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

           Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. [X]

           The aggregate market value of the registrant's common stock held by non-affiliates was approximately $56,853,623 based on the closing price of such common stock as traded on the NASD over-the-counter bulletin board on March 15, 2002.

           Common Stock outstanding as of March 15, 2002 - 131,477,830 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the registrant's proxy statement for the annual meeting of stockholders to be held on May 28, 2002, which proxy statement will be filed no later than 120 days after the close of the registrant's fiscal year ended December 31, 2001.

           As used in this Report, the terms "Urecoats" and the "Company" or "Us" or "We" refer to Urecoats Industries Inc., its subsidiaries, and associated companies, unless the context otherwise requires.

Item 1.   Business.

General Development of Business

Urecoats Industries Inc. is a technology-driven sales, marketing and product development company. We are transitioning from a four-year period largely characterized by research and development into a full sales and production mode. We installed a new executive management team during 2001 to lead us out of our prior development-stage operations and are well into the process of building an infrastructure to meet our strategic plans. We are engaged, through our subsidiaries, in the sales, marketing, development, manufacturing, acquisition, and distribution of specialty sealant and coating products for the construction and building products industries. We are selling and distributing our products through a growing network of national and international distribution locations. We are committed to building shareholder value through diversification of our product lines and brand awareness.

We made our first brief entry into the roofing and waterproofing contracting business in 2001, primarily to control the promotion, testing and application of our UrecoatsRSM-100™ sealant and BlueMAX™ system ("Flagship Products"), and to generate revenues. We divested these contracting operations at the end of 2001.

We entered the distribution business last year, primarily to manage the sales, marketing and distribution of our Flagship Products and other sealant and coating products acquired from the acquisition (See "Acquisition" below) during 2001 ("Comprehensive Product Line").

We entered the manufacturing business in 2001, primarily to have control over the manufacturing of our Comprehensive Product Line during 2001. We consolidated our research, new product development, and testing efforts into these operations.

We continue to pursue international expansion through joint ventures. We are in negotiations with several parties in Canada, Mexico, and Iceland, and talks with parties in China, Japan, and Europe as of the date of this report.

Acquisitions

We acquired Infiniti Products, Inc. (f/k/a Infiniti Paint Company, Inc.) ("Infiniti"), a Florida based adhesives, sealants, coatings, paints, and foam distributor on September 4, 2001, effective September 1, 2001, pursuant to a Stock Purchase Agreement. We acquired Infiniti for several strategic reasons, including, to: (a) establish a distribution channel for Urecoats product and spray system to service roofing and general contractors (we expect to capitalize on this channel not only with potential cross-over industry uses of our Urecoats products, but also to introduce new products); (b) diversify our existing product line; (c) own Infiniti's diversified line of products; (d) internally develop distribution channel managers; (e) capitalize upon financial strength and reliability of certain key suppliers; (f) benefit from certain relationships with reputable and long standing product manufacturers; (g) capitalize on profitability from both the manufacturing and distribution of our products; (h) duplicate its business model for expansion in strategic locations; (i) capitalize on prior research and development efforts and activities of Infiniti within the sealant and coatings business; and (j) expand on Infiniti's current customer base to utilize as a foundation for future sales of our Urecoats products.

Comprehensive Product Line

With our Urecoats products and those acquired from Infiniti, we now offer a comprehensive line of sealant and coating products as described below:

           Urecoats Brands

                      RSM Series™

                     We acquired all right, title and interest in two formulas, including certain technologies for their manufacture and application in 1997, and spent four years completing their development. These technologies form the foundation of our Urecoats™ brand products that incorporate recycled material in their composition. Our RSM Series™ products are revolutionary, new weatherproofing products, that provide cost-effective and eco-useful weatherproofing solutions for a variety of industries, such as roofing, waterproofing, steel, and concrete.

                                UrecoatsRSM-100™

                               UrecoatsRSM-100™, a plural component roofing and waterproofing interpenetrating polymer network composition, creates a seamless water resistant elastomeric membrane that fully adheres to a variety of roofing surfaces, substrates and structures. Utilizing crumb rubber from recycled tires in its formula, UrecoatsRSM-100™ exhibits remarkable physical and adhesion properties, and is a durable high performance weatherproofing sealant and coating.

                                UrecoatsRSM-550™

                               UrecoatsRSM-550™, a plural component corrosion inhibiting interpenetrating polymer network composition, creates a monolithic barrier that fully adheres to a variety of steel surfaces and substrates. Utilizing crumb rubber from recycled tires in its formula, UrecoatsRSM-550™ exhibits remarkable physical and adhesion properties, and, like the UrecoatsRSM-100, is a durable high performance weatherproofing sealant and coating.

