsecured short term, related party notes payable,
  non interest bearing due on demand.                          133,326       133,402
Short term, unsecured note payable to shareholder, non
  interest bearing, due on demand.                              63,368        51,728
                                                            -----------   -----------
     Total                                                     244,867       233,303
     Less Current Maturities                                   244,867       226,412
                                                            -----------   -----------
     Total Notes Payables                                   $    -        $    6,891
                                                            ===========   ===========
</Table>

Total accrued interest on the above notes was $13,844 and $7,909 for the
years ended December 31, 2002 and 2001, respectively.

Following are maturities of long-term debt for each of the next two years;

                   2003                     $ 244,867
                   2004                             0
                                            ----------
                   Total                    $ 244,867
                                            ==========

NOTE 4 - Operating Leases
-------------------------
On March 1, 2000, the Company renewed its lease agreement to lease an
industrial condominium in a multi-tenant building for use as its principal
executive office. The Company paid $3,936 per month for a 4,495 square foot
facility. The lease expired on February 28, 2002. The Company then leased
the space on a month-to-month basis. On September 9, 2002, the Company
signed a lease agreement for an executive office suite in a multi-tenant
building for its principal office. The Company paid a minimum of $2,566 per
month for the office space. The lease expired March 31, 2003, thereafter
the lease term automatically convert to month-to-month with the base rent
increasing to the then published rate for offices similarly situated to
that of the premises. The building is located at 4199 Campus Drive, Suite
520, Irvine, California 92780. In March 2005 the Company moved from that
office to 2030 Main Street, Suite 1300, Irvine, CA 92614 where it leases an
office in conjunction with an unrelated party.




                                     25

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 4 - Operating Leases - continued
-------------------------------------
The following is a schedule of future minimum payments under operating
leases as of December 31, 2002:

                   Periods                Amounts
                   -------              ----------
                     2003               $   7,698
                                        ----------
                   Total                $   7,698
                                        ==========

Rent expense entering into the determination of net loss follows:

                                                  Year Ended December 31
                                                    2002          2001
                                                ------------  ------------
         Minimum rent on operating leases       $    41,751   $    45,852
                                                ------------  ------------
         Total Rent Expense                     $    41,751   $    45,852
                                                ============  ============


NOTE 5 - Depreciation (Restated)
--------------------------------

The Company capitalizes the purchase of equipment and fixtures for major
purchases in excess of $1,000 per item. Capitalized amounts are depreciated
over the useful life of the assets using the straight-line method of
depreciation.

Scheduled below are the assets, costs and accumulated depreciations at
December 31, 2002 and 2001.

<Table>
<Caption>
                       December 31,          Depreciation           Accumulated
                     2002       2001           Expense              Depreciation
Assets               Cost       Cost       2002        2001       2002       2001
----------------  ---------- ---------- ----------  ---------- ---------- ----------
<S>               <C>        <C>        <C>         <C>        <C>        <C>
Land              $    -     $ 617,840  $    -      $    -     $    -     $    -
Furniture &
  Fixtures           38,711     38,550      8,044       1,066     33,945     25,820
Equipment            81,087  1,504,870      2,425     290,447     12,045    713,469
Vehicle                -        39,402       -         16,297       -        17,731
Website              27,123     25,728      7,077       7,016     18,918     11,841
                  ------------------------------------------------------------------
  Balance         $ 146,921 $2,226,390  $  33,843   $ 324,826  $  64,908  $ 768,861
                  ==================================================================
</Table>

                                     26

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

Note 6   Equipment Held for Sale or Disposal
--------------------------------------------

According to FASB 121, Equipment Held for Sale or Disposal be reported at
the lower of carrying amount or fair value less cost to sell. This
Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows expected
to result from the use of the asset and its eventual disposition. If the
sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss
is recognized. Otherwise, an impairment loss is not recognized

<Table>
<Caption>

                                   Depreciation  Accumulated
                                        Expense Depreciation      Net Book
Assets                       Cost          2002         2002         Value
--------------       ------------  ------------ ------------  ------------
<S>                  <C>           <C>          <C>           <C>
Equipment Held
  For Sale or
  Disposal            $1,387,886      $283,389     $971,899       $415,987
</Table>

Management believes that the assets held for sale will generate cash in
excess of the net book values as stated herein and therefore no impairment
is indicated, for the period ended December 31, 2002.

NOTE 7 - Related Party Transactions
-----------------------------------

In May 2002, the Company entered into five-year employment agreements with
its three officers and directors. Pursuant to the terms of the agreements,
Ehrenfried Liebich and Keith Fryer are to receive base salaries of $168,000
per year. John Pope is to receive a base salary of $135,000 per year.
(Note: Mr. Pope died in May 2004). Because of limited funds, the Company
was unable to fully pay these salaries. All unpaid salaries to these
individuals have been recorded as accounts payable and will be paid as
funds become available. The agreements call for an annual review by the
board of directors, with the possibility of increasing the base salary each
year. The agreements also provide that each individual is entitled to
participate in all Company employee benefit, profit sharing, 401(k),
insurance and other prequisite plans and programs. The agreements may be
terminated by the Company upon the expiration of the term of the agreement,
upon death or disability, for cause and without cause. If an agreement is
terminated without cause, the individual is entitled to receive a lump sum
payment equal to 24 times the individual's monthly salary plus an amount
equal to the individual's monthly salary times the number of years the
individual has been an employee of the Company. This lump sum payment is
due within 30 days of termination.






