U. S. Securities and ~~Exchange~~ ~~Commission~~Exchange ~~Washington, D.C. 20549~~Commission

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2002

	or

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _____________ to ________________

Commission File No. 02-99110

LIQUITEK ENTERPRISES, INC. ~~(Exact name of Small Business Issuer in its Charter)~~

(Exact name of Small Business Issuer in its Charter)

 
  NEVADA

  91-1499978

  (State

  or Other Jurisdiction of

  (I.R.S.

  Employer I.D. No.)

  incorporation

  or organization)

1350 East Draper Parkway ~~Draper, Utah 84020 (Address of Principal Executive Offices)~~

Draper, Utah 84020

(Address of Principal Executive Offices)

Issuer’s Telephone Number: (801) 553-8785

Not applicable. ~~(Former name, changed since last report)~~

(Former name, changed since last report)

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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

(1) Yes ý No o (2) Yes ý No o

(APPLICABLE ONLY TO CORPORATE ISSUERS)

State the number of shares outstanding of each of the Issuer'’s classes of common equity, as of the latest practicable date:

As of ~~November~~May 1213, ~~2001~~2002, ~~the Company had~~ 39,~~776~~758,~~737~~517 shares of Common Stock were outstanding.

Another 1615,~~638~~315,~~249~~876 restricted shares of Common Stock of the registrant have been issued ~~subject to~~in aconnection ~~rescission~~with ~~right~~an acquisition, but these will be cancelled in ~~connection~~the ~~with~~second quarter an2002 as that acquisition was rescinded on April 12, 2002.

Transitional Small Business Issuer Format Yes o No ý

LIQUITEK ENTERPRISES INC.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
Unaudited Condensed Consolidated Balance Sheet as of September 30, 2001 and Audited Condensed Consolidated Balance Sheet as of December 31, 2000
	Unaudited Condensed Consolidated Balance Sheet as of March 31, 2002 and Audited Condensed Consolidated Balance Sheet As of December 31, 2001
Unaudited Condensed Consolidated Statements of Operations for the Three-month and Nine-month Periods Ended September 30, 2001 and 2000.
	Unaudited Condensed Consolidated Statements of Operations for the Three-month Periods Ended March 31, 2002 and 2001.
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine-month Periods Ended September 30, 2001 and 2000.
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three-month Periods Ended March 31, 2002 and 2001.
Notes to the Unaudited Condensed Consolidated Financial Statements for the Three-month and Nine-month Periods Ended September 30, 2001 and 2000.
	Notes to the Unaudited Condensed Consolidated Financial Statements for the Three-month Periods Ended March 31, 2002 and 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II.	OTHER INFORMATION
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 1.	Legal Proceedings
PART II.	OTHER INFORMATION
Item 2.	Changes in Securities
Item 1.	Legal Proceedings
Item 3.	Defaults Upon Senior Securities
Item 2.	Changes in Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 3.	Defaults Upon Senior Securities
Item 5.	Other Information
Item 4.	Submission of Matters to a Vote of Security Holders
Item 6.	Exhibits and Reports on Form 8-K
Item 5.	Other Information
SIGNATURES
Item 6.	Exhibits and Reports on Form 8-K
SIGNATURES

PART I - FINANCIAL INFORMATION

All statements, other than statements of historical fact, included in this Form 10-Q, including the statements under “Management’s Discussion and Analysis,” are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Such forward-looking statements involve assumptions, known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by such statements contained in this Form 10-Q. Such potential risks and uncertainties include, without limitation, competitive technology advancements and other pressures from competitors, economic conditions generally and in our research and development efforts, availability of capital, cost of labor (foreign and domestic), cost of raw materials, occupancy costs, and other risk factors detailed herein and in our filings with the Securities and Exchange Commission. We assume no obligation to update the forward-looking statements or to update the reasons actual results could differ from those projected in such statements. Readers are cautioned not to place undue reliance on these forward-looking statements.

Item 1. Financial Statements.

The Management of Liquitek Enterprises Inc. (“we,” “us,” or “Company”) prepared the unaudited condensed consolidated financial statements together with related notes that are filed with this Form 10-Q Quarterly Report. In the opinion of management, these financial statements fairly present the financial condition of the Company, but should be read in conjunction with the financial statements for the year ended December 31, ~~2000~~ 2001 previously filed with the Securities and Exchange Commission.

Liquitek Enterprises, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

~~September 30~~March 31, ~~2001~~2002 and December 31, ~~2000~~2001

	September 30, 2001 (Unaudited)			December 31, 2000 (Audited)
	March 31, 2002			December 31, 2001
	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash	$	6693,~~391~~547		$	2371,~~864~~917
Accounts receivable	257,228			200,575
Accounts receivable, net	203,513			191,384
Advances to Company Being Acquired	1,465,025			620,000
Inventory	161,172			80,040
Prepaid Expenses and Other Current Assets	165,524			113,830
Prepaid expenses and other assets	40,718			52,450
Total Current Assets	1498,~~954,168~~950			~~958~~395,~~269~~791
Property and equipment, net	32,~~031~~746,~~497~~326			32,~~153~~814,~~130~~216
Deposits and other assets	~~456~~33,~~364~~159			~~447~~30,~~185~~362
Acquired completed technology, net	10,151,250			10,557,300
Prepaid royalties to related party	150,000			150,000
Goodwill, net	9,637,341			10,022,918
Acquired completed technology, net	2,905,142			2,905,142
Patents and other intangibles, net	~~730~~418,~~519~~687			~~848~~420,~~097~~134
TOTAL ASSETS	$	25,961,139		$	25,986,899
Advances to Distech Limited	1,717,827			1,620,157
TOTAL ASSETS	$	8,470,091		$	8,335,802
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	~~923~~653,~~353~~800		$	~~587~~522,~~915~~236
Notes Payable to related party	1,200,000			-
Due to Related Parties	2,011,491			1,980,730
Total Current Liabilities	$	2,123,353		$	587,915
Notes Payable	50,000			—
Due to Related Parties	311,859			967,079
Total Current Liabilities	2,715,291			2,502,966
Deferred income taxes	3,651,344			3,827,213
Convertible Debentures	316,500			60,000
Stockholders' Equity
Common stock, par value $.001/ share, 100,000,000 shares authorized	39,776			38,126
Common stock, par value $.001/ share, 100,000,000 shares authorized 03/31/2002: 39,758,517 outstanding 12/31/2001: 39,776,737 outstanding	39,758			39,776
09/30/2001: 39,776,737 outstanding
Additional paid-in capital	32,723,778			32,783,942
12/31/2000: 38,126,737 outstanding
Subscriptions, stock options and deferred compensation	1,737,710			1,625,210
Additional paid-in capital	32,752,911			30,204,561
Accumulated deficit	(29,062,946		)	(28,676,092		)
Stock options, warrants and deferred compensation	1,581,241			1,356,241
Total stockholders' equity	5,438,300			5,772,836
Accumulated deficit	(14,499,345		)	(10,994,236		)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	8,470,091		$	8,335,802
Total stockholders' equity	19,874,583			20,604,692
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	25,961,139		$	25,986,899

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Liquitek Enterprises, Inc. and Subsidiaries Condensed Consolidated Statements of Operations For the Three-month and Nine-month Periods Ended September 30 2001, and 2000~~4

Liquitek Enterprises, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three-month Periods Ended March 31, 2002 and 2001

(Unaudited)

	Three Months Ended September 30, 2001			Three Months Ended September 30, 2000			Nine Months Ended September 30, 2001			Nine Months Ended September 30, 2000
	Three Months Ended March 31, 2002			Three Months Ended March 31, 2001
Sales	$	524,~~320~~417		$	~~393~~465,~~914~~835		$	~~1,420,637~~		$	~~524,525~~
Cost of Sales	~~387~~333,~~954~~970			~~303~~319,~~568~~195			~~1,100,785~~			~~403,697~~
Gross profit	~~136~~190,~~366~~447			90146,~~346~~640			~~319,852~~			~~120,828~~
Operating Expenses
Selling and distribution expenses	7238,~~459~~590			~~151~~149,~~043~~675			~~311,694~~			~~194,801~~
General and administrative expenses	~~888~~476,~~893~~772			~~888~~1,~~107~~302,011			~~2,983,945~~			~~3,197,926~~
Research and development expenses:
Research and development expenses	14,921			210,003
Acquired In-Process Research and Development	-			-			-			970,000
	530,283			1,661,689
Other	89,955			139,977			492,720			405,528
Loss before interest and income tax benefit	(339,836		)	(1,515,049		)
	1,051,307			1,179,127			3,788,359			4,768,255
Interest expense, net	(47,018		)	(15,074		)
Loss before interest and income tax benefit	(914,941		)	(1,088,781		)	(3,468,507		)	(4,647,427		)
Income tax benefit	—			—
Interest and other income / (Expense) net	12,023			18,852			(36,601		)	97,756
Net (loss)	$	(386,854	)	$	(1,530,123	)
Income tax benefit	-			-			-			-
Basic and diluted loss per share	$	(0.01	)	$	(0.04	)
Net (loss)	$	(902,918	)	$	(1,069,929	)	$	(3,505,108	)	$	(4,549,671	)
Basic and diluted loss per share	$	(0.02	)	$	(0.03	)	$	(0.09	)	$	(0.15	)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Liquitek Enterprises, Inc. and Subsidiaries| Condensed Consolidated Cash Flows For the Nine-month Periods Ended September 30, 2001 and 2000~~5