                                BlueMAX™

                               BlueMAX™ is a proprietary and patent pending plural component hot spray system developed for creating and applying the RSM Series™ product line on-site. Our first commercialized BlueMAX™ production unit is referred to as "Model 230". The BlueMAX™ application system mixes and meters the components of the RSM Series™ formulae, and the resulting product is spray applied hot. The RSM Series™ sealants and BlueMAX™ spray application system are interdependent, analogous to the razor and the razor blade.

                                MilMAX™

                               MilMAX™ is a proprietary and patent pending plural component spray apparatus developed for use with the BlueMAX™ to facilitate the mixing of the components comprising the UrecoatsRSM-100™ formula prior to application to a surface.

                                RSM Certified Training Program™

                               The contractors/end-users of the BlueMAX™ are required to undergo extensive training through our multi-faceted certified contractor training program ("Certified Training Program"). The applicator (end-user) is thoroughly trained in the technical aspects of the BlueMAX™ and UrecoatsRSM-100™ sealant and receives hands-on field experience on both. We offer on-site technical support and refresher courses on a regular basis for customer service purposes.

           URX-300 Series™

          UrecoatsURX-300 Series joint sealants are flexible, high quality, single component thermoplastic elastomer compounds which are extruded hot, thermoset and easy to install. They are ultra-low modulus joint sealant and crack fillers designed to envelop and protect exposed and compromised surfaces for both industrial concrete and asphalt applications.

           Infiniti Brands

                      Infiniti Series™

                     We acquired all right, title and interest in certain intellectual property and formulas, including certain technologies for their manufacture, when we purchased Infiniti. These technologies form the foundation of our Infiniti™ brand products. Our Infiniti Series™ products provide cost-effective weatherproofing solutions to roofing, waterproofing and construction contractors.

                      Other Brands and Items

                     Infiniti also sells other products and equipment supplied from manufacturers and suppliers, including spray polyurethane foam, paints, clear sealers, spray equipment, and supplies, to roofing, waterproofing and construction contractors.

Sales and Marketing

UrecoatsRSM-100™ has excellent characteristics for the roofing and waterproofing industries. Therefore, we are targeting the United States commercial and industrial roofing and waterproofing industries as our initial market segment. According to the National Roofing Contractors Association's 2000-2001 Annual Market Survey, total roofing industry sales for 2000 were $33.84 billion. Roofing contractors participating in the survey predict total industry roofing sales at $36.15 billion in 2001. Urecoats maintains a regional sales and marketing team. Our sales efforts and promotional activities are primarily aimed at roofing and waterproofing contractors for our Flagship Products and general contractors for our Comprehensive Product Line, who use and recommend for use to their customers, sealant and coating products. In addition, Urecoats advertises in professional journals and trade publications and has an extensive direct mail program of descriptive product literature and technical information the to roofing, waterproofing and construction fields. The Company is also developing training modules and seminars to augment its Certified Training Program. In addition, we are further developing our web site and creating a technical team for ongoing customer support. We participate in regional and national trade shows to introduce our Flagship Products, to roofing, waterproofing and general contractors throughout the United States and abroad. We use independent sales representatives, in conjunction with our regional sales and marketing team, for sales and marketing purposes, and generally target: (a) Building Owners; (b) Architects; (c) Engineers; (d) Roofing Consultants; (e) Specifiers; and (f) Contractors. We are implementing our comprehensive marketing campaign that includes a wide variety of video, audio and print mediums. Our campaign adopts a "Take a Peek into the Future" theme, emphasizing a strong commitment to complete customer satisfaction, technologically advanced products, use of recycled material, and state-of-the-art application systems.

Manufacturing

We utilize high volume, quality oriented, and reputable outside vendors in multiple locations across the United States for most of our Comprehensive Product Line's manufacturing needs. This strategy facilitates cost-effective manufacturing and optimizes transportation and delivery costs. We use a variety of specialty and other chemicals in our products. The materials required for manufacturing our Comprehensive Product Line are in large supply and available around the globe. Our current suppliers can meet and exceed our present expected sales volumes.