                                     27

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 7 - Related Party Transactions (continued)
-----------------------------------------------

The employment agreements also provide that the salaries can be paid to
corporations or other entities in the form of consulting fees rather than
directly to the officer if he, in his sole discretion, so elects. Salary
paid to Mr. Liebich was paid to ERI Associates, Mr. Liebich's private
consulting business. Salary paid to Mr. Fryer was paid to Keith Fryer
Associates California, Inc., his private consulting business. Salary paid
to John Pope was paid to his private consulting business, John F. Pope,
Inc.

In May 2003, Mr. Liebich, Mr. Fryer and Mr. Pope voluntarily agreed to
temporarily reduce the Company's obligations under the employment
agreements until such time as the operations and cash flow of the Company
justify reinstating those agreements.

In 2001 and 2000, officers and shareholders of the Company loaned the
Company a total of $133,402. The notes are unsecured, non interest bearing,
and due on demand.

NOTE 8 - Research and Development
---------------------------------

Research and development expenses were $88,810 and $65,000 in 2002 and
2001, respectively.

NOTE 9 - Net Operating Loss Carryforward for Income Tax Purposes
----------------------------------------------------------------

The Company has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal Revenue Codes are met. These
losses are as follows:

<Table>
<Caption>
                    Year of          Expiration
                      Loss            Amount                   Date
                 ------------     ---------------        -----------------
                 <S>              <C>                    <C>
                     1992              $ 440,338                2007
                     1993                  -                    2008
                     1994                198,818                2009
                     1995                782,181                2010
                     1996                241,809                2011
                     1997                  -                    2017
                     1998                 80,058                2018
                     1999              2,642,390                2019
                     2000              2,125,832                2020
                     2001              2,042,416                2021
                     2002              7,250,024                2022
</Table>



                                     28

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 9 - Net Operating Loss Carryforward for Income Tax Purposes
(continued)
----------------------------------------------------------------

The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expense. Net operating losses would create possible tax assets
in future years. Due to the uncertainty as to the utilization of net
operating loss carryforwards an evaluation allowance has been made to the
extent of any tax benefit that net operating losses may generate.

<Table>
<Caption>
                                                 2002         2001
                                              -----------  -----------
<S>                                           <C>          <C>
Current Tax Asset Value of Net Operating
Loss Carryforwards at Current Prevailing
Federal Tax Rate                              $4,800,000   $2,566,153
Evaluation Allowance                          (4,800,000)  (2,566,153)
                                              -----------  -----------
  Net Tax Asset                               $    -       $    -
                                              ===========  ===========
  Current Income Tax Expense                  $    -       $    -
  Deferred Income Tax Benefit                      -            -
</Table>

NOTE 10 - Options/Warrants for Purchase of Common Stock
-------------------------------------------------------
During 2001, the Company canceled the 2000 and 1999 stock option incentive
plans. The Company adopted a plan which provides for the grant of options
to officers, consultants and employees to acquire shares of the Company's
common stock at a purchase price equal to or greater than fair market value
as of the date of the grant. Options are exercisable six months after the
grant date and expire five years from the grant date. The plan calls for a
total of 1,000,000 shares to be held for grant, with no more than 200,000
shares being granted in each year of the plan. A summary of activity
follows;

<Table>
<Caption>

Stock Option Plan                                              2002
                                                    -----------------------
                                                                  Weighted
                                                                   Average
                                                         Number   Exercise
                                                      of Shares      Price
                                                   ------------ ----------
    <S>                                            <C>          <C>
    Outstanding at beginning of year                   442,969  $     .79
    Granted                                            327,223        .21
    Exercised                                              -         -
    Canceled                                               -         -
                                                   ------------ ----------
      Outstanding at end of year                       770,192  $     .54
                                                   ============ ==========
      Exercisable at end of year                       770,192  $     .54
                                                   ============ ==========
</Table>


                                     29

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 10 - Options/Warrants for Purchase of Common Stock -continued-

Additional paid-in-capital and the related expense was adjusted for the
stock options granted during 2002. In accordance with SFAS 123, "Accounting
for Stock-Based Compensation", no option expense was recognized for the
years ended December 31, 2002 and 2001 since the extension price of the
options exceeded the market value of the Company's common stock.
The fair value of the option grant was established at the date of grant
using the Black-Sholes option pricing model with the following weighted
average assumptions;

                                                   2002        2001
                                                ----------  ----------
Risk-free interest rate                              3.0%        3.5%
Dividend yield                                         0%          0%
Volatility                                           100%         50%
Average expected term (years to exercise date)        1/2         1/2
                                                ----------  ----------
Employee stock options outstanding and exercisable under this plan as of
December 31, 2002 is:

Stock Option Plan
<Table>
<Caption>
                                     Weighted
                           Weighted   Average                Weighted
     Range                 Average   Remaining               Average
      of                     of      Contractual               of
    Exercise               Exercise     Life                 Exercise
     Price      Options     Price     (Years)   Options       Price
   ----------  ---------- ---------- ---------- ----------  ----------
   <S>         <C>        <C>        <C>        <C>         <C>
   $      .79    442,969  $      .79          4   442,969   $      .79
          .21    327,223         .21        3.5   327,723          .21
</Table>

NOTE 11 - Capital Leases
------------------------

The Company was the lessee of a 1999 Isuzu Truck under a capital lease
expiring September 30, 2004. The assets and liabilities under this lease
were recorded at the fair market value of the asset. The asset is
depreciated over the related lease term.