Liquitek Enterprises, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three-month Periods Ended March 31, 2002 and 2001

(Unaudited)

	Nine Months		Nine Months
	Three Months Ended March 31, 2002			Three Months Ended March 31, 2001
	Ended September 30, 2001		Ended September 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)	$	(386,854	)	$	(1,530,123	)
Net (loss)	(3,505,108	)	(4,549,671	)
Adjustments to reconcile net (loss) to net cash used by operating activities:
Adjustments to reconcile net (loss) to net cash used
Depreciation and amortization	70,540			384,944
by operating activities:
Stock options	112,500			75,000
Depreciation and amortization	1,150,386		1,407,097
Changes in operating assets and liabilities:
Acquired in-process research and development	-		970,000
Accounts receivable	(12,128		)	(13,465		)
Stock options	225,000		108,336
Inventory	(81,132		)	(11,033		)
Changes in current assets and liabilities:
Prepaid expenses	11,732			(26,779		)
Accounts receivable	(56,651	)	(99,042	)
Deposits and other assets	(2,797		)	9,649
Inventories	(34,116	)	(53,098	)
Accounts payable and accrued expenses	131,564			154,995
Prepaid expenses and Other Current Assets	(17,578	)	(14,626	)
Net cash (used) by operating activities	(156,575		)	(956,812		)
Deposits and other assets	(9,179	)	-
CASH FLOWS FROM INVESTING ACTIVITIES
Accounts payable, accrued expenses, and deferred income taxes	159,566		(147,575	)
Advances to Distech Limited	(97,670		)	(359,335		)
Net cash (used) by operating activities	(2,087,680	)	(2,378,579	)
Acquisition of property and equipment	(1,204		)	(72,012		)
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized patent costs and other technologies	—			(1,516		)
Cash from companies acquired	-		70,867
Net cash (used) by investing activities	(98,874		)	(432,863		)
Acquisition of Subsidiary Company	-		(50,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances to companies being acquired	(845,025	)	(1,249,316	)
Advances from (to) related parties	30,761			1,048,389
Acquisition of property and equipment	(90,797	)	(855,417	)
Proceeds from issuance of notes payable	50,000			—
Capitalized patent costs and Other Technologies	(28,751	)	(995,563	)
Proceeds from issuance of common stock	—			450,000
Net cash (used) by investing activities	(964,573	)	(3,079,429	)
Repurchase and retirement of common stock	(60,182		)	—
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debentures	256,500			—
Advances from (to) related parties	(655,220	)	(24,666	)
Net cash provided by financing activities	277,079			1,498,389
Proceeds from issuance of notes payable	1,200,000		-
NET INCREASE IN CASH	21,630			108,714
Proceeds from issuance of common stock	2,550,000		6,727,999
CASH AT BEGINNING OF PERIOD	71,917			23,864
Repayment of debt assumed in acquisition	-		(961,481	)
CASH AT END OF PERIOD	$	93,547		$	132,578
Net cash provided by financing activities	3,094,780		5,741,852
NET INCREASE IN CASH	42,527		283,844
CASH AT BEGINNING OF PERIOD	23,864		366,566
CASH AT END OF PERIOD	66,391		650,410

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

LIQUITEK ENTERPRISES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

~~for~~For the ~~Three-month and~~ ~~Nine~~Three-month Periods Ended ~~September~~March 3031, ~~2001~~2002 and ~~2000~~2001.

1. NATURE OF BUSINESS, REORGANIZATION AND BASIS OF PRESENTATION

Nature of Business

On February 12, 2001, we completed the acquisition of Distech Limited (“Distech”), a New Zealand corporation engaged in designing and manufacturing equipment for treating water and other fluids. ~~Distech~~ However, ~~has~~the ~~developed~~acquisition ~~unique~~transaction, ~~fail-safe~~as amended, included a right of ~~state-of-~~rescission for the~~-art,~~ ~~sub-atmospheric~~former ~~water~~shareholders ~~distillation~~of ~~equipment. The~~Distech ~~technology~~Limited ~~employs~~contingent ~~vacuum~~on ~~distillation~~the ~~for~~Company ~~low~~infusing ~~temperature~~$5 ~~evaporation~~million ~~and~~in ~~vapor~~new ~~compression~~capital ~~for~~by ~~efficient~~March ~~recycling of~~31, ~~heat energy~~2002. ~~The~~That ~~result~~requirement iswas anot met, so the ~~cost-efficient~~rescission ~~system~~was ~~for~~put ~~producing~~into ~~high-purity~~effect ~~water~~as inof ~~commercial quantities~~April 12, 2002. ~~International~~All ~~patents protect several~~ of ~~Distech~~the Company’s ~~technical~~shares, ~~innovations. Management~~warrants ~~believes~~and options that ~~features~~had ~~such as automatic~~been ~~clean-~~issued in~~-place~~ ~~(to~~connection ~~protect~~with ~~against~~ the ~~adversities~~Distech ofLimited ~~scaling),~~acquisition ~~remote~~will ~~system~~be returned to ~~management~~the ~~over~~Company ~~telecommunication~~in ~~links,~~exchange ~~minimal~~for ~~pre-treatment~~the ~~requirements,~~like equities in Distech Limited that had been ~~compact~~swapped ~~size,~~upon ~~small~~initial ~~footprint~~completion ~~and~~of ~~competitive~~the ~~pricing~~acquisition. The ~~suggest~~returned aCompany ~~strong commercial~~equities ~~opportunity~~will ~~for~~then ~~this~~be ~~equipment~~cancelled.

~~In conjunction with that acquisition, we issued 15,340,104~~Liquitek ~~shares of restricted common stock of the Company plus 790~~Corporation,~~896~~ ~~warrants and 69,000 options for~~ the ~~purchase~~other ofsubsidiary ~~additional~~engaged ~~shares of restricted common stock~~ in ~~exchange~~ ~~for~~developing ~~100%~~fluid ~~of the comparable equity securities of Distech. Warrants for 236,844 shares were exercised~~treatment ~~during the quarter ended June 30~~equipment, ~~2001,~~has ~~yielding~~been ~~approximately~~essentially ~~US$165,000~~dormant ~~(avg. US$0.70~~since ~~per share) in additional investment in~~ the ~~Company. As~~termination ~~the~~of ~~Company’s~~key ~~stock market price was in~~employees ~~steady~~with ~~decline~~this ~~shortly~~subsidiary ~~after~~and the ~~warrant~~equipment ~~exploration~~licensed ~~date~~to ~~occurred, the Board approved~~ a ~~revision~~Hawaiian ofrecycling ~~the exercise price of the warrants. The revised exercise price was calculated as~~company ~~US$0.1267 which~~ was ~~the~~sold ~~average~~to ~~closing~~that ~~price~~licensee, ~~for the week ended September 28~~i.e., ~~2001,~~ assince ~~reported~~late ~~by the Over the Counter Bulletin Board~~2001. ~~The~~This ~~Company~~subsidiary ~~was~~has ~~required~~not tohistorically ~~issue~~been ~~an additional~~a ~~1,061,301~~significant ~~shares for the exercised warrants increasing the total~~portion ~~shares~~of ~~issued~~consolidated ~~under~~financial ~~these~~position ~~warrants~~or toresults ~~1,298,145~~of operations.

The ~~former holders of the Distech equity securities have a~~ ~~right~~Company’s ofremaining ~~rescission~~operations oninclude ~~the~~Thermoflow ~~transaction~~Corporation ~~until the Company achieves an equity~~(“Thermoflow”), ~~infusion~~Interfluid ofEnvironmental $5Services,~~000,000~~ orInc. ~~September 30~~(“Interfluid”), ~~2001~~and VitriSeal, ~~whichever occurs first~~Inc. ~~As of~~ ~~September 30~~(“VitriSeal”), ~~2001~~all ~~the~~of ~~Company~~which ~~had~~are ~~failed~~wholly-owned tosubsidiaries ~~raise~~of the ~~requisite amount of capital, and Distech had until October 31, 2001 to exercise their right of rescission~~Company. OnLiquitek ~~October 25~~Corporation, ~~2001~~Thermoflow ~~the~~and ~~parties~~Interfluid ~~came~~were toall anacquired ~~agreement~~through ~~to extend the rescission date by six months to March 31, 2002. Because of this contingency, neither the Distech~~tax-~~related issuances~~free, ~~the Distech financial position at September 30, 2001, nor the Distech operating results~~ stock-for ~~the nine~~-~~months~~stock ~~ended September 30, 2001 is~~reorganizations ~~reflected~~ in ~~the September 30, 2001 financial statements contained in this Form 10-Q report~~2000.