Distribution

We began developing our own proprietary regional network of distribution centers last year through our acquisition of Infiniti to supply roofing, waterproofing and general contractors with our plural component sealant and coating products and application system. We were able to develop an affiliation with the awareness being generated about our products from our sales and marketing efforts with a Forbes Private 500 roofing material supplier that has 91 locations throughout the Northeast United States. This reputable supplier has agreed to sell, market and service our Comprehensive Product Line through its locations for us and we are in the midst of working out the logistics. We plan to augment our existing Infiniti distribution expansion plans during the 2002 year. Our ultimate aim is to market and sell our Comprehensive Product Line, and new products currently under development now or acquired hereafter by us, in major geographic markets in the United States and abroad.

Research and New Product Development

Our research and development efforts focus on specialty sealants and coatings that are effective, convenient and have an economic benefit. We place a high priority on research and new product and process development. We have spent millions of dollars and conducted extensive research and development on our RSM™ formula and hot spray liquid-applied system technologies. Our research and development activities are supplemented by a commitment to identifying and obtaining new technologies, technological collaborations, joint ventures and acquisition efforts. Our goal is to develop a continuous flow of new products. We are conducting research on variations of our core RSM™ formula for new products in cross-over industries, such as steel and concrete. We also acquired other sealant and coating technologies through our acquisition of Infiniti, which is continuing its development of new products. The Company's research and development expenditures for 2001, 2000 and 1999, were approximately $1.25 million, $1.21 million and $1 million, respectively. There are intrinsic uncertainties associated with the research and development efforts and the regulatory process. There is no assurance that any of the research projects will result in new products that the Company can commercialize.

           RSM Series™ Cross-Over Formula Variations

          Our original RSM™ formula was developed for roofing applications. However, various tests on our RSM™ formula continually confirm that the formula can be used effectively for applications other than roofing. We are continuing to develop and test the RSM™ formula, as applied as moisture and oxygen barriers for steel, concrete and marine applications, among others.

           Ancillary Products

          We are currently developing a complete line of ancillary Urecoats™ brand products, such as flushes, flashings, patching kits, tapes, etc., to augment our RSM Series™ products for inclusion in our growing distribution network.

           Infiniti Series™ Products

          We acquired certain sealant and coating intellectual property and formulas from Infiniti when we purchased Infiniti. Infiniti is continuing to develop additional sealant and coating products using its own technology, and through outside materials manufacturers, for Infiniti™ Brand products, including topcoats for use on our UrecoatsRSM-100™ sealant.

Competition

The United States adhesives, sealants and coatings industry is highly fragmented with over 500 companies. Future growth is expected to result from the trend of the industry to create new design and manufacture, lower costs, improve product characteristics, reduce weight and corrosion in new applications. Additional industry growth is expected to occur as a result of the increased use of adhesives, sealants and coatings in international markets. Competition is generally regional and is based on product quality, technical service for specialized customer requirements, breadth of product line, brand name recognition, price, service, and warranty. Due to the uniqueness of our technologies, ease of application, cost savings, and the environmental marketing component, we believe we can achieve significant market share in this industry. We believe based on our patented RSM™ formula that we do not have direct competition. We have found no other product like our RSM™ that combines the characteristics of an adhesive, sealant and coating in one composition. In addition, our RSM™ can only be created through our proprietary and patent pending BlueMAX™ application system. Nonetheless, Urecoats faces strong indirect competition. Numerous companies are engaged in the development, manufacture and marketing of sealant and coating products that compete with us. These competitors have equivalent or, in most cases, greater availability to resources than we do. In marketing our products to roofing, waterproofing and general contractors, we compete primarily on the basis of product technology, value-added services, product performance, and installed price. Our future success will depend on our ability to successfully market our products and create awareness in industry and the public regarding the value of our products. We are creating the Urecoats brand identity through our sales and marketing efforts. The Urecoats logo and identifying Urecoats products marks are featured on our products, marketing materials and advertising. We are posturing for distribution worldwide. We supplement our sales and marketing activities by participation in industry trade shows and conferences, literature, direct mail, website and advertising in local industry publications.

Patents and Trademarks

Urecoats has a limited number of patents and patent applications, including a patent issued and patents applied for in the United States and in various foreign countries. Principal reliance is placed upon our RSM™ formula and, proprietary BlueMAX™ applicator and MilMAX™ spray wand applicator, and these products are identified by trademarks which are pending and/or published throughout their respective marketing area.