During January 2002, the truck was repossessed by the lessor and was
subsequently sold. The balance due to the lessor, by the Company, due to
the foreclosure sale is $10,371. This amount is included in the accounts
payable balance of the Company at December 31, 2002.



                                     30


                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 12 - Net Earnings (Loss) Per Share (Restated)
--------------------------------------------------
The computation of earning (loss) per share of common stock is based
on the weighted average number of shares outstanding at the date of
the financial statements.

<Table>
<Caption>
                                                    2002          2001
                                                ------------ ------------
<S>                                             <C>          <C>
Basic Earning per share:
  Income (Loss) (numerator)                    $(7,250,024) $(2,049,126)
     Shares (denominator)                       20,353,544   15,873,294
 dilutive effect of options                           -            -
                                                ------------ ------------
     Per Share Amount                          $     (0.35) $     (0.13)
                                                ============ ============
</Table>

Shares from the exercise of the outstanding options were not included in
the computation of diluted loss per share because their inclusion would
have been antidilutive for the year ended December 31, 2002 and 2001.

NOTE 13 - Construction in Progress (Restated)
---------------------------------------------

Construction in progress of $507,536 has been fully impaired.  The
equipment was  being held in a warehouse in Moberly, Missouri and was
eventually going to be used in the Poseidon project in Germany.
Unfortunately due to the German government ultimately taking title to the
land that the project was designated for, and the Company's inability to
move the equipment to another facility, the construction of the equipment
has not been available to the Company and there has been a change in
ownership of the property where the processing equipment was being held.
Without the necessary funds to pursue a lawsuit to recover the equipment,
title to it is in question and consequently it has been fully impaired.
The impairment has been recorded as an abandonment of assets on the
statement of operations for the period ended December 31, 2002.

NOTE 14 - Patent Rights (Restated)
----------------------------------

On February 19, 2001, the Company purchased the patent rights to an asphalt
"de-icing" technology. This technology was acquired from UTEK Corporation
by issuing 1,446,153 shares of Advanced Recycling Sciences, Inc's common
stock. SFAS No. 14, "Goodwill and other Intangible Assets", in summary
requires a Company to review its assets to determine whether or not to
recognize an impairment loss. An impairment loss will be provided in the
case where the carrying amount of a long-lived asset is not recoverable
from its undiscounted cash flows. The impairment loss is measured as the
difference between the carrying amount and the fair value of the asset and
its undiscounted cash flows.

                                     31

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 14 - Patent Rights (continued) (Restated)
----------------------------------------------

Patent rights of $2,350,000 have been fully impaired as the Company has had
no income from use of the patent rights and there is no foreseeable revenue
stream to benefit from the patent rights.

During 2002, the Company incurred additional costs related to protecting
the patent rights associated with the "de-icing" technology, which amounted
to $81,264. This amount has also been fully impaired.

On May 24, 2000, the Company purchased the patent rights to the Tires2Oil
technology. This technology was acquired from UTEK Corporation by issuing
980,000 shares of The Quantum Group, Inc.'s common stock. Patent rights of
$1,715,000 have been fully impaired as the Company has had no income form
use of the patent rights and there is no foreseeable revenue stream to
benefit from the patent rights.

NOTE 15 - Land and Land Preparation(Restated)
---------------------------------------------

During the current year, the Company's subsidiary located in Penkun, in the
state of Mecklenburg-Vorpommern, Germany, incurred costs associated with
the surveying and preparation of the land where the Poseidon Products
recycling facility will be constructed. The Company has incurred and
capitalized costs in the amount of $38,005 (USD). Since the acquisition of
the land in 1998 the Company has spent additional funds in order to bring
the property ready for construction. However, in the purchase agreement of
the land, covenants provided that certain benchmarks for improvements were
required. As the Company did not have the funds to complete the
improvements and the Company turned its attention to other endeavors, the
improvements were not sufficient under the covenants of the initial
purchase. Consequently, the government ended up with the title and the
entire land cost has been classified as abandoned in the amount of
$655,845.

NOTE 16 - Stockholders' Equity
------------------------------
During 2002, the Company issued 266,667 shares of common stock to a
director of the Company in satisfaction of 1987 stock options. Accordingly,
$15,733 has been charged to additional paid-in-capital.

During the year, the Company issued 650,000 shares of common stock in
satisfaction of a debt owed by the Company. Additional paid-in-capital has
been increased by $60,600, representing the excess of the value of the note
over the par value of the common stock.

                                     32

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 17 - SuperCollider Impact 500 Technology
---------------------------------------------

During 1997, the Company worked on the in-house development of a compact
SuperCollider machine designed to take large mesh size crumb rubber
produced by the EGS System and buffings from tire retreading and pulverize
it into fine powder in order to open up several new markets. These markets
include extrusion products, press products and products combining super-
fine crumb and plastic. The Company finalized the engineering for the
SuperCollider and concluded the development, prototype work and initial
performance testing during 1998 and early 1999. After testing the initial
prototype, the Company decided not to sell the SuperCollider into the
market until a number of improvements could be made. During 1999, the
Company made those improvements and began additional testing. The first
SuperCollider was installed and operational at the Donovan Correctional
Facility. It has since been removed and the Company had planned to ship it
to Germany where it was to be installed at the Poseidon Facility. Since the
land is not available to the Company, the SuperCollider is stored for sale
or disposal at Moberly, Missouri.

