US Technologies Inc – ‘10-K’ for 12/31/01

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Annual Report   —   Form 10-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         61    343K 

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 FORM 10-KSB

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

|X|     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)  
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Year Ended December 31, 2001

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

For the Transition Period from    ___________ to  _____________           

Commission File Number 0-15960

    U.S. TECHNOLOGIES INC.
   (Exact name of registrant as specified in its charter.)

 State of Delaware                                  73-1284747
(State of other jurisdiction of                        (I.R.S. Employer   
incorporation or organization)                        Identification No.) 

1130 Connecticut Avenue, N.W., Suite 700
Washington, DC 20036
 (Address of principal executive offices.)

    Registrant's telephone number, including area code: (202) 466-3100

   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 Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was     
required to file such reports), and (2) has been subject to such filing         
requirements for the past 90 days.                                              
    YES |X| NO |_|

      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-KSB or any amendment to   
this Form 10-K.                                                                 
    YES |X| NO |_|

    The aggregate market value of voting common stock held by non-affiliates
of the Registrant at March 31, 2002 was approximately $18,268,148.              

  The number of shares outstanding of the Registrant's Common Stock, par
value $0.02 per share, at March 31, 2002 was 142,696,221 shares.                

 DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive proxy (the "Definitive Proxy Statement") to be
filed with the Securities and Exchange Commission for the Company's 2002 Annual 
Meeting of Stockholders are incorporated by reference in Part III of this Form  
10-KSB.                                                                         

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 TABLE OF CONTENTS

                                                                          Page

PART I...................................................................       

ITEM 1.     BUSINESS.....................................................   1   

ITEM 2.     PROPERTIES...................................................   9   

ITEM 3.     LEGAL PROCEEDINGS............................................   9   

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........  10   

PART II..................................................................       

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                   
            STOCKHOLDER MATTERS.......................................  11

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION....  13   

ITEM 6a.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK....  20   

ITEM 7.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................  20   

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                    
            ACCOUNTING AND FINANCIAL DISCLOSURE.......................  20

PART III.................................................................       

ITEM 9.     DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;    
            COMPLIANCE WITH SECTIONS 16(a) OF THE EXCHANGE ACT........  21

ITEM 10.    EXECUTIVE COMPENSATION.......................................  21   

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                     
            AND MANAGEMENT............................................  21

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............  21   

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K.............................  21   

SIGNATURES     ..........................................................  22   

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....................... F-1   

CONSOLIDATED FINANCIAL STATEMENTS........................................ F-2   

INDEX OF EXHIBITS........................................................       

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PART I

Item 1.     Business                                                            

Overview                                                                        

     U.S. Technologies Inc. ("U.S. Technologies," "USXX" or the "Company")
develops a network of technology and related companies. The Company builds and  
develops its associated companies by providing them with operational assistance,
capital support, industry expertise, other venture business services and access 
to a strategic network of business relationships. The Company's associated      
companies include technology and emerging growth companies that management      
believes have high growth potential.                                            

  In April 2000, the Company completed its acquisition of E2Enet, Inc.
("E2Enet"). E2Enet was a privately held company that had interests in several   
development stage businesses. The acquisition of E2Enet provided the Company    
with a platform to participate in the growing technology industry and the E2Enet
acquisition enhanced our opportunities for creative development of promising    
early stage businesses.                                                         

     In March 2001, the Company completed its acquisition of Yazam.com, Inc.
("Yazam"). Yazam was a privately held company that was engaged in seed-stage    
funding and providing services to emerging internet and technology related      
start-ups. The acquisition of Yazam further expanded the company's strategy to  
develop early stage technology companies.                                       

  Historically, the Company has been engaged, directly and through its
wholly owned subsidiary UST Industries, Inc. ("UST"), in the operation of       
industrial facilities located within both private and state prisons, which are  
staffed principally with inmate labor. UST's prison-based operations are        
conducted under the guidelines of the 1979 Prison Industry Enhancement ("PIE")  
program.                                                                        

Current economic and business conditions have created a difficult 
environment in which to raise capital and develop or sell early stage technology
companies. The Company's ability to execute its business plan and to continue as
a going concern will be dependant on its ability to raise capital in the next   
twelve months. See, "MANAGEMENT'S DISCUSSION AND ANALYSIS - Liquidity and       
Capital Resources," "SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES         
LITIGATION REFORM ACT," "REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS" and
"NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Note 2.                           

      U.S. Technologies, a Delaware corporation, was incorporated on September
9, 1986 and our principal executive offices are located at 1130 Connecticut     
Avenue, NW, Suite 700, Washington, DC 20036.                                    

Acquisitions                                                                    

In an effort to implement our business strategy of developing and 
operating a network of technology companies, we made two significant            
acquisitions as detailed below.                                                 

E2E Net, Inc.                                                                   

       On April 12, 2000, the Company acquired all of the outstanding stock of
E2Enet. At the time of acquisition, E2Enet owned interests in six development   
stage technology companies. In consideration for the exchange of their E2Enet   
shares, E2Enet's stockholders were issued 112,000 shares of Series B Mandatorily
Convertible Preferred Stock, which have a stated liquidation preference of      
approximately $11,200,000. The Company also assumed liabilities in the aggregate
amount of approximately $3,980,000 in conjunction with the acquisition. Related 
to the E2Enet acquisition, the Company agreed to raise new capital funds at or  
prior to the closing of the E2Enet acquisition. To raise these funds, the       
Company completed the private placement sale of $1,250,000 of additional shares 
of its Series A Convertible Preferred Stock and $4,337,914 of its Series C      
Mandatorily Convertible Preferred Stock to various accredited investors,        
including affiliates of the Chief Executive Officer. The proceeds of these      
offerings have been used primarily to finance additional investments in new and 
existing technology businesses, the payment of costs incurred and liabilities   
assumed in connection with the E2Enet Acquisition and related business          
transactions and ongoing working capital needs.                                 

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Yazam.com, Inc.                                                                 

     On March 27, 2001, the Company acquired all of the outstanding stock of
Yazam. Yazam had been engaged in seed-stage funding and business development    
services to emerging internet and technology related start-ups. At its peak,    
Yazam had investments in 26 companies in several different countries and        
approximately 129 employees. Principally due to adverse capital market          
conditions, Yazam had effectively ceased capital raising and investment         
operations in the fourth quarter of 2000 pending its liquidation or sale.       

      The purchase price for Yazam was $22.0 million in cash, 27,374 shares of
the Company's Series F Convertible Preferred Stock and warrants to purchase an  
aggregate of 8,000,000 shares of the Company's Common Stock at $0.34 per share. 
Pursuant to the transaction, the Company acquired approximately $28.5 million of
cash held by Yazam at closing, investments in various associated companies and a
business under contract for sale for $1 million and assumed liabilities of $2.0 
million.                                                                        

      Yazam, prior to the acquisition by USXX, wrote down its investment in 19
companies, in accordance with an assessment of the 26 associated companies'     
financial condition and potential to execute its business plan. Existing U. S.  
Technologies personnel are now developing the remaining associated companies of 
Yazam. Gregory FCA, the principal operating subsidiary acquired in the          
transaction, is a public relations and investor relations firm which was sold by
the Company on April 1, 2002.                                                   

Ownership Position in Our Associated Companies                                  

     From April 12, 2000 through December 31, 2001, we acquired interests in
or established 31 technology companies. As of December 31, 2001, the Company    
owned interests in the technology companies listed below. We classify companies 
in which we, directly or indirectly through wholly owned subsidiaries, have     
interests as associated companies. We have indicated below our approximate      
percentage of equity ownership in each associated company. Our approximate      
equity ownership/voting percentages have been calculated based on the issued and
outstanding common stock of each associated company, assuming the issuance of   
common stock upon the exercise of outstanding options and warrants and the      
conversion into common stock of outstanding convertible securities. Our         
percentage ownership in any of the associated companies is subject to change as 
we make new investments and our associated companies accept new investments from
us or other investors.                                                          

     For those companies in which our equity ownership percentage is greater
than 50%, we generally direct or control all of their operating activities we   
account for them as consolidated subsidiaries. For those companies in which our 
equity ownership percentage is at least 20%, but not more than 50%, we generally
have significant involvement in and influence over their operating activities,  
with board representation and rights to participate in material decisions. We   
account for them on the equity basis. For those companies in which our equity   
ownership percentage is less than 20%, we may not be actively involved in their 
management or day-to-day operations, but may have Board representation and may  
provide them advisory services and accordingly we account for them on the cost  
basis.                                                                          

      We have identified below by marking with an asterisk (*) each associated
company that is a development stage company. A development stage company has not
yet begun planned principal operations, or has begun planned principal          
operations but has not yet generated significant revenue from those operations. 
Whether a company is in the development stage is determined on a case-by-case   
basis by that company's management. There is no specific revenue threshold that 
is applicable in all cases. A development stage company typically will be       
devoting most of its efforts to activities such as financial planning, raising  
capital, research and development, acquiring operating assets, and recruiting   
and training personnel. Currently, 7 of our associated companies are in the     
development stage.                                                              

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                                                                [Download Table]

                                           Voting       Voting   
                           Associated    Ownership    Ownership  
   Associated Company       Company     December 31, December 31,
   ------------------                   ------------ ------------
                             Since          2001         2000    
                             -----          ----         ----    
                                                                 
Bluemercury                April 2000       9.12%        9.12%   
Gomembers.com            November 2000      0.47%        0.47%   
OneMade.com                April 2000      12.25%       12.25%   
Portris                   October 2000     42.20%       30.40%   
PromiseMark, Inc.          April 2000      16.86%       16.86%   
Final Arrangements, LLC    July 2000        0.13%        0.13%   
3G Vision, Inc.*           March 2001       6.28%         N/A    
Baobob, Inc.*              March 2001       7.00%         N/A    
Mercantec, Inc.            March 2001        0.7%         N/A    
Gammasite, Inc.            March 2001       7.28%         N/A    
Incepto, Inc.*             March 2001       6.58%         N/A    
Phlair, Inc.*              March 2001       9.03%         N/A    
EZ Face                    March 2001       5.78%         N/A    
Quintessence  Photonics,   March 2001       1.48%         N/A    
  Inc. *                                                         
Selis Networks, Inc.*      March 2001       8.60%         N/A    
My  Virtual  Model/EZ      March 2001       0.80%         N/A    
  Size, Inc.                                                     
Global Commerce  Zone,   March 2001       1.33%         N/A      
  Inc.                                                           
Mobile Economy, Inc.*      March 2001       2.20%         N/A    
Plant America, Inc.         May 2001        1.00%         N/A    
Xi Software, Inc.        December 2001       100%         N/A    

     Pursuant to various nominee agreements, the Company acts as nominee for
additional investors that participated in the various financings of certain     
associated companies. Therefore, is some cases, the Company has a voting        
ownership that exceeds the economic ownership listed in the table above.        

Overview of Associated Companies                                                

      Below are summary descriptions of the business of each of our associated
companies:                                                                      

  Bluemercury, Inc. ("Bluemercury") owns high-end cosmetic specialty
retailers and currently operates two retail stores in Washington, D.C. and one  
retail store in Philadelphia, Pennsylvania. Additionally, Bluemercury operates  
an e-commerce site for cosmetics and accessories.                               

    Gomembers.com ("Gomembers") provides software that helps associations,
labor unions and professional societies manage a variety of tasks, including    
payroll and Internet integration. Initially, E2Enet had invested in MEI Software
Systems, Inc. ("MEI"), which provided customized software systems to manage the 
databases of trade associations, professional associations, fund-raising        
organizations, and chambers-of-commerce. MEI was acquired by Gomembers in       
November 2000, thereby converting the Company's approximately 5% interest in MEI
to a 0.47% interest in Gomembers.                                               

 OneMade, Inc. ("OneMade") provides an e-commerce community to serve
wholesalers, retailers, consumers, and artists active in the arts, hobby and    
crafts industries.                                                              

Portris, Inc. ("Portris"), is a software company, that developed  
applications that would enable business work groups to exchange information and 
collaborate on documents over networks.                                         

        In October 2000, the Company completed the acquisition of a 30.4% equity
interest in Portris, Inc. for aggregate consideration of $380,000. In May 2001, 
the Company purchased an additional interest in Portris for $555,000 in cash and

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in-kind services. Pursuant to this transaction the Company increased its equity 
interest in Portris to approximately 42%. In December 2000, Portis ceased       
operations due to its inability to attract additional capital funding and       
initial customers and partners for its software applications.                   

     PromiseMark, Inc. ("PromiseMark"), formerly known as Vipro Corporation,
is an Internet surety company providing, among other services, repair guarantees
against computer viruses. PromiseMark has e-commerce relationships with a       
leading Internet utility company, a credit card association, one of the largest 
warranty claims administrators in the world, and over 170 Internet service      
providers.                                                                      

    Final Arrangements, LLC ("Final Arrangements") is an Internet start-up
that offers the ability to make funeral arrangements online. Initially, E2Enet  
had invested in WebMilestones.com ("WebMilestones"). WebMilestones was acquired 
by Final Arrangements in December 2000, thereby converting the Company's 37.35% 
interest in WebMilestones to a 0.13% interest in Final Arrangements.            

   3G Vision, Inc. ("3G Vision") is a start-up that is developing with a
focus on video and image processing applications. 3G Vision's mission is to     
upgrade low quality video into high-resolution video and images. 3G Vision's    
solutions involve stitching and super-resolution technologies currently         
unavailable on the market today.                                                

     Baobab, Inc. ("Baobob") is developing technology that will allow humans
to conduct a direct dialogue with machines, using natural spoken language as the
communication channel. In January 2001, Baobab raised $2.5 million from Intel   
Capital, Big Sky Partners, and Yazam.                                           

     Mercantec, Inc. ("Mercantec") distributes complete e-commerce solutions
through Internet Service Providers and web hosting providers to small and       
medium-sized businesses. Initially, Yazam had invested in CommerceTone Inc.     
("CommerceTone"), which provides a powerful suite of eMarketing tools and       
services that made Mercantec's products the most fully featured e-commerce      
offering available in the marketplace. CommerceTone was acquired by Mercantec in
April 2001, thereby converting the Company's interest in CommerceTone to a 0.77%
interest in Mercantec.                                                          

Gammasite, Inc. ("Gammasite") is a technology provider of precise 
information cataloging solutions for the enterprise market. The Gammasite's core
technology allows organizations to automatically classify large amounts of      
unstructured information transforming unorganized data masses into organized,   
easily retrievable taxonomies. The technology is based on the experience of     
several scientists at the forefront of machine learning technologies.           

       Incepto, Inc. ("Incepto") provides software-based systems that ensure the
availability of business-critical databases while maintaining data and          
transaction consistency and durability, without decreasing network performance. 
Incepto's patent-pending technology clusters databases on independent local or  
remote servers. It forms distributed database clusters that provide the highest 
level of availability.                                                          

Phlair, Inc. ("Phlair") provides a comprehensive marketing and CRM
analytics solution for enterprises. Phlair has signed leading enterprise        
clients, analyzes millions of impressions and provides reports that give clients
valuable visibility into their customer interactions leading to increased sales 
and customer retention.                                                         

      EZ Face, Inc. ("EZ Face") is the pioneer in the development of "Personal
Visualization" technology and in the creation of a "Virtual Mirror" utility     
through which Internet users can visualize how they actually look when wearing  
color cosmetics, jewelry, eyewear and other fashion accessories.                

Quintessence Photonics Corporation ("Quintessence") was the first 
graduate of DynaFund's EIR (Entrepreneur in Residence) program. The company     
plans to develop and produce a family of lasers for telecommunications use based
on a proprietary approach developed by certain respected technologists.         

Selis Networks, Inc. ("Selis") develops, markets and sells        
next-generation IT performance monitoring and management products.              
Revolutionizing the approach to IT network monitoring and management, Selis     
focuses on business services, rather than network devices, providing managers   
with online information and status reports on all the business services running 

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on their networks. During the year ended December 31, 2001, the Company advanced
$540,000 to Selis in the form of secured notes which were converted into new    
equity of Selis in March 2002, thus increasing the Company's ownership to       
16.88%.                                                                         

      EZ Size, Inc. ("EZ Size") has developed a universal smart sizing service
that partners with the apparel industry to raise consumers' confidence that the 
clothes they buy will fit them. The EZ Size process leverages technologies in   
imaging and size acquisition; garment acquisition processes; and proprietary fit
algorithms. EZ Size's assets were acquired by My Virtual Model, Inc. ("MVM") and
the sole remaining EZ Size asset is its equity in MVM. MVM is an interactive    
shopping solution with a variety of fashion and lifestyle applications.         

Global Commerce Zone, Inc. ("Global Commerce Zone") provides the
technology infrastructure and services to facilitate international consumer     
e-commerce.                                                                     

 Mobile Economy, Inc. ("Mobile Economy") offers business-to-business
infrastructure solutions and services to the emerging mobile-Internet industry. 
Mobile Economy's technology supports leading mobile internet platforms such as  
WAP and i-Mode and will be fully leveraged by upcoming 2.5G and 3G              
next-generation cellular technologies.                                          

       Plant America, Inc. ("Plant America") is a e-commerce business focused on
providing products and communication channels to the commercial landscape and   
garden market. The Company obtained its ownership interest through providing    
certain services to Plant America.                                              

       Xi Software Inc. ("Xi Software") is a software company formed in December
2001 that designs and markets professional services automation tools that       
enhance corporate and individual productivity. Xi Software's product family,    
TimeAgent, monitors the amount of time a user spends in Microsoft applications  
or browser windows and assigns billable time to clients and matters. Xi         
Software's assets were contributed to Xi Software by USXX after USXX acquired   
the assets through the foreclosure of notes due to USXX by Portris, another USXX
associated company.                                                             

PIE Business of USXX                                                            

       The Company operates, through its wholly owned subsidiary UST Industries,
Inc., industrial facilities located within both private and state prisons. UST  
staffs these facilities principally with inmate labor under the guidelines of   
the PIE program. In 1979, Congress established the PIE program to encourage     
state and local governments to create jobs for prisoners that approximate       
private sector work, pay the local prevailing wages for similar work, and enable
inmates to acquire marketable skills to increase their chances for              
rehabilitation and employment upon release.                                     

    Under a 1997 agreement with Wackenhut Corrections Corporation ("WCC"),
WCC allows the Company to operate as its industry PIE partner in any WCC-managed
correctional facility. WCC also has agreed to purchase products manufactured by 
the Company to the extent feasible. WCC runs 47 correctional facilities in the  
United States, Australia, England and Canada. In 1998, the company reached an   
agreement with the States of California and Florida to expand its operations    
into correctional facilities managed by those states.                           

  UST currently operates an electronics plant at WCC's Lockhart, Texas
corrections facility which presently manufactures and repairs circuit boards and
performs various mechanical assembly operations on customer products which were 
formerly assembled in Mexico. UST also operates a furniture manufacturing plant 
in a state correctional facility located in Blythe, California which presently  
manufactures office panel blanks for Unisource, Inc.                            

     Electronics Manufacturing. UST provides contract manufacturing services
including cable and wire harness assembly, finished assembly rework and repair, 
and printed circuit board assembly. Given the emergence of new technologies and 
the proliferation of electronics into virtually all segments of the world       
economy, management believes that the contract manufacturing segment represents 
a growth opportunity for the outsourcing operations.                            

Original Equipment Manufacturers ("OEM") such as Cisco,         
Hewlett-Packard, IBM, Lucent, Texas Instruments and others are increasingly     
relying on contract manufacturers for assembly and other value-added services.  
Many OEMs have begun to view outsourcing as a strategic tool which allows them  
to focus their efforts on resources and core competencies resulting in improved 
flexibility and responsiveness in all segments of their business. The benefits  

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of outsourcing by the OEMs include improved time to market, access to state of  
the art manufacturing facilities and technologies, and lower production and     
procurement costs.                                                              

  UST specializes in production of circuit boards which are ordered in
shorter production runs and therefore does not compete with the larger companies
in the industry who have invested in high speed production equipment capable of 
continuous production runs creating hundreds of thousands of boards.            

      Furniture Manufacturing. Through its furniture manufacturing facility in
Blythe, California, UST manufactures office partitions and associated parts for 
use in the office workstation industry. The facility is capable of producing a  
high quality panel comparable to those produced and sold by Herman Miller and   
Steelcase. UST's products are designed to be interchangeable with several       
manufacturers of office furniture.                                              

      The major market served by the UST's furniture manufacturing facility is
the replacement or aftermarket office partition market. This market is dominated
by a few large companies which offer alternatives to purchasing the higher      
priced products of Herman Miller and Steelcase. These companies offer finished  
products which are interchangeable with the more expensive products, but at a   
considerably lower price. In January 2000, UST contracted with Unisource, Inc.  
to produce their panels. This manufacturer requires approximately one-shift, out
of a possible three shifts, of the operating capabilities of the Blythe facility
and accounted for approximately 14% of UST's 2001 sales volume. UST is actively 
seeking other customers to increase the plant's output and is negotiating with  
Unisource to produce additional products, warehouse finished goods, and provide 
order fulfillment services.                                                     

      Business Strategy. The Company's strategy for UST is to establish itself
as a cost efficient contract manufacturer and outsourcing provider using the    
employment of prison labor in a variety of business sectors. To that end, the   
Company utilizes the PIE program to perform its services by using a low-cost,   
but highly motivated labor pool, in modern, clean and efficient facilities. The 
Company intends to operate the business by maintaining corporate overhead at or 
below its present level. The Company's strategy also includes the following:    

      o    Utilize existing expertise in electronics manufacturing to seek new
           business opportunities and to fully utilize all of UST's electronic
assembly facility in Lockhart, Texas;                   

    o    Provide ancillary services such as the final assembly of products
         and installation of parts associated with the primary electronics
manufacturing process;                                  

    o    Expand UST's furniture manufacturing operations by increasing its
       modular furniture production capabilities and introducing other
furniture products; and                                 

  o    Evaluate UST's ability to provide value added services in other
        markets where low cost labor without the soft costs of turnover,
          absenteeism, vacations, holidays, and employer paid benefits would
be a competitive advantage.                             

   Management believes that additional capacity can be added, beyond the
existing facilities, without significant additional corporate overhead.         

