<SUBMISSION>
<ACCESSION-NUMBER>0000948600-02-000002
<TYPE>8-K/A
<PUBLIC-DOCUMENT-COUNT>5
<PERIOD>20010615
<ITEMS>7
<FILING-DATE>20020125
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PERMA FIX ENVIRONMENTAL SERVICES INC
<CIK>0000891532
<ASSIGNED-SIC>4955
<IRS-NUMBER>581954497
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K/A
<ACT>34
<FILE-NUMBER>001-11596
<FILM-NUMBER>02517495
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1940 NORTHWEST 67TH PLACE
<STREET2>SUITE A
<CITY>GAINESVILLE
<STATE>FL
<ZIP>32653
<PHONE>3523734200
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1940 NW 67TH PL
<STREET2>SUITE A
<CITY>GAINESVILLE
<STATE>FL
<ZIP>32653
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>8-K/A
<SEQUENCE>1
<FILENAME>form8ka2.htm
<DESCRIPTION>FORM 8-K/A (AMENDMENT NO. 2)
<TEXT>
<HTML>
<HEAD>
<TITLE>Form 8-K/A (6-15-2001), Amendment No. 2</TITLE>
</HEAD>
<BODY TEXT="#000000" LINK="#0000ff" VLINK="#551a8b" ALINK="#ff0000" BGCOLOR="#c0c0c0">

<p>&nbsp;</p>

<TABLE WIDTH="100%">
<TR VALIGN="TOP"><TD ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION<br>
  </TD></TR>
<TR VALIGN="TOP"><TD ALIGN="CENTER">Washington, D.C.  20549</TD></TR>
<TR VALIGN="TOP"><TD ALIGN="CENTER"></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="CENTER"><br>
    <br>
    <br>
  </TD></TR>
<TR VALIGN="TOP"><TD ALIGN="CENTER">FORM 8-K/A</TD></TR>
<TR VALIGN="TOP"><TD ALIGN="CENTER"></TD></TR>
<TR VALIGN="TOP"><TD><br>
    <br>
    <br>
  </TD></TR>
<TR VALIGN="TOP"><TD>
<P ALIGN="CENTER">CURRENT REPORT</TD></TR>
<TR VALIGN="TOP"><TD>
<P ALIGN="CENTER">(Amendment No. 2)</TD></TR>
<TR VALIGN="TOP"><TD><br>
    <br>
    <br>
  </TD></TR></TABLE>

<P ALIGN="CENTER">
Pursuant to Section 13 or 15(d) of<br>
The Securities Exchange Act of 1934<br>
</P>

<P ALIGN="CENTER">&nbsp;
</P>

<P>
Date of Report (Date of earliest event reported)<U>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;June 15, 2001&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  &nbsp;&nbsp;</U></P>

<TABLE WIDTH="100%">
<TR VALIGN="TOP"><TD>
<P ALIGN="CENTER"><U><br>
<br>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.<br>
</U>(Exact name of registrant as specified in its charter)</P>

  </TD></TR></TABLE>
<br>
<br>
<TABLE WIDTH="100%">
<TR VALIGN="TOP"><TD ALIGN="CENTER"><U></U><U>Delaware</U> </TD>
<TD ALIGN="CENTER"></TD>
<TD ALIGN="CENTER"><U>1-11596</U></TD>
<TD ALIGN="CENTER"></TD>
<TD ALIGN="CENTER"><U>58-1954497</U></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="CENTER"> (State or other<br>
    jurisdiction of<br>
    incorporation)</TD>
<TD ALIGN="CENTER"></TD>
<TD ALIGN="CENTER">&nbsp;(Commission File<br>
  Number)</TD>
<TD ALIGN="CENTER"></TD>
<TD ALIGN="CENTER">&nbsp;&nbsp;&nbsp;(IRS Employer<br>
  Identification No.)</TD></TR></TABLE>
<TABLE WIDTH="100%">
<TR VALIGN="TOP"><TD><U><br>
    <br>
    <br>
    1940 N.W. 67th Place, Suite A, Gainesville, Florida</U>        &nbsp;        <U><br>
    </U>(Address of principal executive offices)</TD>
<TD>
<P ALIGN="CENTER"><U><br>
<br>
32653<br>
 </U>(Zip Code)</P>