~~The~~Thermoflow owns ~~Distech~~and ~~operations~~operates ~~complement~~a ~~those~~proprietary ofantifreeze ~~another~~recycling ~~wholly owned~~facility ~~subsidiary,~~in ~~Liquitek~~Las ~~Corporation.~~ Vegas, ~~Together~~Nevada. The ~~these~~Thermoflow ~~businesses~~technology allows ~~give~~recycling usof aantifreeze ~~suite~~to ofproduce ~~technologies~~fully ~~offering~~reformulated antifreeze ~~competitive~~virtually ~~solutions~~indistinguishable tofrom ~~problems~~antifreeze inmade ~~water~~from ~~bottling,~~virgin ~~recycling,~~materials. ~~industrial~~The ~~wastewater,~~Thermoflow ~~remediation,~~technology ~~desalination~~ and ~~ultra-pure~~subsets ~~water~~thereof ~~applications. These businesses~~ are ~~further~~capable ~~complemented~~of byeconomically ~~the~~treating/recycling ~~operations~~many ofother ~~Thermoflow~~contaminated ~~Corporation (“Thermoflow”)~~liquids, ~~Interfluid Environmental~~including ~~Services, Inc~~wastewater. Liquitek ~~(“Interfluid”),~~Corporation ~~and~~shares ~~VitriSeal,~~the ~~Inc.~~rights ~~(”VitriSeal”),~~to ~~also~~use ~~wholly-owned~~any ~~subsidiaries~~or all of the ~~Company. Liquitek~~Thermoflow ~~Corporation,~~technology ~~Thermoflow~~in ~~and~~meeting ~~Interfluid~~the ~~were~~needs ~~all~~of ~~acquired~~its ~~through tax-free, stock-for-stock reorganizations in 2000~~clientele.

Thermoflow owns and operates a proprietary antifreeze recycling facility in Las Vegas, Nevada. The Thermoflow technology allows recycling of antifreeze to produce fully reformulated antifreeze indistinguishable from antifreeze made from virgin materials. The Thermoflow technology and subsets thereof are capable of economically treating/recycling many other contaminated liquids, including wastewater. Liquitek Corporation shares the rights to use any or all of the Thermoflow technology in meeting the needs of its clientele.

Interfluid Environmental Services, Inc. operates a closed-loop waste antifreeze collection and recycled antifreeze distribution system in the San Diego, California area. The waste collected in San Diego is deposited at an unrelated transfer facility in the Los Angeles, California area. Such waste, along with that brought to the transfer facility by other closed-loop operators and waste antifreeze collectors, is then transported in Interfluid’s long-haul bulk transportation equipment to Las Vegas for processing in the Thermoflow plant. Interfluid also provides long-haul bulk transport services for others of Thermoflow’s customers. Interfluid is an integral part of the Thermoflow operation, but is a separate legal entity to isolate higher risk operations.

Liquitek Corporation has licensed a proprietary oily wastewater treatment system to Hawaii’s largest recycling company. This client has recently been awarded a reduced inspection schedule from environmental regulators because of the effectiveness of the Liquitek water treatment system. The system, or derivatives thereof, may be readily replicated in other locations. Liquitek has also developed a proprietary system for recycling carwash, laundry and aqueous solvent wastewater. Finally, Liquitek engaged in engineering customized solutions based on its proprietary technologies for potential customers with a variety of water treatment problems.7

VitriSeal owns the rights for a series of patented processes and proprietary know-how called VitriSeal™. The process is based on inorganic silicate chemistry. It produces ~~superior,~~ hard, bright, clear, corrosion-protective coatings on metal surfaces at a fraction of the cost of other clear coatings. The VitriSeal™ waterborne coating has little to no organic vapor emissions and creates minimal waste during the normal process operation. Accordingly there are no abnormal regulatory impacts or special governmental approval requirements on the VitriSeal™ application process, either in our own facility or in potential licensees’ facilities. The VitriSeal™ coating combines many of the attributes of other types of coatings, such as anodizing, chrome plating and ~~painting.~~ painting. It has corrosion and weathering resistance comparable to organic paint coatings, and it does not delaminate, or “creep back,” from damage locations as chrome plating and painting do. This unique combination of properties is expected to afford opportunities in a wide variety of markets: vehicle wheels, fabricated ~~fabricated~~ aluminum products, extruded aluminum products and sheet/coil aluminum ~~aluminum~~ products. Ongoing research indicates ~~indicates~~ potential for applying the coating to non-aluminum substrates as well.

During the quarter ended ~~September~~March 3031, ~~2001~~2002, the Company ~~was~~ continued to be heavily involved in efforts to raise capital tofor ~~fund~~funding continued operations and for eliminating the rescission rights of the Distech transaction. While energies were primarily focused on these efforts, the Company continued, on a reduced scale, to refine its products through its research and development efforts and ~~expansion~~to ofexpand ~~potential~~its base of customers~~. Distech~~ ~~has~~and ~~nurtured~~potential customers. Distech nurtured demonstration and selling possibilities with potential customers in the metal finishing, food processing, waste water treatment, and supermarket industries. The ~~shortfall~~shortage of ~~available~~ capital limited ~~the~~ our ability to demonstrate the efficacy of the equipment and ~~correspondingly~~, consequently, the booking of orders. ~~Vitriseal~~ ~~received~~VitriSeal ~~positive~~continued ~~test~~to ~~results~~coat samples for ~~its~~interested ~~applications~~parties and to support the testing regimens prescribed by those parties. Testing continues with ~~heavy~~wheel ~~truck~~manufacturers, ~~wheels~~automotive ~~and~~parts suppliers, aluminum sheet and coil ~~processing~~distributors, ~~and~~an isaircraft ~~currently~~manufacturer, ~~being~~an aluminum ~~tested~~primary bymaterials producer and a ~~major~~supplier ~~aluminum primary~~of coating materials ~~producer~~to industrial customers. Thermoflow ~~expanded~~continued to expand its operations ~~with~~by ~~new~~building on its sources of supply of waste antifreeze and ~~new~~the ~~customers~~recycled antifreeze customer base that ~~were~~had been built ~~added~~up toin ~~the~~2001. First ~~Company~~quarter inperformance was ~~the~~somewhat ~~second~~below ~~quarter~~expectations because of dumping of excess inventories at 25-year low prices by makers of virgin ethylene-glycol. Nevertheless, Thermoflow continued to show positive EBITDA (Earning Before Interest, Taxes, Depreciation and Amortizaton) for each month of the quarter, and for the quarter as a whole positive EBITDA in excess of that for all of the year ended December 31, 2001.

Basis of Presentation

We prepared our condensed consolidated financial statements for the three-month ~~and nine-month~~ periods ended ~~September~~March 3031, ~~2001~~2002 and ~~2000~~ 2001 without audit by our independent auditors. In the opinion of management, all adjustments necessary to present fairly the Company’s financial position as of ~~September~~ 30March 31, ~~2001~~2002, and the results of operations and cash flows for the three-month ~~and nine-month~~ periods ended ~~September~~March 3031, ~~2001~~ 2002 and ~~2000~~2001 have been made. Such adjustments consist only of normal recurring adjustments.

Certain note disclosures normally included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to instructions for Form 10-Q. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Form 10-KSB annual report for 2000 previously filed with the Securities and Exchange Commission.8

~~The~~Certain note ~~results~~disclosures ofnormally ~~operations~~included ~~for~~in our annual financial statements prepared in accordance with accounting principles generally accepted in the ~~three-month~~United States ~~and~~have ~~nine~~been condensed or omitted pursuant to instructions for Form 10-~~month~~Q. ~~periods~~The ~~ended~~accompanying ~~September~~unaudited ~~30,~~condensed ~~2001~~consolidated ~~are~~financial ~~not~~statements ~~necessarily~~should be ~~indicative~~read ofin conjunction with the ~~results~~financial statements and notes thereto included toin beour ~~expected~~Form 10-K annual report for 2001 previously filed with the ~~full~~Securities and ~~year~~Exchange Commission.

The results of operations for the three-month period ended March 31, 2002 are not necessarily indicative of the results to be expected for the full year.

2. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS

~~GOVERNMENT~~Except as ~~REGULATION~~set forth below, the Company’s significant accounting policies are as described in the notes to the Company’s December 31, 2001 financial statements included in the related Form 10-K previously filed with the Securities and Exchange Commission.

Thermoflow Corporation’s facility is subject to certain government regulations regarding hazardous waste management, primarily related to the recycling of ethylene glycol (spent antifreeze) and storage of other hazardous materials used in the recycling process. Compliance with these provisions has not had, nor does the Company expect such compliance to have, any material effect upon the capital expenditures, operations, financial condition or competitive position of the Company. Management believes that its current practices and procedures comply with applicable requirements.

Thermoflow is subject to inspections by the Nevada Department of Conservation and Natural Resources, a Division of Environmental Protection (the “Department”), which evaluates compliance with applicable hazardous waste management regulations. No violations were reported by the Department during the 1999 and 2000 inspections. The Department then shifted to an annual inspection cycle for Thermoflow; the 2001 inspection has not been completed as of the date of this report. In addition, Thermoflow Corporation has an active Nevada hazardous material storage permit that expires on February 28, 2002. Finally, during the quarter ended June 30, 2001, Thermoflow began processing oily wastewater to render it harmless for disposal to the sewer system under a permit granted by the Department.

Except as set forth below, the Company’s significant accounting policies are as described in the notes to the Company’s December 31, 2000 financial statements included in the related Form 10-KSB filed with the Securities and Exchange Commission.

PRINCIPLES OF CONSOLIDATION

The accompanying ~~September~~March 3031, ~~2001~~2002 ~~condensed consolidated~~ financial statements include the accounts of the Company and its wholly -owned subsidiaries, except for Distech Limited which was still owned by the Company at that date, but which has not been consolidated because of the contingencies that then remained in place ~~at September 30, 2001,~~ as noted above. All significant inter-company transactions and balances have been eliminated in consolidation.

