MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS

UNAUDITED STATEMENTS

FINANCIAL

The following discussion should be read in conjunction with Company’s Consolidated Unaudited Financial Statements and Notes included in this report.

RESULTS OF OPERATIONS, comparison of periods, March 2001 and March 2000

Gross sales increased $16,344 during the current period due to the recent approval and sale of the Company’s WaterClear equipment line to another California school and private party. Further orders for similar equipment are pending at other locations. The pending sale of the first ZawCAD unit to be delivered to Lockheed Martin Corporation is not expected until October 2001.

Sales of additional ZawCAD units have not yet been finalized. Deliveries on previous orders, (those placed prior to the Company obtaining the license, with deposits) are not scheduled to be completed until the fourth quarter of this year if certain engineering, marketing and design costs can be included in the new sales presentations given to the previous customers.

General expenses will show a decrease for the year due to elimination of the auto lease and the IKON office copier lease. The new Sparks office/warehouse facility is being temporarily closed until staffing can be arranged. Most of the office equipment purchases are complete at this time and it is expected that overall, non-operating, expenses will be stabilized for the remainder of 2001.

Liquidity: The company’s liquidity increase during the current period was due to the recent equipment sales. The company is negotiating a lease/credit line for equipment purchase – resale use during 2001. With the new credit line, the company is planning to deploy its Cyclo Mill equipment during the fourth quarter of 2001.