      Customers. Historically, UST has been and remains dependent upon certain
customers for a major portion of its sales. The top three customers, Dell       
Computer, Unisource Office Furniture, and Circuit Check, Inc. together accounted
for approximately 40% of UST's sales for the year ended December 31, 2001.      
Amounts due from two customers, SCI Systems and Unisource Office Furniture      
accounted for 44% of total receivables.                                         

  Suppliers and Raw Materials. The raw materials used in each of UST's
facilities are widely available from numerous suppliers. The Company does not   
anticipate any difficulty in obtaining sufficient quantity and quality of raw   
materials to satisfy the requirements of its customers.                         

      Competition. The competition in the contract manufacturing and furniture
manufacturing business consists of numerous small, regional companies and a     
significantly smaller group of large national companies. UST competes directly  

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with the smaller regional companies and avoids the markets dominated by the     
national companies. In fact, some of the largest national and international     
companies utilize UST for completion of short run production and rework tasks   
that are part of their own processes but are too small for them to complete     
efficiently. When competing with smaller regional companies, UST has a distinct 
cost advantage created by being able to provide manufacturing facilities without
having to incur the same personnel costs as companies that rely exclusively on  
free-world employees.                                                           

      Regulation of the PIE Business. Congress created the PIE Program in 1979
to encourage state and local governments to establish employment opportunities  
for prisoners that approximate private sector work opportunities and conditions.
The program is designed to place inmates in a realistic working environment, and
enable them to acquire marketable skills and work habits to increase their      
potential for successful rehabilitation and meaningful employment upon release. 
The U.S. Department of Justice's Bureau of Justice Assistance administers the   
PIE Program through its Corrections Branch.                                     

     Each certified PIE Program must be determined to meet certain statutory
and guideline requirements so as to safeguard free world labor and industry and 
to protect free enterprise. Mandatory criteria for participation in the PIE     
Program are as follows:                                                         

     o    Inmates must be paid the prevailing local wage or state or Federal
            minimum wage, whichever is greater, to protect private business from
     unfair competition that would otherwise stem from the flow of
low-cost, prison made goods into the marketplace;       

       o    Workers compensation and unemployment compensation  benefits must be
provided;                                               

o    Inmate participation in the program must be voluntary and in 
writing;                                                

     o    Organized labor and local private industry must be consulted prior
to the initiation of a new PIE industry;                

o    Participating companies must have written assurances from the
          appropriate state agency that the new PIE industry will not result
      in the displacement of workers employed prior to the program's
         implementation, does not occur in occupations in which there is a
      surplus of labor in the locality, and does not impair existing
contracts for services; and                             

       o    Deductions (not to exceed 80%) must be made from the inmates pay for
     taxes, reasonable charges for room and board, family support,
          victims compensation fund, and a mandatory savings account for the
 inmate, the proceeds of which are available upon release.

In addition, each prison is also subject to laws and regulations  
concerning the operation, management and supervision of prisoner employees,     
which affects the operation of each of the UST's facilities. The Company's PIE  
operations are also subject to all governmental workplace regulations commonly  
associated with a service or manufacturing enterprise.                          

Government Regulations and Legal Uncertainties                                  

    Investment Company Act of 1940. U.S. companies that have more than one
hundred (100) stockholders or whose shares are publicly traded in the U.S. and  
are, or hold themselves out to be, engaged primarily in the business of         
investing, reinvesting or trading of securities are regulated by the Securities 
and Exchange Commission (the "Commission" or "SEC") pursuant to the Investment  
Company Act of 1940, as amended. Investment Company Act regulations are         
inconsistent with USXX' strategy of actively managing, developing, operating and
promoting collaboration among its network of associated companies. USXX would   
not be able to operate its business as a registered investment company.         

  Management of USXX believes that because of the planned structure of
USXX's interests in its associated companies and its business strategy, USXX is 
not currently subject to regulation under the Investment Company Act. However,  
USXX cannot assure you that the present structure of its associated companies   
interests and its business strategy will preclude regulation under the          
Investment Company Act, and USXX may need to take specific actions to avoid     
regulation under the Investment Company Act that may not be in its best         
interests or consistent with its strategy. To avoid regulation under the        
Investment Company Act and related SEC rules, USXX may need to sell assets that 

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it would otherwise want to retain and may be unable to sell assets that it would
otherwise want to sell. In addition, USXX may be forced to acquire additional,  
or retain existing, income-generating or loss-generating assets which it would  
not otherwise have acquired or retained and may need to forego opportunities to 
acquire interests in companies that it believed would benefit its business. If  
USXX were forced to sell, buy or retain assets in this manner, it may be        
prevented from successfully executing its business strategy.                    

      Because gains, losses, income and asset values for technology businesses
can be highly volatile, and because future rounds of financing for our          
technology associated companies will dilute USXX's ownership interests, the     
financial analyses relevant to its status under the Investment Company Act will 
be subject to regular change. The audit committee of USXX's board of directors, 
together with USXX' management, will decide financial and other valuation issues
relevant to determining USXX' compliance with the Investment Company Act and    
related regulations.                                                            

    E-commerce Regulation and Other Legal Uncertainties. There are several
new laws and regulations that affect the Internet and e-commerce. For example,  
Congress recently enacted laws regarding online copyright infringement and the  
collection of personal information and financial data. Additionally, the Federal
government has applied old rules and regulations to this new medium in certain  
areas. E-commerce businesses are subject to the same numerous laws affecting    
interstate and international commerce in general. However, the application of   
these laws to online business is sometimes unclear and subject to litigation in 
both domestic and foreign jurisdictions.                                        

     Although there generally remains a desire by legislators and regulators
to keep the Internet as unfettered as possible with new rules and regulations,  
the Internet's popularity, increased use and its impact on consumers will       
undoubtedly foster the adoption of additional laws and regulations on a local,  
state and federal level, as well as globally. Current laws and regulations cover
issues such as the collection and use of data from website visitors and related 
privacy issues, pricing, content, copyrights, trademarks, promotions,           
distribution and quality of goods and services, registration of domain names and
use, and export and distribution of encryption technology. The enactment of     
additional laws or regulations may impede the growth of the technology industry,
which could decrease the revenues of our associated companies and place         
additional economic burdens on them.                                            

  Other specific areas of legislative and regulatory activity include:

       Taxes. Through the Internet Tax Freedom Act of 1998, Congress has enacted
a three-year moratorium, ending on October 21, 2001, on the application of      
discriminatory, multiple or special taxes by the states on Internet access or on
products and services delivered over the Internet. Congress further declared    
that there will be no federal taxes on goods, services and information sold     
exclusively over the Internet until the end of the moratorium. However, this    
moratorium does not prevent states from taxing activities or goods and services 
that the states would otherwise have the power to tax. Furthermore, the         
moratorium does not apply to some state taxes on Internet access that were in   
place before the moratorium was enacted, provided the tax was generally imposed 
and actually enforced. The moratorium also does not affect federal and state    
income taxes on the taxable income of e-commerce businesses.                    

      Business Opportunities. An amendment to the Delaware General Corporation
Law, which became effective on July 1, 2000, clarifies that a corporation has   
the power to waive in advance, in its certificate of incorporation or by action 
of its board of directors, the corporation's interest or expectations in        
business opportunities or classes or categories of business opportunities, as   
those opportunities may be defined by the corporation. These classes or         
categories of opportunities could be defined in many different ways, including  
by type of business, by who originated the business opportunity, by who has the 
interest in the business opportunity, by the period of time, or by the          
geographical location. Our Board of Directors may consider and take action as   
permitted by this new statutory provision. If we waive an opportunity in        
accordance with this provision, a director would not be required to present the 
waived opportunity to us, even if pursuing the opportunity could be in our best 
interest, and instead could present it to other businesses, including the       
director's own business.                                                        

In addition to the specific issues outlined above, other generally
applicable laws may also affect our associated companies and us. The exact      
applicability of many of these laws to Internet e-commerce is, however,         
uncertain.                                                                      

Competition                                                                     

We face intense competition to develop and acquire interests in   
technology companies from traditional venture capital firms, companies with     
business strategies similar to our own, corporate strategic investors, other    
better financed Internet incubators and other capital providers. Competitors    

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with business strategies similar to our own include publicly held CMGI, Internet
Capital Group and Safeguard Scientifics, as well as private companies, including
Idealab. In addition, we may face competition from an emerging group of online  
service providers that facilitate relationships between entrepreneurs and       
venture capitalists, such as vcapital.com and Garage.com. We also will be       
competing with corporate strategic investors that include Fortune 500 companies 
that are developing Internet strategies and Internet capabilities as well as    
investing in technology companies. Further, certain professional service firms, 
directly or through affiliated private investment funds, provide capital and    
services to technology companies that are clients. Many of our competitors have 
more experience identifying and acquiring interests in technology companies, and
have greater financial and management resources, brand name recognition and     
industry contacts than we do.                                                   

This intense competition could limit our opportunities to acquire 
interests in associated companies or force us to pay higher prices to acquire   
these interests. Further, the impact of this competition on the valuation of    
technology companies could result in lower returns. In addition, some of our    
competitors, including venture capital firms, private companies with business   
strategies similar to ours and corporate strategic investors, may have a        
competitive advantage over us because they have more flexibility than we do in  
structuring acquisitions in companies because they do not need to acquire       
majority or controlling interests in companies to avoid regulation under the    
Investment Company Act, as discussed above.                                     

Employees                                                                       

As of December 31, 2001, excluding our non-consolidated associated
companies and our discontinued operations, the company employed approximately 7 
persons in corporate and administrative functions and 99 persons in the PIE     
business. None of the Company's employees are represented by a union. We        
consider our relationships with our employees to be good.                       

Item 2.     Properties.                                                         

     U.S. Technologies leases executive office space in Washington, D.C. The
office is approximately 8,200 square feet and the lease provides for monthly    
payments of $24,000. The lease on the office expires on December 31, 2004. The  
Company has occasionally subleased some of this office space to certain         
associated companies and other entities.                                        

     Our wholly owned subsidiary, UST, operates in a minimum-security prison
in Lockhart, Texas. The lease on the Lockhart facility provides approximately   
27,800 square feet of manufacturing and office space through January 31, 2004,  
and provides an automatic three year extension unless notification has been     
given by either party at least six months prior to the expiration date of the   
current term. The amount of square footage may be increased or decreased        
depending upon the number of prisoners to be employed. UST also operates in a   
minimum-security prison at Chuckawalla Valley State Prison located in Blythe,   
California. The lease on the Blythe facility provides approximately 36,300      
square feet of manufacturing and office space through October 2006. The lease   
provides for monthly payments of $726.                                          

  The Company is also obligated under several leases and subleases for
office space in Virginia and New York that it assumed in conjunction with the   
Yazam acquisition that it currently does not occupy and has no future intended  
use for. The Company is attempting to renegotiate or terminate such leases.     

Item 3.     Legal Proceedings.                                                  

       On January 3, 2001, Vektronix S.A. de C.V. and Rodolfo Avala-Avarzagoitia
sued the Company in the 22nd Judicial District Court of Caldwell County, Texas  
for fraudulent inducement to enter a contract with UST, breach of warranty and  
breach of contract for an unspecified amount of damages. The Company has filed a
counterclaim for breach of contract and a claim on the personal guarantee of    
Rodolfo Avala-Avarzagoitia and is seeking $114,777 in actual damages and        
recovery of costs. Limited discovery has been initiated and the Company will    
vigorously contest this matter. Management does not believe the results of this 
litigation will be material to the Company.                                     

Presently, the Company is a party to two pending lawsuits involving 
Kenneth H. Smith ("Smith"), the former president, CEO and chairman of the Board 
of Directors of the Company. In February 1999, Smith resigned from USXX and     
entered into a severance agreement with the Company. In connection with his     

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severance agreement, Smith agreed to sell 3,366,152 shares of USXX stock that he
owned for $875,200. in order to pay all or a portion of the then-outstanding    
loans due from him to USXX. Additionally, Smith purchased from USXX the stock of
a wholly owned subsidiary called GWP, Inc. for a $1,234,832 purchase money      
promissory note. Smith pledged an additional 3 million shares of USXX stock as  
collateral to secure that note. In addition to the right to purchase GWP from   
USXX, Smith, was to receive $125,000 as severance. In March 1999, USXX deemed   
Smith to be in default of the purchase money promissory note, and when Smith    
failed, after proper notice, to cure the default, USXX foreclosed on the note   
and sold the 3 million shares of USXX stock that Smith had pledged. USXX applied
the sale proceeds against the outstanding amount of the note, resulting in a    
deficiency of $525,000 still owing to USXX on Smith's note related to the       
purchase of GWP. Smith then negotiated a Forbearance and Waiver Agreement with  
USXX, dated April 15, 1999, in which the Company agreed to temporarily postpone 
further collection of the deficiency and Smith agreed, among other things, to   
the amount of the deficiency, to the legality of USXX's foreclosure and sale of 
his pledged shares, and to a release of any claims he may have had against USXX 
and any of its affiliates, officers, directors or representatives.              

      USXX commenced a lawsuit against Smith on November 9, 2001, in the federal
district court in Austin, Texas. In that case, USXX seeks to reduce to judgment 
the outstanding balance of $525,000 plus interest on Smith's indebtedness to the
Company under the purchase money promissory note that he executed in connection 
with his purchase of GWP from the Company in February 1999. Additionally, Smith 
filed a lawsuit against USXX and others (including Gregory Earls, current CEO of
the Company), on November 13, 2001 in the Superior Court of Fulton County,      
Georgia. In his complaint, Smith alleges that USXX still owes him a portion of  
the $125,000 severance promised under the severance agreement. Notwithstanding  
the release of claims set forth in the April 15, 1999 Forbearance and Waiver    
Agreement, Smith has also made claims for fraud, misrepresentation, conversion, 
breach of fiduciary duty, rescission, conspiracy and civil RICO, all of which   
are based upon his contention that, in connection his February 1999 severance   
from the Company, he was misled into selling and pledging the 6,366,152 shares  
of USXX stock that he then owned. His complaint seeks compensatory damages in   
excess of $41 million, which he contends was the value of the shares of stock   
that he sold and pledged at their highest traded value between February 1999 and
the present.                                                                    

     In March 2002, the Company removed Smith's Georgia Superior Court case to
the federal district court in Atlanta, Georgia, which court then dismissed all  
of Smith's claims except his claim for additional severance payments. The       
Company disputes that additional severance payments are due, but given the      
existence of a factual dispute, could not move to dismiss that claim at the     
initial pleadings stage.                                                        

   USXX has indicated that it intends to vigorously pursue collection of
Smith's outstanding indebtedness, although we are not presently aware of any    
information regarding Smith's ability to pay. Additionally, USXX has vigorously 
defended against Smith's lawsuit against the Company. Since both lawsuits are at
the initial stages and no discovery has been conducted, we are not in a position
to be able to provide an evaluation of the likelihood of a favorable or         
unfavorable outcome or an estimate of the amount or range of potential exposure.

     From time to time the Company is subject to claims and suits that arise
in the ordinary course of its business. While it is not possible to predict the 
ultimate outcome of these matters, the Company believes that any losses         
associated with any of such matters will not have a material effect on the      
Company's business, financial condition or results of operations.               

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

During the fourth quarter ended December 31, 2001, no matters were
submitted to a vote of security holders of the Company.                         

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 PART II

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

Market Information                                                              

  The Company's Common Stock has been quoted on the OTC Bulletin Board
under the symbol "USXX" except for the period from May, 2001 until November 12, 
2001 during which it was suspended as a result of its failure to file timely the
Form 10-K for the year ending December 31, 2000. However, during that time, the 
Company's Common Stock was still traded over-the-counter.                       

The following table sets forth the high and low bid prices of the 
Company's Common Stock in the over-the-counter market for the quarter ended     
March 31, 2002 and the years ended December 31, 2001 and 2000. Prices are as    
quoted on the OTC Bulletin Board System or the over-the-counter market.         
Quotations reflect inter-dealer prices without retail mark-up, markdown or      
commissions and may not necessarily represent actual transactions.              
                                                                         Bid
                                                            High         Low

2002                                                                            
                 1st Quarter......................           $0.30       $0.09
2001                                                                            
                 4th Quarter......................           $0.35       $0.05
                 3rd Quarter......................           $0.38       $0.05
                 2nd Quarter......................           $0.55       $0.10
                 1st Quarter......................           $0.53       $0.13
2000                                                                            
                 4th Quarter......................           $0.86       $0.11
                 3rd Quarter......................           $1.22       $0.63
                 2nd Quarter......................           $2.91       $1.00
                 1st Quarter......................           $5.75       $0.15

      On March 28, 2002, the closing bid price of the Company's Common Stock, as
quoted on the OTC Bulletin Board system, was $0.20.                             

Holders of Common Stock                                                         

   As of March 31, 2002, there were 609 holders of record of the Company's
Common Stock. This number is exclusive of beneficial owners whose securities are
held in street name.                                                            

Dividends                                                                       

The Company has not declared or paid any cash dividend on its Common
Stock. The policy of the Board of Directors of the Company is to retain any     
earnings for the expansion and development of the Company's business. Future    
dividend policy and the payment of dividends, if any, will be determined by the 
Board of Directors in light of circumstances then existing, including the       
Company's earnings, financial condition and other factors deemed relevant by the
Board of Directors.                                                             

Recent Sales of Unregistered Securities                                         

 The Company has raised capital and completed acquisitions through the
offer and sale of securities that are exempt from registration under the        
Securities Act of 1933 pursuant to the exemptions from registration provided by 
Regulation D promulgated under the Securities Act, Section 4(2) of the          
Securities Act or otherwise. As follows are discussions of the sales of         
unregistered securities by the Company for the three fiscal years ended December
31, 2001:                                                                       

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Year Ended December 31, 2001                                        

On March 27, 2001, in connection with the Company's acquisition of  
Yazam.com, Inc., the Company issued 27,374 shares of Series F Preferred Stock,  
which are convertible into 27,374,000 shares of the Company's Common Stock, and 
warrants to purchase 8,000,000 shares of Company Common Stock.                  

     During 2001, the Company issued 6,512,137 shares of common stock pursuant
to subscriptions during 2000 and 2001 to purchase mandatorily convertible       
preferred stock with conversion prices of $0.76 and $0.21 per common share. USV 
Partners, LLP ("USV Partners") an affiliate of the CEO of the Company, purchased
1,857,990 shares of common stock in this offering for cash of $394,800.         

   During late 2001, the Company issued 335 shares of Series G Convertible
Junior Preferred Stock for net cash proceeds of $335,000 to various accredited  
investors. The outstanding Series G Preferred Stock is convertible into         
2,233,333 shares of the Company's Common Stock. Subsequent to December 31, 2001,
the Company issued an additional 1,921.6 Shares of Series G Preferred Stock for 
net proceeds of $1,921,600, which is convertible into 12,810,667 shares of the  
Company's Common Stock. Greg Earls, the CEO of the Company, purchased 1,000.5   
shares of Series G Stock for $1,000,500.                                        

Year Ended December 31, 2000                                        

      On April 12, 2000, the Company received funds for 4,534 shares of Series C
Stock for an aggregate of $4,534,000. Net of issuance costs of $196,806,        
proceeds of the offering were $4,337,914. The Series C Stock converted into an  
aggregate of 3,126,895 shares of Common Stock in August 2001. Of these shares,  
USV Partners purchased 2,750 shares for $2,750,000.                             

On April 12, 2000, the Company raised $1,250,000 through the sale of
125,000 shares of Series A Preferred Stock, which are convertible into          
10,245,900 shares of Common Stock to USV Partners. Upon the conversion of all   
Series A Preferred Stock held by USV Partners in November 2001, USV received    
39,641,011 shares of Common Stock.                                              

  During the fiscal year ended December 31, 2000, the Company received a
total of approximately $5,784,000 in connection with the private placement of   
Series A Preferred Stock and Series C Preferred Stock.                          

In April 2000 in conjunction with the E2Enet Acquisition, E2Enet's  
stockholders were issued shares of Series B Preferred Stock, which have a total 
liquidation preference aggregating $11,200,000. Upon their mandatory conversion 
in August 2001, these shares of Series B Preferred Stock were converted into    
approximately 56,000,000 shares of Common Stock.                                

      In December, 2000, the Company entered into an agreement with Buyline.net,
Inc. ("Buyline"), one of the Company's associated companies, and Accenture      
whereby the Company issued to Accenture 1,552.5 shares of the Company's Series D
Mandatorily Convertible Preferred Stock ("Series D Preferred"), in full         
satisfaction of amounts owed by Buyline to Accenture. The Series D Preferred    
were converted into 1,552,500 shares of Common Stock of the Company in August   
2001.                                                                           

Year Ended December 31, 1999                                        

   Commencing in July 1998, and continuing through May 1999, the Company
received $5,000,000 under an agreement with USV Partners which provided that the
Company would issue to USV Partners shares of its Series A Preferred Stock      
pursuant to Regulation "D" promulgated under the Securities Act of 1933 and     
warrants to purchase 500,000 shares of Common Stock. Of the $5,000,000, amounts 
received during 1999 and 1998 were $1,300,000 and $3,700,000, respectively. The 
shares of Series A Preferred Stock and the warrants were issued to USV Partners 
in May 1999. In November 1999, the terms of the Series A Preferred Stock were   
amended to cancel the right of the holders of the Series A Preferred Stock to   
receive an annual dividend and to change the conversion price for the Series A  
Preferred Stock to $0.122.                                                      

Other Items                                                         

    On March 27, 2001, the Company and holders of Yazam Preferred securities
and Yazam Warrants ("Yazam Holders") entered into a Registration Rights         
Agreement ("the Yazam Registration Rights Agreement"). Under the Yazam          
Registration Rights Agreement, the Yazam Holders have the right to compel the   
Company to register their respective shares at the Company's expense. The Yazam 
Holders also have unlimited registration rights to be combined, at the Company's

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expense, with certain registrations of any equity securities by the Company     
("piggyback rights"), subject to restrictions which an underwriter might impose 
for the sale of the shares. This Yazam Registration Rights Agreement expires by 
its terms March 27, 2007.                                                       

     The Company, USV Partners, Northwood Capital, Northwood Ventures, Ledecky
and other holders of the Company's Series B and C preferred stock, entered into 
an agreement regarding registration rights for the Series A, Series B, and      
Series C preferred stock and Common Stock into which they are to be converted.  
Collectively, the stockholders party to the agreement have the right on three   
occasions to compel the Company to register their respective shares at the      
expense of the Company and rights on other occasions to have such registration  
effected at the expense of the holders. These stockholders also have unlimited  
registration rights to be combined, at the Company's expense, with certain      
registrations of any equity securities by the Company piggyback rights, subject 
to restrictions which might be imposed by an underwriter for the sale of such   
shares.                                                                         

     During the years ended December 31, 2001 and 2000, the Company recognized
a non-cash expense of approximately $4.6 million and $14.8 million,             
respectively, as a result of deemed beneficial conversion features of the Series
F Preferred Stock issued in 2001 and the Series A, Series B and Series C        
Preferred Stock issued in 2000. The beneficial conversion amount was calculated 
for each respective preferred series as the excess of the market price of the   
Company's Common Stock on the measurement date over the conversion price of the 
respective preferred series multiplied by the number of the Company's common    
shares to be issued on conversion of each preferred series.                     