NOTE 18 - License Rights (Restated)
-----------------------------------

The Company is currently renegotiating its exclusive worldwide license
agreement with Faru GmbH., Dresden, Germany ("Faru"). Faru is the patent
holder of the REVULCON(R) technology. This technology enables the
production of high density, smooth finish rubber moldings and extrusions,
including new tires, by adding REVULCON(R) compound. This is done by a
process of devulcanizing the rubber, returning it to a state where it can
be utilized in new products and re-vulcanized. The reactivated rubber waste
can be processed without further additives to rubber products like mats,
plates, solid rubber tires, components for fall protection, elements for
sound and vibration deadening, blocking and insulating layers against heat
and moisture. Profiles and other goods can be made by extrusion or
injection molding when the revulcanized rubber is mixed with fresh rubber
or plastics. While there are other companies developing and marketing
competing technology, the REVULCON(R) technology is the only one that does
not introduce or use chemicals in its process. The License Rights have been
fully impaired as there is no determinable cash flows that can be generated
for future use.

Capitalized amounts were amortized over 10 years using the straight-line
method of amortization.

At December 31, 2002 the License Rights were fully impaired based on their
remaining unamortized values. The year 2002 is provided for historical
reference as follows:.

<Table>
<Caption>
                                             Amortization           Accumulated
                        License Costs            Expense             Amortization
                  --------------------- --------------------- ---------------------
Licensor              2002      2001       2002       2001       2002        2001
----------------- ---------- ---------- ---------- ---------- ----------  ----------
<S>               <C>        <C>        <C>        <C>        <C>         <C>
Rothbury          $       0  $ 497,547  $  49,756  $  49,756  $       0   $ 281,943
Faru GmbH                 0    150,000     15,000     15,000          0      52,500
                  ---------- ---------- ---------- ---------- ----------  ----------
  Total           $       0  $ 647,547  $  64,756  $  64,756  $       0   $ 334,443
                  ========== ========== ========== ========== ==========  ==========
</Table>

                                     33

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 19 - Principles of Consolidation
-------------------------------------

Advanced Surfacing Technologies, Inc. ("AST")
---------------------------------------------
AST was incorporated in Nevada in May 1997 as Quantum Modified Asphalt
Xcetera, Inc., a wholly owned subsidiary of the Company. The name was
changed to Advanced Surfacing Technologies, Inc., in March 2001.

The Company believes there are significant opportunities in the rubberized
asphalt paving industry. The Company, through AST intends to focus most of
its efforts in the upcoming year to exploiting the growing rubberized
asphalt paving, particularly in Europe. The Company has entered into an
agreement with a manufacturer to sell specialized mobile equipment for
blending rubber and asphalt at hot mix plants. The Company will also
oversee technology transfer programs to international clients, on-site
project management and seminars to educate both public and private sector
engineers about the Company's products and services. The Company also
intends to establish and operate its own rubberized asphalt paving business
in Germany.

Tires2Oil, Inc.
---------------

Tires2Oil, Inc. is a 93% owned subsidiary of the Company. Tires2Oil(TM) was
formed as a Nevada corporation on January 17, 2001. The primary
responsibility of Tires2Oil(TM) is the continued research, development and
exploitation of certain super critical fluid ("SCF-Oil(TM)") tire recycling
technology. The SCF-Oil(TM) technology can be used to break down tires into
a form of oil and carbon. The oil can be easily upgraded in existing oil
refineries. This technology has been proven in the laboratory at University
of South Alabama.

Based on laboratory experiments, the Company believes the Tires2Oil process
can be applied to the surface of crumb rubber to de-vulcanize it. This
treated rubber will be suitable to incorporate into the production of new
tires and other molded rubber products, including new tires. When the
rubber is re-vulcanized it provides the same characteristics as original
rubber.

Poseidon Products GmbH ("Poseidon") Poseidon is currently a wholly-owned
subsidiary of the Company. For some time, the Company has intended to
finish construction of this state of the art rubber recycling facility in
Penkun, located in the state of Mecklenburg-Vorpommern, Germany. This
facility was to produce crumb rubber and manufacture a wide range of value-
added aftermarket products using technologies licensed or developed by the
Company.

Due to difficulties in securing financing to construct this facility, and
the Company's belief that its best opportunities lie in the rubberized
asphalt paving industry, the Company has abandoned its plans to finish
construction of its Poseidon facility and without complying with various
benchmarks provided by covenants in the original purchase agreement, the
government ultimately reclaimed title to the property.



                                     34


                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

NOTE 20 - Going Concern
-----------------------

The Company's financial statements are prepared using generally accepted
accounting principles, in the United States of America, applicable to a
going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. Currently, the Company
does not have significant cash or other material assets, nor does it have
an established source of revenues sufficient to cover its operating costs
and to allow it to continue as a going concern. The Company does not
currently possess a financial institution source of financing and the
Company cannot be certain that its existing sources of cash will be
adequate to meet its liquidity requirements.