  </TD></TR></TABLE>
<br>
<br>
<TABLE WIDTH="100%">
<TR VALIGN="TOP"><TD>Registrant's telephone number, including area code <U> &nbsp;&nbsp;&nbsp;&nbsp;(352)
    373-4200&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD></TR></TABLE>

<br>
<br>
<TABLE WIDTH="100%">
<TR VALIGN="TOP"><TD>
<P ALIGN="CENTER"><U>                                    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
                                   </U> (Former name or former address, if changed since last report) </P>

</TD></TR></TABLE>

&nbsp;
<p>&nbsp;</p>
<TABLE WIDTH="653">
<TR VALIGN="TOP"><TD width="57">Item 7.</TD>
<TD width="582"><U>Financial Statements and Exhibits</U></TD></TR></TABLE>

<TABLE WIDTH="653">
<TR VALIGN="TOP"><TD width="16"><br>
  </TD>
<TD width="33"><br>
  </TD>
<TD width="24"><br>
  (a)</TD>
<TD width="554"><br>
  Financial statements of businesses acquired</TD></TR></TABLE>

<P>On July 5, 2001, Perma-Fix Environmental Services, Inc. (the "Company") filed a Form 8-K to
report its acquisition, effective June 25, 2001, of all of the outstanding voting stock of East
Tennessee Materials and Energy Corporation, a Tennessee corporation ("M&amp;EC"), pursuant to
the terms of the Stock Purchase Agreement, dated January 18, 2001, (the "Purchase Agreement")
between the Company, M&amp;EC, all of the shareholders of M&amp;EC, and Bill Hillis.  Pursuant to
Item 7 of Form 8-K, the Company filed certain financial information with Amendment No. 1 to
Form 8-K on September 16, 2001 ("Amendment No. 1").  This Amendment No. 2 is being filed
to amend such financial information.</P>

<TABLE WIDTH="653">
<TR VALIGN="TOP"><TD width="54">(1)</TD>
<TD width="585">Audited Financials</TD></TR></TABLE>

<P>The  following audited financial statements of M&amp;EC are filed as
required by Rule 3.05(b) of Regulation S-X, as promulgated pursuant to the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and are attached hereto as Exhibit 99.1.</P>

<P>Report of Independent Certified Public Accountants Gallogly, Fernandez &amp; Riley, LLP</P>

<P>Audited Consolidated Financial Statements:</P>

<TABLE WIDTH="659">
<TR VALIGN="TOP"><TD width="53"></TD>
<TD width="22">A.</TD>
<TD width="22"></TD>
<TD width="536">Consolidated Balance Sheets as of December 31, 2000 and 1999.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="53"></TD>
<TD width="22">B.</TD>
<TD width="22"></TD>
<TD width="536">Consolidated Statements of Operations for the Years Ended December 31,
2000 and 1999.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="53"></TD>
<TD width="22">C.</TD>
<TD width="22"></TD>
<TD width="536">Consolidated Statements of Stockholders' Deficit for the Years Ended
December&nbsp;31, 2000 and 1999.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="53"></TD>
<TD width="22">D.</TD>
<TD width="22"></TD>
<TD width="536">Consolidated Statements of Cash Flows for the Years Ended December 31,
2000 and 1999.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="53"></TD>
<TD width="22">E.</TD>
<TD width="22"></TD>
<TD width="536">Notes to Financial Statements.</TD></TR></TABLE>

<p>&nbsp;</p>

<TABLE WIDTH="653">
<TR VALIGN="TOP"><TD width="54">(2)</TD>
<TD width="585">Unaudited Interim Financials</TD></TR></TABLE>

<P>The  following unaudited interim financial statements of M&amp;EC are filed as
required by Rule 3.05(b) of Regulation S-X, as promulgated pursuant to the Securities Act
and the Exchange Act, and are attached hereto as Exhibit 99.2.</P>

<P>&nbsp;</P>

<P align="center">2</P>

<P>&nbsp;</P>

<TABLE WIDTH="662">
<TR VALIGN="TOP"><TD width="642" colspan="3">Unaudited Interim Financial
    Statements of M&amp;EC:</TD>
</TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32">A.</TD>
<TD width="561">Consolidated Balance Sheets as of June 25, 2001 (unaudited) and December 31,
2000.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32">B.</TD>
<TD width="561">Unaudited Consolidated Statements of Operations for the six
  months ended June 25, 2001, and June 30, 2000.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32">C.</TD>
<TD width="561">Unaudited Consolidated Statements of Cash Flows for the six months ended
June 25, 2001, and June 30, 2000.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32">D.</TD>
<TD width="561">Notes to Consolidated Financial Statements.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32"></TD>
<TD width="561">
  </TD></TR>
</TABLE>