   The following table presents the dilution of the Company's Common Stock
that will result upon the conversion of the Company's various convertible       
preferred shares that are outstanding at December 31, 2001:                     

                                                                [Download Table]

                                                                          
Common Stock outstanding at December 31, 2001............     137,339,868 
Conversion of Series A Preferred Stock...................      10,147,468 
Conversion of Series F Preferred Stock...................      27,374,000 
Conversion of Series G Preferred Stock...................       2,233,333 
                                                              ----------- 
                                                              177,094,670*
                                                              =========== 

*     Does not include shares that would be issuable upon exercise of stock     
options and warrants.                                               

Item 6.     Management's Discussion and Analysis or Plan of Operation.          

The following Management's Discussion and Analysis contains       
forward-looking statements that involve risks and uncertainties. Our actual     
results could differ materially from those anticipated in the forward-looking   
statements as a result of certain factors, including those set forth elsewhere  
in this form 10-KSB and the risks discussed in other SEC filings. The following 
discussion should be read in conjunction with our audited Consolidated Financial
Statements and related Notes thereto included elsewhere in this Form 10-KSB.    

General                                                                         

    We are a company actively engaged in technology and e-commerce through
our ownership interests in our associated companies. As of December 31, 2001, we
owned interests in 20 technology and e-commerce companies that we refer to as   
our associated companies. Although we refer to the companies in which we have   
acquired an equity ownership interest as our "associated companies", we do not  
act as an agent or legal representative for any of our associated companies, and
we do not have the power or authority to legally bind any of our associated     
companies, and we do not have the types of liabilities in relation to our       
associated companies that a majority owner of a company would have.             

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Results of Operations                                                           

     The following table sets forth the Company's results of operations on a
segment basis for the periods indicated:                                        

                                                                [Download Table]

                                                Years ended December 31,   
                                                   2001         2000       
                                                   ----         ----       
Net Loss                                                                   
                                                                           
  Parent Company............................... $(8,305,240)  $(17,686,011)
  Associated Companies.........................  (6,280,132)   (15,080,631)
  UST Industries, Inc..........................    (776,494)      (642,105)
  Discontinued Operations......................    (244,086)           --  
                                                ------------  ------------ 
Total Net Loss................................. $(15,605,952) $(33,408,747)
                                                ============= =============

Parent Company Operations                                                       

       The parent company operations mainly consist of corporate administration,
investment strategy management and capital raising activities. The discussion of
the results of operations of the parent company segment is set forth below:     

                                                                [Download Table]

                                                Years ended December 31,  
                                                   2001         2000      
                                                   ----         ----      
Revenues                                                                  
                                                                          
  Consulting revenues.......................... $        --    $  21,000  
                                                -----------     --------  
Total revenues.................................          --       21,000  
                                                -----------    ---------  

Operating Costs and Expenses                                              
  General and administrative expense...........   3,529,985    3,126,121  
  Impairment of long-lived assets .............     113,041           --  
                                                -----------    ---------  
Total operating costs and expenses.............   3,643,026    3,126,121  
                                                -----------    ---------  
Loss from operations...........................  (3,643,026)  (3,105,121) 
                                                ------------  ----------  

Other Income (Expense)                                                    
  Interest, net................................     (65,451)       54,182 
  Other, net...................................      (1,253)      122,617 
                                                ------------   ---------- 
Net Loss.......................................  (3,709,730)   (2,928,361)
Deemed dividends...............................  (4,595,510)  (14,757,650)
                                                ------------ ------------ 
Net Loss Applicable to Common Shareholders..... $(8,305,240) $(17,686,011)
                                                ============  ============

       The Company recorded general and administrative expenses of approximately
$3.5 million in 2001 as compared to approximately $3.1 million in 2000. The     
major components of the expense for the year ended December 31, 2001 were $1.8  
million of legal and accounting expenses incurred in conjunction with the       
Company's acquisition of Yazam in March 2001 and other legal issues related to  
litigation and SEC compliance. During 2000, the Company relocated its corporate 
headquarters in Washington, DC. This was done to accommodate staff increases    
necessary to manage its associated companies, which were acquired during 2000   
and 2001. Company management is committed to aggressively monitoring the        
performance of its associated companies to ensure that its return on investments
is maximized and felt that the increased expenses were required to accomplish   
this goal.                                                                      

During the year ended December 31, 2001, the Company recognized an
impairment of $113,041 related to the write-off of the remaining book value of  
certain furniture, fixtures, computer equipment and leasehold improvements.     
There was no comparable expense in the year ended December 31, 2000.            

       During the years ended December 31, 2001 and 2000, the Company recognized
a non-cash expense of $4,595,510 and $14,757,650, respectively, as a result of  
deemed beneficial conversion features of the Series A, Series B, Series C and   

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Series F Preferred Stock. The beneficial conversion amount was calculated for   
each respective preferred series as the excess of the market price of the       
Company's Common Stock on the measurement date over the conversion price of the 
Series A, Series B, Series C and Series F Preferred Stock times the number of   
the Company's common shares to be issued on conversion of each preferred series.

  At December 31, 2001, the Company had net operating loss carryforwards
("NOL's")of approximately $33,000,000 that expire in various years through 2017 
and future tax benefits of approximately $24,000,000. These include NOL's and   
future benefits resulting from the acquisitions of E2E and Yazam. Under Section 
382 of the Internal Revenue Code, a change in ownership, as defined, of over 50%
of the holdings of the largest shareholders results in a limitation on the      
availability of NOL's. During the last several years there have been a number of
changes in capital structure, one or more of which may have been a "Section 382 
change of ownership". The analysis is complex and subject to review by the      
Internal Revenue Service. The future deductions from impairment losses would    
also be similarly limited. Accordingly, while management believes that          
approximately one half of the tax benefits indicated above are available to     
offset future taxable income, there is a Section 382 limitation.                

Associated Company Operations                                                   

    The technology company operations consist of the results of associated
companies accounted for by the consolidation, equity or cost method and the     
results of the former E2Enet and Yazam entities that manage the associated      
companies. The discussion of the results of operations of the technology company
segment is set forth below:                                                     

                                                                [Download Table]

                                                Years ended December 31,   
                                                   2001         2000       
                                                   ----         ----       
Revenues                                                                   
                                                                           
  Product sales................................ $        --     $      --  
                                                -----------     ---------  
Total revenues.................................          --            --  
                                                -----------     ---------  

Operating Costs and Expenses                                               
  General and administrative expense...........   2,245,440      2,843,221 
  Impairment of long-lived assets .............   3,989,736     12,304,800 
                                                -----------     ---------- 
Total operating costs and expenses.............   6,235,176     15,148,021 
                                                -----------    ----------- 
Loss from operations...........................  (6,235,176)   (15,148,021)
                                                ------------   ----------- 

Other Income (Expense)                                                     
  Interest, net................................      19,584            --  
  Equity in loss of associated companies.......    (394,558)      (640,350)
  Other, net...................................     330,018            --  
                                                -----------      --------- 
Net loss before share of minority interest                                 
 in loss of subsidiary.........................  (6,280,132)   (15,788,371)
Minority interest in loss of subsidiary........          --        707,740 
                                                -----------   ------------ 
Net Loss....................................... $(6,280,132)  $(15,080,631)
                                                ============  =============

      During the year ended December 31, 2001, the Company recorded an expense
of $3,989,736 resulting from the impairment of certain assets associated with   
the acquired portfolios of E2Enet and Yazam. The impairment included $870,000 on
its investment in OneMade, $506,000 on its investment in PromiseMark, $427,000  
on a write-down of the intangible intellectual property of Xi Software, $363,000
on a write-down on its notes to Selis, $355,000 on a write-off of its remaining 
investment in Portris due to its ceasing of operations and $1,469,000 due to a  
reduction of the estimated fair market value of the Company's investment in its 
remaining associated companies. During the year ended December 31, 2000, the    
Company recorded an expense of $12,304,800 resulting from the impairment of     
certain assets associated with E2Enet. The impairment included approximately;   
$3,014,400 due to the bankruptcy of Urban Box Office, $3,866,000 due to the 100%
write-off of goodwill associated with the April 2000 acquisition of E2Enet,     
$1,817,000 due to the ceasing of Buyline's operations and $3,607,400 due to a   
reduction of the estimated fair market value of the Company's investment in its 
remaining associated companies.                                                 

     During the years ended December 31, 2000 and 2001, the Company recorded
an expense of $394,558 and $640,350, respectively, representing the Company's   
share of the losses of certain associated companies acquired from E2Enet and    

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Yazam that are carried on the equity basis. Management does not expect to record
continuing expenses during 2002 as all associated companies are now carried on  
the cost basis.                                                                 

 During the year ended December 31, 2001, the Company recorded other
income of $330,018, which was primarily related to a non-cash gain on the sale  
of its investment in Buyline in June 2001 of $640,700 offset by approximately   
$348,000 of expenses related to the write-off of Yazam-Israel assets and        
reserves for lease termination costs.                                           

       During the year ended December 31, 2000, the Company recorded a reduction
of $707,740 in its net loss due to the portion allocable to the minority        
ownership interest in the Company's consolidated subsidiary, Buyline. There was 
no comparable reduction of expense recorded during the year ended December 31,  
2001 as the Company's interest in Buyline was sold in June 2001.                

UST Industries Operations                                                       

     UST Industries operations consist of the manufacturing operators of the
Company and its prison-based businesses. The discussion of the results of       
operations of the UST Industries segment is set forth below:                    

                                                                [Download Table]

                                                 Years ended December 31,
                                                   2001         2000     
                                                   ----         ----     
Revenues                                                                 
                                                                         
  Product sales................................ $ 2,246,766   $2,671,378 
                                                -----------   ---------- 
Total revenues.................................   2,246,766    2,671,378 
                                                -----------   ---------- 

Operating Costs and Expenses                                             
  Cost of sales................................   2,295,517    2,902,444 
  Selling expense..............................      56,792       66,354 
  General and administrative expense...........     537,398      273,171 
Impairment of long-lived assets ...............     147,169           -- 
                                                -----------    --------- 
Total operating costs and expenses.............   3,036,876    3,241,969 
                                                -----------    --------- 
Loss from operations...........................    (790,110)    (570,591)
                                                ------------   --------- 

Other Income (Expense)                                                   
  Interest, net................................          --     (19,799) 
  Other, net...................................      13,616     (51,715) 
                                                -----------   ---------- 
Net Loss....................................... $  (776,494)  $(642,105) 
                                                ============  =========  

       Sales of the Company's electronics manufacturing operations for 2001 were
approximately $1,895,000 resulting in a decrease of 8.2 % compared to 2000.     
Management's efforts to increase sales further in 2001 were adversely effected  
by quality problems with existing electronics products, which reduced reorders  
for 2001 and impaired the ability to attract new customers. The quality         
problems, relating to training on manual electronic assembly operations have    
been corrected by more extensive supervision of new employees and increased     
emphasis on quality control. There were no significant changes in the customer  
mix in electronics manufacturing operations for 2001 versus 2000. Management    
continues to solicit new customers and encourage additional orders from existing
customers and expects these efforts to be successful.                           

     Sales of the Company's furniture manufacturing operations for 2001 were
approximately $352,000 resulting in a decrease of 32.6% compared to 2000.       
Management is attempting to locate new customers for its furniture manufacturing
operations, however due to the specialized nature of the facilities             
manufacturing equipment, primarily for planning wooden products, the universe of
potential customers is limited.                                                 

      Cost of sales, in the amount of $2,295,517, decreased as a percentage of
net sales to 102% for the year ended December 31, 2001 from $2,902,444, which   
represented 109% of net sales, for the year ended December 31, 2000. The        
decrease in the cost of sales percentage is primarily due to Lockhart's change  
of customer mix resulting in the use of more customer supplied materials and    
consequently reducing cost of sales as a percent of sales.                      

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     Gross margin as a percentage of net sales has increased from a negative
8.6% during 2000 to a negative 2.2% in 2001. While the Company still is         
experiencing negative gross margins on the manufacturing operations,            
improvements have been made in controlling labor and other overhead costs that  
have resulting in slight improvement in 2001. Management continues to solicit   
customers with products which have longer production runs, but frequently longer
runs consist of smaller homogeneous circuit boards which go to facilities       
equipped for high speed processing versus the Company's facility which is better
suited to larger circuit boards which require more hand assembly.               

    Selling expenses in the amount of $56,792 representing 3% of net sales
during the year ended December 31, 2001 compared to $66,354 representing 2% of  
net sales for the year ended December 31, 2000. The increase in the selling     
expenses percentage is primarily due to the increased use of outside commission 
sales personnel.                                                                

     General and administrative expenses totaled $537,398 for the year ended
December 31, 2001 representing 24% of net sales, compared to $273,171           
representing 10% of net sales for the year ended December 31, 2000. Included in 
general and administrative expense for the year ended December 31, 2001 were    
legal expenses and settlements of $122,000 related to certain litigation and the
write-off of a bad debt of approximately $64,000.                               

       The Company recorded and impairment expense of $147,169 in the year ended
December 31, 2001 mainly related to the write-off of fixed assets at its Utah   
and Lockhart facilities of approximately $97,000 and the write-off of obsolete  
inventory of approximately $50,000.                                             

Liquidity and Capital Resources                                                 

During the years ended December 31, 2001 and 2000, the Company  
experienced negative operating cash flows of $6,212,740 and $5,632,756,         
respectively. Negative cash flows from operations resulted principally from     
operating losses incurred during these years. The primary operating uses of cash
during 2001 were to fund net losses of $10,766,356, net of non-cash items such  
as losses from impairment of assets of $4,249,946, depreciation of $227,320, and
equity in the losses of associated companies of $394,558. Net cash used in 2001 
operating activities was unfavorably impacted by a decrease in accrued expenses 
mainly related to the payment of $2,000,000 in April 2001 related               
to the E2Enet put agreement. The primary operating uses of cash during 2000 were
to fund net losses of $18,651,097, net of non-cash items such as losses from    
impairment of assets of $12,304,800, depreciation of $1,750,927, non-cash       
expense of stock option issuance of $746,614, and equity in the losses of       
associated companies of $640,350. Net cash used in 2000 operating activities was
unfavorably impacted by decreases of $703,979 and $ 1,057,661 in accounts       
payable and accrued expenses, respectively, and minority interest in losses of a
subsidiary of $707,740.                                                         

 During the year ended December 31, 2001, cash provided by investing
activities was $3,896,314 and was largely related to the $6,134,031 net         
cash acquired in the acquisition of Yazam and offset by $1,463,961 used for     
investments in associated companies and $993,771 for increases in notes         
receivable from associated companies. During the year ended December 31, 2000,  
investing activities used a net amount of $2,043,750, consisting primarily of   
investments of $972,339 in associated companies and increases in notes          
receivables from associated companies of $938,364.                              

     Cash provided by financing activities of $2,404,848 and $7,673,165 during
2001 and 2000, respectively, were primarily the net proceeds from the sale of   
preferred stock. During the year ended December 31, 2001, the Company raised    
$1,188,700 by the sale of additional shares of its Series E Preferred Stock and 
shares of its Series G Preferred Stock. During the year ended December 31, 2000,
the Company raised $5,784,000 by the sale of $1,250,000 of additional shares of 
its Series A Preferred Stock to USV Partners and $4,534,000 of its newly created
Series C Preferred Stock to accredited investors. Of the 4,534 shares of Series 
C Preferred issued, USV Partners purchased 2,725 shares for $2,725,000. The     
proceeds of these offerings were used primarily to finance additional           
investments in new and existing technology and Internet businesses the payment  
of costs incurred and liabilities assumed in connection with the E2Enet         
Acquisition and related business transactions and ongoing working capital needs.
Additionally, the Company received loan proceeds of $22.0 million on a          
short-term note that was used to pay the cash portion of the Yazam acquisition  
consideration. The note was paid back out of the cash acquired in the Yazam     
acquisition.                                                                    

    The Series F Stock issued in the Yazam Acquisition is convertible into
27,374,000 shares of Common Stock of the Company. In conjunction with agreements
entered into by the Company and certain Series F stockholders, these            

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stockholders may require the Company to repurchase their shares of Series F     
Stock on September 30, 2002 for $300 per share or a total of $5,383,719. The    
remaining Series F stockholders can require the Company to repurchase their     
shares of Series F Stock for a price per share of the average price of Company  
Common Stock as reported on the OTC BB (or other applicable nationally          
recognized market quotation system) for the 20 trading days prior to the date of
the request multiplied by 1,000, but not less than $100 per share of Series F   
Stock (or $0.10 per common share) or a minimum of $942,827. Because of these    
repurchase options, the redemption value of of the Series F Convertible         
Preferred Stock will not be included in the Company's stockholders' equity.     

     The Company cannot determine whether the holders of Series F Stock will
require the repurchase or with certainty whether the average price per share    
will exceed $0.10 in these circumstances and therefore cannot with certainty    
estimate the maximum financial obligation to repurchase the Series F Convertible
Preferred Stock. Currently, the Company is exploring several alternatives with  
regard to its obligations under the repurchase obligation including negotiating 
with Series F stockholders to amend or waive the repurchase obligation. However,
if the Company is required to fund its obligation to repurchase Series F Stock, 
it may have to raise additional funds to do so and there can be no assurance    
that the Company will be able to raise such additional funds.                   

    Historically, the capital the Company needed, both for working capital
and to pursue acquisition opportunities, has exceeded the Company's cash flows  
from operations. These shortfalls have been met by the Company's ability to     
raise capital through equity transactions involving the Company's convertible   
preferred stock. The Company's independent certified public accountants have    
raised this matter in their Report on the Consolidated Financial Statements as  
contributing to uncertainty over the Company's ability to continue as a going   
concern. The Company's ability to continue as a going concern depends on its    
ability to raise capital in the next twelve months. Current economic and        
business conditions have created a difficult environment in which to raise      
capital. The Company's ability to execute its business plan is, and its ability 
to continue as a going concern may be, dependant on its ability to raise        
capital. See, "BUSINESS - Overview," "SAFE HARBOR STATEMENT UNDER THE PRIVATE   
SECURITIES LITIGATION REFORM ACT," "REPORT OF INDEPENDENT CERTIFIED PUBLIC      
ACCOUNTANTS" and "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Note 2.          

Management expects that additional funds will be invested in new  
and existing associated companies during 2002. The Company is committed to      
providing adequate capital to UST's manufacturing operations to improve         
operations, increase sales and improve profitability. The sources of funds to   
cover these investments and to provide the Company's working capital will come  
from operations, sales of the Company's preferred stock and possible sale of    
investments in associated companies.                                            

   The Company's ability to support its business objectives is dependent
upon its ability to generate cash flow from operations, complete the development
of its capital raising operations and attract investors to its equity offerings.
While there is no assurance that these objectives can be attained, the Company  
believes there is a reasonable expectation of achieving these goals. Should the 
Company be unable to achieve its objectives and successfully execute its        
business plan, the Company may be required to significantly curtail its         
acquisition and investment activities.                                          

Critical Accounting Policies                                                    

      The Company carries its investments in associated companies at cost, as it
does not believe that it has a significant degree of influence over its         
investees. The cost amounts are written down, where appropriate for impairment. 
The impairment analysis takes into account factors such as business plan        
development, analysis of financial and operating data, ability to attract       
additional investment capital, retention of key personnel, valuation of         
additional investments from other investors and other factors. Charges for      
impairment were approximately, $4,250,000 and $12,305,000 for the years ended   
December 31, 2001 and 2000, respectively.                                       

Effect of Inflation                                                             

  Inflation has not had a material impact on the Company's operations.

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New Accounting Pronouncements                                                   

   In June 1998, the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for   
Derivative Instruments and Hedging Activities", which requires that all         
derivative financial instruments be recognized as either assets or liabilities  
in the balance sheet. SFAS No. 133, which was effective for the first quarter of
2001, has not had a material impact on the Company's results of operations,     
financial position or cash flows.                                               

    In July 2001, FASB issued SFAS No. 141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business 
combinations initiated after June 30, 2001 to be accounted for using the        
purchase method of accounting, and broadens the criteria for recording          
intangible assets separate from goodwill. SFAS No. 142 requires the use of a    
non-amortization approach to account for purchased goodwill and certain         
intangibles, effective January 1, 2002. The Company does not believe that the   
adoption of these pronouncements will have a material impact on its financial   
statements.                                                                     

    FASB also recently issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" and SFAS No. 144, "Accounting for the Impairment or Disposal of    
Long-Lived Assets." SFAS No. 143 requires the recognition of a liability for the
estimated cost of disposal as part of the initial cost of a long-lived asset.   
SFAS No. 144 supersedes SFAS No. 121 to supply a single accounting approach for 
measuring impairment of long-lived assets, including segment of a business      
accounted for as a discontinued operation or those to be sold or disposed of    
other than by sale. The Company believes that adopting these pronouncements on  
its financial statements will not have a material impact on its financial       
statements.                                                                     

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

Certain statements in this Annual Report on Form 10-KSB contain   
"forward-looking statements" within the meaning of the Private Securities       
Litigation Reform Act of 1995, which statements can generally be identified by  
use of forward-looking terminology, such as "may," "will," "expect," "estimate,"
"anticipate," "believe," "target," "plan," "project," or "continue" or the      
negatives thereof or other variations thereon or similar terminology, and are   
made on the basis of management's plans and current analyses of the Company, its
business and the industry as a whole. These forward-looking statements are      
subject to risks and uncertainties, including, but not limited to, economic     
conditions, competition, interest rate sensitivity and exposure to regulatory   
and legislative changes. Current economic and business conditions have created a
difficult environment in which to raise capital. The Company's ability to       
execute its business plan is, and its ability to continue as a going concern may
be, dependant on its ability to raise capital. The above factors, in some cases,
have affected, and in the future could affect, the Company's financial          
performance and could cause actual results for 2002 and beyond to differ        
materially from those expressed or implied in such forward-looking statements,  
even if experience or future changes make it clear that any projected results   
expressed or implied therein will not be realized.                              