           RSM™ Formula

          We have one issued patent for the RSM™ formula, namely, U.S. Patent No. 6,271,305, issued August 7, 2001, entitled: "Bituminous Polyurethane Interpenetrating Elastomeric Network Composition and Method of Manufacturing the Same". A continuation application seeking broader coverage for the composition was filed in the United States Patent and Trademark Office ("USPTO") on June 27, 2001 and was assigned U.S. Application Serial No. 09/893,242. We filed corresponding international applications in Europe, Application No. 99942335.3, filed August 19, 1999; Brazil, Application No. P19913081-5, filed August 19, 1999; Mexico, Application No. PA/a/2001/001705, filed August 19, 1999 and Canada, Application No. 2,341,202, filed August 19, 1999. Currently, these four applications are pending. The Europe patent application covers the following countries: Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, Monaco, Netherlands, Portugal, Spain, Sweden, Switzerland, and United Kingdom. We filed a trademark application for the use of the trademark "RSM" on April 5, 2000, U.S. Application No. 76/018,685 and "Rubber Sealant Membrane(RSM)" on February 8, 2002, U.S. Application No. 76/368,476. These applications are pending. We filed a trademark application for the use of the trademark "Urecoats 100" on April 5, 2000, U.S. Application No. 76/019,022, which was published on December 25, 2001.

           BlueMAX™ Applicator

          We filed one patent application for our spray application technology, namely, U.S. Patent Application Serial No. 09/970,126, on October 3, 2001, entitled: "Applicator Assembly for Application of Adhesives, Sealants and Coatings". This patent application is pending. We filed a trademark application for the use of the trademark "Blue Max" on February 8, 2002, U.S. Application No. 76/368,424. This application is pending.

           MilMAX™ Spray Wand Apparatus

          We filed one patent application for our spray wand apparatus technology, namely, U.S. Patent Application Serial No. 10/072,325, on February 7, 2002, entitled: "Spray Gun/Applicator". This patent application is pending. We filed a trademark application for the use of the trademark "Mil Max" on February 8, 2002, U.S. Application No. 76/368,476. This application is pending.

Employees

At December 31, 2001, the Company employed 36 people.

International Expansion

We are committed to international expansion and building an infrastructure to support these efforts. We recently hired our first international market manager. Marketing activities will be coordinated on a worldwide basis, and resident management teams will provide leadership and infrastructure for customer focused rapid introduction of new products in the local markets.

Forward-Looking Statements

Certain statements made by the Company in this report and in other reports and statements released by the Company constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as comments which express the Company's opinions about trends and factors which may impact future operating results. Disclosures that use words such as the Company "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. Any such forward-looking statements, whether made in this report or elsewhere, should be considered in context with the various disclosures made by the Company about its operations.

Historical Information

The Company was incorporated in the state of Delaware on October 20, 1989 as Natural Child Collection, Inc. and changed its name to Natural Child Care, Inc., on January 14, 1991. In 1993, the Company underwent a recapitalization, reverse merger, discontinued its pre-merger NCC operations, changed its name to Winners All International, Inc., and began post-merger random lottery operations. On February 8, 1999, the Company changed its name to Urecoats Industries Inc. We acquired Rainguard Roofing Corporation, a Florida corporation organized on May 28, 1997, effective January 1, 2001, which had minimal assets and liabilities, so we could enter the roofing and waterproofing business. The Board of Directors divested these operations, effective December 31, 2001. Infiniti Paints Co., Inc. changed its name to Infiniti Products, Inc. on February 8, 2002.

Item 2.   Properties.

Our operations are conducted in leased facilities located throughout Florida. Our headquarters and primary administrative and research facilities are located in Deerfield Beach, Florida. We have four additional facilities in Pompano Beach, Florida, two for manufacturing and two for distribution and warehousing. We have a secondary research facility in Apopka, Florida and distribution facility in Orlando, Florida. These facilities are adequate and provide sufficient space for our present administrative, research and development, manufacturing, distribution, and sales and marketing needs.

Item 3.   Legal Proceedings.

None.

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

The Company did not submit any matter during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.

Item 4(a).   Executive Officers of the Registrant.

           Set forth below are the executive officers of the Company. Each serves at the pleasure of the Board:

Mr. Kardok was appointed Chief Executive Officer on October 9, 2001 and President on March 19, 2001. He also served as Chief Operating Officer from March 19, 2001 to December 31, 2001 and Treasurer from March 19, 2001 until May 18, 2001. Mr. Kardok was appointed as a Director of the Company on March 1, 2001. Previously, Mr. Kardok was senior vice president, Centimark Corporation, Canonsburg, PA, from October 1997 to February 2000.

Mr. Adams was appointed as Executive Vice President and Corporate Secretary on March 1, 1999. He also served in various executive and other capacities in the Company since January 1, 1997.