&nbsp;
<TABLE WIDTH="653">
<TR VALIGN="TOP"><TD width="22"></TD>
<TD width="36"></TD>
<TD width="28">(b)</TD>
<TD width="541">Unaudited pro forma financial information.</TD></TR></TABLE>

<P>The following unaudited pro forma financial information is filed as required by Article 11 of
Regulation S-X, as promulgated pursuant to the Securities Act and the Exchange Act, and is
attached hereto as Exhibit 99.3.  The following information should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 31, 2000, and
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001.</P>

<TABLE WIDTH="662">
<TR VALIGN="TOP"><TD width="642" colspan="3">Unaudited Pro Forma Combined Condensed<br>
Financial Statements of the Company and M&amp;EC:</TD>
</TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32">A.</TD>
<TD width="561">Unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 2000.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32">B. </TD>
<TD width="561">Unaudited Pro Forma Condensed Combined Statement of Operations for the six
months ended June 30, 2001.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32">C.</TD>
<TD width="561">Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.<br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32"></TD>
<TD width="561">
  </TD></TR>
<TR VALIGN="TOP"><TD width="49"></TD>
<TD width="32"></TD>
<TD width="561">&nbsp;
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p align="center">3</p>
  <p>&nbsp;
  </TD></TR></TABLE>

<TABLE WIDTH="653">
<TR VALIGN="TOP"><TD width="28"><br>
  </TD>
<TD width="52"></TD>
<TD width="32">(c)</TD>
<TD width="515">Exhibits</TD></TR></TABLE>

<TABLE WIDTH="679">
<TR VALIGN="TOP"><TD width="48"></TD>
<TD width="35">2.1* </TD>
<TD width="576">Stock Purchase Agreement, dated January 18, 2001, among the Company; East
Tennessee Materials and Energy Corporation; Performance Development
Corporation; Joe W. Anderson; Ronald W. Anderson; M. Joy Anderson;
Russell R. and Cindy E. Anderson; Charitable Remainder Unitrust of William
Paul Cowell, Kevin Cowell, Trustee; Joe B. and Angela H. Fincher; Ken-Ten
Partners; Michael W. Light; Management Technologies, Incorporated; M&amp;EC
401(k) Plan and Trust; PDC 401(k) Plan and Trust; Robert N. Parker; James
C. Powers; Richard William Schenk, Trustee of the Richard Schenk Trust dated
November 5, 1998; Talahi Partners; Hillis Enterprises, Inc.; Tom Price and
Virginia Price; Thomas John Abraham, Jr. and Donna Ferguson Abraham; and
Bill J. Hillis, is incorporated by reference from Exhibit 2.1 to the Company's
Form 8-K, dated January 31, 2001.<br>
  <br>
  </TD></TR></TABLE>

<TABLE WIDTH="657">
<TR VALIGN="TOP"><TD width="46"></TD>
<TD width="38">10.1*</TD>
<TD width="553">Promissory Note, dated June 7, 2001, issued by M&amp;EC in favor of
Performance Development Corporation.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="46"></TD>
<TD width="38">10.2*</TD>
<TD width="553">Form 433-D Installment Agreement, dated June 11, 2001, between M&amp;EC and
the Internal Revenue Service.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="46"></TD>
<TD width="38">23.1</TD>
<TD width="553">Consent of Gallogly, Fernandez &amp; Riley, LLP.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="46"></TD>
<TD width="38">99.1</TD>
<TD width="553">Audited financial statements of M&amp;EC.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="46"></TD>
<TD width="38">99.2</TD>
<TD width="553">Unaudited financial statements of M&amp;EC.<br>
  <br>
  </TD></TR>
<TR VALIGN="TOP"><TD width="46"></TD>
<TD width="38">99.3</TD>
<TD width="553">Unaudited pro forma financial information.</TD></TR></TABLE>