INTANGIBLE ASSETS OTHER THAN PATENTS

Goodwill, acquired completed technology and other intangible assets that were recorded when Thermoflow, Liquitek and Interfluid were acquired ~~completed~~in ~~technology~~2000 ~~are~~were substantially ~~amortized~~written ondown in 2001 to reflect the impairment of those assets athat ~~straight-line~~had ~~basis~~occurred ~~over~~by 20the ~~years~~end of that year. ~~Assembled~~In ~~workforce,~~accordance ~~acquired~~with ~~customer~~Statement ~~base~~of Financial Accounting Standards No. 142, “Goodwill and ~~other~~Other ~~intangible~~Intangible ~~assets~~Assets,” (“SFAS 142”), the remaining asset values for these intangibles are ~~amortized~~no ~~over~~longer 10subject to amortization, 5but ~~and~~will ~~2-3~~be ~~years,~~reviewed regularly ~~respectively,~~to onascertain athe ~~straight-line~~need ~~basis~~for further impairment write downs. No such further impairments were recognized in the quarter ending March 31, 2002.

~~RECENT ACCOUNTING PRONOUNCEMENTS~~10

For the three-month and nine-month periods ended September 30, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and hedging activities” (“SFAS 133”), as amended. Since the Company does not presently engage in activities covered by SFAS 133, there was no significant effect on the Company’s September 30, 2001 financial statements.

In July, 2001, the Financial Accounting Standards Board issued Statements No. 141, “Business Combinations” (“SFAS 141”) and No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 141 supersedes APB Opinion No. 16, “Business Combinations” and FASB Statement No. 38, “Accounting for Pre-acquisition Contingencies of Purchased Enterprises.” SFAS 141 is effective for fiscal years beginning after June 30, 2001 and requires that all business combinations be accounted for by a single method, the purchase method. SFAS 142 supersedes APB Opinion No. 17, “Intangible Assets.” SFAS 142 is effective for fiscal years beginning after December 15, 2001 and provides that all existing and newly acquired goodwill and intangible assets will no longer be amortized but will be tested for impairment annually and written down only when impaired. Management has not determined exactly how the requirements of such pronouncements will affect the Company’s future financial statements, though it is expected to be significant. With goodwill and acquired technology intangibles constituting approximately $20 million of the approximately $26 million in total assets (nearly 77%) as of September 30, 2001, either the absence of amortization charges (for the three-months ended September 30, 2001, such amortization approximated $264,000) or the write-down of impaired values will have a significant impact whenever either occurs.

Additionally, the Financial Accounting Standards Board has recently issued Statements No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143") and No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs, and is effective for financial statements issued for fiscal years beginning after June 15, 2002. SFAS 144 supersedes Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and addresses financial accounting and reporting for the impairment of disposal of long-lived assets, including accounting for a segment of a business accounted for as a discontinued operation. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. Management has not determined exactly how the requirements of such pronouncements will affect the Company's future financial statements.

RECLASSIFICATIONS

Certain amounts in the ~~2000~~2001 financial statements have been reclassified to conform to their ~~September~~March 3031, ~~2001~~2002 presentation.

3. RELATED PARTY ~~AND STOCK~~ TRANSACTIONS

In connection with the acquisition of Distech ~~Limited~~ (Note 1), the Company advanced approximately $1,~~465~~718,000 to Distech through ~~September 30~~March 31, ~~2001~~2002. These advances are due on demand and are non-interest bearing. ~~It is~~Since ~~expected that once~~ the contingencies in the transaction ~~are~~were not fulfilled ~~and the~~by ~~acquisition is recorded in~~ the ~~books~~agreed ofupon ~~the Company, the inter-company~~deadline ~~receivable~~ and ~~payable shown in~~ the ~~books~~transaction ofwas ~~the~~therefore ~~Company~~rescinded ~~and~~as ~~Distech~~of ~~will~~April ~~be eliminated~~12, in2002, ~~consolidation. If Distech Limited were to move to implement~~ the ~~recission under the extended agreement~~amount ~~(see~~advanced ~~Note 4), these advances~~ will be converted to an equity ~~position~~investment in ~~Destech~~the post-rescission Distech Limited toat bethe ~~owned~~rate byof ~~the Company~~1. ~~Additionally,~~25% ~~the~~per ~~shares~~$100,000 of ~~Distech~~advances. This ~~Limited~~equity ~~would~~position beis ~~returned~~likely to ~~the~~be diluted ~~shareholders~~as of Distech Limited ~~and~~obtains ~~the~~further ~~Company's~~investment ~~shares~~in ~~would~~their bebusiness ~~returned~~ to permit them ~~the~~to ~~Company~~progress ~~and~~independently ~~retired~~of the Company.

~~During the three-month period ended September 30, 2001, the Company converted $2~~4.1 STOCK million in notes payable to Lighthouse Capital, Inc. (“Lighthouse”), an affiliate of Culley W. Davis, the former Chairman of the Board of the Company, into restricted common stock of the Company at the rate of $1.50 per share. This rate exceeded the weighted average closing price, as stated on the Over the Counter Bulletin Board, of the shares on the dates monies were advanced by Lighthouse, which was approximately $1.14 per share. In connection with such transaction, approximately $47,000 of accrued interest on the note was written off, creating an extraordinary gain on the extinguishment of debt.TRANSACTIONS

~~On February 15, 2001, the Company reached agreements with~~In ~~Daniel~~accordance ~~L. Corbin (“Corbin”) and Dennis A. Repp (“Repp”) whereby each mutually agreed~~ with the ~~Company~~amended toagreement ~~rescind~~covering ~~their~~the ~~respective~~acquisition ~~royalty~~of ~~agreements in~~Interfluid ~~exchange~~Recycling, ~~for~~Inc., ~~100~~18,~~000~~220 shares ~~each~~ of the ~~Company’s~~ common stock~~. As~~ ~~a result~~ of ~~these rescission agreements,~~ the Company, ~~Corbin and Repp~~ were ~~released~~bought back from ~~all~~the ~~duties~~former ~~and~~owners ~~obligations under~~of ~~the~~Interfluid ~~original~~Recycling, ~~royalty agreements~~Inc. As ~~the~~at ~~Company’s common stock had~~ a ~~closing~~ price of $13.50 30 per share. The ~~on that~~repurchased ~~date,~~shares ~~the Company recognized stock compensation expense in the amount of~~were ~~$300,000 pertaining to these issuances~~cancelled.

~~On March 22, 2001, the Company completed the sale of 50,000 shares of its restricted common stock at $3~~5.00 NOTES per share under the terms of a private placement undertaken during the first quarter of 2000 pursuant to Rule 506 of Regulation D, based upon the offering being made only to “accredited investors” as defined by Federal securities law.PAYABLE

~~Other~~ On ~~related~~January ~~party~~25, ~~transactions~~2002 ~~are~~the ~~disclosed~~Company borrowed $50,000 with ~~elsewhere~~interest inbearing ~~the~~12% ~~notes~~per annum due on or before July 25, 2002. Principal and accrued interest payable at maturity. The Note, at any time prior to maturity, shall have the ~~condensed~~right ~~consolidated~~to ~~financial~~convert ~~statements~~to a 12% Convertible Debenture offered by the Company.

46. ~~GOING~~ CONVERTIBLE ~~CONCERN/LIQUIDITY CONSIDERATIONS~~DEBENTURES

As During the ~~discussed~~quarter inended ~~Note~~March 131, 2002, the Company isissued ~~engaged~~an additional $256,500 in convertible ~~three~~debentures. Such ~~businesses:~~debenture’s ~~development~~bear ofinterest aat ~~metal~~12% ~~coating~~per ~~process~~annum ~~known as “VitriSeal™,” recycling antifreeze,~~ and ~~providing~~mature ~~equipment~~in ~~for~~36 ~~processing~~months, ~~other~~at ~~contaminated~~which ~~fluids~~time toall ~~recycle~~principal ~~them~~and oraccrued ~~render~~interest ~~them~~are ~~harmless~~due toin ~~the environment~~full. The ~~Company~~debenture ~~has~~can ~~not~~be ~~generated~~converted ~~significant revenues~~to in the ~~past. Management~~ ~~expects~~Company’s ~~that~~common ~~the~~stock ~~Company~~at ~~will~~any ~~require~~time ~~significant~~up ~~additional~~to ~~capital~~15 days prior to ~~advance the~~maturity ~~development~~at the rate of ~~these~~$0.50 ~~operations~~per toshare. Additionally, the Company ~~point~~issued atdetachable ~~which~~stock ~~they~~warrants ~~may~~with ~~become commercially~~these ~~viable~~debentures. ~~The~~For ~~acquisition of~~each ~~Distech~~$2.00 ~~(see~~of ~~Note~~principal 1)subscribed, ~~required~~one ~~expansion~~“Class ofA” ~~our~~warrant ~~capital~~was ~~resources~~granted bywith a strike price of $~~5,000,000~~0.25 ~~capital~~per ~~infusion~~share. Also, ~~which~~for ~~was~~each ~~initially~~$1.00 toof beprincipal ~~completed by September~~subscribed, ~~30,~~one ~~2001~~“Class inB” ~~order~~warrant towas ~~eliminate~~granted with a ~~right~~strike price of ~~rescission~~$1.00 onper ~~this transaction~~share. ~~The~~ ~~right~~Therefore, of128,250 ~~rescission~~“Class ~~was~~A” ~~subsequently~~warrants ~~extended~~and ~~six~~256,500 ~~months~~“Class toB” ~~March~~warrants ~~31,~~were granted ~~2002~~ in connection with these issuances. All warrants are immediately anexercisable ~~agreement~~and ~~dated~~expire ~~October~~in ~~25,~~60 ~~2001~~months. Using the Black-Scholes option valuation model,