The Company has an inventory of tire recycling processing and product
manufacturing equipment in storage following the closure of the San Diego
facility. This equipment was going to be used in the Poseidon project in
Germany. The Company is now in the process of selling portions of that
inventory to generate cash. The Company does not believe that the cash so
generated will be sufficient to meet its overall ongoing needs. The Company
is endeavoring to dispose of these assets for the highest valuation it can
negotiate. Should the Company be unable to continue in operation, the
forced liquidation values for these assets will be less than might be
obtained over time. In some cases, the Company has received advances in
anticipation of the asset sales. These short-term borrowings will be repaid
from the proceeds of the asset sale or the possible sale of a subsidiary.
The Company has received an offer (subject to due diligence) to sell its
Tires2Oil, Inc., subsidiary. The Company believes that the offered price is
sufficient to allow the Company to meet its existing obligations and remain
in operation while it develops the AST European business to a point of
self-sufficiency the company is also negotiating with a second group where
an offer is anticipated. Although the Company is negotiating these
transactions in good faith, no assurance can be given that the transaction
will be successfully concluded and the anticipated cash will be received.

NOTE 21 - RESTATEMENT AND RECLASSIFICATION
------------------------------------------

The company has restated its financial statements for the year ended
December 31, 2002 to reflect issues identified during a regulatory review
of its financial statements associated with the initial 10-KSB filed with
the SEC on May 15, 2003. Management and the board of directors concluded
these restatements were necessary to reflect the changes described below.
There was no net effect on cash provided by operating activities or cash
used by investing and financing activities as a result of these errors.

During the year it became apparent that certain assets reported by the
Company were not expected to provide a future cash flow to support their
values, other assets were lost due to covenants in the associated property
ownership, and other assets were deemed to be held for sale.



                                     35

                     Advanced Recycling Sciences, Inc.
                       Notes to Financial Statements
                             December 31, 2002

The company has restated the consolidated balance sheet as of December 31,
2002 and the consolidated statements of operations, consolidated statements
of stockholders' equity, and consolidated statements of cash flows for the
year then ended.

The more appropriate presentation should have been, and is now, treated as
an impairment to assets and intangibles and increases the 2002 net loss, as
well as reclassifications of assets according to their future disposition.

A summary of the effects on the Balance Sheet are as follows:

                        Consolidated Balance Sheets
                             December 31, 2002

<Table>
<Caption>
                                              As            As        Change
                                           Previously     Restated
                                          Reported
                                         ------------ ------------ ------------
<S>                                      <C>          <C>          <C>
                                     Assets
Current Assets
--------------
  Cash                                        24,468        4,468   $        0
  Employee Receivable                         21,520       21,520            0
  Deposits                                     2,950        2,950            0
  Prepaid Expenses                             2,785        2,785            0
                                         ------------ ------------ ------------
      Total Current Assets                    51,723       51,723            0

Property & Equipment
--------------------
  Land (Note 15)                             655,845            -     (655,845)(a)
  Furniture & Fixtures                        38,711       38,711            0
  Equipment                                1,468,973       81,087   (1,387,886)(b)
  Websites                                    27,123       27,123            0
                                         ------------ ------------ ------------
Total Property & Equipment                 2,190,652      146,921   (2,043,731)
      Less Accumulated Depreciation       (1,024,762)     (52,863)     971,899
                                         ------------ ------------ ------------
      Net Property & Equipment             1,165,890       94,058   (1,071,832)

Equipment Held for Disposal, net (Note 6)         0       415,987      415,987 (b)


Other Assets
------------
  Construction in Progress (Note 13)         507,536          0       (507,536)(c)
  License Rights, net (Note 18)              248,348          0       (248,348)(c)
  Patent Rights (Note 14)                  4,146,261          0     (4,065,000)(c)
                                         ------------ ------------ ------------
Total Other Assets                         4,902,145          0     (4,902,145)
                                         ------------ ------------ ------------
      Total Assets                       $ 6,119,758  $   561,768  $(5,557,990)
                                         ============ ============ ============
</Table>



                                     36

                     Advanced Recycling Sciences, Inc.
                              Balance Sheets
                               December 31

<Table>
<Caption>
                                              As            As        Change
                                           Previously     Restated
                                          Reported
                                         ------------ ------------ ------------
<S>                                      <C>          <C>          <C>

                          Liabilities & Stockholders' Equity
Current Liabilities
  Accounts Payable                           834,204      834,204           0
  Accrued Expenses                           185,654      185,654           0
  Notes Payable (Current Portion)             48,173       48,173           0
  Notes Payable   Related Party              196,694      196,694           0
  Interest on Note Payable                    13,884       13,844           0
                                         ------------ ------------ ------------
      Total Current Liabilities            1,278,569    1,278,569           0


  Minority Interest                           38,057       38,057           0

Stockholders' Equity

  Common Stock, Par Value of $.001            23,799       23,799           0
  Additional Paid In Capital              15,231,076   15,231,076           0
  Paid-in Capital Stock Options               25,543       25,543           0
  Accumulated Deficit                    (10,373,723) (15,931,713) (5,557,990)
  Accumulated Other Comprehensive Income (   103,563) (   103,563)          0
                                         ------------ ------------ ------------
      Total Stockholders' Equity           4,803,132     (754,858)  (5,557,990)
                                         ------------ ------------ ------------

      Total Liabilities
       & Stockholders' Equity            $ 6,119,758  $   561,768  $(5,557,990)
                                         ============ ============ ============

</Table>

(a)  Land was impaired due to German government evoking reversionary rights
     under covenants that required various benchmarks of development to the
     land that was not completed.
(b)  Equipment that was deemed available for sale was reclassified to
     Equipment Held for Disposal. Equipment is reported on the face of the
     balance sheet as its net book value.
(c)  Equipment, license rights and patent rights were fully impaired as
     there was no anticipation of a future cash flow that would recover
     their cost value.