<P>*Filed as an exhibit to the Company's Current Report on Form 8-K, dated June 15,
2001, and filed July&nbsp;5, 2001.</P>

<P>&nbsp;</P>

<TABLE WIDTH="653">
<TR VALIGN="TOP"><TD COLSPAN="2" width="645">
<P ALIGN="CENTER"><U></U><U>SIGNATURES<br>
<br>
</U>
<P ALIGN="CENTER">&nbsp;</TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2" width="645">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
    <p>&nbsp;</p>
  </TD></TR>
<TR VALIGN="TOP"><TD width="266"></TD>
<TD width="373">PERMA-FIX ENVIRONMENTAL
SERVICES, INC.</TD></TR>
<TR VALIGN="TOP"><TD width="266"></TD>
<TD width="373"><br>
  <br>
  <br>
  <p>&nbsp;</p>
  </TD></TR>
<TR VALIGN="TOP"><TD width="266"></TD>
<TD width="373">By:<u>&nbsp;&nbsp;/s/ Richard T. Kelecy &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
  </u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Financial Officer</TD></TR>
<TR VALIGN="TOP"><TD width="266">&nbsp;
    <p>Dated: January 24, 2002</p>
  </TD>
<TD width="373"></TD></TR></TABLE>

<p align="center">4</p>

</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>consent2.htm
<DESCRIPTION>CONSENT OF AUDITORS
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 23.1 - Consent of Auditors</TITLE>
</HEAD>
<BODY TEXT="#000000">

<P ALIGN="CENTER"><font size="6"><b>G/F/R<br>
</b></font>Gallogly, Fernandez &amp; Riley, LLP<br>
<br>
Accountants &amp; Consultants</P>

<P ALIGN="CENTER">&nbsp;</P>

<P ALIGN="CENTER">CONSENT OF INDEPENDENT<br>
CERTIFIED PUBLIC ACCOUNTANTS</P>
<P ALIGN="left"></P>
<P ALIGN="left">&nbsp;</P>
<P ALIGN="left">&nbsp;</P>
<P>Perma-Fix Environmental Services, Inc.<br>
Gainesville, Florida</P>
<P ALIGN="JUSTIFY"><br>
We hereby consent to the use in the Company's Form 8-K/A of our report dated July 13, 2001, relating to the consolidated financial statements of East Tennessee Materials and Energy Corporation and subsidiary which is contained in that Form 8-K/A.</P>

<P ALIGN="JUSTIFY">We hereby consent to the incorporation by reference of our report dated July 13, 2001, relating to the consolidated financial statements of East Tennessee Materials and Energy Corporation and subsidiary appearing in the Company's Form 8-K/A into the Company's previously filed Forms S-3 and S-8 Registration Statements, File Numbers 33-85118 (S-3), 333-14513 (S-3), 333-43149 (S-3), 33-80580 (S-8), 333-3664 (S-8), 333-17899 (S-8), 333-25835 (S-8) and 333-76024 (S-8).</P>
<P ALIGN="JUSTIFY"></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>/s/ Gallogly, Fernandez &amp; Riley, LLP</P>
<P>Gallogly, Fernandez&nbsp;&amp; Riley, LLP<br>
Orlando, Florida<br>
<br>
January 24, 2002</P>
<P>&nbsp;</P></BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>audited.htm
<DESCRIPTION>AUDITED FINANCIAL STATEMENTS
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 99.1 - Audited Financial Statements</TITLE>
</HEAD>
<BODY TEXT="#000000">

<FONT FACE="Arial" SIZE=6><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
</FONT><B><FONT FACE="Arial" SIZE=6><P ALIGN="RIGHT">East Tennessee Materials</P>
<P ALIGN="RIGHT">and Energy Corporation</P>
</FONT><FONT FACE="Arial" SIZE=6><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
</B><P ALIGN="RIGHT">&nbsp;</P>
</FONT><FONT FACE="Arial" SIZE=5><P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">&nbsp;</P>
</FONT><P>&nbsp;</P>
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
<P align="right"><font size="4">Contents</font></P>
<hr noshade color="#000080" size="9">
<P ALIGN="RIGHT">
<div align="right">
  <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=523>
<TR><TD WIDTH="83%" VALIGN="TOP">
<B><P>Independent Auditors' Report</B></TD>
<TD WIDTH="9%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P ALIGN="RIGHT">3</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<B><P>Consolidated Financial Statements</B></TD>
<TD WIDTH="9%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP"><DIR>