In the Form 10-Q report for the quarter ended March 31, 2001, the Company reported that the private placement of a $5,000,000 equity investment in Liquitek Enterprises, Inc. had been fully subscribed by AcceleratedTechnologies Fund LLC (“ATF”), an entity organized by Culley W. Davis, the former Chairman of the Board of the Company. In a press release to the general public issued on July 10, 2001, the Company announced that ATF would be unable to fulfill this commitment and that Lighthouse, an affiliate of Mr. Davis, would convert the $2.1 million it had advanced to the Company against the ATF commitment from debt to Company common stock of the Company at the rate of $1.50 per share. This rate exceeded the weighted average closing price of the shares on the dates monies were advanced by Lighthouse, which was $1.14 per share.11

~~The Company~~management ~~has~~estimates dealt with its liquidity problems in part by temporary layoffs plus payables and payroll deferrals. The Company is seeking further equity investment through a private placement offering of convertible debentures and through a registered rights offering to current shareholders. While such ~~investment~~ iswarrants ~~being~~have ~~sought, and to deal with pressing financial needs, the~~an ~~Company~~insignificant ~~sought and obtained in August 2001~~value, ~~a bridge loan in the amount of $1,200,000 from an existing shareholder. This note is collateralized by a UCCI filing on the assets of Thermoflow Corporation~~ and ~~carries~~as ~~a per annum interest rate of twelve percent (12%) with interest payable quarterly commencing on December 31~~such, ~~2001~~no ~~and~~portion ~~continuing on the last day~~ of ~~each calendar quarter thereafter until paid in full, principal and accrued but unpaid interest payable on or before~~ the ~~close of business on August 9, 2002. Approximately~~ $~~545~~256,~~000 of~~500 ~~this~~subscribed ~~was used to pay off an overdue note held by HydroMaid International,~~has ~~Inc.,~~been aallocated ~~related party, for funds it had advanced~~ to ~~enable~~ the ~~Company to exercise the option it held on the building in North Las Vegas, Nevada, where the Thermoflow plant is located~~warrants.

~~The Company, as part of its ongoing fund raising efforts, has updated its operating plans and projections, and is developing a comprehensive presentation for potential investors~~7. A list of potential accredited investors has been identified, and commitments made for further analysis and evaluation. The Company expects, from current contacts, to raise the required capital to meet current and future operating needs. INVENTORY

~~5. LOSS~~ Inventory consists ~~PER~~of ~~COMMON~~the ~~SHARE~~following at March 31, 2002 and December 31, 2001:

	March 31, 2002		December 31, 2001
Additives and other raw materials	$	80,348	$	53,153
Finished goods	80,824		26,887

	$	161,172	$	80,040

8. INTANGIBLE ASSETS

Intangible assets subject to amortization under SFAS 142 consist of patents and a non-compete agreement with costs approximating $206,000 and $25,000, respectively, net of accumulated amortization of approximately $21,200 and $7,500 at March 31, 2002. Amortization expense for the quarter ended March 31, 2002 approximated $1,500. Amortization expense to be recorded in the future is not expected to be significant.

Intangible assets not subject to amortization include acquired completed technology and other intangible assets. The total carrying amount of such assets approximated $3,121,500 at March 31, 2002.

9. GOING CONCERN/LIQUIDITY CONSIDERATIONS

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments related to recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

As discussed in Note 1, the Company has been engaged in three businesses: development of a metal coating process known as “VitriSeal™,” recycling antifreeze, and providing equipment for processing contaminated fluids to purify or recycle them or render them harmless to the environment. The Company has, to date, generated significant revenues only in the antifreeze recycling business, which revenues are now sufficient to routinely sustain positive EBITDA in that operation. With the rescission of the Distech acquisition, the Company is no longer in need of raising capital for that business. It may yet need to raise capital for the metal coating subsidiary, depending on product testing presently in progress with potential customers. The Company will not seek further capital for VitriSeal unless and until such testing proves the need therefore. Management has reduced ongoing operating expenses to the lowest level that will sustain the continuation of these reduced operations. Such operations will be financed by the cash flow from the Thermoflow subsidiary until such time as the future of the VitriSeal operation becomes clearer.

10. LOSS PER COMMON SHARE

Loss per common and common equivalent share is based on the weighted average number of shares of common stock and potential common stock (as retroactively adjusted for the effect of the Reorganization) outstanding during the period in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share.”

The weighted average numbers of common shares ~~outstanding~~ outstanding for the three-month periods ended ~~September~~March 3031, ~~2001~~2002 and ~~2000~~2001 were ~~39,609,346~~ ~~and 37~~39,~~951~~774,~~247~~000 ~~respectively. The weighted average numbers of common shares outstanding for the nine-month periods ended September 30, 2001~~ and ~~2000 were~~ 38,~~601~~229,~~457~~000 ~~and 29,674,315~~ respectively.

A total of 15,~~340~~315,~~104~~876 restricted shares of Common Stock of the Company ~~have~~were ~~been~~ issued, ~~subject to rescission,~~ in connection with the exchange of shares with common stockholders of Distech Limited in a tax-free, stock-for-stock ~~reorganization. An~~ ~~additional~~reorganization ~~1,298,145~~(see ~~restricted~~Note ~~shares~~1). With ~~of the Common Stock of the Company were~~that ~~issued~~reorganization ~~under~~having ~~the~~been ~~exercise~~rescinded as of ~~warrants~~April ~~held~~12, by2002, ~~the~~these ~~stockholders of Distech~~restricted ~~Limited~~shares aswill abe ~~result~~returned ofto the ~~reorganization~~Company for cancellation. Such ~~issuances~~issuance ~~have~~is not ~~been~~ reflected in the Company’s ~~September~~March 3031, ~~2001~~ 2002 financial statements because of the contingencies in the acquisition transaction that ~~transaction~~then existed.

611. SEGMENT INFORMATION

~~Prior to the acquisitions discussed in Note 1, the Company~~Except operated in only one segment, metal coating, which was then and remains in the development stage. As of approximately June 1, 2000, the Company had three reportable segments (see the table below). Except as set forth herein, the segments’ significant accounting policies are the same as those described in the notes to the Company’s December 31, ~~2000~~2001 ~~consolidated~~ financial ~~statements~~ statements included in the related Form 10-~~KSB~~K filed with the Securities and ~~Exchange~~ Exchange Commission. Interest expense is not allocated to individual operating ~~segments~~ segments when determining segment profit or loss. The Company evaluates performance based on profit or loss from operations before interest, income taxes and non-recurring gains and losses.

The Company’s reportable segments are strategic business units that offer different products and services. Each segment is managed separately because they use different technologies and/or market to distinct classes of customers.

~~For the nine-months ended September 30, 2001(Table and Subsequent Paragraph in Thousands)~~13

	Metal			Waste
	(Table and subsequent paragraph in Thousands)
	Coating			Water			Antifreeze
	Metal Coating Process			Waste Water Treatment			Antifreeze Recycling		Unallocated			Totals
	Process			Treatment			Recycling		Unallocated			Totals
Sales to external customers	$	—		$	—		$	524	$	—		$	524
Sales to external
Segment profit/(loss)	(231		)	(43		)	89		(202		)	(387		)
customers	$	-		$	102		$	1,319	$	-		$	1,421
Segment assets	527			74			6,345		28,070			35,016
Segment loss	$	987		$	814		$	372	$	1,332		$	3,505
Segment assets	$	590		$	12,378		$	11,379	$	27,687		$	52,034

Unallocated segment assets in the foregoing table consist primarily of investments in subsidiaries ($18,730), subsidiary payables to the Company ($7,~~165~~517) and other assets ($1,~~792~~823). The former two amounts were eliminated in consolidation, along with $~~177~~ 299 of inter-company receivables and inventory holdings within a subsidiary. The net of the unallocated segment assets ($2728,~~687~~070 as shown in the table) and the eliminations ($18,730, $7,~~165~~517 and $~~177~~ 299 as described in this paragraph) is $1,~~615~~524. When this amount is added to the segment assets in the other segments in the table ($~~590~~527, $~~12,378~~74 and $116,~~379~~345), the total of $258,~~962~~470 corresponds ~~(within a rounding allowance)~~ to the consolidated total assets as presented in the balance ~~balance~~ sheet for ~~September~~March 3031, ~~2001~~2002.

7. MAJOR CUSTOMERS

For the ~~nine~~three-month period ended ~~September~~March 3031, ~~2001~~ 2002, two ~~one~~customers ~~customer~~ of the antifreeze ~~antifreeze-~~recycling segment individually accounted for at least 10% of ~~segment revenues and~~ consolidated ~~revenues.~~ ~~Furthermore, one customer of the waste water treatment segment accounted for over 10% of that subsidiary’s~~ revenues~~, but did not account for more than 10% of consolidated revenues~~.