  This Form 10-KSB also contains forward-looking statements concerning
acquisitions and investments, and prospects for acquisitions and investments.   
The Company cautions that the actual developments and results of the Company's  
acquisitions and investments may differ from its expectations. There can be no  
assurance that the conditions necessary to completing any acquisition,          
investment or related financing transaction will be satisfied, or that any such 
prospective event will occur. Additional investments by the Company or an       
unrelated person in any of the Company's associated companies provide no        
assurance that such associated company will succeed or that the Company's       
investments will be recovered or profitable. The Company's assets and           
operations, including results of operations, would be affected materially by the
extent to which the Company and the Company's associated companies continue to  
have access to financing sources on reasonable terms in order to pursue its and 
their business plans, by the success or failure of the business plans of the    
Company, and the Company's associated companies, by economic conditions         
generally and particularly in the developing technology market, by competition  
and technological changes in the Company's and the Company's associated         
companies industries and businesses, and by the results of the Company's and the
Company's associated companies operations if and when operating. In addition,   
the occurrence of any of the foregoing events or the failure of any of the      
foregoing events to occur would materially affect the Company's assets,         
operations and results of operations. See, "BUSINESS - Overview," "MANAGEMENT'S 
DISCUSSION AND ANALYSIS - Liquidity and Capital Resources," "REPORT OF          
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS" and "NOTES TO CONSOLIDATED FINANCIAL  
STATEMENTS - Note 2.                                                            

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Item 6a.    Quantitative and Qualitative Disclosures about Market Risk.         

   Interest Rate Risk. The Company presently has no derivative financial
instruments. However, the carrying value of other financial instruments, such as
accounts receivable, notes receivable, accounts payable and notes payable       
approximate fair value because of their short-term nature. During the years     
ended December 31, 2001 and 2000, the Company had a line of credit whereby      
interest was based on the prime rate and exposed the Company to interest rate   
risk in the event that the prime rate increased and the Company had outstanding 
balances under the line of credit. The line of credit was retired as of June 30,
2001.                                                                           

      Impairment Risk. At December 31, 2001, we held ownership interests in 20
associated companies that were not publicly traded. We assess the net realizable
value of these associated companies on a regular basis to determine if we have  
incurred any other than temporary decline in the value of our investment. For   
the year ended December 31, 2001, we incurred approximately $4,250,000 in       
impairment charges, related mainly to our investment in associated companies. We
may incur additional impairment charges in future periods.                      

    Foreign Exchange Risk. Because we have interests in companies that are
domiciled outside the United States, we are subject to foreign currency risk. To
the extent that we maintain deposits in any country outside the United States,  
we will be subject to changes in the relative values of the dollar and the      
currency of the associated company.                                             

Item 7.     Financial Statements and Supplementary Data.                        

      The following Consolidated Financial Statements, and the related Notes
thereto of U.S. Technologies Inc. and the Report of Independent Certified       
Public Accountants are set forth on pages F-1 through F-28 and are filed as a   
part of this Form 10-KSB.                                                       

Report of Independent Certified Public Accountant.......................... F-1 
Consolidated Balance Sheets -- December 31, 2001 and December 31, 2000..... F-2 
Consolidated Statements of Operations -- Years ended December 31, 2001 and      
December 31, 2000 ........................................................ F-4
Consolidated Statements of Stockholder's Equity -- Years ended December 31,     
2001 and December 31, 2000 ............................................... F-5
Consolidated Statements of Cash Flows -- Years ended December 31, 2001          
 and December 31, 2000 .................................................... F-10
Notes to Consolidated Financial Statements................................. F-12

Item 8.     Changes in and Disagreements with Accountants on Accounting and     
Financial Disclosure.                                   

a. Change in Certified Public Accountants                           

     The accounting firm BDO Seidman, L.L.P. ("BDO Seidman") was the Company's
independent certified public accountant for the fiscal year ended December 31,  
2000 and had served in that capacity since the year ended December 31, 1997. In 
a decision approved by the Audit Committee of the Company's Board of Directors, 
BDO Seidman was dismissed as the Company's independent public accountants on    
August 16, 2001. BDO Seidman's report on the Company's financial statements for 
the years ended December 31, 1999 and 2000 contained no adverse opinions or     
disclaimer of opinions, and was not qualified as to audit scope, accounting     
principles or uncertainties, except that BDO Seidman included an explanatory    
paragraph that discusses factors that raise substantial doubt about the         
Company's ability to continue as a going concern in its report on the Company's 
financial statements for the year ended December 31, 2000. During the years     
ended December 31, 1999 and 2000, and through August 16, 2001, the Company      
believes it had no disagreements with its independent certified public          
accountants on any matters of accounting principles or practices, financial     
statement disclosure or auditing scope or procedure. The Company requested that 
BDO Seidman furnish it with a letter addressed to the Securities and Exchange   
Commission stating that they agree with the foregoing; and providing any        
appropriate disclosure pursuant to Regulation S-K, Item 304(a)(1)(v). On        
September 6, 2001, BDO Seidman provided the Company a letter, addressed to the  
Commission, stating that it agreed with the Company's statements except for     
certain internal control issues and provided the information required by the    
Commission's Regulation S-K, Item 304(a)(1)(v). The Company confirms that BDO   
Seidman advised it of the Item 304(a)(1)(v) information as so described in their
letter. A copy of the BDO Seidman letter was attached to the Form 8-K/A as filed
on August 16, 2001 and is incorporated by reference herein.                     

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b. New Independent Certified Public Accountants                     

     The accounting firm, Radin Glass & Co., LLP ("Radin, Glass"), was engaged
for the purpose of reviewing, and reviewed, the Registrant's unaudited interim  
financial statements for the quarters ended June 30, 2001 and September 30,     
2001, included in the Company's Form 10-Q's for the related periods. Radin,     
Glass performed the Company's post-acquisition audit of Yazam.com Inc. for the  
years ended December 31, 1999 and 2000 that were previously filed with the      
Commission. Radin, Glass was also engaged to be its independent public          
accountants to audit the Registrant's financial statements for the year ended   
December 31, 2001 and 2000.                                                     

PART III

Item 9.     Directors  and  Executive  Officers, Promoters and Control Persons; 
Compliance with Section 16(a) of the Exchange Act.      

      We incorporate by reference the information contained under the captions
"Election of Directors ", "Section 16(a) Beneficial Ownership Reporting         
Compliance" and "Executive Officers" in our Definitive Proxy Statement relative 
to our annual meeting of stockholders, to be filed within 120 days after the end
of the year covered by this Form 10-KSB Report pursuant to Regulation 14A under 
the Securities Exchange Act of 1934, as amended.                                

Item 10.    Executive Compensation.                                             

      We incorporate by reference the information contained under the captions
"Executive Compensation", "Compensation Tables" and "Other Forms of             
Compensation" in our Definitive Proxy Statement relative to our annual meeting  
of stockholders, to be filed within 120 days after the end of the year covered  
by this Form 10-KSB Report pursuant to Regulation 14A under the Securities      
Exchange Act of 1934, as amended.                                               

Item 11.    Security Ownership of Certain Beneficial Owners and Management.     

      We incorporate by reference the information contained under the captions
"Security Ownership of Certain Beneficial Owners and Directors and Officers" in 
our Definitive Proxy Statement relative to our annual meeting of stockholders,  
to be filed within 120 days after the end of the year covered by this Form      
10-KSB Report pursuant to Regulation 14A under the Securities Exchange Act of   
1934, as amended.                                                               

Item 12.    Certain Relationships and Related Transactions.                     

      We incorporate by reference the information contained under the captions
"Certain Relationships and Related Transactions" in our Definitive Proxy        
Statement relative to our annual meeting of stockholders, to be filed within 120
days after the end of the year covered by this Form 10-KSB Report pursuant to   
Regulation 14A under the Securities Exchange Act of 1934, as amended.           

Item 13.          Exhibits and Reports on Form 8-K.                             

(a)   Exhibits:                                                                 

   The exhibits required by Item 601 of Regulation S-B are filed herewith.
(See Index of Exhibits)                                             

(b)   Reports on Form 8-K filed during the last quarter of the year ended       
December 31, 2001:                                                  

(1)      On September 6, 2001, the Company filed a Current Report on Form 8-K/A 
       to report under Item 4 additional disclosure regarding changes to the
Company's Certifying Accountant.                              

(2)      On November 20, 2001, the Company filed a Current Report on Form 8-K to
      report under Item 4 the appointment of Radin, Glass & Co., LLP to be
its independent public accountants.                           

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, U.S. Technologies Inc. has duly caused this report to be  
signed on its behalf by the undersigned, thereunto duly authorized, on the      
15th day of April, 2002.                                                        

                                                        U.S. TECHNOLOGIES INC.

                                                      By:/s/ GREGORY EARLS
                                                       ---------------------
                                                             Gregory Earls
                                                            Chairman and
                                                         Chief Executive Officer

    Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of U.S.    
Technologies Inc. and in the capacities indicated.                              

      Signature                        Title                            Date

/s/  GREGORY EARLS      Chief Executive Officer and Director      April 15, 2002
------------------------                                                        
Gregory Earls                                                         

/s/  ARTHUR J. MAXWELL                  Director                  April 15, 2002
------------------------                                                        
Arthur J. Maxwell                                                         

/s/  GEORGE J. MITCHELL                 Director                  April 15, 2002
------------------------                                                        
George J. Mitchell                                                    

/s/  JAMES V. WARREN                   Director                   April 15, 2002
------------------------                                                        
James V. Warren                                                       

/s/  WILLIAM H. WEBSTER                 Director                  April 15, 2002
------------------------                                                        
William H. Webster                                                    

/s/  MICHAEL R. SKOFF              Chief Financial Officer        April 15, 2002
------------------------                                                        
Michael R. Skoff           Principal Accounting Officer               

*By: /s/ GREGORY EARLS
 ---------------------
 Gregory Earls
Attorney-in-fact

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    REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors                                                              
U.S. Technologies Inc.                                                          
Washington, D.C.                                                                

We have audited the accompanying consolidated balance sheets of U.S.            
Technologies Inc. as of December 31, 2001 and 2000 and the related consolidated 
statements of operations, stockholders' equity (capital deficit), and cash flows
for each of the two years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and       
perform the audit to obtain reasonable assurance about whether the financial    
statements and schedule are free of material misstatement. An audit includes    
examining, on a test basis, evidence supporting the amounts and disclosures in  
the financial statements and schedule. An audit also includes assessing the     
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements and schedule.
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of U.S. Technologies   
Inc. at December 31, 2001 and 2000, and the results of its operations and its   
cash flows for each of the two years in the period ended December 31, 2001 in   
conformity with accounting principles generally accepted in the United States of
America.                                                                        

The accompanying consolidated financial statements have been prepared assuming  
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses    
from operations and has a working capital and net capital deficiency that raise 
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial    
statements do not include any adjustments that might result from the outcome of 
this uncertainty.                                                               

/s/ Radin, Glass & Co., LLP                                                     
Certified Public Accountants                                                    

New York, NY                                                                    
April 10, 2002                                                                  

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                             U.S. TECHNOLOGIES INC.                             

                           CONSOLIDATED BALANCE SHEETS                          

December 31,                                                 2001         2000  
------------                                                 ----         ----  

ASSETS                                                                          
Current Assets                                                                  
                                                                                
  Cash..................................................  $ 94,532     $  6,110 
  Trade accounts receivable, net of reserves of                                 
   $77,621 and $158,000.................................   132,909      401,253 
  Inventory, net .......................................   137,155      169,834 
  Subsidiary held for sale (Note 16)....................   420,000           -- 
  Prepaid expenses......................................     3,777       81,848 
                                                          --------     -------- 
Total current assets....................................   788,373      659,045 

PROPERTY AND EQUIPMENT, net of accumulated depreciation    342,230      656,820 
INVESTMENTS IN ASSOCIATED COMPANIES (Notes 3 and 4 ).... 2,830,519    3,434,217 
NOTES RECEIVABLE .......................................   252,406       90,000 
OTHER...................................................   386,859          450 
                                                          --------     -------- 
Total assets............................................$4,600,387   $4,840,532 
                                                        ==========   ========== 

CURRENT LIABILITIES AND CAPITAL DEFICIT                                         
Current Liabilities                                                             
  Accounts payable......................................$2,507,287   $1,715,586 
  Accrued expenses......................................   604,868      290,985 
  Series F Preferred - Redemption Value (Note 10)....... 5,383,719           -- 
  Due to Yazam Shareholders............................. 1,236,345           -- 
  Obligation under put option assumed in conjunction                            
   with E2E acquisition.................................        --    2,000,010 
  Line of credit .......................................        --      197,392 
  Notes payable - related parties....................... 1,507,210       21,300 
  Notes payable ........................................     5,120      664,561 
                                                          --------     -------- 
Total current liabilities...............................11,244,549    4,889,834 
NOTES PAYABLE AND CAPITAL LEASE OBLIGATION, less                                
 current portion........................................        --           -- 
                                                        ----------    --------- 
Total liabilities.......................................11,244,549     4,889,834
                                                        ----------    --------- 

SERIES F PREFERRED - Redemption Value (Note 10).........   942,827           -- 

COMMITMENTS AND CONTINGENCIES (Notes 2 and 15)                                  

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                             U.S. TECHNOLOGIES INC.                             

                           CONSOLIDATED BALANCE SHEETS                          

December 31,                                                2001         2000   
------------                                                ----         ----   

CAPITAL DEFICIT (Note 10)                                                       
  Series A convertible preferred stock; votes as if                             
   converted to common stock; $0.02 par value;                                  
   1,000,000 shares authorized; 123,860 and 625,000                             
                                                                                
   issued and outstanding............................    1,238,600    6,250,000 
  Series B mandatory convertible preferred stock;                               
   votes as if converted to common stock on certain                             
   issues; $0.02 par value; 0 and 112,000 shares                                
   authorized, issued and outstanding................           --   11,200,000 
  Series C mandatory convertible preferred stock;                               
   votes as if converted to common stock on certain                             
   issues; $0.02 par value; 8,750 shares authorized;                            
   0 and 4,534 shares issued and outstanding.........           --    4,337,914 
  Series D mandatorily convertible preferred stock;                             
   votes as if converted to common stock on certain                             
   issues; $0.02 par value; 2,000 shares authorized;                            
   0 and 1,552.5 shares issued and outstanding.......           --      170,775 
  Mandatorily convertible preferred stock issuable;                             
   10,000 shares authorized; none issued and outstanding        --    1,199,200 
  Series F convertible preferred stock; $0.02 par                               
   value, 27,234 shares authorized; 27,234 and 0 shares                         
   issued and outstanding............................     1,387,244          -- 
  Series G convertible junior preferred stock; $0.02                            
   par value, 5,000 shares authorized; 335 and 0 shares                         
   issued and outstanding............................       335,000          -- 
  Common stock; $.02 par value; 500,000,000 shares                              
   authorized; 137,339,868 and 29,610,786 shares                                
   issued and outstanding............................     2,746,798     592,216 
  Additional paid-in capital.........................    53,712,235  27,601,507 
  Accumulated deficit................................   (67,006,866)(51,400,914)
                                                        ----------- ----------- 
Total capital deficit................................    (7,586,989)    (49,302)
                                                        ----------- ----------- 

Total liabilities and capital deficit................    $4,600,387  $4,840,532 
                                                        =========== =========== 

    See accompanying notes to consolidated financial statements.

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                             U.S. TECHNOLOGIES INC.                             

                      CONSOLIDATED STATEMENTS OF OPERATIONS                     

Years ended December 31,                                   2001          2000   
------------------------                                   ----          ----   

Revenues                                                                        
                                                                                
  Product sales................................        $2,246,766    $2,671,378 
  Consulting revenues..........................                --        21,000 
                                                        ---------    ---------- 
Total revenues.................................         2,246,766     2,692,378 
                                                        ---------     --------- 

Operating Costs and Expenses                                                    
  Cost of sales................................         2,295,517     2,902,444 
  Selling expense..............................            56,792        66,354 
  General and administrative expense, including                                 
   non-cash compensation expense of $15,864 and                                 
   $746,614....................................         6,312,823     6,242,513 
  Impairment of long-lived assets..............         4,249,946    12,304,800 
                                                       ----------    ---------- 
Total operating costs and expenses.............        12,915,078    21,516,111 
                                                       ----------    ---------- 
Loss from operations...........................       (10,668,312)  (18,823,733)
                                                      -----------   ----------- 

Other Income (Expense)                                                          
  Interest, net................................          (45,867)        34,383 
  Equity in loss of associated companies.......         (394,558)      (640,350)
  Other, net...................................         (348,558)        70,863 
  Gain on sale of subsidiary...................          690,472             -- 
                                                       ---------      --------- 

Net loss from continuing operations before minority                             
  interest in loss of subsidiary...............      (10,766,356)   (19,358,837)
  Minority interest in loss of subsidiary......               --        707,740 
                                                     -----------   ------------ 
Net loss from continuing operations before deemed                               
   dividends...................................      (10,766,356)   (18,651,097)
  Deemed dividends.............................       (4,595,510)   (14,757,650)
                                                     -----------   ------------ 
Net loss from continuing operations............      (15,361,866)   (33,408,747)

Discontinued operations (Note 16(b)):                                           
  Loss from operations of discontinued subsidiary       (175,804)            -- 
  Loss on disposal of subsidiary...............          (68,282)            -- 
                                                    ------------   ------------ 
Net Loss.......................................     $(15,605,952)  $(33,408,747)
                                                    ============   ============ 

Basic and diluted loss per common share:                                        
  Net loss from continuing operations..........           $(0.28)        $(1.14)
  Loss from operations of discontinued subsidiary             --             -- 
  Loss on disposal of subsidiary...............               --             -- 
                                                          ------         ------ 
  Net loss.....................................           $(0.28)        $(1.14)
                                                          ======         ====== 

Weighted average common shares outstanding.....       56,199,140     29,408,063 

    See accompanying notes to consolidated financial statements.

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                             U.S. TECHNOLOGIES INC.                             

         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)      

                                                                       Series B 
                                                         Series A    Mandatorily
                                         Shares         Convertible  Convertible
                                   Common     Treasury   Preferred     Preferred
                                   Stock        Stock       Stock        Stock  
                                   -----       -------   ----------   ----------
                                                                                
BALANCE, DECEMBER 31, 1999...... 29,195,278   (400,000)   $5,000,000  $      -- 
  Stock issuances related to                                                    
   exercise of options and                                                      
   warrants and stock issued in                                                 
   connection with the                                                          
    Buyline acquisition..........   815,508         --           --          -- 
  Retirement of treasury stock...  (400,000)   400,000           --          -- 
  Issuance of Series A and C                                                    
   Preferred Stock for cash                                                     
   Series B Preferred Stock                                                     
   in connection with the E2E                                                   
   acquisition and related deemed                                               
   dividends.....................        --         --    1,250,000  11,200,000 
  Issuance of Series D preferred                                                
   stock to settle liability of a                                               
   subsidiary....................        --         --           --          -- 
  Proceeds from convertible                                                     
   preferred stock issuable......        --         --           --          -- 
  Compensatory stock option grants       --         --           --          -- 
  Net loss.......................        --         --           --          -- 
                                 ----------  ---------   ----------  ---------- 
BALANCE, DECEMBER 31, 2000...... 29,610,786         --    6,250,000  11,200,000 
  Issuance of Convertible                                                       
   Preferred Series G for cash..         --         --           --          -- 
  Proceeds from convertible                                                     
   preferred stock issuable.....         --         --           --          -- 
  Issuance of Series F in                                                       
   connection with the Yazam                                                    
   acquisition and related deemed                                               
   dividends....................         --         --           --          -- 
  Issuance of common stock upon                                                 
   conversion of Preferred Stock 108,250,309        --   (5,011,400)(11,200,200)
  Issuance on exercise of                                                       
   warrants.....................       2,773        --           --          -- 
  Cancellation on non-payment                                                   
   of subscription..............    (524,000)       --           --          -- 
  Compensatory stock option                                                     
   grants.......................          --        --           --          -- 
  Series F redemption                                                           
   adjustment...................          --        --           --          -- 
  Net loss......................          --        --           --          -- 
                                  ---------- ---------   ----------  ---------- 
BALANCE, DECEMBER 31, 2001...... 137,339,868 $      --  $ 1,238,600  $       -- 
                                 =========== =========  ===========  ========== 

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                             U.S. TECHNOLOGIES INC.                             