<P>Balance sheets<br>
Statements of operations<br>
Statements of stockholders' deficit<br>
Statements of cash flows<br>
Notes to consolidated financial statements</DIR>
</TD>
<TD WIDTH="9%" VALIGN="TOP">
<P ALIGN="RIGHT">4<br>
<br>
<br>
<br>
9</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P ALIGN="CENTER">--<br>
<br>
<br>
<br>
--</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P ALIGN="RIGHT">5<br>
6<br>
7<br>
7<br>
27</TD>
</TR>
</TABLE>
</div>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P>&nbsp;</P>


<P align="right"><b>2&nbsp;</b></P>
<B><FONT FACE="Arial" SIZE=4><P ALIGN="JUSTIFY">Independent Auditors' Report</P>
<P ALIGN="JUSTIFY"></P>
</B><P ALIGN="JUSTIFY">&nbsp;</P>
</FONT><P ALIGN="JUSTIFY">To the Board of Directors<br>
East Tennessee Materials and Energy Corporation<br>
Oak Ridge, Tennessee</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">We have audited the accompanying consolidated balance sheets of East Tennessee Materials and Energy Corporation and subsidiary (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.</P>
<P ALIGN="JUSTIFY">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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.</P>
<P ALIGN="JUSTIFY">In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of East Tennessee Materials and Energy Corporation and subsidiary at December 31, 2000 and 1999 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.</P>
<P ALIGN="JUSTIFY">Effective June 25, 2001, the Company was acquired by Perma-Fix Environmental Services, Inc. (see Note 16).</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY"><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/
Gallogly, Fernandez &amp; Riley, LLP<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certified Public Accountants<br>
</P>
<P ALIGN="JUSTIFY">Orlando, Florida<br>
July 13, 2001</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="right"><b>3</b></P>
<P ALIGN="right">&nbsp;</P>
<P ALIGN="right">&nbsp;</P>
<P ALIGN="right">&nbsp;</P>
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
<P align="right"><font size="4">Consolidated Balance Sheets</font></P>
<hr noshade size="9" color="#000080">
<TABLE BORDER="0" CELLSPACING=2 WIDTH=633>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<I><P><br>
December&nbsp;31,</I></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">2000</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">1999</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Assets</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Current:</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</TD>
<TD WIDTH="3%" VALIGN="BOTTOM"><B>$</B></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">212,693</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<p align="right">265,374</TD>
<TD WIDTH="2%" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">14,044</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">4,793</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Total
    current assets</b></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">226,737</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">270,167</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Plant and equipment,</B> net </TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">9,480,288</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">3,957,845</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Other assets:</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM"><DIR>

<P>Permits, net of accumulated amortization of $509,094 and $170,091</DIR>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">1,276,627</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">1,447,466</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM"><DIR>

<P>Lease acquisition costs, net of accumulated amortization of $87,536 and $53,848</DIR>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">213,111</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">246,798</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM"><DIR>

<P>Goodwill, net of accumulated amortization of $24,052 and $12,026</DIR>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">96,213</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">108,238</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>Other</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">9,648</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">9,438</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Total
    other assets</b></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">1,595,599</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">1,811,940</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM"></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">11,302,624</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">6,039,952</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080">
  </TD>
</TR>
</TABLE>