                                     37

<PAGE>
   ----------------------------------------------------------------------

       ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                    ACCOUNTING AND FINANCIAL DISCLOSURE

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

None.

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

                                 PART III

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

            ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS,
                   AND CONTROL PERSONS; COMPLIANCE WITH
                     SECTION 16(a) OF THE EXCHANGE ACT

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

The following table sets forth as of December 31, 2002 the name, age, and
position of each executive officer and director and the term of office of
each director of the Corporation.

<Table>
<Caption>
Name                    Age    Position                 Director or Officer Since
----------------------  -----  -------------            -------------------------
<S>                     <C>    <C>                      <C>
Ehrenfried Liebich      60     Chief Executive Officer  March 1989
                               Director                 March 1989

Keith J. Fryer          53     President                October 2000
                               Chief Operating Officer  October 2000
                               Secretary                July 1997
                               Director                 March 1995

John F. Pope            61     Vice President           March 1989
  (deceased May 2004)          Chief Financial Officer  March 1989
                               Treasurer                January 1991
                               Director                 March 1989
</Table>
   ----------------------------------------------------------------------

All officers hold their positions at the will of the Board of Directors.
All directors hold their positions for one year or until their successors
are elected and qualified.

Set forth below is certain biographical information regarding each of the
Company's executive officers and directors:

                             Ehrenfried Liebich
                            --------------------

Mr. Liebich is the Chief Executive Officer and Chairman of the Board of
Directors of the Company. Mr. Liebich first became involved with the
Company in March 1989. Mr. Liebich was born and educated in Germany. After
his formal secondary education in Germany he joined the Merchant Marine,
which he left as a Ship's Officer with the Court Line, London, U.K. Mr.
Liebich immigrated to Canada in 1965 where he started various businesses in
the areas of real estate, investment, chemical distribution and
electronics. In March of 1989 he became the President, a Director and
controlling shareholder of the Company. Following a management
reorganization in October 2000, Mr. Liebich became the Chief Executive
Officer and Chairman of the Board of Directors.


                                     38

                               Keith J. Fryer
                              ----------------

Mr. Fryer is the President, Chief Operating Officer, Secretary and a
Director of the Company. Mr. Fryer first became involved with the Company
in August 1992. Mr. Fryer was educated in England and graduated from the
Cheshire College of Further Education with a City and Guilds of London
Institute Diploma in Construction and Site Surveying. He also studied at
Cranfield and Dunchurch UK Management Colleges and became a Member of the
Institute of Marketing London in 1974. Mr. Fryer became a Chartered Member
of the Institute in 1989. He is a life member of the Wig & Pen Club, The
Strand, London. Mr. Fryer successfully operated Keith Fryer Associates
England, a business he formed in 1986, that provided marketing consulting
services in various business areas. In 1992, Mr. Fryer established Keith
Fryer Associates California, Inc., a marketing consulting firm. Following a
management reorganization in October 2000, Mr. Fryer became the President
and Chief Operating Officer of the Company. He became the Secretary in July
1997, and a Director of the Company in March 1995.

                                John F. Pope
                               --------------

Mr. Pope was (deceased May 2004) the Chief Financial Officer, a Vice
President, Treasurer and a Director of the Company. Mr. Pope began his
professional career in 1963 as an auditor in public accounting and
subsequently on the corporate staff of Olivetti Underwood in New York. He
joined Burger King Corporation in Miami, Florida, in 1968 and progressed to
the position of Controller, Company Stores Division. He joined Orange
Julius International, Inc., Santa Monica, California, in 1974 as Vice
President, Finance and a Director for the parent company and its national
and international subsidiaries.

In 1980, Mr. Pope became President of Inflation Management, Inc., Los
Angeles, California. From February 1982 until February 1984 he was Vice
President, Finance of Aerobic Dancing, Inc. In 1984 he became Senior Vice
President of Animated Playhouses Incorporated and Subsidiaries, before
moving to become Executive Vice President Finac International, Inc., an
investment and venture capital firm in Torrance, California.

From 1986 through November 1987, Mr. Pope acted as Vice President Finance
and Administration for ASI Sign Systems of Marina Del Rey, Inc. After
leaving ASI Sign Systems in late 1987, Mr. Pope became an independent
financial consultant assisting a number of domestic and international
public and private companies in franchising, financial structure, and
internal and SEC reporting. He continues to serve on the Board of Directors
of several companies he helped to become public companies, including
currently serving as the interim President and a Director of the New
Anaconda Company.

In 1989, Mr. Pope became a founding member of the Board of Directors of the
Quantum Group, Inc. Mr. Pope is a Certified Management Accountant (CMA) and
has previously served on the National Board of Directors and currently
serves on the National Strategic Planning Committee of The Institute of
Management Accountants. He has also been Certified in Financial Management
(CFM) by the same institute. He is a Certified Public Accountant (CPA) and
a member of the American Institute of Certified Public Accountants (AICPA).
He has been a member of a number of other professional and civic
organizations, including the Curriculum Steering Committee, School of
Accountancy, University of Southern California.