Mr. Barbar was appointed Senior Vice President of Finance, Chief Financial Officer and Treasurer on May 19, 2001. He also served as Interim Chief Financial Officer from March 19, 2001 to May 18, 2001. Previously, Mr. Barbar was vice president of finance, Pinnacle Healthcare Technologies, Inc., Boca Raton, FL, from September 2000 to March 2001; vice president and treasurer, General Roofing Services, Fort Lauderdale, FL, from February 1999 to September 2000; and chief financial officer, R & J Roofing of Florida Inc., Boca Raton, FL, from November 1996 to August 1998.

Dr. Guyton was appointed Senior Vice President of Marketing and Special Projects on August 17, 2001. Previously, Dr. Guyton was a senior manager, Arthur Andersen Business Consulting, Miami, FL, from January 1999 to August 2001; national director of training, Centimark Corporation, Pittsburgh, PA, from January 1998 to December 1998; and national training director, Uniforce Staffing Services, Inc., Boca Raton, FL, from January 1997 to December 1997.

Mr. Clark was appointed Chief Operating Officer on January 1, 2002 and Senior Vice President of Operations on September 1, 2001. Previously, Mr. Clark was vice president of human resources and administration, Centimark Corporation, Pittsburgh, PA, from August 1998 to August 2001 and director of human resources, Port Authority of Allegheny County, Pittsburgh, PA, from March 1995 to August 1998.

Mr. Newell was appointed Vice President of Sales on January 17, 2001. Previously, Mr. Newell was vice president of sales, Stevelle Construction Company, Emeryville, CA, from July 2001 to October 2001; manager of strategic planning, National Gypsum Corp., September 2000 to May 2001; area sales and marketing manager, US Gypsum Company, Charlotte, NC, from May 2000 to September 2000; product marketing manager, US Gypsum Company, Chicago, IL, from February 1998 to May 2000; and district sales manager of US Gypsum Company, Fremont, CA, from January 1991 to February 1998.

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.

Market for Registrant's Common Equity

The Company's common stock is traded on the over-the-counter bulletin board under the symbol "UREC." The following table sets forth, for the calendar quarters during the past two years, the range of high and low bid information for the common stock as reported by the NASD. The Company did not declare any dividends during the past two years. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

As of February 12, 2002, there were approximately 7,800 holders of record of the Company's common stock.

Recent Sales of Unregistered Securities

During the quarterly period ended December 31, 2001, the Company issued securities, for certain private transactions, in reliance on Section 4(2) of the Act, as described below:

           Common Stock

          (1)   On October 9, 2001, we issued an aggregate of 225,000 shares of restricted common stock to directors for board of director services, valued and recorded at $49,275.

          (2)   On December 31, 2001, we issued 521,244 shares of restricted common stock in cancellation of $140,736 in short-term loans bearing interest at 9% per annum, to the Chairman of the Board.

          (3)   On October 1, 2001, we issued an aggregate of 850,000 shares of restricted common stock for consulting services to two directors, valued and recorded at $239,062.

          (4)   On November 14, 2001, we issued 200,000 shares of restricted common stock for consulting services, valued and recorded at $37,350.

          (5)   On November 29, 2001, we issued 200,000 shares of restricted common stock related to a legal settlement, valued and recorded at $32,850.

          (6)   During December 2001, we issued an aggregate of 250,000 shares of restricted common stock for legal settlements, valued and recorded at $41,246.

          (7)   On December 31, 2001, we issued an aggregate of 58,218 shares of restricted common stock to officers, as bonuses, valued and recorded at $9,781.

          (8)   On November 30, 2001, we issued 25,000 shares of restricted common stock to an officer, as other compensation, valued and recorded at $4,031.

          (9)   During December 2001, we issued an aggregate of 196,667 shares of restricted common stock to officers, as other compensation, valued and recorded at $32,915.

          (10)  During November 2001, we issued an aggregate of 5,418,267 shares of restricted common stock pursuant to a private placement offering, for $1,400,000 in cash.

          (11)  During December 2001, we issued an aggregate of 7,010,544 shares of restricted common stock pursuant to a private placement offering, for $1,650,000; of which $450,000 was paid in cash and $1,200,000 in recorded subscriptions receivable.

          Preferred Stock

          On December 31, 2001, we issued 124,755 shares of Series B Convertible Preferred Stock in cancellation of $623,775 in short-term loans bearing interest at 9% per annum, to the Chairman of the Board.