812. ~~COMMITMENTS AND~~ SUBSEQUENT ~~CONTINGENCIES~~EVENTS

~~On August~~As ~~14,~~discussed ~~2001~~in Note 1, the ~~Company~~acquisition ~~was served notice~~ of ~~a civil action filed by~~ ~~Hamlin~~Distech ~~Jennings~~Limited inwas U.rescinded S.on ~~District~~April ~~Court~~12, ~~Northern~~2002. Effective ~~District~~that ~~of Illinois~~date, ~~seeking a declaratory judgment on~~ the ~~ownership~~Company’s ofadvances ~~inventions~~to ~~expected~~Distech ~~from~~(see ~~work under~~Note a3) ~~grant~~were ~~from~~converted ~~the~~to ~~National~~an ~~Science~~equity ~~Foundation. While~~interest ~~serving~~in ~~the~~Distech. Such ~~Company~~investment aswill abe ~~consultant,~~accounted ~~Mr. Jennings applied~~ for ~~and was~~under ~~awarded~~ the ~~grant~~cost tomethod ~~fund experimentation~~ in ~~using the VitriSeal™ coating,~~ oraccordance ~~derivatives~~with ~~thereof,~~Accounting asPrinciples anBoard ~~undercoating~~Opinion ~~to vapor deposition hard coatings~~No. ~~The~~ ~~Company believes that the agreements that Mr. Jennings signed upon commencing his employment~~18, ~~particularly~~“The ~~the Consulting~~Equity ~~Agreement and the contemporaneous Non-disclosure and Invention~~Method ~~Assignment~~of ~~Agreement,~~Accounting ~~protect~~for ~~the~~Investments ~~Company’s interest~~ in ~~this~~Common ~~matter~~Stock.”

~~The~~On ~~Company~~August is14, ~~engaged~~2001, inthe ~~settlement~~Company was served ~~discussions~~notice ~~with~~of ~~EET~~a civil action filed by Dr. Hamlin Jennings and Evanston Materials Consulting Corporation (~~“EET”~~EMCC) ~~concerning~~in aU. ~~claim~~S. byDistrict ~~EET~~Court, ~~for~~Northern District of ~~approximately $634~~Illinois,~~000~~ ~~from~~seeking a declaratory judgment on the ~~Company.~~ ownership of certain inventions ~~The~~expected ~~Company~~from ~~believes~~work ~~that~~under a grant from the ~~amount~~National ~~due~~Science ~~EET~~Foundation. While isserving ~~less~~the ~~than~~Company ~~$100~~as a consultant,~~000,~~ ~~which~~EMCC ~~expenses~~applied ~~were~~for ~~accrued~~and inwas awarded the ~~Company’s~~grant ~~financial~~to ~~statements~~fund asexperimentation ~~they~~in ~~were~~an ~~incurred~~undercoating to vapor deposition hard coatings. ~~EET~~The ~~has~~parties ~~prepared~~proceeded ~~but~~in ~~not~~initial stages of litigation in this ~~filed~~case ato ~~complaint~~the ~~that~~point ~~also~~where ~~asserts~~the ajudge ~~claim~~ruled ~~for~~against ~~treble~~Jennings/EMCC’s ~~damages~~motion ~~under~~for ~~the~~summary ~~Tennessee~~judgment ~~Consumer~~in ~~Protection~~his ~~Act. The Company~~favor ~~believes~~and ~~that~~against ~~EET~~the Company’s ~~claims~~motion for ~~the~~dismissal ~~$634,000~~on ~~and~~ the grounds ~~trebled~~of ~~damages~~lack ~~are without~~of ~~merit~~justiciability. IfThe crux of the ~~Company~~argument isbetween ~~unable to~~the ~~reach~~parties aregards ~~settlement~~the ~~with~~agreements ~~EET~~that Dr. ~~and~~Jennings ~~EET~~signed ~~decides~~upon tocommencing ~~pursue litigation~~his consultancy, particularly the Consulting ~~Company~~Agreement ~~intends~~and tothe ~~defend~~Non-disclosure ~~the~~and ~~claim~~Invention ~~vigorously. The~~Assignment ~~Company’s~~Agreement, ~~defense~~as well as statutory interpretation of ~~the~~certain ~~EET~~federal ~~claim~~laws ~~may~~pertaining ~~include~~to aSmall ~~countersuit~~Business ~~against~~Innovative ~~EET~~Research funding programs. ~~The~~ After ~~Company~~these ~~cannot~~initial ~~predict~~rulings, the judge recommended that the parties ~~the~~agree ~~resolution~~to terms for an interim settlement of ~~this~~the ~~dispute~~case atwith ~~this~~the ~~time.~~right for either

In conjunction with the Interfluid acquisition which closed on July 1, 2000, the previous stockholders of Interfluid received 200,000 shares of the Company’s restricted common stock. Under the original terms of the acquisition agreement, such stockholders were eligible to sell shares under Rule 144 after the restrictions pertaining to that rule were lifted on July 1, 2001. To the extent that such sales were made at prices below certain levels stipulated in the agreement, the Company would have to issue additional shares to the selling shareholder(s). An amendment to the agreement has been agreed upon by the shareholders and the Company. The original provisions for the issuance of additional shares have been voided. In their place, a right of rescission has been granted on the condition that the Company undertakes the dissolution of its business. If the funding necessary to continue operations is raised, the Company will buy back the 200,000 shares at a price of $3.00 in four equal installments. The first is due within fourteen days after raising the necessary funds to allow the Company to go forward with its business. The second is due on March 31, 2002, the third on March 31, 2003 and the fourth on March 31, 2004. Should the market price on any of those dates exceed $3.00 per share, the stockholder may opt to forego that installment with no further obligation on the Company for that installment. Management expects to formalize this amendment with a written agreement.14

9party to re-new the case at a later date when money is at issue, with both parties waiving statute of limitations provisions. ~~SUBSEQUENT~~ The ~~EVENTS~~parties reached agreement and on May 15, 2002 signed an Interim Settlement Agreement and a License Agreement. This allows both parties to go forward with their respective interests with adequate protections available to both for future issues.

~~On October~~In 24April 2002, ~~2001~~a ~~the~~lawsuit ~~Company~~filed ~~signed~~by anEET ~~agreement~~Corporation (“EET”) ~~with~~in ~~representatives~~the State of Tennessee was served on the Company. EET claimed ~~Distech~~it ~~Limited~~was owed monies for rent and utilities on a ~~six-month~~leased ~~extension~~property ofin ~~the~~east Tennessee, ~~rescission~~consulting ~~rights~~services ~~contained~~for inMichael Williams, compensation for its President, Alois F. Sferrazza, and other factors. This issue has been the ~~agreement~~subject ~~under~~of ongoing ~~which~~negotiations between the ~~Company~~parties isfor ~~acquiring~~several ~~Distech~~months. ~~Under~~On May 8, 2002, the ~~original~~parties reached an agreement ~~whereby~~in principle on a settlement of the ~~Company~~claims, ~~acquired~~the ~~100~~terms ~~percent~~ of which include but are not limited to (i) the ~~common~~dismissal ~~stock~~of the EET lawsuit, (ii) a mutual general release of ~~Distech~~claims, ~~Limited~~(iii) the cancellation of approximately 1,295,000 shares of the Company from stock held by principals of EET, and (iv) the Company ~~was~~conveying ~~obligated~~ownership of a patent relating to ~~raise~~the ~~US$5.0~~electro-dialysis ~~million~~technology inand ~~capital~~a bypending ~~September~~patent ~~30,~~relating to a ~~2001~~flow-through physical-chemical process to EET Corporation. The ~~amended~~Company ~~agreement~~will ~~allows~~retain a royalty-free exclusive license in perpetuity to use the technologies protected under the ~~capital~~patents ~~formation~~and patents pending conveyed to ~~continue~~EET ~~through~~Corporation ~~March~~in ~~31,~~13 ~~2002~~specified ~~before~~western states. The Company believes the assignment ~~rescission~~of the intellectual property to EET will not impair its ability to ~~rights~~pursue ~~may~~its becurrent ~~exercised~~business plans.

The Company announced on November 14, 2001 the first sale of Distech’s model D-1000 vacuum distillation machine to Almon Environmental, Ltd, of Toronto, Canada. The machine will be part of a system that will recover, concentrate and recycle aircraft de-icing fluid at Toronto’s Lester B. Pearson International Airport. The D-1000, the largest capacity machine that Distech has built to date, is expected to recapture and adequately concentrate and purify the glycol so that it may be recycled for aircraft de-icing without having to be transported off the airport premises.

The Company’s Liquitek Corporation subsidiary had previously leased equipment for the treatment of oily waste water for 60 months to a customer in Hawaii. As of October 1, 2001, after the conclusion of 28 months of the lease, the Company negotiated a buyout of this equipment by the customer for $192,000. The Company will recognize a loss of approximately $36,000 on the write-down of a related Intangible for the remaining valuation of this lease agreement, as was recorded at the acquisition of Liquitek Corporation.