                                     39

                               Key Employees
                               -------------

                              Sudheer Helekar
                              ---------------

Mr. Helekar received a Masters Degree in Mechanical Engineering from
Worchester Polytechnic Institute, Massachusetts, in 1968. Mr. Helekar has
38 years experience in developing new technologies to commercial hardware.
He developed the Solar Stirling Engine from concept to commercial hardware
within eighteen months. He has also helped develop various solar and
ethanol plant concepts, as well as, several turbines and energy systems. He
also has experience with cryogenic systems, conventional pyrolysis, carbon
activation and power generation. Prior to joining the Company, Mr. Helekar
spent eight years as an environmental consultant for Alton Geoscience,
where he was primarily responsible for environmental audits, environmental
energy and conversion of bio-waste to energy and chemicals.

There are no family relationships between any of the Company's officers and
directors. In addition, none of the officers and directors have been
involved in legal proceeding which require disclosure in this annual report
of the Company.

Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

Directors and executive officers are required to comply with Section  16(a)
of the Securities Exchange Act of 1934, which requires generally that such
persons file reports regarding ownership of and transactions in securities
of the Company on Forms 3, 4, and 5. A Form 3 is an initial statement of
ownership of securities, which is to be filed by the officers and directors
owning shares in the Company within 10 days after the effective date of the
Company's filing on Form 10-SB. Form 4 reports changes in beneficial
ownership and is due on or before the tenth day of the month following any
month in which they engage in any transaction in the Company's common
stock. Form 5 covers annual statements of changes in beneficial ownership
which is due 90 days after the fiscal year end of the Company.

Based solely on a review of Forms 3 and 4 and amendments thereto furnished
to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to the most recent
fiscal year, it appears that Mr. Fryer inadvertently failed to timely file
Form 4s disclosing the sell of securities in September 2002. Disclosure of
these sales was made on the Form 5 for the year ended December 31, 2002
filed by Mr. Fryer.

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

                      ITEM 10. EXECUTIVE COMPENSATION

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

The following table sets forth certain summary information concerning the
compensation paid or accrued over each of the Registrant's last three
completed fiscal years to the Company's, or its principal subsidiaries,
chief executive officers during such period (as determined at December 31,
2002 the end of the Registrant's last completed fiscal year).



                                     40

                         Summary Compensation Table
                        ---------------------------

<Table>
<Caption>
                 Long Term Compensation             Long Term            Compensation
                                                             Awards           Payouts

                                                     Restr
Name &                                      Annual   icted              LTIP
Principal                                   Compen   Stock  Options   Payout   Compen
Position           Year   Salary    Bonus   sation  Awards  /SARs #      ($)   sation
-------------------------------------------------------------------------------------
<S>            <C>      <C>      <C>      <C>     <C>      <C>      <C>      <C>

Ehrenfried Liebich 2002  $77,740  $   -0-  $   -0- $   -0-  103,971 $    -0- $    -0-
CEO/Director       2001  132,325      -0-      -0-     -0-   29,227      -0-      -0-
                   2000  129,956      -0-      -0-     -0-   52,666      -0-      -0-

Keith Fryer        2002  140,540      -0-   16,000     -0-  103,971      -0-      -0-
President/COO/     2001  171,071      -0-      -0-     -0-   29,227      -0-      -0-
Secretary/Director 2000  132,750      -0-      -0-     -0-   36,259      -0-      -0-

John F. Pope       2002   96,367      -0-      -0-     -0-   94,751      -0-      -0-
Vice President     2001  110,750      -0-      -0-     -0-   24,007      -0-      -0-
Treasurer/Director 2000   50,000      -0-      -0-     -0-   15,108      -0-      -0-
-------------------------------------------------------------------------------------
</Table>

Bonuses and Deferred Compensation
---------------------------------

The Company does not have any bonus, deferred compensation or retirement
plan. Such plans may be adopted by the Company at such time as deemed
reasonable by the board of directors. The Company does not have a
compensation committee, all decisions regarding compensation are determined
by the board of directors.

                                     41

Stock Option and Stock Appreciation Rights Plans
------------------------------------------------
                   Options/SAR Grants in Last Fiscal Year
                  ---------------------------------------

<Table>
<Caption>
                     Number of     % of Total
                     Securities    Options/SARS Exercise
                     Underlying    Granted to   or Base
                     Options/SARS  Employees in Price         Expiration
Name                 Granted       Fiscal Year  ($/sh)        on Date
---------------------------------------------------------------------------
<S>                  <C>           <C>          <C>           <C>
Ehrenfried Liebich        103,971           32%          $.21      06/03/07
Keith Fryer               103,971           32%          $.21      06/03/07
John Pope                  94,751           29%          $.21      06/03/07
---------------------------------------------------------------------------
</Table>

Termination of Employment and Change of Control Arrangement
-----------------------------------------------------------

In May 2002, the Company entered into five-year employment agreements with
its three officers and directors. Pursuant to the terms of the agreements,
Ehrenfried Liebich and Keith Fryer are to receive base salaries of $168,000
per year. John Pope is to receive a base salary of $135,000 per year.
Because of limited funds, the Company was unable to fully pay these
salaries. All unpaid salaries to these individuals have been recorded as
accounts payable and will be paid as funds become available. The agreements
call for an annual review by the board of directors, with the possibility
of increasing the base salary each year. The agreements also provide that
each individual is entitled to participate in all Company employee benefit,
profit sharing, 401(k), insurance and other perquisite plans and programs.
The agreements may be terminated by the Company upon the expiration of the
term of the agreement, upon death or disability, for cause and without
cause. If an agreement is terminated without cause, the individual is
entitled to receive a lump sum payment equal to 24 times the individual's
monthly salary plus an amount equal to the individual's monthly salary
times the number of years the individual has been an employee of the
Company. This lump sum payment is due within 30 days of termination.