Item 6.   Selected Financial Data.

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* This amount does not include revenue from our contracting services of $1,352,463, which was discontinued, effective December 31, 2001. The combined revenue of application systems, coatings, sealants and other products, and contracting services totaled $2,607,755. See Consolidated Financial Statements and related Notes for complete information.

Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations.

Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three-Year Period Ended December 31, 2001

Overview

This financial review presents the operating results for Urecoats Industries Inc. for each of the three years in the period ended December 31, 2001, and its financial condition at December 31, 2001. This review should be read in connection with the information presented in the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements.

Business

General Development of Business

Urecoats Industries Inc. ("Urecoats" or the "Company") is a technology-driven sales, marketing and product development company. We are transitioning from a four-year period largely characterized by research and development into a full production mode. A new executive management team was installed during 2001 to lead us out of our prior development-stage operations and we are well into the process of building an infrastructure to meet our strategic plans. We are engaged, through our subsidiaries, in the acquisition, development, manufacturing, sales, marketing, and distribution of unique formulations and product lines for the construction and building products industries. We are selling and distributing our products through a growing distribution network of national distribution locations. We are committed to building shareholder value through diversification of our product lines and brand awareness.

We made a brief entry into the roofing and waterproofing contracting business last year, primarily to control the promotion, testing and application of our UrecoatsRSM-100™ sealant and BlueMAX™ system ("Flagship Products"), and to generate revenues. We divested these contracting operations at the end of 2001.

We entered the distribution business last year, primarily to control the sales, marketing and distribution of our Flagship Products and other sealant and coating products acquired during 2001 ("Comprehensive Product Line").

UrecoatsRSM-100™ has excellent characteristics for the roofing and waterproofing industry. Therefore, we are targeting the United States commercial and industrial roofing and waterproofing industries as our initial market segment for our Flagship Products. We are developing our regional sales and marketing team. Our sales efforts and promotional activities are primarily aimed at roofing and waterproofing contractors for our Flagship Products and general contractors for our Comprehensive Product Line. We require contractors/end-users to go through our Certified Training Program as part of our sales process. We place a high priority on training for various reasons and primarily to make sure that our customers are technically able to properly apply the UrecoatsRSM-100™ sealant using our proprietary BlueMAX™ technology. We participate in regional and national trade shows to introduce our Flagship Products, to roofing, waterproofing and general contractors throughout the United States and abroad. We are implementing our comprehensive marketing campaign that includes a wide variety of mediums.

We conduct light manufacturing operations at present. However, we utilize high volume, quality oriented, and reputable outside manufacturers under private label for most of our Comprehensive Product Line's manufacturing requirements.

We began acquiring and developing our own proprietary national network of distribution centers last year through our acquisition of Infiniti to get our products to out customers. Using the Infiniti model, we opened a second Infiniti location at the end of last year. In addition, we recently established a distribution affiliation with a Forbes Private 500 material supplier that operates 91 locations throughout the Northeast United States. These combined distribution strategies should better enable us to get our products to more markets quicker with less capital outlay. Our ultimate aim is to market and sell our Comprehensive Product Line, and new products under development now or acquired hereafter by us, in major geographic markets in the United States and abroad in the most cost-effective and profitable manner.

Our research and development efforts focus on specialty sealants and coatings that are effective, convenient and have an economic benefit. We have always placed a high priority on research and new product and process development. Our goal is to develop a continuous flow of new products. We are conducting research on variations of our core RSM™ formula for new products in cross-over industries, such as steel and concrete. We also acquired other sealant and coating technologies through our acquisition of Infiniti, which is continuing its development of new products.

We continue to pursue international expansion through joint ventures. We are in negotiations with several parties in Canada, Mexico, and Iceland, and talks with parties in China, Japan, and Europe as of the date of this report.

We have a limited number of patents and patent applications, including a patent issued and patents applied for in the United States and in various foreign countries. Principal reliance is placed upon our RSM™ formula and proprietary BlueMAX™ applicator and MilMAX™ spray wand applicator, and these products are identified by trademarks which are pending and/or published throughout their respective marketing area.

Results of Operations

Year Ended December 31, 2001 as Compared to Year Ended December 31, 2000

Revenues

The following is a summary of revenues for the years ending December 31,

We reported record revenue for the year ended December 31, 2001 of $1,255,292. The revenue generated from sales of our proprietary and patent pending applicator system was $490,000 and represented 39% of our revenue, while sales from sealants, coatings and other products was $765,292, which represented 61% of our total revenue. This is the first year we are reporting revenue, therefore, prior year comparisons are not possible.