         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)      

                                  Series C   Series D     Series A              
                                Mandatorily Mandatorily  Convertible Convertible
                                Convertible Convertible   Preferred    Preferred
                                 Preferred   Preferred       Stock       Stock  
                                    Stock       Stock       Issuable    Issuable
                                 ---------- -----------   ----------    --------
                                                                                
BALANCE, DECEMBER 31, 1999...... $      --    $     --    $  289,703  $      -- 
  Stock issuances related to                                                    
   exercise of options and                                                      
   warrants and stock issued in                                                 
   connection with the Buyline                                                  
   acquisition                          --          --           --          -- 
  Retirement of treasury stock..        --          --           --          -- 
  Issuance of Series A and C                                                    
   Preferred Stock for cash                                                     
   Series B Preferred Stock in                                                  
   connection with the E2E                                                      
   acquisition and related                                                      
   deemed dividends              4,337,914          --     (289,703)         -- 
  Issuance of Series D                                                          
   preferred stock to settle                                                    
   liability of a subsidiary            --     170,775           --          -- 
  Proceeds from convertible                                                     
   preferred stock issuable             --          --           --   1,199,200 
  Compensatory stock option                                                     
   grants.....................          --          --           --          -- 
  Net loss....................          --          --           --          -- 
                                ----------   ---------   ----------   --------- 
BALANCE, DECEMBER 31, 2000....  4,337,914      170,775           --   1,199,200 
  Issuance of Convertible                                                       
   Preferred Series G for cash.        --         --             --          -- 
  Proceeds from convertible                                                     
   preferred stock issuable....        --         --             --     853,700 
  Issuance of Series F in                                                       
   connection with the Yazam                                                    
   acquisition and related                                                      
   deemed dividends............        --         --             --          -- 
  Issuance of common stock                                                      
   upon conversion of                                                           
   Preferred Stock.............(4,337,914)  (170,775)            --  (2,052,900)
  Issuance on exercise of                                                       
   warrants....................        --         --             --          -- 
  Cancellation on non-payment                                                   
   of subscription............         --         --             --          -- 
  Compensatory stock option                                                     
   grants.......................       --         --             --          -- 
  Series F redemption                                                           
   adjustment...................       --         --             --          -- 
  Net loss....................         --         --             --          -- 
                               ----------  ---------     ----------  ---------- 
BALANCE, DECEMBER 31, 2001.... $       --  $      --     $       --  $       -- 
                               ==========  =========     ==========  ========== 

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                             U.S. TECHNOLOGIES INC.                         

         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)  

                                                 Series F         Series G  
                                               Convertible       Convertible
                                                Preferred         Preferred 
                                                  Stock             Stock   
                                                ---------         --------- 

                                                                            
BALANCE, DECEMBER 31, 1999..................  $       --         $      --  
  Stock issuances related to exercise of                                    
   options and warrants and stock issued in                                 
   connection with the Buyline acquisition            --                --  
  Retirement of treasury stock..............          --                --  
  Issuance of Series A and C Preferred Stock                                
   for cash Series B Preferred Stock                                        
   in connection with the E2E acquisition                                   
   and related deemed dividends..............         --                --  
  Issuance of Series D preferred stock                                      
    to settle liability of a subsidiary......         --                --  
  Proceeds from convertible preferred stock                                 
   issuable...................................        --                --  
  Compensatory stock option grants............        --                --  
  Net loss....................................        --                --  
                                                  ------          --------  
BALANCE, DECEMBER 31, 2000....................        --                --  
  Issuance of Convertible Preferred Series                                  
   G for cash.................................        --           335,000  
  Proceeds from convertible preferred stock                                 
   issuable...................................        --                --  
  Issuance of Series F in connection with                                   
   the Yazam acquisition and related deemed                                 
   dividend...................................  7,713,790               --  
  Issuance of common stock upon conversion                                  
    of Preferred Stock........................                          --  
  Issuance on exercise of warrants............         --               --  
  Cancellation on non-payment of subscription.         --               --  
  Compensatory stock option                                                 
   grants.....................................         --               --  
  Series F redemption                                                       
   adjustment..................................(6,326,546)              --  
  Net loss.....................................        --               --  
                                                ---------        ---------- 
BALANCE, DECEMBER 31, 2001.....................$1,387,244        $  335,000 
                                               ==========        ========== 

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                             U.S. TECHNOLOGIES INC.                             

         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)      

                                  Common    Treasury    Paid-in     Accumulated 
                                  Stock      Stock      Capital       Deficit   
                                  -----      -----      -------       -------   
                                                                                
BALANCE, DECEMBER 31, 1999.... $ 583,906  $ (227,684) $12,125,450  $(17,992,167)
  Stock issuances related to                                                    
   exercise of options and                                                      
   warrants and stock                                                           
   issued in connection with                                                    
   the Buyline acquisition.....   16,310          --      191,477            -- 
  Retirement of treasury stock.   (8,000)    227,684     (219,684)           -- 
  Issuance of Series A and C                                                    
   Preferred Stock for cash                                                     
   Series B Preferred Stock                                                     
   in connection with the E2E                                                   
   acquisition and related                                                      
   deemed dividends............       --          --   14,757,650   (14,757,650)
  Issuance of Series D preferred                                                
   stock to settle liability of                                                 
   a subsidiary................       --          --           --            -- 
  Proceeds from convertible                                                     
   preferred stock issuable....       --          --           --            -- 
  Compensatory stock option                                                     
   grants......................       --          --      746,614            -- 
  Net loss.....................       --          --           --   (18,651,097)
                               ---------  ----------   ----------   ----------- 
BALANCE, DECEMBER 31, 2000.....  592,216          --   27,601,507   (51,400,914)
  Issuance of Convertible                                                       
  Preferred Series G for cash..       --          --           --            -- 
  Proceeds from convertible                                                     
   preferred stock issuable           --          --           --            -- 
  Issuance of Series F in                                                       
   connection with the Yazam                                                    
   acquisition and related                                                      
   deemed dividends............       --          --    4,595,510    (4,595,510)
  Issuance of common stock upon                                                 
   conversion of Preferred                                                      
   Stock...................... 2,165,006          --   20,607,983            -- 
  Issuance on exercise of                                                       
   warrants...................        55          --      880,887            -- 
  Cancellation on non-payment                                                   
   of subscription............   (10,480)         --       10,480            -- 
  Compensatory stock option                                                     
   grants.....................        --          --       15,869            -- 
  Series F redemption                                                           
   adjustment.................        --          --           --            -- 
  Net loss....................        --          --           --   (11,010,442)
                              ----------   ---------   ----------  ------------ 
BALANCE, DECEMBER 31, 2001....$2,746,798   $      --  $53,712,235  $(67,006,866)
                              ==========   =========  ===========  ============ 

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                             U.S. TECHNOLOGIES INC.                         

          CONSOLIDATED STATEMENTS OFSTOCKHOLDERS' EQUITY (CAPITAL DEFICIT)  

                                                                    Total   
                                                                    -----   
                                                                            
BALANCE, DECEMBER 31, 1999...............................       $  (220,792)
  Stock issuances related to exercise of options and                        
   warrants and stock issued in connection with the                         
   Buyline acquisition...................................           207,787 
  Retirement of treasury stock...........................           --      
  Issuance of Series A and C Preferred Stock for cash                       
   Series B Preferred Stock in connection with the E2E                      
   acquisition and related deemed dividends..............        16,498,211 
  Issuance of Series D preferred stock to settle                            
   liability of a subsidiary.............................           170,775 
  Proceeds from convertible preferred stock issuable.....         1,199,200 
  Compensatory stock option grants.......................           746,614 
  Net loss...............................................       (18,651,097)
                                                                ----------- 
BALANCE, DECEMBER 31, 2000...............................           (49,302)
  Issuance of Convertible Preferred Series G for cash....           335,000 
  Proceeds from convertible preferred stock issuable.....           853,700 
  Issuance of Series F in connection with the Yazam                         
   acquisition and related deemed dividends..............         7,713,790 
  Issuance of common stock upon conversion                                  
    of Preferred Stock...................................                -- 
  Issuance on exercise of warrants.......................           880,942 
  Cancellation on non-payment of subscription............                -- 
  Compensatory stock option grants.......................            15,869 
  Series F redemption adjustment.........................        (6,326,546)
  Net loss...............................................       (11,010,442)
                                                                ----------- 
BALANCE, DECEMBER 31, 2001...............................      $ (7,586,989)
                  === =====                                    ============ 

    See accompanying notes to consolidated financial statements.

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                           U.S. TECHNOLOGIES INC.                              

                      CONSOLIDATED STATEMENTS OF CASH FLOWS                    

Years ended December 31,                              2001            2000     
------------------------                              ----            ----     

OPERATING ACTIVITIES                                                           
                                                                               
  Net loss...................................... $(10,766,356)   $(18,651,097) 
  Adjustments to reconcile net loss to net cash                                
   used in operating activities:                                               
    Net loss from activities of subsidiary held                                
     for sale...................................     (244,086)             --  
    Gain on sale of subsidiary..................     (640,696)             --  
  Depreciation and amortization.................      227,320       1,750,927  
    Equity in losses of associated companies....      394,558         640,350  
    Loss (gain) on disposal of assets...........           --          42,706  
    Loss on settlement of note receivable.......           --          76,726  
    Impairment of long-lived assets.............    4,249,946      12,304,800  
    Minority interest in loss of subsidiary.....           --        (707,740) 
    Inventory valuation allowance...............           --          80,000  
    Provision for bad debts.....................           --         158,000  
    Issuance of stock options...................       15,864         746,614  
    Changes in operating assets and liabilities,                               
     net of effects of                                                         
      acquisitions:                                                            
      Receivables...............................      268,344        (363,964) 
      Inventory.................................       32,679          10,741  
      Prepaid expenses..........................       78,071          40,796  
      Other assets..............................     (170,303)             25  
      Accounts payable..........................      791,701        (703,979) 
      Accrued expenses..........................    1,550,228      (3,057,671) 
      Obligation under put option assumed in                                   
       conjunction with E2E acquisition.........   (2,000,010)      2,000,010  
                                                  -----------       ---------  
Net cash used in operating activities...........   (6,212,740)     (5,632,756) 
                                                  -----------      ----------  

INVESTING ACTIVITIES                                                           
  Net proceeds from disposal of assets..........      282,936              --  
  Investments in affiliates.....................   (1,463,961)       (972,339) 
  Cash advances on notes receivable.............     (993,771)       (938,364) 
  Capital expenditures..........................      (42,055)       (210,861) 
  Net cash acquired in (paid for) acquisitions..    6,113,165          77,814  
                                                    ---------      ----------  
Net cash provide by (used in) investing                                        
 activities.....................................    3,896,314      (2,043,750) 
                                                  -----------      ----------  

FINANCING ACTIVITIES                                                           
  Proceeds from convertible preferred stock                                    
   issued or issuable...........................    1,188,700        6,497,411 
  Investments by minority interests.............           --          707,740 
  Issuance of common stock......................           --          167,523 
  Net borrowings under line of credit...........     (197,392)         197,392 
  Net proceeds from notes payable-related parties   1,485,910               -- 
  Proceeds from issuance of notes payable.......   22,000,000          151,673 
  Principal payments on notes payable...........  (22,072,370)         (48,574)
                                                 ------------       ---------- 
Net cash (used in) provided by financing                                       
 activities.....................................    2,404,848        7,673,165 
                                                    ---------      ----------- 

Increase (decrease) in cash.....................       88,422           (3,341)
CASH, beginning of period.......................        6,110            9,451 
                                                  -----------        --------- 
CASH, end of period.............................  $    94,532        $   6,110 
                                                  ===========        ========= 

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                             U.S. TECHNOLOGIES INC.                        

                      CONSOLIDATED STATEMENTS OF CASH FLOWS                

Years ended December 31,                                 2001         2000 
------------------------                                 ----         ---- 
Supplemental disclosures of cash flow information:                         
                                                                           
  Cash paid during the year for interest.........  $   83,058       $17,000
  Cash paid during the year for taxes............          --            --

Supplemental schedule of non-cash investing                                
  and financing activities:                                                
  Conversion of notes receivable into investments                          
   in Associated Companies........................    555,000       771,638
  Conversion of note receivable acquired in E2E                            
    acquisition to investment in Associated                                
    Companies.....................................         --       747,500
  Note payable issued for payment of the premium                           
   of an insurance policy.........................         --        85,000
  Common stock issued in conjunction with Buyline                          
   acquisition                                             --        40,264
  Series B mandatorily convertible preferred stock                         
    issued in conjunction with E2E acquisition...          --    11,200,000
  Series D mandatorily convertible preferred stock                         
    issued to settle the liability of a subsidiary         --       170,775
  Series F convertible preferred stock issued in                           
   conjunction with Yazam acquisition.............  7,713,790            --
  Deemed dividends relative to Series A, B, C                              
   and F preferred stock                            4,595,510    14,757,650

On March 27, 2001, the Company exchanged 27,434 Shares of Series F convertible  
preferred stock for all the outstanding shares of Yazam (See Note 3). In        
conjunction with the acquisition, liabilities were assumed as follows:          

Fair value of assets acquired, including net cash                 
     acquired of $ 6,113,165...........................        $33,008,049
     Cash paid..........................................        (22,000,000)
     Warrants issued....................................           (880,000)
Value of Series F convertible preferred shares                    
      issued............................................         (7,713,790)
     Acquisition costs..................................           (399,914)
                                                               -----------
    Liabilities assumed................................        $ 2,014,345
                                                               ===========

On April 12, 2000, the Company exchanged 112,000 shares of Series B mandatorily 
convertible preferred stock for all of the outstanding shares of E2E (See Note  
3). In conjunction with the acquisition, liabilities were assumed as follows:   

    Fair value of assets acquired.......................       $15,180,000
Value of Series B mandatorily convertible preferred               
      shares issued......................................       (11,200,000)
                                                               -----------
    Liabilities assumed.................................       $ 3,980,000
                                                               ===========

On April 26, 2000, the Company acquired a controlling interest in Buyline in    
exchange for conversion of existing notes and additional cash investment.       
Additionally, the Company acquired additional shares of Buyline from its founder
in exchange for 23,008 shares of Company common stock. In conjunction with the  
acquisition, liabilities were assumed as follows:                               

Fair value of net assets acquired, including net cash             
    acquired of $77,814..................................     $2,400,000
    Notes receivable converted into Buyline equity........     (1,131,000)
    Value of Company common shares issued.................        (40,000)
                                                             -----------
   Liabilities assumed...................................    $ 1,229,000
                                                             ===========

    See accompanying notes to consolidated financial statements.

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U.S. TECHNOLOGIES INC.

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies                                

Description of the Company and Basis of Presentation                            

U.S. Technologies Inc. (the "Company" or "USXX") develops technology and        
emerging growth companies. USXX identifies companies with high growth potential 
to optimize their performance by deploying operational assistance, capital      
support, and industry expertise. The Company also performs labor and service    
intensive "outsourcing" work for Fortune 1000 and other select companies through
its subsidiary. Currently, the work is performed by inmates in detention        
facilities located in Texas and California under the guidelines of a 1979       
Federal Government Program known as the Prison Industry Enhancement program     
("PIE"). The Company performs electronic and furniture assembly, manufacturing, 
enhancement, rework, packaging and sorting of products.                         

In April, 2000, the Company acquired E2Enet, Inc., ("E2E") formerly a privately 
held technology services company. In March 2001, the Company acquired Yazam.com,
Inc. ("Yazam") which was engaged in seed stage funding to technology related    
start-ups. E2E and Yazam made early stage investments in development stage      
technology business ("Associated Companies"). Subsequent to the acquisitions of 
E2E and Yazam, the Company's focus is developing and operating a network of     
technology and related companies. The Company builds and develops Associated    
Companies by providing them with operational assistance, capital support,       
industry expertise and other business services.                                 

The consolidated statements of operations, cash flows and changes in            
stockholders' equity include the accounts of the Company and its subsidiaries.  
All material intercompany accounts and transactions are eliminated.             

Accounting for Investments in Associated Companies                              

The various interests that the Company acquires in its Associated Companies are 
accounted for under three broad methods: consolidation, equity and cost method. 
The accounting method applied is generally determined based on the Company's    
voting interest in the Associated Company.                                      

Consolidation - Associated Companies in which the Company owns more than 50% of 
the outstanding voting securities are accounted for under the consolidation     
method of accounting. Under this method, the subsidiary company's results are   
reflected within the Company's financial statements. All significant            
intercompany accounts and transactions are eliminated. Participation of other   
stockholders in the earnings or losses of the consolidated subsidiary is        
reflected as minority interest such that the Company's results of operations    
reflect only the Company's share of such earnings or losses.                    

Equity Method - Associated Companies over which the Company exercises           
significant influence are accounted for under the equity method of accounting.  
Whether or not the Company exercises significant influence with respect to the  
investee company depends on several factors, including but not limited to: an   
ownership interest level of 20% to 50% in the voting securities of the          
associated company, active participation on the associated company's board of   
directors, approval of the associated company's operating and budgetary         
decisions, and other ownership rights which allow the Company to exercise       
significant control over the associated company. Under the equity method of     
accounting, an associated companies results of operations are not reflected     
within the Company's consolidated accounts, however, the Company's share of the 
earnings or losses of the associated company is reflected in the caption "equity
in loss of investees" in the statement of operations.                           

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Cost Method - Investments not accounted for under the consolidation or equity   
methods of accounting are accounted for under the cost method of accounting.    
Under this method, the Company's share of the earnings or losses of the         
associated company is not included in the statement of operations. However, cost
method impairment charges are recognized in the statement of operations if      
circumstances indicate a permanent impairment.                                  

Effective January 1, 2001, the Company determined that all of its investments in
associated companies, except for Portris, Inc., should be accounted for on the  
cost method. Management does not believe that it is able to exercise a          
significant degree of control and in no case owns more than 20% of the voting   
shares. The carrying values as of January 1, 2001 or the balances on the date of
acquisition have been used as the cost as of those dates.                       

Asset Impairment                                                                

The Company evaluates quarterly the carrying value for financial statement      
purposes of its interests in, and advances to, each of its Associated Companies 
for impairment. These evaluations of impairment are based on achievement of     
business plan objectives and milestones of each Associated Company, the fair    
value of each ownership interest and advance relative to its carrying value, the
financial condition and prospects of the associated company, and other relevant 
factors. For financial statement purposes, the fair value of the Company's      
ownership interests in, and advances to, privately held Associated Companies is 
generally determined based on the prices paid by third parties for ownership    
interests in the Associated Companies, to the extent third party ownership      
interests exist, or based on the achievement of business plan objectives and the
milestones. As discussed in Notes 3 and 4, the Company recognized losses of     
$4,249,946 and $12,304,800 during the years ended December 31, 2001 and 2000,   
respectively, related to the impairment of its investments in Associated        
Companies and goodwill.                                                         

Cash and Cash Equivalents                                                       

The Company considers all highly liquid investments with original maturity dates
of three months or less from the date of purchase to be cash equivalents.       

Inventories                                                                     

Inventories are stated at the lower of cost, determined by the average cost     
method, or market.                                                              

Property and Equipment                                                          

Property and equipment are stated at cost less accumulated depreciation.        
Depreciation is computed using the straight-line method over the following      
estimated lives:                                                                

                                             Estimated Lives

Equipment........................                 5-7 years       
Furniture and fixtures...........                   7 years       
Vehicles.........................                   3 years       
       Leasehold Improvements...........      Lesser of 6 years or term of lease

Revenue Recognition and Accounts Receivable                                     

Revenue is recognized on the sale of products or services when the products are 
shipped or the services are performed, all significant contractual obligations  
have been satisfied, and the collection of the resulting receivable is          
reasonably assured. Shipping, handling and warehousing costs are included in    
costs of sales in the statement of operations.                                  

An allowance for doubtful accounts is provided based on periodic review of the  
accounts.                                                                       

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Income Taxes                                                                    

The Company accounts for income taxes under the asset and liability approach    
that requires the recognition of deferred tax assets and liabilities for the    
expected future tax consequences of events that have been recognized in the     
Company's financial statements or tax returns. The Company provides a valuation 
allowance against its deferred tax assets to the extent that management         
estimates that it is "more likely than not" that such deferred tax assets will  
not realized. The Company's net operating loss carryforwards are subject to     
limitation based upon transactions occurring that resulted in a change in       
control as defined in the Internal Revenue Code.                                

Loss Per Share                                                                  

The Company presents basic and diluted loss per share in accordance with the    
provisions of SFAS No. 128, Earnings Per Share. Basic loss per common share are 
based on the weighted average number of common shares outstanding during the    
period. Diluted loss per share include the dilutive effect of convertible       
preferred stock, stock options and warrants. However, for all periods presented 
diluted loss per share have not been presented because the impact of the assumed
exercise of convertible preferred stock, stock options and warrants would have  
been anti-dilutive.                                                             

Stock Option Plans                                                              

As permitted by SFAS No. 123, Accounting for Stock Based Compensation, the      
Company accounts for stock options under the "intrinsic value method" in        
accordance with Accounting Principles Board ("APB") Opinion No. 25, Accounting  
for Stock Issued to Employees and related interpretations. Under the intrinsic  
value method, compensation expense is only recognized if the exercise price of  
the employee stock option is less than the market price of the underlying stock 
on the date of grant.                                                           

Use of Estimates                                                                

The preparation of financial statements in conformity with generally accepted   
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of         
contingent assets and liabilities at the date of the financial statements and   
the reported amounts of revenue and expenses during the reporting period.       
Examples include the availability of funding for technology companies, valuation
of technology companies, bad debts and fixed asset lives. Actual results could  
vary from these estimates.                                                      

Fair Value of Financial Instruments                                             

The fair value of a financial instrument is the amount at which the instrument  
could be exchanged in a current transaction between willing parties. The        
carrying amounts of the Company's financial instruments included in the         
accompanying consolidated balance sheets are not materially different from their
fair values.                                                                    

New Accounting Pronouncements                                                   

In June 1998, the Financial Accounting Standards Board ("FASB"), issued         
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for   
Derivative Instruments and Hedging Activities", which requires that all         
derivative financial instruments be recognized as either assets or liabilities  
in the balance sheet. SFAS No. 133, which was effective for the first quarter of
2001, has not had a material impact on the Company's results of operations,     
financial position or cash flows.                                               

In July 2001, FASB issued SFAS No. 141, "Business Combinations" and SFAS No.    
142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business     
combinations initiated after June 30, 2001 to be accounted for using the        
purchase method of accounting, and broadens the criteria for recording          
intangible assets separate from goodwill. SFAS No. 142 requires the use of a    
non-amortization approach to account for purchased goodwill and certain         
intangibles, effective January 1, 2002. The Company does not believe that the   
adoption of these pronouncements will have a material impact on its financial   
statements.                                                                     

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FASB also recently issued SFAS No. 143, "Accounting for Asset Retirement        
Obligations" and SFAS No. 144, "Accounting for the Impairment or Disposal of    
Long-Lived Assets." SFAS No. 143 requires the recognition of a liability for the
estimated cost of disposal as part of the initial cost of a long-lived asset.   
SFAS No. 144 supersedes SFAS No. 121 to supply a single accounting approach for 
measuring impairment of long-lived assets, including segment of a business      
accounted for as a discontinued operation or those to be sold or disposed of    
other than by sale. The Company believes that adopting these pronouncements on  
its financial statements will not have a material impact on its financial       
statements.                                                                     

Reclassifications                                                               

Certain prior year amounts have been reclassified to conform with current year  
presentation.                                                                   

2.     Going Concern                                                            

The Company's consolidated financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company       
incurred significant losses during each of the two years in the period ended    
December 31, 2001, and had working capital deficiencies at December 31, 2001 and
2000. These circumstances raise substantial doubt about the Company's ability to
continue as a going concern.                                                    

On March 27, 2001, the Company acquired Yazam.com Inc. ("Yazam") (see Note 3).  
As a result of the acquisition of Yazam, the Company obtained approximately     
$6,100,000 in cash (and assumed liabilities of approximately $2,000,000), which 
was used to support the Company's working capital and investing requirements    
during 2001. In addition to the acquisition cost for Yazam, the Company         
selectively invested additional funds in those acquired companies of Yazam which
were deemed to have the most potential to achieve their strategic business      
objectives. Any return may be realized through future cash flows from the       
acquired companies or through the sale of the acquired companies, once their    
business operations are properly developed.                                     