The employment agreements also provide that the salaries can be paid to
corporations or other entities in the form of consulting fees rather than
directly to the officer if he, in his sole discretion, so elects. Salary
paid to Mr. Liebich was paid to ERI Associates, Mr. Liebich's private
consulting business. Salary paid to Mr. Fryer was paid to Keith Fryer
Associates California, Inc., his private consulting business. Salary paid
to John Pope was paid to his private consulting business, John F. Pope,
Inc.

In May 2003, Mr. Liebich, Mr. Fryer and Mr. Pope voluntarily agreed to
temporarily reduce the Company's obligations under the employment
agreements until such time as the operations and cash flow of the Company
justify reinstating those agreements.

To the Company's knowledge, there are no compensatory plans or
arrangements, including payments to be received from the Company, with
respect to any person named in cash compensation set out above which would
in any way result in payments to any such person because of his
resignation, retirement, or other termination of such person's employment
with the company or its subsidiaries, or any change in control of the
Company, or a change in the person's responsibilities following a changing
in control of the Company.

                                     42

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

                  ITEM 11. SECURITY OWNERSHIP OF CERTAIN
                     BENEFICIAL OWNERS AND MANAGEMENT

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

The following table sets forth as of March 27, 2002 the name and the number
of shares of the Registrant's Common Stock, par value $0.001 per share,
held of record or beneficially by each person who held of record, or was
known by the Registrant to own beneficially, more than 5% of the 17,176,913
issued and outstanding shares of the Registrant's Common Stock, and the
name and shareholdings of each director and of all officers and directors
as a group.

<Table>
<Caption>

Title of Amount and Nature of
Class    Name of Beneficial Owner      Beneficial Ownership Percentage of Class
-------- ----------------------------- -------------------- -------------------
<S>      <C>                           <C>                  <C>
Common   Ehrenfried Liebich            1,415,248(1)         5.8%
         University Tower
         4199 Campus Drive, Suite 550
         Irvine, California 92612

Common   Keith J. Fryer                  797,758(2)         3.3%
         University Tower
         4199 Campus Drive, Suite 550
         Irvine, California 92612

Common   John F. Pope (2)                174,747(3)         0.7%
         University Tower
         4199 Campus Drive, Suite 550
         Irvine, California 92612

Common   UTEK Corporation              2,309,453            9.4%
         202 South Wheeler Street
         Plant City, Florida 33566

_________________________________________________________________________________

Common   All Officers and Directors as a Group:
         (3 persons)                   2,387,753           9.7%

_________________________________________________________________________________
</Table>

(1) This includes 1,168,919 shares held in the name of Ehrenfried Liebich
and options to purchase up to an additional 246,329 common shares within 60
days of the date of original filing of Form 10-KSB.
(2) This includes 577,846 shares held in the name of Keith Fryer, 5,000
shares held of record in the name of his daughter and 1,488 held of record
by Keith Fryer Associates, California, Inc., Mr. Fryer may be deemed the
beneficial owner of all such shares. This figure also includes options to
purchase up to an additional 213,424 common shares within 60 days of the
date of original filing of this Form 10-KSB.
(3) This includes 19,500 shares which are held of record by John F. Pope,
Inc. Mr. Pope may be deemed to be a beneficial owner of the shares because
he has shared investment power of the shares. This figure also includes
options to purchase up to an additional 155,247 common shares within 60
days of the date of original filing of this Form 10-KSB.


                                     43

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

                     ITEM 12. CERTAIN RELATIONSHIPS AND
                            RELATED TRANSACTIONS

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

None.

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

                                  PART IV

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

                 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

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

(a) Reports on Form 8-K.
None.

(b) Exhibits. The following exhibits are included as part of this report:
None.

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

                     ITEM 14. CONTROLS AND PROCEDURES

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

(a) Evaluation of Disclosure Controls and Procedures.
     The Company's Chief Executive Officer and Chief Financial Officer has
     conducted an evaluation of the Company's disclosure controls and
     procedures as of a date (the "Evaluation Date") within 90 days before
     the filing of this annual report. Based on his evaluation, the
     Company's Chief Executive Officer and Chief Financial Officer
     concluded that the Company's disclosure controls and procedures are
     effective to ensure that information required to be disclosed by the
     Company in reports that it files or submits under the Securities
     Exchange Act of 1934 is recorded, processed, summarized and reported
     within the time periods specified in the applicable Securities and
     Exchange Commission rules and forms.

(b) Changes in Internal Controls and Procedures.
     Subsequent to the Evaluation Date, there were no significant changes
     in the Company's internal controls or in other factors that could
     significantly affect these controls, nor were any corrective actions
     required with regard to significant deficiencies and material
     weaknesses.

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




                                     44


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

                                 SIGNATURES

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


In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf,
thereunto duly authorized.

                              Advanced Recycling Sciences, Inc.

Date: May 31, 2006            /S/ Ehrenfried Liebich
                              ______________________________________
                                  Ehrenfried Liebich,
                                  Chief Executive Officer




Date: May 31, 2006            /S/ Leon Caldwell
                              ______________________________________
                                  Leon Caldwell,
                                  Chief Financial Officer





                                     45