During the year we acquired a roofing contracting company, Rainguard Roofing, primarily to field-test our Flagship Products, and to generate revenue. The revenue generated by this subsidiary was $1,352,463. The revenue earned by this subsidiary was previously reported as part of our total revenue.

*   This amount does not include revenue from our contracting services of $1,352,463, which was discontinued, effective December 31, 2001. The combined revenue of application systems, coatings, sealants and other products, and contracting services totaled $2,607,755.

As a result of successfully field testing our products and in response to our future customers, who are roofing contractors, management decided to discontinue operations of Rainguard Roofing effective for the year ended December 31, 2001. The total net activity of these discontinued operations is reflected in the (Loss) From Discontinued Operations on the Consolidated Statement of Operations.

Cost and Expenses

Our total cost and expenses are comprised of cost of sales, selling, general and administrative expenses, professional fees, depreciation and amortization, research and development, consulting fees, and interest expense. Our total costs and expenses increased from $4,207,332 for the year ended December 31, 2000 to $6,784,150 for the year ended December 31, 2001 for an increase of $2,576,818. The increase is due to the company exiting its development stage and beginning sales and distribution of its application system, sealants, coatings and other products.

Cost of Sales: Our cost of sales for the year ended December 31, 2001 was $1,060,890 and is comprised of $1,035,311 of direct product costs and $25,579 of freight and other cost of sales. Direct cost for the Application Systems was $426,606 or 87% as a percent of related revenue, and $608,705 for coatings, sealants and other products or 80% as a percent of related revenue. This is the first year that we have cost of sales relating to revenue generated, therefore, prior year comparisons are not possible.

Selling, General and Administrative Expenses: Our selling, general and administrative expenses for the year ended December 31, 2001 was $2,899,297 as compared to $1,268,441 for the year ended December 31, 2000. The increase of $1,630,856 is attributable to us introducing our comprehensive line of products to the market place. This required an increase of personnel for production, testing, technical support, sales, advertising, show booth and related materials, marketing and distribution. In addition a comprehensive sales and marketing program was established including an updated web site, product brochures, literature pieces and corporate video.

Professional Fees: Our professional fees increased $113,980 from $154,049 for the year ended December 31, 2000 to $268,029 for the year ended December 31, 2001. This increase related to the additional legal, accounting and professional services required for major issues we dealt with during the year such as patent application on the proprietary BlueMAX™ application system and private placement documentation.

Depreciation and Amortization: Our depreciation and amortization expense for the year ended December 31, 2001 was $402,240 as compared to $261,435 for the year ended December 31, 2000 for an increase of $140,805. The increase is attributable to depreciation on vehicles, machinery and equipment acquired to establish production, and field testing our products.

Research and Development: Our research and development costs increased $33,201 from $1,217,012 for the year ended December 31, 2000 to $1,250,213 for the year ended December 31, 2001. This reflects our transition from development stage to full sales and production. We are introducing our proprietary products to the roofing industry in the Southeastern region of the United States. We remain committed to the continual development of new products and technology.

Consulting Fees: Our consulting fees for the year ended December 31, 2001 was $734,273 as compared to $1,108,888 for the year ended December 31, 2000 for a decrease of $374,615. We outsourced certain projects and functions during the year relating to the development of technical, operations, sales, and distribution programs. Some of these functions are currently being handled internally and explains the decrease for the period.

Interest Expense: Our interest expense decreased $28,299 from $197,507 for the year ended December 31, 2000 to $169,208 for the year ended December 31, 2001. The decrease is due to the reduction of total liabilities over the year.

Discontinued Operations: During 2001, we acquired a roofing contracting company, Rainguard Roofing, primarily to field-test our Flagship Products and to generate revenues. As a result of the successful field testing of these products and in response to our future customers who are roofing contractors, management decided to discontinue these operations, effective for the year ended December 31, 2001. The total net activity is reflected in the (Loss) From Discontinued Operations on the Consolidated Statement of Operations in the amount of $(1,662,183).

Asset Impairment: We had Goodwill relating to the acquisition of a subsidiary, Urecoats International, Inc., in 1997. Management evaluated the fair market value of this asset as required and determined that there was no value at December 31, 2001. Therefore, a charge of $913,490 for the impairment of the asset was recorded and reflected as an Extraordinary Item.

Year Ended December 31, 2000 as Compared to Year Ended December 31, 1999

Revenues

We were in the development stage during these years and no revenue was reported for the years ended December 31, 2000 and 1999.