During the three-month period ended September 30, 2001, the Company made principal and interest payments in the amount of $60,000 towards a $300,000 note payable to Lighthouse Capital, Inc. which was due November 8, 2001. As of the date of this report, the Company is in default on this note for principal and interest in the amount of approximately $259,000.

On November 19, 2001, the Company announced that its VitriSeal, Inc. subsidiary had received an official Notice of Allowability from the U.S. Patent and Trademark Office regarding the Company’s patent application titled “Protective Coating for Metals”.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS

Consolidated net revenues for the three-month ~~and nine-month periods~~ period ended ~~September~~March 3031, ~~2001~~ 2002, were $524,~~320~~417 ~~and $1,420,637~~ compared to $~~393~~465,~~914~~835 ~~and $524,525~~ for the comparable ~~comparable~~period ~~periods~~ in ~~2000~~2001. Consolidated ~~costs~~cost of sales ~~were~~was $~~387~~333,~~954~~970 ~~and $1,100,785~~ for the three-month ~~and~~period ~~nine-month periods~~ ended ~~September~~March 3031, ~~2001~~2002 compared to $~~303~~319,~~568~~195 ~~and $403,697~~ for the comparable ~~periods~~period in ~~2000~~2001. These data yield a gross margin of ~~26% and 22~~36.53% for the three-month ~~and~~period ~~nine-month periods~~ ended March ~~September 30~~31, ~~2001~~2002 while this measure for the three~~-month~~ ~~and nine-~~month ~~periods~~period ended ~~September~~March 3031, ~~2000~~2001 was 2231.95% ~~and 23%~~. The 2002 and 2001 periods ~~also~~both include ~~production~~operations ~~facility overhead costs~~ for ~~the~~ VitriSeal, ~~Inc. subsidiary~~Thermoflow, ~~that~~Liquitek ~~had not been established in the comparable periods of the~~and ~~earlier year, and for which no revenues were generated in 2001~~Interfluid.

Consolidated operating expenses were $1530,~~051,307~~283 ~~and $3,788,359~~ for the ~~three- month and~~ ~~nine-month~~three ~~periods~~months ended ~~September~~March 3031, ~~2001~~2002 versus $1,~~179~~661,~~127~~689 ~~and $4,768,255~~ for the comparable ~~periods~~ period in ~~2000~~2001. The ~~nine-month~~ ~~decreases~~decrease ~~are~~is attributable to an amalgam of increases and decreases, the major elements of which are (1) the ~~restructuring~~cut-back in VitriSeal operations because of the ~~VitriSeal™~~capital shortage ~~research and development process~~(~$93,000), (2) the ~~consolidation~~elimination of ~~Thermoflow,~~amortization ~~Liquitek and~~of ~~Interfluid~~intangibles ~~operating~~in ~~expenses~~2002 (~$253,000), (3) ~~the~~more ~~write-off~~efficient ~~upon~~operation ~~acquisition~~of inThermoflow ~~2000~~and Interfluid of (~$~~970~~72,000), in(4) ~~in-process~~the ~~research~~cessation ~~and~~of ~~development~~operations ~~intangibles~~ for ~~the~~ Liquitek Corporation ~~Corporation subsidiary~~(~$119,000), (45) the ~~stock~~one-time-only ~~compensation~~charge ~~associated~~in ~~with~~2001 ~~the~~for ~~royalty rescission~~stock ~~agreements~~compensation ~~negotiated~~ in ~~2001~~ association with ~~Daniel~~the L.elimination ~~Corbin~~of ~~and~~royalties ~~Dennis~~on ~~A. Repp~~VitriSeal ~~and~~sales (5$300,000), aand (6) the reduction inof ~~financial~~corporate ~~consulting~~overhead ~~service~~labor ~~fees~~and ~~associated~~management ~~with~~incentive compensation ~~the~~costs ~~2000 equity fund raising~~(~$269,000).

The Company experienced a consolidated net loss and corresponding loss per share of $~~902~~386,~~918~~854 and $0.0201, respectively, for the three~~-month~~ months ~~period~~ ended ~~September 30~~March 31, ~~2001~~2002, compared to a consolidated net loss and loss per share of $1,~~069~~530,~~929~~ 123 and $0.0304, respectively, for the comparable ~~2000 period. The losses for the nine-month period ending September 30,~~ 2001, ~~were $3,505,108 and $0.09 while the losses for the comparable 2000~~ period ~~were $4,549,671 and $0~~.~~15.~~

CAPITAL RESOURCES AND LIQUIDITY

With the ~~Distech acquisition described~~rescission ~~herein,~~of ~~and with~~ the ~~changes~~Distech inacquisition ~~management~~described ~~personnel~~herein, ~~which~~the ~~occurred~~Company’s inoperating ~~late~~plans and ~~2000,~~capital ~~the~~requirements ~~primary~~have ~~thrust~~changed substantially. Pursuit of ~~our~~all ~~operating~~ plans for ~~2001 is to accomplish~~ the ~~transition~~ ~~from~~operation ~~development~~of ~~stage~~Distech ~~businesses~~as topart ~~commercial~~of ~~operations with~~the ~~production,~~Company ~~sales~~has ~~and~~been ~~revenue~~terminated. ~~In early~~This ~~2001~~development, ~~each~~in ~~operating~~conjunction ~~company~~with ~~completed~~ the ~~development~~cessation of ~~long-range~~operations ~~strategic plans~~for ~~and~~the ~~operating plans. Control~~Liquitek ~~mechanisms~~Corporation ~~have~~subsidiary ~~been put~~ in ~~place~~2001 to(as ~~monitor~~reported ~~adherence~~in tothe ~~these~~Form ~~plans. However,~~10-K ~~due~~report tofor ~~the deficiency of capital,~~that ~~the~~year), ~~operating~~means ~~plans~~that ~~have~~we ~~been~~are ~~delayed~~no orlonger ~~significantly reduced. The Company expects to achieve the results from the operating plans~~ in the ~~future~~fluid astreatment ~~efforts~~equipment ~~to raise capital are~~and ~~realized~~engineering business.

The ~~2001~~2002 Operating Plan for VitriSeal, Inc. contemplates ~~revenue~~further ~~from~~testing ~~contract coating in our Detroit plant for a variety~~ of ~~forged, fabricated, extruded and sheet aluminum products. Over~~ the ~~ensuing~~VitriSeal™ ~~three years, we expect to~~coating ~~enlarge~~with ~~the~~potential ~~volumes~~customers ofwho ~~these~~have ~~contract-coating~~already ~~services~~been contacted and ~~license~~expressed ~~or franchise~~enough ~~the~~interest ~~use~~to ofundertake ~~our~~such ~~technology in the plants of customers~~testing. The ~~ongoing research and development program will address~~ ~~definition~~2002 ofOperating ~~the~~Plan ~~characteristics~~will ofbe ~~the~~revised ~~coating,~~to ~~applying~~provide ~~the~~for ~~coating~~expanded tooperations ~~different~~if any ~~forms~~ of ~~aluminum~~the ~~and~~testing ~~experimenting~~now ~~with~~underway ~~coatings~~proves ~~for other metals~~promising.

The ~~2001~~2002 Operating Plan for Thermoflow Corporation calls for ~~significant~~continued growth in the utilization of the capacity of the Las Vegas plant~~. We~~, ~~also~~including ~~have started~~further touse ~~combine~~of ~~waste~~the ~~water~~plant ~~treatment with waste antifreeze treatment in the~~for ~~Las~~wastewater ~~Vegas facility~~treatment. We ~~expect~~had expected to be at 100% of practical capacity sometime in ~~2003.~~ 2002, but a glut of ~~Recent~~ethylene-glycol ~~updates~~dumped toon the ~~Thermoflow~~antifreeze ~~long-range~~market ~~strategic~~by ~~plan~~the ~~and~~makers ~~operating~~of virgin product ~~plan~~has ~~have~~ deferred ~~the~~our ~~consideration~~expectation ofin ~~adding~~that aregard ~~second~~to ~~plant~~2003.

~~The~~Given these ~~Liquitek~~current ~~Corporation~~operating ~~2001~~plans ~~Operating~~and the fact that the Company has, to date, ~~Plan~~generated ~~envisages~~significant ~~revenues~~revenue only in the antifreeze recycling business, the Company’s capital needs are dramatically different from those of previous filings. With the ~~sale~~rescission ~~and/or~~of ~~engineering~~the Distech acquisition, the Company is no longer in need of ~~small-~~raising capital for that business. It may, however, still need ~~intermediate-~~to ~~and~~raise ~~large-scale~~capital ~~fluid~~for ~~treatment~~the ~~systems~~metal ~~using~~coating subsidiary, depending on the ~~Company’s~~results of ~~technologies~~the product testing presently in progress with potential customers. The ~~realization~~Company ofwill ~~these~~not seek further capital ~~plans~~for VitriSeal unless and until such testing proves the need therefore. Management has ~~been~~reduced ~~delayed~~ongoing ~~because~~operating expenses ofto ~~current~~the ~~capital~~lowest ~~deficiencies~~level ~~and~~that ~~resignations~~will sustain the continuation of these reduced operations. Such operations will be financed by the cash flow from ~~principal~~the ~~personnel~~Thermoflow subsidiary until such time as the future of the VitriSeal operation becomes clearer.