The Company has entered into transactions with respect to certain shares of the 
Series F Preferred Stock modifying their respective rights (see Note 10).       
Subsequent to September 30, 2002, certain former Yazam shareholders have the    
right to put their shares of Series F Preferred Stock to the Company for a      
minimum amount that is approximately $5,384,000. Additionally, the Company still
owes certain former shareholders of Yazam approximately $1,236,000 cash in      
consideration for their Yazam stock.                                            

The Company's ability to support its business objectives is dependent upon its  
ability to raise capital, primarily through sales of convertible preferred stock
and common stock. The Company's continued ability to access the capital markets 
may be dependant on its ability to generate cash flow from, positive earnings or
realizing a return from the cash flow of, or sale of its interests in, one or   
more of its Associated Companies. Should the Company be unable to raise         
sufficient capital to meet its cash flow needs, the Company may be required to  
significantly curtail its operations and investing activities. The consolidated 
financial statements do not include any adjustments that might result from the  
outcome of this uncertainty. See Note 15 for Commitments and Contingencies.     

3.     Business Combinations                                                    

Acquisition of Yazam                                                            

On March 27, 2001, the Company acquired Yazam, a company previously providing   
seed-stage funding and business development services to emerging Internet and   
technology start-ups, for approximately $22 million in cash plus 27,374 shares  
of Series F Preferred Stock (which are convertible into 27,374,000 shares of    
USXX common stock) and warrants to purchase 8,000,000 shares of USXX stock for  
$0.34 per share. Based on the conversion terms of the Series F Preferred Stock  
and the market price of the Company's common stock on the date of issuance of   
the Series F Preferred Stock, the Company recognized the existence of a         
beneficial conversion feature in the amount of $4,595,510. This amount was      
recorded as a deemed dividend during the first quarter of 2001, resulting in an 
increase in the net loss applicable to common shareholders. This acquisition was
accounted for as a purchase, and the results of operations of Yazam are included
in the Company's consolidated results of operations from the date of the        
acquisition.                                                                    

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The following table summarizes the estimated fair values of the assets acquired 
and liabilities assumed in connection with the acquisition:                     

Investments in associated companies...........................   $ 1,691,511    
Cash acquired.................................................    28,513,049    
Other assets..................................................     2,803,489    
Accounts payable and accrued expenses.........................    (2,014,345)   
                                                            ------------
                                                             $30,993,704
                                                             ===========

The following unaudited pro-forma condensed consolidated financial data assume  
that the acquisition of Yazam, as described above, occurred at the beginning of 
each fiscal year presented. This data has been prepared for comparative purposes
only and does not purport to be indicative of the results of operations which   
actually would have resulted had the acquisition occurred on the date indicated,
or which may result in the future.                                              

                                                         2001         2000
                                                         ----         ----

Revenues.............................................   $4,570,829   $6,949,885 
Net loss applicable to common shareholders...........  (21,575,039) (72,568,320)
Basic and diluted net loss per common share..........  $    (0.38)  $    (2.47) 

E2Enet, Inc. and Associated Companies                                           

On April 12, 2000, the Company acquired all of the outstanding stock of E2E by  
merging E2E into a wholly owned subsidiary of the Company, U.S. Technologies    
Acquisition Sub, Inc., which subsequently changed its name to E2E net, Inc. As a
result, upon the completion of the E2E acquisition, E2E became a wholly owned   
subsidiary of the Company. This transaction was accounted for as a purchase. The
results of operations of E2E are included in the Company's consolidated         
financial statements from the date of acquisition.                              

In consideration for the exchange of their E2E shares, E2E's stockholders were  
issued 112,000 shares of Series B Mandatorily Convertible Preferred Stock, which
have a stated liquidation preference aggregating approximately $11,200,000. The 
Company also assumed liabilities in the aggregate amount of approximately       
$3,980,000 in conjunction with the acquisition. The Company agreed, under the   
E2E Acquisition Agreement, to raise new capital funds at or prior to the closing
of the E2E Acquisition. To raise these funds, the Company completed the private 
placement sale of $1,250,000 of additional shares of its Series A Convertible   
Preferred Stock (the "Series A Preferred Stock"), to USV Partners, and          
$4,337,914 of its Series C Mandatorily Convertible Preferred Stock ("Series C   
Preferred Stock"), to various accredited investors including USV Partners.      

E2E had ownership interests ranging from 5.65% to 29.05% in six development     
stage technology companies at the time of the acquisition. The following table  
summarizes the estimated fair values of the assets acquired and liabilities     
assumed in connection with the acquisition:                                     

Investments in associated companies............................   $ 8,953,000   
Note receivable - Buyline......................................       748,000   
Goodwill.......................................................     4,989,000   
Other assets...................................................       490,000   
Accounts payable and accrued expenses..........................    (1,980,000)  
Accrued put obligation.........................................    (2,000,000)  
                                                               -----------
                                                               $11,200,000
                                                               ===========

In connection with the E2E acquisition, the Company agreed to assume the        
obligation of a former E2E shareholder under a put agreement with the           
shareholders of a former E2E Associated Company. This put option was exercised  
following the closing of the E2E acquisition, and the Company recorded a        
liability in the amount of $2,000,010, equal to the number of shares covered by 
the put option multiplied by the option's strike price. This obligation was     
settled in cash during April 2001.                                              

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The following unaudited pro-forma condensed consolidated financial data assume  
that the acquisition of E2E, as described above, occurred on January 1, 2000.   
This data has been prepared for comparative purposes only and does not purport  
to be indicative of the results of operations which actually would have resulted
had the acquisition occurred on the date indicated, or which may result in the  
future.                                                                         

                                                  2000
                                                  ----
Revenues................................................   $ 2,671,378          
Net loss applicable to common shareholders..............   (34,443,024)         
Basic and diluted net loss per common share.............         (1.17)         

4.     Investments in Associated Companies and Impairment of Long-lived Assets  

The following summarizes the carrying value of the Company's ownership interests
in Associated Companies accounted for under the equity method or cost method of 
accounting. The ownership interests are classified according to applicable      
accounting methods at December 31, 2001 and 2000.                               

                                                          2001        2000
                                                          ----        ----

Equity Method..........................................   $      --   $ 194,760 
Cost Method............................................   2,830,519   3,239,457 
                                                         ---------   ---------
                                                        $2,830,519  $3,434,217
                                                        ==========  ==========

The Company has restructured some of E2E's and Yazam's Associated Companies and 
provided these entities with additional working capital, investment or loans in 
the years ended December 31, 2001 and 2000 as described below.                  

On April 12, 2000, the Company closed an agreement with Promisemark to invest an
additional $1,000,000 in Promisemark, another E2E Associated Company, for       
additional equity in the form of shares of Promisemark Series B Convertible     
Preferred Stock. In June, 2001, the Company invested an additional $500,000 for 
additional equity in the form of shares of Promisemark Series C Convertible     
Preferred Stock.                                                                

On October 16, 2000, the Company completed the acquisition of a 30.4% equity    
interest in Portris, Inc. ("Portris"). Portris is a software company that is    
developing an information management system that facilitates performance of     
interactive team oriented projects over the internet. Under the terms of the    
agreement, the Company received a 30.4% equity interest in Portris for an       
aggregate of $380,000, by canceling $250,000 of debt and providing additional   
cash to Portris. In May 2001, the Company invested an additional $555,000 in    
Portris that resulted in an increase in the Company's ownership interest to     
42.0%. Additionally, the Company made advances to Portris in the form of secured
promissory notes in an aggregate amount of $559,000 during 2001. In December    
2001, the Company foreclosed on the assets of Portris and Portris ceased        
operations. The Company contributed the assets acquired from Portris to a new   
wholly owned entity named Xi Software, which is currently assessing the market  
potential for the assets.                                                       

E2E's initial investment in Buyline was increased so that Buyline became a      
controlled operating subsidiary on April 26, 2000, as a result of the Company   
acquiring 20,700,005 shares of Buyline's common stock. The Buyline shares were  
issued to the Company in exchange for (1) the conversion to Buyline's common    
stock of USXX's and E2E's existing loans to Buyline (including accrued          
interest), (2) acknowledgment of in-kind services already rendered by E2E, and  
(3) approximately $1,000,000 cash invested by the Company. On April 26, 2000,   
the Company issued 23,008 shares of its common stock to Buyline's founder in    
exchange for 634,699 shares of Buyline's common stock. As a result of these     
transactions, the Company became the controlling shareholder of Buyline. In     
conjunction with certain executive resignations and other business plan         
execution issues, Buyline abandoned its software, ceased operations and stopped 
pursuing business opportunities on December 1, 2000.                            

On December 28, 2000, the Company and Buyline settled a liability of Buyline's  
through the issuance of equity securities. In settlement of a payable to a      
vendor for software consulting and other services, the Company issued 1,552.5   
shares of Series D Mandatorily Convertible Preferred Stock and Buyline issued   
2,589,794 shares of common stock to the vendor. The Company received from       
Buyline in consideration for their role in this transaction 5,025,819 additional

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shares of Buyline common stock. As of December 31, 2000, the Company's ownership
percentage of Buyline was approximately 64%. During the year ended December 31, 
2000, losses in the amount of $707,740 were allocated to Buyline's minority     
shareholders.                                                                   

As a result of the events discussed above, management determined during the     
fourth quarter of 2000 that the recorded goodwill and certain other long-lived  
assets related to the Buyline operation was permanently impaired. The Company   
realized an impairment loss of approximately $1,817,000 which is included in the
E2E segment during 2000. On June 30, 2001, the Company sold its investment in   
Buyline to a company controlled by the Chief Executive Officer (see Note 13).   

On July 5, 2000, the Company completed the acquisition of approximately a 37%   
interest in WebMilestones.com, LLC ("WebMilestones"), an Internet services      
company that provided a site for publishing obituary notices that can be        
accessed through the Internet's World Wide Web. The Company invested $400,000 in
WebMilestones, of which $100,000 was in the form of equity and $300,000 in a    
note. On December 27, 2000, all of the membership interests of WebMilestones    
were exchanged for membership interests in Final Arrangements, LLC ("Final      
Arrangements"), the largest publisher of online obituaries and a provider of    
software to manage funeral homes. The Company received a 0.1267% ownership      
interest in Final Arrangements in connection with this transaction.             

On November 3, 2000, all of the common and preferred shares of MEI were         
exchanged for common stock of gomembers.com, Inc. ("gomembers"), a provider of  
software solutions for member-based organizations. The Company received a 0.47% 
ownership interest in gomembers in connection with this transaction.            

On November 3, 2000, UBO filed for bankruptcy protection.                       

The Company recorded approximately $794,000 in excess investment over its share 
of the underlying equity in the net assets of companies acquired during the year
ended December 31, 2000, accounted for under the equity method of accounting.   
Amortization expense of approximately $259,000 is included in "equity in losses 
of associated companies" in the accompanying consolidated statement of          
operations for the year ended December 31, 2000. This excess was being amortized
over a three-year period.                                                       

In connection with the Company's ongoing evaluation of its Associated Companies,
management determined that several of the Company's Associated Companies had    
suffered permanent declines in value and, accordingly, recorded a loss on       
impairment as detailed below. Such impairment analysis takes into account       
factors such as business plan development, analysis of financial and operational
data, ability to attract additional investment capital, retention of key        
personnel, valuation of additional investments from other investors and other   
factors.                                                                        

                                                              2001        2000
                                                              ----        ----

E2Enet goodwill.......................................   $      --   $3,866,000 
Promisemark...........................................     506,500    1,457,500 
Urban Box Office......................................          --    3,014,000 
Xi Software...........................................     426,750           -- 
OneMade...............................................     870,000    1,602,500 
Buyline...............................................          --    1,817,000 
Portris...............................................     355,200           -- 
Selis investment and notes receivable.................     362,600           -- 
Soneta................................................     342,500           -- 
CoreMarkets...........................................     250,000           -- 
Other.................................................   1,136,396      547,800 
                                                        ---------    ---------
                                                       $4,249,946  $12,304,800
                                                       ==========  ===========

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5.     Inventories                                                              

At December 31, inventories consisted of the following:                         

                                                                [Download Table]

                                                         2001        2000   
                                                         ----        ----   

                                                                            
Raw material.......................................   $ 105,542   $ 231,177 
Work in progress...................................      24,193      18,272 
Finished goods.....................................       7,420         385 
                                                      ---------   --------- 
                                                        137,155     249,834 
Reserve for obsolescence...........................          --     (80,000)
                                                      ---------   --------- 
                                                      $ 137,155   $ 169,834 
                                                      =========   ========= 

The Company provided a reserve for obsolete raw materials of $80,000 during the 
year ended December 31, 2000. During the year ended December 31, 2001, the      
related inventory was written off and changed to the reserve.                   

6.    Property and Equipment                                                    

At December 31, property and equipment consisted of the following:              

                                                                [Download Table]

                                                            2001        2000  
                                                            ----        ----  

                                                                              
Equipment............................................   $1,646,257 $1,414,387 
Furniture and fixtures...............................     150,911     502,614 
Leasehold improvements...............................     168,550     213,331 
                                                        ---------   --------- 
                                                        1,965,718   2,130,332 
Less accumulated depreciation........................  (1,623,488) (1,473,512)
                                                       ----------  ---------- 
                                                        $ 342,230  $  656,820 
                                                        =========  ========== 

Depreciation expense for the years ended December 31, 2001 and 2000 was $227,320
and $142,697, respectively.                                                     

7.     Note Receivable                                                          

Associated Companies                                                            
The Company had advances to Associated Companies of $ 252,406 and $90,000 on    
December 31, 2001 and 2000, respectively, that are classified as Notes          
Receivable. Such advances bear interest rates of 8% and are generally           
convertible into equity of the Associated Companies.                            

Sale of Subsidiaries - GWP                                                      
The Company sold GWP, a wholly owned subsidiary, to Kenneth H. Smith, the former
President and Chief Executive Officer of the Company in February 1999. The total
purchase price for GWP was approximately $2,451,000. A portion of the purchase  
price for GWP was paid in the form of a promissory note executed by Mr. Smith in
the principal amount of $1,234,832. The principal amount of Mr. Smith's         
promissory note and any accrued unpaid interest were initially due and payable  
in full on February 15, 2002. Repayment of the promissory note was secured by   
Mr. Smith's pledge to the Company of his 3,000,000 shares of the Company's      
Common Stock.                                                                   

On April 1, 1999, following a default under Mr. Smith's promissory note, the    
Company exercised its rights under the pledge agreement with Mr. Smith and sold 
the 3,000,000 shares pledged by Mr. Smith for a total sale price of $1,050,000. 
The aggregate sale price of $1,050,000, less the expenses associated with the   
sale, was applied in reduction of Mr. Smith's indebtedness to the Company. On   
April 15, 1999, the Company entered into a forbearance agreement with Mr. Smith 
pursuant to which the parties agreed the amount outstanding under the promissory
note Mr. Smith executed in connection with the sale of GWP was equal to         

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$525,000. The promissory note has not been repaid. As of December 31, 2001 and  
2000, the Company has recorded a valuation allowance equal to the amount        
outstanding.                                                                    

8.     Notes Payable and Capital Lease Obligation                               

Notes payable and capital lease obligations consisted of the following at       
December 31:                                                                    

                                                                [Download Table]


                                                               2001        2000
                                                               ----        ----
                                                                               
Buyline.net, Inc. note payable, original principal                             
 $650,000 payable $18,000 per month, accelerated                               
 under certain conditions; interest accrues at                                 
 Prime Rate; in payment default at December 31,                                
 2000. Collateralized by the Company's investment                              
 in Buyline...........................................   $     --   $ 587,071  
Unsecured note payable to an insurance company payable                         
  in monthly installments of $7,793 plus interest at                           
  7.49% maturing in July 2001                                  --      52,889  
Unsecured, non interest-bearing notes payable to                               
 related parties upon demand                            1,507,210      21,300  
5% unsecured note payable; in default at December 31,                          
 2000; requiring an 18% default interest rate.........         --       8,745  
Capital lease obligation, with monthly payments of                             
 $778 and imputed interest of 9%......................      5,120      15,856  
                                                       ----------    --------  
                                                        1,512,330     685,861  
Less current maturities............................... (1,512,330)   (685,861) 
                                                       ----------    --------  
                                                       $       --   $      --  
                                                       ==========   =========  

The capital lease obligation is secured by certain equipment.                   

9.     Income Taxes                                                             

Provisions for federal and state income taxes consist of the following:         

                                                                [Download Table]

Years ending December 31,                          2001        2000         
-------------------------                          ----        ----         

Deferred                                                                    
                                                                            
  Federal....................................   $(3,500,000)    $(6,040,000)
  State......................................      (600,000)     (1,066,000)
                                                  ---------     ----------- 
                                                 (4,100,000)     (7,106,000)

Change in deferred tax asset valuation allowance,                           
 including net of change due to acquisitions...   4,100,000       7,106,000 
                                                -----------       --------- 
                                                $        --     $        -- 
                                                ===========     =========== 

The reconciliation of income tax computed at the United States federal statutory
tax rate (34 percent) to income tax benefit is as follows:                      

                                                                [Download Table]

                                                    2001             2000    
                                                    ----             ----    

                                                                             
Benefit at United States statutory rate......     $(3,854,000)   $(6,341,000)
State tax benefit............................        (453,000)      (746,000)
Permanent differences........................       1,524,000        (19,000)
Change in deferred tax asset valuation                                       
 allowance, net of changes due to acquisitions .    2,783,000      7,106,000 
                                                    ---------      --------- 
                                                  $        --   $         -- 
                                                  ===========   ============ 

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Significant components of the Company's deferred tax assets at December 31, 2001
and 2000 are as follows:                                                        

                                                                [Download Table]

                                                            2001          2000  
                                                            ----          ----  
Deferred tax assets                                                             
                                                                                
   Current assets and liabilities....................  $       --     $ 295,000 
   Impairment losses.................................   9,400,000     4,476,000 
   Net operating loss carryforwards (Federal and                                
    state)...........................................  12,000,000     9,576,000 
Valuation allowance.................................. (21,400,000)  (14,347,000)
                                                      -----------   ----------- 
                                                      $        --     $      -- 
                                                      ===========     ========= 

At December 31, 2001, the Company had net operating loss carryforwards          
("NOL's")of approximately $33,000,000 that expire in various years through 2017 
and future tax benefits of approximately $24,000,000. These include NOL's and   
future benefits resulting from the acquisitions of E2E and Yazam. Under Section 
382 of the Internal Revenue Code, a change in ownership, as defined, of over 50%
of the holdings of the largest shareholders results in a limitation on the      
availability of NOL's. During the last several years there have been a number of
changes in capital structure, one or more of which may have been a "Section 382 
change of ownership". The analysis is complex and subject to review by the      
Internal Revenue Service. The future deductions from impairment losses would    
also be similarly limited. Accordingly, while management believes that          
approximately one half of the tax benefits indicated above are available to     
offset future taxable income, there is a Section 382 limitation.                

10.    Stockholders' Equity (Capital Deficit)                                   

Common Stock and Loss Per Share                                                 

The Company had 500,000,000 authorized shares of $0.02 par value common stock   
and 10,000,000 authorized shares of $0.02 par value preferred stock at December 
31, 2001.                                                                       

Diluted loss per share data is not presented as convertible preferred stock,    
stock options and warrants which comprised common stock equivalents totaling    
62,291,195, and 122,365,470 for the years ended December 31, 2001 and 2000,     
respectively, are anti-dilutive.                                                

Warrants                                                                        

In conjunction with issuance of $275,000 convertible debentures in January 1998,
the Company granted the placement agent warrants to acquire 275,000 shares of   
Common Stock for $1. The warrants are exercisable for five years. During 2000,  
warrants to acquire 137,500 shares of Common Stock were exercised. At December  
31, 2001, warrants to acquire 137,500 shares of Common Stock remain outstanding.

In conjunction with the acquisition of Yazam, the Company issued 8,000,000      
warrants to purchase the Company's Common Stock at $0.34 per share for a period 
of four years. At December 31, 2001, a total of 7,997,227 warrants related to   
the Yazam acquisition remain outstanding.                                       

Series A Convertible Preferred Stock                                            

During 1998 and 1999, the Company received $5,000,000 under an agreement with   
USV Partners which provided that the Company would issue to USV Partners        
warrants to purchase 500,000 shares of Common Stock and 500,000 shares of its   
Series A Preferred Stock. On November 29, 1999, the terms of the Series A       
Preferred Stock were modified to cancel the right of the holders to receive an  
annual dividend and to change the conversion price to $0.122. The Company may   
not issue any stock with the same or senior preferences or priorities to this   
series without the consent of the majority of this series' shareholders.        

On April 12, 2000, the Company sold an additional 125,000 shares of Series A    
Preferred Stock to USV Partners for $1,250,000. Based on the conversion terms of
the Series A Preferred Stock and the market price of the Company's common stock 
on the date of issuance of the Series A Preferred Stock, the Company recognized 
the existence of a beneficial conversion feature in the amount of $1,250,000.   

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This amount was recorded as a non-cash deemed dividend during 2000, resulting in
an increase in the net loss applicable to common shareholders.                  