Costs and Expenses

Our total costs and expenses are comprised of selling, general and administrative expenses, professional fees, depreciation and amortization, research and development, consulting fees, and interest expense. Our total costs and expenses increased from $2,381,026 for the year ended December 31, 1999 to $4,207,332 for the year ended December 31, 2000 for an increase of $1,826,306. The increase is due to continued research and development efforts.

Selling, General and Administrative Expenses: Our selling, general and administrative expenses for the year ended December 31, 2000 was $1,268,441 as compared to $561,464 for the year ended December 31, 1999. The increase of $706,977 is attributable to additional personnel and other related costs.

Professional Fees: Our professional fees decreased by $79,798 from $233,847 for the year ended December 31, 1999 to $154,049 for the year ended December 31, 2000. This decrease relates to the reduction in legal and accounting services during the year.

Depreciation and Amortization: Our depreciation and amortization expense for the year ended December 31, 2000 was $261,435 as compared to $118,704 for the year ended December 31, 1999 for an increase of $142,731. The increase is attributable to depreciation on machinery and equipment acquired to further develop and test our products.

Research and Development: Our research and development costs increased $250,316 from $966,696 for the year ended December 31, 1999 to $1,217,012 for the year ended December 31, 2000. This increase relates to the increased emphasis of the development of the RSM-100™ and an appropriate application system.

Consulting Fees: Our consulting fees for the year ended December 31, 2000 were $1,108,888 as compared to $395,758 for the year ended December 31, 1999 for an increase of $713,130. The increase is attributable to the outsourcing of certain research and development.

Interest Expense: Our interest expense for the year ended December 31, 2000 was $197,507 as compared to $104,557 for the year ended December 31, 1999. The decrease of $92,950 is primarily due to interest on a loan from a related party used to fund the operations of our Company.

Liquidity and Capital Resources

We had $519,225 of cash on hand at December 31, 2001 reflecting an increase of $502,227 when compared to the $16,998 of cash on hand at December 31, 2000. The cash on hand at December 31, 1999 was $15,026.

The cash required by operations for 2001 was $5,438,908 which was primarily attributable to our net loss for the year offset by increase in accrued expenses and elimination of non-cash expenses for consulting, legal fees, settlements and employee compensation. The cash required by operations for 2000 and 1999 was $2,914,223 and $1,682,901 respectively and was a result of our net loss offset by an increase in the elimination of non-cash expenses primarily for consultants and employee compensation.

The cash used in investing activities was $1,437,007 for the year ended December 31, 2001 as compared to $725,505 for the year ended December 31, 2000 reflecting an increase of $711,502. The net cash required for capital expenditures in the current year was $652,645 for the purchase of vehicles, machinery and equipment for the production of our product and the establishment of the contracting services subsidiary. We also invested in computer systems, both hardware and software, which is enabling us to more effectively manage our business. The net capital expenditures were $686,617 in 2000 and $437,618 in 1999 and represent the major reason for the cash required from investing activities for those years.

We also used $728,903 of cash in the acquisition of our wholly owned subsidiary, Infiniti Paint Co., Inc. in 2001. This acquisition expanded our product line to include a broader base of proprietary products in addition to providing an internal distribution source for our existing products.

The cash provided from financing activities was $7,378,142 for the year ended December 31, 2001 as compared to $3,641,700 for the year ended December 31, 2000 and $2,047,963 for 1999. The primary source of cash each year is attributable to the issuance of common stock and proceeds of loans from the Chairman of the Board.

We currently do not have the liquidity or capital resources to fund our operations without raising capital either from borrowing or from the sale of additional shares of stock. We anticipate further financing through short-term loans or the sale of our preferred stock to accredited sophisticated investors.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

We do not issue or invest in financial instruments or their derivatives for trading or speculative purposes. Our operations are conducted presently in the United States, and, as such, we are not subject to material foreign currency exchange risks. Although we have outstanding debt and related interest expense, market risk in interest rate exposure in the United States is currently not material to our operations.

Forward Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Certain disclosures made by the Company in this report and in other reports and statements released by the Company are and will be forward-looking in nature, such as comments that express the Company's opinions about trends and factors that may impact future operating results. Disclosures that use words such as the Company "believes," "anticipates," "expects" and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from expectations. Any such forward-looking statements, whether made in this report or elsewhere, should be considered in context with the Company's disclosures about its businesses made in the Company's press releases and in the Company's Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission ("SEC").