The Distech Limited 2001 Operating Plan provides for sales of the D-50 model and derivatives thereof, models producing approximately 50 U.S. gallons of treated water per hour, in remediation, water bottling, desalination, closed-loop recycling and institutional markets. The research and development program is expected to support these sales objectives and also expand the product line through development of larger scale equipment. Future years’ sales will grow as the product reputation spreads and will be augmented by products in the D-1000 and D-3000 series, models that will produce 1,000 and 3,000 U.S. gallons of treated water per hour, respectively

The updated operating plans for 2001 project that all of the Company’s businesses, except Liquitek Corporation, will yet generate revenues, some for the first time. These updated forecasts show a delay on the onset of these revenues because of capital deficiencies. There continue to be risks associated with these assessments. We cannot know for certain at this point that the market will accept our product offerings, particularly when several of the products previously have not even been offered for sale. Nevertheless, management believes that the efficacy and consumer economics of these products will allow us to reach our goals.

All Distech sales, financing and other significant transactions will be transacted in U.S. dollars. As such, the Company does not foresee any significant risks arising out of fluctuations of foreign currency exchange rates.

The Company expects to raise additional capital within the next twelve months to fund further development of present and anticipated operations. The acquisition of Distech has required expansion of our capital resources by a $5,000,000 equity infusion by March 31, 2001. The Company is presently seeking equity investment through a private placement offering (see Note 4, GOING CONCERN/LIQUIDITY CONSIDERATIONS).

In the Form 10-Q report for the quarter ended March 31, 2001, the Company reported that the private placement of a $5 million equity investment in Liquitek Enterprises, Inc. had been fully subscribed by Accelerated Technologies Fund LLC (“ATF”), an entity organized by Culley W. Davis, the former Chairman of the Board of the Company. In a press release issued on July 10, 2001, the Company announced that ATF would be unable to fulfill this commitment and that Lighthouse Capital, Inc. (“Lighthouse”), an affiliate of Mr. Davis, would convert the $2.1 million it had advanced to the Company against the ATF commitment from debt to Company common stock at the rate of $1.50 per share. This rate exceeded the weighted average closing price of the shares on the dates monies were advanced by Lighthouse, which was $1.14 per share.

The July 10, 2001, press release went on to say that the Company was dealing with its liquidity problems in part by temporary layoffs plus payables and payroll deferrals. The Company sought and closed in August 2001, a bridge financing arrangement with a $1.2 million loan from an existing shareholder. The Company is also seeking permanent equity investment through a private placement offering of convertible debentures and through a registered rights offering to current shareholders. Certain accredited potential investors have been identified and are pursuing due diligence efforts to evaluate the investment as of the filing of this Form 10-Q report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company does not presently have any investments subject to market risks beyond those generally associated with being in business in the United States. All of our transactions are denominated in U.S. dollars.

PART II –— OTHER INFORMATION

Item 1. Legal Proceedings.

On August 14, 2001, the Company was served notice of a civil action filed by ~~Hamlin~~Dr. Hamlin Jennings and Evanston Materials Consulting Corporation (EMCC) in U. S. District ~~District~~ Court, Northern District of Illinois, seeking a declaratory judgment on the ownership of certain inventions expected from work under a grant from the National Science Foundation. While serving the Company as a consultant, ~~Mr.~~EMCC ~~Jennings~~ applied for and was awarded the grant to fund experimentation in ~~using the VitriSeal™ coating, or derivatives thereof, as~~ an undercoating to vapor deposition hard coatings. The ~~Company~~parties ~~believes~~proceeded ~~that the agreements~~in ~~that~~initial ~~Mr.~~stages ~~Jennings~~of ~~signed~~litigation ~~upon~~in ~~commencing~~this ~~his~~case ~~employment,~~to ~~particularly~~the point where the judge ruled ~~Consulting~~against ~~Agreement~~Jennings/EMCC’s ~~and~~motion ~~the~~for ~~contemporaneous~~summary ~~Non-disclosure~~judgment ~~and~~in ~~Invention Assignment~~his ~~Agreement,~~favor ~~protect~~and against the Company’s ~~interest~~motion infor ~~this~~dismissal ~~matter~~on the grounds of lack of justiciability. The crux of the argument

The Company is engaged in settlement discussions with EET Corporation (“EET”) concerning a claim by EET for approximately $634,000 from the Company. The Company believes that the amount due EET is less than $100,000, which expenses were accrued in the Company’s financial statements as they were incurred. EET has prepared but not filed a complaint that also asserts a claim for treble damages under the Tennessee Consumer Protection Act. The Company believes that EET’s claims for the $634,000 and the trebled damages are without merit. If the Company is unable to reach a settlement with EET and EET decides to pursue litigation, the Company intends to defend the claim vigorously. The Company’s defense of the EET claim may include a countersuit against EET. The Company cannot predict the resolution of this dispute at this time. 16

between the parties regards the agreements that Dr. Jennings signed upon commencing his consultancy, particularly the Consulting Agreement and the Non-disclosure and Invention Assignment Agreement, as well as statutory interpretation of certain federal laws pertaining to Small Business Innovative Research funding programs. After these initial rulings, the judge recommended that the parties agree to terms for an interim settlement of the case with the right for either party to re-new the case at a later date when money is at issue, with both parties waiving statute of limitations provisions. The parties reached agreement and on May 15, 2002 signed an Interim Settlement Agreement and a License Agreement. This allows both parties to go forward with their respective interests with adequate protections available to both for future issues.

In April 2002, a lawsuit filed by EET Corporation (“EET”) in the State of Tennessee was served on the Company. EET claimed it was owed monies for rent and utilities on a leased property in east Tennessee, consulting services for Michael Williams, compensation for its President, Alois F. Sferrazza, and other factors. This issue has been the subject of ongoing negotiations between the parties for several months. On May 8, 2002, the parties reached an agreement in principle on a settlement of the claims, the terms of which include but are not limited to (i) the dismissal of the EET lawsuit, (ii) a mutual general release of claims, (iii) the cancellation of approximately 1,295,000 shares of the Company from stock held by principals of EET, and (iv) the Company conveying ownership of a patent relating to the electro-dialysis technology and a pending patent relating to a flow-through physical-chemical process to EET Corporation. The Company will retain a royalty-free exclusive license in perpetuity to use the technologies protected under the patents and patents pending conveyed to EET Corporation in 13 specified western states. The Company believes the assignment of the intellectual property to EET will not impair its ability to pursue its current business plans.

We are unaware of any other actual, threatened, or planned legal actions against us.

Item 2. Changes in Securities.

~~Warrants~~ In ~~were~~accordance ~~exercised~~with bythe ~~former~~amended ~~shareholders~~agreement ofcovering ~~Distech Limited during~~ the ~~quarter~~acquisition ~~ended June 30, 2001. A total~~ of ~~236,844~~Interfluid ~~shares were issued for these warrants~~Recycling, ~~and the exercise price was approximately US$0~~Inc.~~70 per~~, ~~share. During the quarter ended September 30~~18,220 ~~2001~~shares ~~the board approved a revision~~ of the ~~exercise~~common ~~price~~stock ~~for the warrants exercised. The revised exercise price~~ of ~~US$.1267 resulted in~~ the ~~issuance~~Company ofwere anbought-back ~~additional~~from ~~1,061,301~~the ~~shares~~former ~~increasing~~owners ~~the total number~~ of ~~shares~~Interfluid ~~issued on the exercise of these warrants to 1~~Recycling,~~298,145. These~~ ~~shares are subject to rescission under the terms of the Distech Limited Acquisition Agreement~~Inc. ~~That~~at ~~rescission right constitutes~~ a ~~contingency~~price ~~that has precluded the inclusion~~ of ~~the~~$3.30 ~~Distech~~per ~~Limited~~share. The ~~acquisition~~repurchased ~~and~~shares ~~operating~~were ~~results in the Company’s financial statements included in this Form 10-Q report~~cancelled.

During the three-month period ended September 30, 2001, the Company converted $2.1 million in notes payable to Lighthouse Capital, Inc. into 1.4 million restricted common shares of the Company at a rate of $1.50 per share.

Item 3. Defaults Upon Senior Securities.

During the three-month period ended September 30, 2001, the Company made principal and interest payments in the amount of $60,000 towards a $300,000 note payable to Lighthouse Capital, Inc, which was due November 8, 2001 None. ~~As of the date of this report, the Company is in default on this note for principal and interest in the amount of approximately $259,000.~~

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits.*

None.

(b) Reports on Form 8-K.

None.

* A summary of any Exhibit is modified in its entirety by reference to the actual Exhibit.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~LIQUITEK ENTERPRISES INC.~~	LIQUITEK ENTERPRISES INC.
Date: 11/19/01	BY:	/s/ LESTER W. B. MOORE
Date: 06/07/02		BY:	/s/ LESTER W. B. MOORE
		Lester W. B. Moore, Chairman of the Board
			Lester W. B. Moore, Chairman
Date: 06/07/02		BY:	/s/ JOHN W. NAGEL
			John W. Nagel, President, Chief Executive Officer and Chief Financial Officer

Date: 11/19/01	BY:	/s/ JOHN W. NAGEL
		John W. Nagel, President, Chief Executive Officer, Chief Financial Officer

NEVADA		91-1499978
(State or Other Jurisdiction of		(I.R.S. Employer I.D. No.)
incorporation or organization)

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