Series B Mandatorily Convertible Preferred Stock                                

In conjunction with the acquisition of E2E, the Company issued 112,000 shares of
$.02 par value Series B Mandatorily Convertible Preferred Stock ("Series B      
Preferred Stock") to former E2E stockholders. The Series B Preferred Stock has a
stated liquidation preference upon dissolution aggregating approximately        
$11,200,000. Upon their mandatory conversion as described below, these shares of
Series B Preferred Stock converted into 56,000,000 shares of Common Stock in    
August 2001. Based on the conversion terms of the Series B Preferred Stock and  
the market price of the Company's common stock on the date of issuance of the   
Series B Preferred Stock, the Company recognized the existence of a beneficial  
conversion feature in the amount of $11,200,000. This amount was recorded as a  
non-cash deemed dividend during 2000, resulting in an increase in the net loss  
applicable to common shareholders.                                              

The Company may not issue any stock with the same or senior preferences or      
priorities to this series without the consent of the majority of this series'   
shareholders.                                                                   

Series C Mandatorily Convertible Preferred Stock                                

On April 12, 2000, the Company sold 4,534 shares of its Series C Mandatorily    
Convertible Preferred Stock ("Series C Preferred Stock"), to accredited         
investors for net proceeds of $4,337,914. The Series C Preferred Stock converted
into 3,129,900 shares of Common Stock at a conversion price per share of $1.45  
in August 2001. Based on the conversion terms of the Series C Preferred Stock   
and the market price of the Company's common stock on the date of issuance of   
the Series C Preferred Stock, the Company recognized the existence of a         
beneficial conversion feature in the amount of $2,307,650. This amount was      
recorded as a non-cash deemed dividend during 2000, resulting in an increase in 
the net loss applicable to common shareholders.                                 

Series D Mandatorily Convertible Preferred Stock                                

On December 28, 2000, the Company issued 1,552.5 shares of $.02 par value Series
D Preferred Stock. All of the shares of Series D Preferred Stock were converted 
into 1,552,500 shares of Common Stock at $1.00 per share in August 2001.        

Mandatorily Convertible Preferred Stock Issuable                                

During 2001 and 2000, the Company received $853,700 and $1,199,200,             
respectively, of cash for shares of a new class of preferred stock that was     
originally intended to be designated as the Series E Mandatorily Convertible    
Preferred Stock from a limited number of accredited investors. This class of    
Preferred Stock issuable was converted into Common Stock at conversion prices   
ranging from $0.21 to $0.76 per common share in lieu of the actual issuance of  
Series E Preferred.                                                             

Series F Redeemable Convertible Preferred Stock                                 

In conjunction with the acquisition of Yazam, the Company issued 27,374 shares  
of $.02 par value Series F Convertible Preferred Stock ("Series F Preferred     
Stock") to former Yazam stockholders. The Series F Redeemable Preferred Stock   
has a stated liquidation preference aggregating approximately $6,000,000. Upon  
their conversion, these shares of Series F Preferred Stock will be converted    
into approximately 27,374,000 shares of Common Stock at $0.22 per share. Based  
on the conversion terms of the Series F Preferred Stock and the market price of 
the Company's common stock on the date of issuance of the Series F Preferred    
Stock, the Company recognized the existence of a beneficial conversion feature  
in the amount of $4,595,510. This amount is recorded as a non-cash deemed       
dividend during 2001, resulting in an increase in the net loss applicable to    
common shareholders.                                                            

Beginning on the second anniversary of the date of the first issuance of shares 
of Series F Preferred Stock, and for a period of 90 days thereafter, each holder
of shares of Series F Preferred Stock shall have the right to require the       
Company to redeem such holder's shares at a purchase price of $100 per share (as
adjusted for any combinations, consolidations, stock distributions or stock     
dividends or similar events with respect to such shares).                       

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In July 2001, the Company entered into an agreement with a holder of 7,826      
shares of Series F Preferred Stock. Under this agreement the holder waived its  
right to require the Company to repurchase its shares on or after September 1,  
2001 and their redemption rights as stated in the certificate of designations if
the Charter Amendment described below did not occur. The holder received in     
consideration the right to require the Company to repurchase its Series F       
Preferred Stock for $300 per share for a ninety-day period beginning on         
September 30, 2002. The Company also agreed to not purchase the Series F        
Preferred Stock held by a certain holder without prior written consent. The     
amount of the accretive dividend described above will change to reflect the     
higher redemption price but it will be recorded over a longer period reflecting 
the change in the earliest date before which the stock may be redeemed.         

In July 2001, USV Partners agreed to purchase 10,119.77 shares of Series F      
Preferred Stock from a group of current holders of such stock. USV Partners then
entered into an agreement with the Company and waived its right to require the  
Company to repurchase its shares on or after September 1, 2001 and their        
redemption rights as stated in the certificate of designations if the Charter   
Amendment described below did not occur. USV received in consideration the right
to require the Company to repurchase its Series F Preferred Stock for $300 per  
share for a ninety-day period beginning on September 30, 2002. The amount of the
accretive dividend described above will change to reflect the higher redemption 
price but it will be recorded over a longer period reflecting the change in the 
earliest date before which the stock may be redeemed.                           

In conjunction with the transactions described above with certain holders of    
Series F Preferred Stock, the minimum amount that the Company would need to pay 
to the former Yazam stockholders and USV Partners should this repurchase be     
required on or after September 30, 2002 is approximately $5,384,000. This amount
isclassified as current liabilities on the consolidated balance sheet.          

Series G  Convertible Junior Preferred Stock                                    

During 2001, the Company received $335,000 of cash for shares of a new class of 
preferred stock that is designated as the Series G Convertible Junior Preferred 
Stock ("Series G Preferred Stock") from a limited number of accredited          
investors. The Series G Preferred Stock has liquidation preferences that are    
junior to the liquidation preferences available to the Series A Preferred Stock 
and the Series F Preferred Stock. The Series G Preferred Stock is convertible   
into Common Stock at a conversion price of $0.15 per common share. Subsequent to
December 31, 2001, the Company received an additional $1,921,600 of cash from   
the sale of Series G Preferred Stock.                                           

Registration Rights                                                             

The Company and certain holders of the Company's Series A Preferred Stock and   
the Series F Preferred Stock entered into an agreement regarding registration   
rights for the Common Stock into which they are to be converted. Collectively,  
the stockholders party to the agreement have the right to compel the Company to 
register their respective shares at the expense of the Company at certain times 
(no earlier than six months subsequent to conversion of such shares to Common   
Stock) and rights on other occasions to have such registration effected at the  
expense of the holders.                                                         

Preferred Stock Voting Rights                                                   

The terms of the Series A Preferred Stock and the Series F Preferred Stock      
permits them to vote as if the Series A Preferred Stock and Series F Preferred  
Stock were already converted to Common Stock.                                   

Charter Amendment                                                               

The Company was obligated by the E2E and Yazam acquisitions to call a meeting of
its stockholders for the purpose of amending the Company's Restated Certificate 
of Incorporation. The amendment (the "Charter Amendment"), which was passed in  
August 2001, increased the number of shares of Common Stock the Company is      
authorized to issue to an amount sufficient to permit the conversion to Common  
Stock of all of the Company's outstanding shares of all of its authorized and   
designated series of convertible preferred stock and any other outstanding      
securities or options, which are convertible into or otherwise permit the holder
thereof to purchase or otherwise receive shares of Common Stock. Upon the       

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acceptance of the Charter Amendment by the Secretary of State of the State of   
Delaware in August 2001, the Series B Preferred Stock, the Series C Preferred   
Stock and the Series D Preferred Stock automatically converted into shares of   
Common Stock.                                                                   

Stock Compensation Plans                                                        

During 1999, the Company created the U.S. Technologies Inc. 1999 Stock Option   
Plan to provide for the granting of incentive and nonqualified options to       
purchase the Company's Common Stock to selected officers, other key employees,  
directors and consultants. The option plan was amended in 2000 and 2001. General
terms provide for a three or four year vesting with an exercise price equal to  
the market value of the Common Stock as of the grant date. The options expire   
three months after the employee's termination, or ten years from the date of    
grant. Subject to stockholder approval, the maximum number of shares that can be
reserved under this plan as amended is 30,000,000.                              

In accordance with SFAS No. 123, the fair value for the Company's employee stock
options was estimated at the date of grant using the Black-Scholes option       
pricing model with the following weighted average assumptions for 2001 and 2000.

                                                                [Download Table]

                                                               2001       2000 
                                                               ----       ---- 

                                                                               
Risk-free interest rate.....................................    5.0%       6.5%
Dividend yield..............................................    0.0%       0.0%
Volatility factor...........................................   70.0%      70.0%
Weighted-average expected life (in years)...................    7.0        7.0 

For purposes of pro forma disclosures, the estimated fair value of options is   
amortized to expense over the option's vesting period. The Company's pro forma  
information follows:                                                            

                                                                [Download Table]

                                                         2001           2000    
                                                         ----           ----    
Net loss applicable to common shareholders                                      
                                                                                
   As reported...............................      $(15,605,952)   $(33,408,747)
   Pro forma.................................       (16,315,172)    (34,487,862)
Earnings per share                                                              
   As reported...............................          $  (0.28)       $  (1.14)
   Pro forma.................................             (0.29)          (1.18)

The grant date weighted-average fair value of options granted during 2001 was   
$0.28, all of which related to options issued at exercise prices equal to the   
market price of USXX stock on the respective grant dates. Compensation expense  
recognized during 2001 and 2000 related to the Company's option plans was       
$15,864 and $746,614, respectively, and is included in general and              
administrative expense.                                                         

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A summary of stock option activity,  and related  information for the years 2001
and 2000 follows:                                                               

                                                                [Download Table]

                                        Qualified Plans     Nonqualified Plans  
                                        ---------------     ------------------  
                                                 Weighted-             Weighted-
                                                  average               average 
                                                  exercise             exercise 
                                       Options      price     Options    price  
                                       -------    --------    -------   ------- 
                                                                                
Outstanding at December 31, 1999...   1,512,400   $  0.15   1,975,000   $  0.12 
  Granted..........................          --        --   6,961,667      1.17 
  Exercised........................    (530,000)     0.13    (125,000)     0.13 
  Forfeited or canceled............     (17,400)     0.59    (700,000)     1.16 
                                     -----------   -------  ----------  ------- 
Outstanding at December 31, 2000...     965,000      0.16   8,111,667      0.92 
  Granted..........................          --        --   8,865,000           
0.28Exercised......................          --        --          --        -- 
  Forfeited or canceled............          --        --  (4,040,000)     0.52 
                                    -----------   -------  -----------  ------- 
Outstanding at December 31, 2001...     965,000   $  0.16  12,936,667   $  0.62 
                                    ===========   =======  ==========   ======= 

Options exercisable at:                                                         
  December 31, 2000................     965,000   $  0.16   2,005,000   $  0.63 
  December 31, 2001................     965,000      0.16   3,270,834      0.70 

During 2000, the Company modified options to purchase an aggregate of 750,000   
shares held by two employees to accelerate vesting. These options had no        
intrinsic value as of the date of the modification, therefore, no expense was   
recognized as a result of this modification. Variable accounting will not be    
applied prospectively for these options.                                        

                                                                [Download Table]

                             Options Outstanding           Options Exercisable 
                             -------------------           ------------------- 
                                  Weighted                                     
                      Number       Average   Weighted      Number      Weighted
                  Outstanding at  Remaining   Average    Exercisable    Average
   Range of        December 31,  Contractual Exercise   December 31,   Exercise
Exercise Prices        2001         Life       Price        2001         Price 
---------------        ----         ----       -----        ----         ----- 

                                                                               
 $0.12 - $0.13      2,405,000       7.87      $0.12      2,405,000      $ 0.12 
   0.27 - 0.28      6,595,000       8.81       0.28         12,500        0.27 
   0.50 - 0.56         80,000       2.23       0.52         80,000        0.52 
   0.76 - 0.98      2,221,667       7.57       0.89        871,667        0.89 
   1.34 - 1.56      2,600,000       8.41       1.52        866,667        1.52 
                  -----------     ------     ------      ---------      ------ 
                   13,901,667       8.08     $ 0.62      4,235,834      $ 0.70 
                  ===========     ======     ======      =========      ====== 

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11.    Operating Leases                                                         

The Company and its subsidiaries lease their operating facilities under         
non-cancelable leases that expire through 2010. The Company is also obligated   
under several other operating leases for various vehicles and office equipment. 

Future minimum rentals due under non-cancellable operating leases are as        
follows:                                                                        

      Year                                                    Amount

        2002...............................................   $  570,406
        2003...............................................      570,406
        2004...............................................      583,806
        2005...............................................      268,338
        Thereafter.........................................    1,386,900
                                                              ----------
                                                              $3,379,856
                                                              ==========

Rental expense for the years ended December 31, 2001 and 2000 was approximately 
$796,000, and $213,000, respectively.                                           

Of the above lease obligations, approximately $2,515,000 relate to facilities   
that the Company does not occupy and has no further intention to use. The       
Company has provided for estimated anticipated losses in connection with the    
settlement or re-lease of these facilities.                                     

12.    Businesses and Credit Concentration                                      

The Company is dependent upon certain customers of the UST Segment for a major  
portion of its sales. Three customers accounted for approximately 19%, 14%, and 
7%, respectively, of the Company's sales for the year ended December 31, 2001.  
Three customers accounted for approximately 18%, 17% and 14%, respectively, of  
the Company's sales for the year ended December 31, 2000. Amounts due from two  
customers of the UST segment, constituted 44% of the Company's accounts         
receivable at December 31, 2001. Amounts due from three customers, constituted  
67% of the Company's accounts receivable at December 31, 2000. The Company      
generally does not require collateral on its trade accounts receivable.         

13.    Related Parties                                                          

During the year ended December 31, 2001, certain affiliates of the Chief        
Executive Officer loaned monies to the Company for working capital purposes.    
Such loans are non-interest bearing and were due on demand. Amounts outstanding 
under these loans totaled $1,507,210 at December 31, 2001 and were classified as
Notes Payable - Related Parties.                                                

On June 30, 2001, the Company sold its investment in Buyline to a company       
controlled by the Chief Executive Officer of the Company. In exchange for the   
stock of Buyline, the Company received a non-recourse note (except to the extent
of the stock pledge) with a face value of $100,000, which has been fully        
reserved for. The note bears interest at 7% and is payable only to the extent of
dividend distributions paid by Buyline to the buyer or cash proceeds received by
the buyer related to the sale of Buyline stock.                                 

During the year ended December 31, 2001, certain affiliates of the Chief        
Executive Officer were paid $241,859 by the Company as reimbursement for certain
legal, accounting and administrative expenses incurred on behalf of the Company 
from 1998 through December 31, 2001.                                            

During 2001 and 2000, the Company paid approximately $36,000 and $97,000,       
respectively, to The Spear Group, a company controlled by a director of the     
Company for certain accounting and administrative support functions.            

During 2000, the Company received consulting revenues of approximately $21,000  
from two of its Associated Companies for capital raising assistance.            

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During 2001 and 2000, the Company received approximately $50,000 and $115,000,  
respectively, from certain Associated Companies for management and facilities   
fees. Such amounts have been included as a reduction of general and             
administrative expense in the consolidated statement of operations.             

During the years ended December 31, 2001 and 2000, the Chief Executive Officer, 
certain affiliates of the Chief Executive Officer and certain affiliates of     
directors and former directors purchased common stock and preferred stock of the
Company for net proceeds of $559,300 and $4,306,700, respectively.              

14.    Segment Information                                                      

The Company adopted SFAS 131, Disclosures about Segments of an Enterprise and   
Related Information. SFAS 131 establishes standards for the way that public     
business enterprises report information about operating segments in their       
financial statements. The standard defines operating segments as components of  
an enterprise about which separate financial information is available that is   
evaluated regularly by the chief operating decision makers in deciding how to   
allocate resources and in assessing the performance. Based on the quantitative  
thresholds specified in SFAS 131, the Company has determined that it has three  
reportable segments. The three reportable segments are USXX, Associated         
Companies and UST. USXX is the corporate office, Associated Companies represent 
the technology operations of the Company, and UST is the prison-based           
manufacturer of computer circuit boards and modular office furniture components.

The accounting policies of the operating segments are the same as those         
described in Note 1. Segment amounts disclosed are prior to any elimination     
entries made in the consolidation.                                              

Summary information by segment follows (in thousands):                          

                                                                [Download Table]

                                                Associated                   
2001                                     USXX   Companies     UST      Total 
----                                     ----   ---------     ---      ----- 

                                                                             
Revenues...........................   $    --   $    --    $ 2,247   $ 2,247 
Operating loss.....................    (3,643)   (6,235)      (790)  (10,668)
Depreciation and amortization......         2       115        110       227 
Total segment assets...............   $   749   $ 3,250    $   603   $ 4,602 

                                                Associated                   
2000                                      USXX  Companies     UST      Total 
----                                      ----  ---------     ---      ----- 

Revenues...........................   $    21   $    --    $ 2,671   $ 2,692 
Operating loss.....................    (3,733)  (14,814)      (413)  (18,960)
Depreciation and amortization......       430     1,318          2     1,750 
Total segment assets...............   $ 2,791   $ 3,434    $   865   $ 7,090 


A reconciliation of total segment assets to the Company's consolidated total    
assets follows:                                                                 

                                                                [Download Table]

                                                          December 31,   
                                                        2001      2000   
                                                        ----      ----   
Assets                                                                   
                                                                         
  Total segment assets..............................   $ 4,602   $ 7,090 
  Intercompany eliminations.........................        (2)   (2,249)
                                                       --------  ------- 
                                                       $ 4,600   $ 4,841 
                                                       =======    ====== 

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15.    Commitments and Contingencies                                            

From time to time, the Company is subject to claims and suits that arise in the 
ordinary course of its business. While it is not possible to predict the        
ultimate outcome of these matters, the Company believes that any losses         
associated with any of such matters will not have a material effect on the      
Company's business, financial condition or results of operations.               

Pursuant to various agreements, the Company has committed to invest an          
additional $250,000 in Baobab and $150,000 in Promisemark, both of which are    
Associated Companies. As of April 5, 2002, the Company has only fulfilled       
$50,000 of its funding obligations and could be subject to claims by Baobab,    
Promisemark or other investors.                                                 

16.   Subsequent Events                                                         

(a)    Additional Investments in Associated Companies                           

In March 2002, the Company converted notes receivable in an amount of $568,000  
for Selis into additional equity resulting in the Company's ownership interest  
increasing from 8.6% at December 31, 2001, to 16.88% at March 31, 2002.         

(b)    Sale of Gregory FCA Communications Inc.                                  

In April 2002, the Company sold its investment in Gregory FCA Communications    
Inc. ("Gregory FCA"), a wholly owned subsidiary, to a group of buyers led by the
executives of Greogory FCA. In exchange for all of the capital stock of Gregory 
FCA, the Company received $250,000 in cash, a promissory note for $50,000,      
public relations and investor relations services valued at $120,000 payable over
a one-year period and contingent consideration in the form of a consulting fee  
worth a minimum of $0 and a maximum of $460,000 in cash over the three-year     
period ending March 31, 2005. As Gregory FCA has been sold, its operations have 
been classified as "loss from operations of discontinued subsidiary" of the     
consolidated statement of operations. Revenues of Gregory FCA for the year ended
December 31, 2001 were approximately $1,478,000.                                

17.   Fourth Quarter Adjustments (Unaudited)                                    

Significant adjustments increasing the fourth quarter loss in 2001 and 2000 are 
indicated below.                                                                

                                                                [Download Table]

                                                          2001      2000      
                                                          ----      ----      

                                                                              
Impairment of long-lived assets.......................  $2,199,000 $12,305,000
                                                        ========== ===========
Aggregate adjustment per common share.................  $    0.04  $      0.42
                                                        =========  ===========

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 INDEX OF EXHIBITS

Exhibit No.                         Description                                 

2.1  Stock Exchange Agreement among U.S.Technologies  Inc., E2Enet,  Inc. and   
     certain stockholders of E2Enet, Inc., dated as of February 21, 2000. (Filed
    as Exhibit 2.1 to the Company's Current Report on Form 8-K, filed February
26, 2000, and incorporated herein by reference.)                      

2.2  Amendment to the Stock Exchange Agreement, dated as of April 5, 2000, by   
     and among the Company, US Technologies Acquisition Sub, Inc., E2Enet, Inc.,
    Northwood  Ventures LLC, Northwood  Capital Partners LLC, Jonathan Ledecky
     and certain other stockholders of E2Enet, Inc. (Filed as Exhibit 2.5 to the
     Company's Annual Report on Form 10-K filed April 10, 2000, and incorporated
herein by reference.)                                                 

2.3  Voting Agreement, dated April 12, 2000, by and among U.S.  Technologies    
     Inc., USV Partners, LLC, James V. Warren, Northwood Ventures LLC, Northwood
    Capital Partners LLC and Jonathan J. Ledecky. (Filed as Exhibit 2.3 to the
    Company's  Current   Report  on  Form  8-K,  filed  April  27,  2000,  and
incorporated herein by reference.)                                    

2.4  Voting  Agreement and Proxy, dated April  12, 2000, by and among USV       
  Partners, LLC, James V. Warren, and Gregory Earls for the benefit of the
     holders of the Registrant's Series B Preferred Stock. (Filed as Exhibit 2.4
   to the  Company's  Current Report on Form 8-K,  filed April 27, 2000, and
incorporated herein by reference.)                                    

2.5  Amended and Restated Registration Rights Agreement, dated April 12, 2000,  
    by and among U.S. Technologies Inc., USV Partners,  LLC, Northwood Capital
     Partners LLC, Northwood Ventures LLC, Jonathan J. Ledecky and certain other
   stockholders of  U.S.  Technologies  Inc. (Filed  as  Exhibit  2.5 to the
Company's Current Report on Form  8-K, filed  April 27,  2000,  and   
incorporated herein by reference.)                                    

2.6  Purchase  Agreement, dated  April 26,  2000,  by and among  E2Enet, Inc.,  
     Northwood Ventures LLC, Northwood Capital Partners LLC, Jonathan J. Ledecky
    and Buyline.net Inc. (Filed as Exhibit 2.1 to the Company's Current Report
 on Form 8-K, filed May 11, 2000, and incorporated herein by reference.)

2.7  Stock Exchange Agreement,  dated April 26, 2000, entered into by and among 
   U.S.  Technologies Inc., E2Enet, Inc., and Lawrence  Silverman. (Filed as
    Exhibit  2.2 to the  Company's Current  Report on Form 8-K,  filed May 11,
2000, and incorporated herein by reference.)                          

2.8  WebMilestones.com, LLC Purchase Agreement, dated as of July 5, 2000, by and
   among  WebMilestones.com, LLC, and its members as of that date, including
   E2Enet, Inc. and Charles D. Weiss. (Filed as Exhibit 2.1 to the Company's
     Current Report on Form 8-K, filed July 20, 2000, and incorporated herein by
reference.)                                                           

2.10 Agreement and Plan of Merger, dated  February 28, 2001, by and among U.S.  
    Technologies Inc., U.S. Technologies Acquisition Co. and Yazam.com. (Filed
    as Exhibit 2.1 to the Company's Current Report on Form 8-K, filed March 1,
2001, and incorporated herein by reference.)                          

2.11 First Amendment to the Agreement and Plan of Merger, dated as of March 22, 
    2001, by and among U.S. Technologies Inc., U.S.  Technologies  Acquisition
     Co. and Yazam.com. (Filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K, filed April 11, 2001, and incorporated herein by reference.)

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Exhibit No.                         Description                                 

2.12 Registration  Rights  Agreement, dated as of March 27, 2001, by and among  
     U.S.  Technologies Inc. and Certain Other Shareholders of U.S. Technologies
     Inc. (Filed as Exhibit 2.12 to the Company's Annual Report on Form 10-K for
  the year ended December 31, 2000, and incorporated herein by reference.)

3.1  Restated Certificate of Incorporation of the Company. (Filed as Exhibit 3.1
 to the Company's Annual Report for the year ended December 31, 1997 and
incorporated herein by reference.)                                    

3.2   Amended Certificate of Incorporation of the Company.                      

3.3  Restated Bylaws of the Company. (Filed as Exhibit  3.2 to the  Company's   
     Annual Report for the year ended December 31, 1997 and incorporated  herein
by reference.)                                                        

4.1  Form of Certificate  evidencing Common Stock of the Company. (Filed as     
    Exhibit 3.1 to Amendment No. 1 to the Company's  Registration statement on
Form S-1 (No. 33-11720) and incorporated herein by reference.)        

4.2  Revised form of certificate evidencing Common Stock of the Company         
   reflecting  the change  of the name to U.S.  Technologies Inc.  (Filed as
   Exhibit 4.1 to the Company's  Current  Report on Form 8-K, dated July 14,
1989, and incorporated herein by reference.)                          

4.3  Rights Agreement, dated as of October 31, 1997, between the Company and    
American Securities Transfer & Trust, Inc., as Rights Agent. (Filed as
    Exhibit 4 to the Company's Current Report on Form 8-K, dated as of October
31, 1997, and incorporated herein by reference.)                      

4.4  Amended Certificate of  Designations, Preferences and Rights of Series A   
   Convertible Preferred Stock of U.S. Technologies Inc., dated February 24,
   1999. (Filed as Exhibit 4.1 to the Company's  Current Report on Form 8-K,
dated May 26, 1999, and incorporated herein by reference.)            

4.5  Amended Certificate of Designations, Preferences and Rights of Series A    
   Convertible Preferred Stock of U.S. Technologies Inc., dated November 29,
    1999.(Filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for
  the year ended December 31, 1999, and incorporated herein by reference.)

4.6  Waiver Agreement between USV Partners, LLC and the Company, dated March 1, 
     2000. (Filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K for
  the year ended December 31, 1999, and incorporated herein by reference.)

4.7  Waiver Agreement between The Earls Family Limited Partnership and Gregory  
    Earls, dated September 20, 2000. (Filed as Exhibit 4.6(a) to the Company's
     Annual Report for the year ended December 31,2000 and  incorporated  herein
by reference.)                                                        

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Exhibit No.                         Description                                 

4.10 Certificate of Designations, Preferences and Rights of Series F Convertible
    Preferred Stock of U.S. Technologies Inc., dated March 27, 2001. (Filed as
   Exhibit 4.10 to the Company's Annual Report From 10-K, for the year ended
December 31, 2000, and incorporated herein by reference.)             

*4.11Certificate of Designations, Preferences and Rights of Series  G           
     Convertible Junior Preferred Stock of U.S. Technologies, Inc. dated January
28, 2002.                                                             

4.12 Form of U.S. Technologies Inc. Common Stock Purchase Warrant, dated as of  
   March 27, 2001. (Filed as Exhibit 4.11 to Annual Report on Form 10-K, for
  the year ended December 31, 2000, and incorporated herein by reference.)

10.1 1999 Stock Option Plan, as amended. (Filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-K, for the year ended December 31, 2000, and 
incorporated herein by reference.)                                    

10.2 1999 Stock Option Plan, as further amended, as of April 27, 2001. (Filed as
Exhibit 10.2 to the Company's Annual Report on Form 10-K, for the year
ended December 31, 2000, and incorporated herein by reference.)       

10.3 Agreement between the Company and Wackenhut Corrections Corporation,  dated
 June 30, 1977. (Filed as Exhibit 10.8 to the Company's Annual Report on
   Form 10-K for the year ended December 31, 1997 and incorporated herein by
reference.)                                                           

10.4 Amendment to Agreement between the Company  and  Wackenhut  Corrections    
     Corporation,  dated  January  28,  1998.  (Filed  as  Exhibit  10.9  to the
     Company's  Annual Report on Form 10-K for the year ended December 31, 1997,
and incorporated herein reference.)                                   

10.5 Industry Work Program Agreement between the Wackenhut Corrections          
     Corporation and Labor-to-Industry  Inc., dated as of April 22, 1998. (Filed
   as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1999, and incorporated herein by reference.)       

10.6 Investment Agreement between the Company and USV Partners, LLC, dated as of
  July 16, 1998. (Filed as Exhibit 10.1 to the Company's Current Report on
Form 8-K, dated May 26, 1999, and incorporated herein by reference.)  

10.7 Lease Agreement by and between the State of California and                 
 Labor-to-Industry, Inc., dated as of August 1, 1998.  (Filed as Exhibit
10.13 to the  Company's Annual Report on Form 10-K  for the year ended
December 31, 1999, and incorporated herein by reference.)             

10.7AAmendment No. 1 to Lease Agreement by and between the State of California  
    and Labor-to-Industry, Inc., dated as of March 24, 1999. (Filed as Exhibit
    10.7A to the  Company's  Annual  Report on Form  10-K  for the year  ended
December 31, 2000, and incorporated herein by reference.)             

10.7BAmendment No. 2 to Lease  Agreement by and between the State of California 
    and  Labor-to-Industry, Inc.,  dated as of May 7, 2001.  (Filed as Exhibit
  10.7B to the  Company's Annual Report on Form  10-K  for the year  ended
December 31, 2000, and incorporated herein by reference.)             

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Exhibit No.                         Description                                 

10.8 Stock Purchase Agreement by and among VIPRO Corporation, Northwood Ventures
     LLC, Northwood Capital Partners LLC and the Company,  dated March 13, 1999.
     (Filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1999, and incorporated herein by reference.)  

10.9 Voting  Agreement,  dated as of April 26, 2000, by and among E2Enet,  Inc.,
     Northwood  Ventures  LLC,  Northwood  Capital  Partners  LLC,  Jonathan  J.
     Ledecky, Silverman Trust and Lawrence Silverman.  (Filed as Exhibit 10.1 to
     the  Company's  Current  Report  on  Form  8-K,  filed  May 11,  2000,  and
incorporated herein by reference.)                                    

10.10Side Letter Voting Agreement and Buyline Stock Transfer, dated as of April 
    26, 2000, by and among E2Enet,  Inc.,  Northwood  Ventures LLC,  Northwood
     Capital Partners LLC and Jonathan J. Ledecky. (Filed as Exhibit 10.2 to the
    Company's Current Report on Form 8-K, filed May 11, 2000, and incorporated
herein by reference.)                                                 

10.11Waiver and  Replacement  Agreement  by and  between  the  Company  and CEVP
     Investment  I LP,  dated  July 19,  2001.  (Filed as  Exhibit  10.16 to the
     Company's  Annual Report on Form 10-K for the year ended December 31, 2000,
and incorporated herein by reference.)                                

10.12Securities  Purchase Agreement by and between USV Partners,  L.L.C. and the
     TPG entities, dated July 20, 2001. (Filed as Exhibit 10.17 to the Company's
     Annual  Report on Form  10-K for the year  ended  December  31,  2000,  and
incorporated herein by reference.)                                    

10.13Waiver  and  Replacement  Agreement  by and  between  the  Company  and USV
     Partners,  L.L.C.,  dated  July 20,  2001.  Filed as  Exhibit  10.18 to the
     Company's  Annual Report on Form 10-K for the year ended December 31, 2000,
and incorporated herein by reference.)                                

10.14Stock Purchase  Agreement by and between  Yazam.com,  Gregory FCA and Buyer
     dated April 1, 2002 (Filed as Exhibit 99.1 to the Company's  Current Report
   on Form 10-K filed April 15, 2002, and incorporated herein by reference.)

*21.1 Subsidiaries of the Registrant                                            

*      To be provided herewith.                                           

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                                                                    Exhibit 21.1

    SUBSIDIARIES OF THE REGISTRANT

E2Enet, Inc.                                                                    

Service-to-Industry, Inc.                                                       

Labor-to-Industry, Inc.                                                         

Yazam.com, Inc.                                                                 

Yazam Ltd. (incorporated in Israel)                                             

Yazam.com Capital Corp.                                                         

Yazam.com Financial Advisors Inc.                                               

Gregory FCA Communications Inc.                                                 

Xi Software, Inc.                                                               

Each subsidiary of the Registrant has been organized and is a corporation       
existing under the laws of the State of Delaware, except where otherwise noted. 

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                                                           10-K Exhibit 4.11
                                                                EXHIBIT 4.11

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS   
OF SERIES G CONVERTIBLE JUNIOR PREFERRED STOCK  
 OF U.S. TECHNOLOGIES INC.

  U.S. Technologies Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), by its    
Chief Executive Officer,                                                        

DOES HEREBY CERTIFY:                                                

  FIRST: That pursuant to the authority expressly vested in the Board of
Directors of the Corporation (the "Board") by the provisions of its Restated    
Certificate of Incorporation, as amended (the "Charter"), the Corporation's     
Board of Directors duly adopted as of January 28, 2002, the following resolution
providing for the designations and issuance of up to 5,000 shares of Series G   
Convertible Junior Preferred Stock, par value $0.02 per share:                  

RESOLVED, that this Board of Directors, pursuant to the authority   
  expressly vested in it by the provisions of the Corporation's Restated
     Certificate of Incorporation, as amended, and the General Corporation Law
      of the State of Delaware, hereby authorizes the issuance from time to time
of a series of preferred stock, par value $0.02 per share, of the   
    Corporation and hereby fixes the designation, voting powers, preferences
and relative, participating, optional and other rights and the      
     qualifications, limitations or restrictions thereof, in addition to those
set forth in said Restated Certificate of Incorporation, as amended.

1.    DESIGNATION AND AMOUNT                                                    

This series of preferred stock shall be designated as "Series G     
Convertible Junior Preferred Stock" and shall have a par value of $0.02 per     
share (the "Series G Preferred"). The number of authorized shares constituting  
the Series G Preferred shall be 5,000 shares. Shares of the Series G Preferred  
shall have a stated value of $1,000 per share (the "Stated Value"). The         
Corporation may issue fractional shares of the Series G Preferred.              

2.    LIQUIDATION PREFERENCE                                                    

     In the event of any bankruptcy, liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary (a "Liquidation"), each holder 
of an outstanding share of Series G Preferred ("Preferred G Holder") at the time
thereof shall be entitled to receive, prior and in preference to any            
distribution of any of the assets or funds of the Corporation to the holders of 
equity securities of the Corporation ranking as to dividends or distributions of
assets on Liquidation of the Corporation junior to the Series G Preferred       
("Junior Securities"), including the Corporation's common stock, par value $0.02
per share (the "Common Stock"), by reason of their ownership of such stock, but 
after and subject to any such distribution to the holders of any equity         

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securities of the Corporation ranking as to dividends on distributions of assets
on Liquidation of the Corporation senior to the Series G Preferred ("Senior     
Securities"), including but not limited to the Series A Convertible Preferred   
Stock (the "Series A Stock") and the Series F Convertible Preferred Stock (the  
"Series F Stock"), an amount per share of Series G Preferred equal to 100% of   
the Stated Value. If, upon a Liquidation, the assets and funds of the           
Corporation legally available for distribution among the Preferred G Holders and
the holders of any other equity securities of the Corporation ranking, as to    
Liquidation, on a parity with the Series G Preferred (the "Parity Stock"), shall
be insufficient to pay in full the Liquidation preference of the Series G       
Preferred and liquidating payments on any Parity Stock, then no assets or funds 
shall be distributed to the Preferred G Holders or to the holders of any Parity 
Stock except to the extent that such assets or funds shall be distributed among 
the Preferred G Holders and the holders of any Parity Stock ratably in          
accordance with the respective amounts which would be payable upon Liquidation  
on the Series G Preferred and any Parity Stock if all amounts payable thereon   
were payable in full. Subject to the rights of the holders of shares of any     
Senior Securities, after payment of the Liquidation preference of the Series G  
Preferred and Parity Stock determined pursuant to this Section 2, the remaining 
assets of the Corporation legally available for distribution shall be           
distributed ratably to the holders of Junior Securities, including the Common   
Stock.                                                                          

3.    CONVERSION                                                                

(a) Conversion. The conversion price for conversion of each share of
Series G Preferred shall be $0.15 per common share (the "Conversion Price").    
Such price shall be adjusted to reflect any split, reverse split, stock or other
non-cash dividend, or similar subdivision or combination of the Corporation's   
Common Stock, such adjustment to be determined by the Board in its reasonable   
discretion. Each Preferred G Holder shall have the right to convert each such   
share into fully-paid and nonassessable shares of Common Stock, pursuant to a   
conversion rate equal to the Stated Value divided by the Conversion Price (the  
"Conversion Rate").                                                             

(b)   Procedures for Conversion.                                    

       (i) In order to convert shares of Series G Preferred stock into
shares of Common Stock therefor, a Preferred G Holder shall surrender such      
holder's certificate or certificates therefor, duly endorsed for transfer, at   
any time during normal business hours, to the Corporation at its principal      
office or at such other office or agency then maintained by it for such purpose,
accompanied by (A) a written notice of such Preferred G Holder's election to    
convert (the "Conversion Notice") and (B) an instrument of transfer in form     
reasonably satisfactory to the Corporation and to any conversion agent, duly    
executed by the registered Preferred G Holder or by such holder's duly          
authorized attorney. As promptly as practicable after the surrender for         
conversion of any Series G Preferred certificates ("Preferred Certificates") in 
the manner provided in the preceding sentence but in any event within five (5)  
business days after receipt of the Conversion Notice, the Corporation will      
deliver or cause its transfer agent to deliver to the Preferred G Holder, Common
Stock certificates ("Common Stock Certificates") representing the aggregate     

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number of shares of Common Stock issuable upon such conversion, issued in such  
name or names as such holder may direct, and if the Series G Preferred stock is 
exercised in part, a new certificate representing the Series G Preferred stock  
that has not been converted. Such conversion shall be deemed to have been made  
immediately prior to the close of business on the date of such surrender of the 
shares in proper order for conversion, and all rights of the Preferred G Holder,
solely with respect to the shares converted, shall cease at such time and the   
person or persons in whose name or names the Common Stock certificates are to be
issued, shall be treated for all purposes as having become the record holder or 
holders thereof at such time; provided, however, that any such surrender and    
payment on any date when the stock transfer books of the Corporation shall be   
closed shall constitute the person or persons in whose name or names the        
certificates for such shares of Common Stock are to be issued as the record     
holder or holders thereof for all purposes immediately prior to the close of    
business on the next succeeding day on which such stock transfer books are      
opened.                                                                         

      (ii) The Corporation shall not be required to issue fractional
shares of Common Stock upon conversion of shares of Series G Preferred. At the  
Corporation's discretion, in the event the Corporation determines not to issue  
fractional shares, then in lieu of any fractional shares to which the Preferred 
G Holder would otherwise be entitled, the Corporation shall pay cash equal to   
such fraction multiplied by the current market price as reasonably determined by
the Board in accordance with applicable law.                                    

       (iii) The issuance of Common Stock Certificates upon conversion
shall be made without charge for any issue, stamp or other similar tax in       
respect of such issuance. However, if any such Common Stock Certificate is to be
issued in a name other than that of the holder of record of the shares          
converted, the person or persons requesting the issuance thereof shall pay to   
the Corporation the amount of any such tax which may be payable in respect of   
any transfer involved in such issuance or shall establish, to the satisfaction  
of the Corporation, that such tax has been paid or is not payable.              

    (c) Reservation of Stock Issuable Upon Conversion. The Corporation shall
take all steps necessary and appropriate to ensure that a sufficient number of  
authorized but unissued shares of Common Stock will available to effect the     
Conversion of the Series G Preferred.                                           

(d)   Reorganization, Merger or Sale of the Corporation.            

          (i) Notwithstanding any other provision hereof, in case of (A) any
reorganization or any reclassification of the capital stock of the Corporation  
or (B) any sale of the Corporation or its assets if such transaction does not   
constitute a Liquidation or is not subject to part (d) (iii) below, then, at the
election of a Preferred G Holder, concurrently with the consummation of such    
reorganization, reclassification or sale of the Corporation, provision shall be 
made so that each share of Series G Preferred shall thereafter be convertible   
into the number of shares of stock or other securities or property (including   
cash) to which a holder of the number of shares of Common Stock deliverable upon
conversion of each share of Series G Preferred would have been entitled assuming
conversion on the day immediately prior to the initial announcement of the      
transaction or a proposed transaction that ultimately resulted in the           
transaction. In any case, appropriate adjustment (as determined by the          
Corporation's Board of Directors) shall be made in the application of the       
provisions herein set forth with respect to the rights and interests thereafter 
of the Preferred G Holders, to the end that the provisions set forth herein     

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shall thereafter be applicable, as nearly as equivalent as is practicable, in   
relation to any shares of stock or the securities or property (including cash)  
thereafter deliverable upon the conversion of the shares of Series G Preferred. 

 (ii) After the Corporation has determined to enter into a
transaction described in this Section 3(d)(i), and publicly announces that the  
Corporation will enter into such transaction, the Corporation will provide      
written notice to each Preferred G Holder setting forth the material terms of   
the transaction, together with all relevant information regarding such          
transaction at least 30 days prior to the proposed closing date of the          
transaction.                                                                    

       (iii) In case of any merger, consolidation, reclassification or
other similar reorganization, to the extent the Corporation is not the surviving
entity, the Series G Preferred shall be converted into or exchanged for and     
shall be entitled to receive the same consideration as they would have received 
had they been converted on the day immediately prior to consummation of such    
transaction.                                                                    

4.    RESTRICTIONS ON DIVIDENDS, STOCK SPLITS AND DISTRIBUTIONS                 

     The Corporation shall not at any time or from time to time after the date
that the first share of the Series G Preferred is issued declare or pay any     
dividends on or make other distributions in respect of any of its Junior        
Securities, including, but not limited to, dividends paid or payable in cash,   
the capital stock of the Corporation, or any other property.                    

    SECOND: That such determination of the designations, preferences and the
relative, participating, optional or other rights, and the qualifications,      
limitations or restrictions thereof, relating to the Series G Preferred, was    
duly made by the Corporation's Board of Directors pursuant to the provisions of 
the Corporation's Charter, and in accordance with the provisions of Section 151 
of the General Corporation Law of the State of Delaware, as amended.            

  IN WITNESS WHEREOF, U.S. Technologies Inc. has caused this Certificate
of Designations to be executed as of this 28 day of January, 2002.              

                          U.S. TECHNOLOGIES INC.

                         By: /s/ Gregory Earls
                                         ---------------------------------
                       Gregory Earls
                                 Chief Executive Officer

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		3/27/07		15
		3/31/05		52
		12/31/04		11
		1/31/04		11
		9/30/02		20		47
Filed on:		4/16/02
		4/15/02		24		56			8-K
		4/10/02		25
		4/5/02		52
		4/1/02		4		56
		3/31/02		1		52			10QSB,  NT 10-Q
		3/28/02		13
		2/15/02		43
		1/28/02		55		58
		1/1/02		21		38
For Period End:		12/31/01		1		52			10KSB/A,  8-K,  NT 10-K
		11/20/01		23					8-K
		11/13/01		12					8-K
		11/12/01		13
		11/9/01		12
		10/21/01		10
		9/30/01		23					10-Q
		9/6/01		22		23			8-K/A
		9/1/01		47
		8/16/01		22					8-K,  8-K/A
		7/20/01		56
		7/19/01		56
		6/30/01		21		50			10-Q,  NT 10-Q
		5/7/01		55
		4/27/01		55
		4/11/01		53					8-K
		3/27/01		4		55			8-K,  8-K/A
		3/22/01		53
		3/1/01		53					425,  8-K
		2/28/01		53					8-K
		1/3/01		11
		1/1/01		37
		12/31/00		13		56			10-K405,  NT 10-K
		12/28/00		41		46
		12/27/00		42					8-K
		12/1/00		41
		11/3/00		42
		10/16/00		41
		9/20/00		54
		7/20/00		53					8-K
		7/5/00		42		53			8-K,  8-K/A
		7/1/00		10
		5/11/00		53		56			8-K,  SC 13D/A
		4/27/00		53					8-K
		4/26/00		35		56			8-K/A
		4/12/00		3		53			8-K/A
		4/10/00		53					10-K
		4/5/00		53
		3/1/00		54
		2/26/00		53
		2/21/00		53					8-K
		1/1/00		41
		12/31/99		14		56			10-K,  NT 10-K
		11/29/99		45		54
		5/26/99		54		55			8-K
		4/15/99		12		43			10-K
		4/1/99		43
		3/24/99		55
		3/13/99		56
		2/24/99		54
		8/1/98		55
		7/16/98		55
		4/22/98		55
		1/28/98		55
		12/31/97		22		55			10-K,  10-K/A,  NT 10-K
		10/31/97		54
									List all Filings