<FONT SIZE=1>
</FONT><P ALIGN="RIGHT"><i>See accompanying notes to consolidated financial
  statements.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</i></P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT"><b>4</b></P>
  <P ALIGN="RIGHT">&nbsp;</P>
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
<P align="right"><font size="4">Consolidated Balance Sheets</font></P>
  <hr noshade size="9" color="#000080">
<TABLE BORDER="0" CELLSPACING=2 WIDTH=633>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<I><P><br>
December&nbsp;31,</I></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">2000</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">1999</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Liabilities and Stockholders' Deficit</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Current liabilities:</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">1,128,465</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">461,937</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">920,787</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">460,996</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related party</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">4,489,845</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">3,882,567</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to Perma-Fix</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">3,754,410</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<p align="right">--</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes payable</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">927,600</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">433,400</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current maturities of long-term debt</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">748,750</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">42,764</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of payroll tax liability</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">20,022</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<p align="right">--</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Total
    current liabilities</b></TD>
<TD WIDTH="3%" VALIGN="BOTTOM"></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B>11,989,879</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM"></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">5,281,664</TD>
<TD WIDTH="2%" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Long-term debt, </B>less current maturities </TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">14,703</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">405,042</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Payroll tax liability,</B> less current portion</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">903,474</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">625,000</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Other long-term liabilities</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">200,420</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">157,036</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Total
    liabilities</b></TD>
<TD WIDTH="3%" VALIGN="BOTTOM"></TD>
<TD WIDTH="12%" VALIGN="BOTTOM"><B>13,108,476</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM"></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">6,468,742</TD>
<TD WIDTH="2%" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Commitments</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><b>--</b></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<p align="right">--</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Redeemable Series A Cumulative Preferred Stock</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">1,291,544</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">942,203</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<B><P>Stockholders' deficit:</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock; no par value; authorized 4,000,000
shares;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued 2,066,700 and 2,047,950
shares</TD>
<TD WIDTH="3%" VALIGN="BOTTOM"></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">1,527,691</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">1,802,032</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">(4,525,087</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<B><P>)</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(3,073,025</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>)</TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less treasury stock at cost, 25,000 shares</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">(100,000</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<B><P>)</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(100,000</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>)</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM"><DIR>
<DIR>

<B><P>Total stockholders' deficit</DIR>
</DIR>
</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">(3,097,396</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<B><P>)</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(1,370,993</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>)</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="69%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">11,302,624</B></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">6,039,952</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080">
  </TD>
</TR>
</TABLE>

<FONT SIZE=1>
</FONT><P ALIGN="RIGHT"><i>See accompanying notes to consolidated financial
statements.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</i></P>
<P ALIGN="RIGHT"><b>5</b></P>
<P ALIGN="RIGHT">&nbsp;</P>
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
<P align="right"><font size="4">Consolidated Statements of Operations</font></P>
<hr noshade size="9" color="#000080">
<TABLE BORDER="0" CELLSPACING=2 WIDTH=624>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<I><FONT SIZE=3><P><br>
Year ended December&nbsp;31,</I></FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">2000</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">1999</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<B><P>Net revenues</B></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">905,480</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">1,208,226</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<B><P>Cost of goods sold</B></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">558,806</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">876,779</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
    profit</TD>
<TD WIDTH="4%" VALIGN="BOTTOM"></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">346,674</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM"></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">331,447</TD>
<TD WIDTH="2%" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<B><P>Selling, general and administrative expenses</B></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">1,290,352</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">1,725,784</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<B><P>Depreciation and amortization</B></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">452,345</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">301,840</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    Loss from operations</TD>
<TD WIDTH="4%" VALIGN="BOTTOM"></TD>
<TD WIDTH="11%" VALIGN="BOTTOM"><B>(1,396,023</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM"><B>)</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">(1,696,177</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">)</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM"></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<B><P>Other income (expense):</B></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income</TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">119,005</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<p align="right">--</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense</TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">(175,044</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<B><P>)</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(266,171</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>)</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
    other income (expense)</TD>
<TD WIDTH="4%" VALIGN="BOTTOM"></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">(56,039</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<B>)</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">(266,171</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">)</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<B><P>Net loss</B></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">(1,452,062</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<B><P>)</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(1,962,348</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>)</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<B><P>Preferred stock dividends</B></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">(349,341</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<B><P>)</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(281,719</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>)</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM">
<B><P>Net loss applicable to common stockholders</B></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">(1,801,403</B></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<B><P>)</B>        $</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">(2,244,067</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>)</TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="BOTTOM" colspan="6">
<hr noshade size="5" color="#000080">
  </TD>
</TR>
</TABLE>

<FONT SIZE=1>
</FONT><P ALIGN="RIGHT"><i>See accompanying notes to consolidated financial
  statements.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</i></P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT"><b>6</b></P>
  <P ALIGN="RIGHT">&nbsp;</P>
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Consolidated Statements of Stockholders'
  Deficit</font></P>
<TABLE BORDER="0" CELLSPACING=1 WIDTH=638>
<TR><TD WIDTH="174" VALIGN="BOTTOM"></TD>
<TD WIDTH="17" VALIGN="BOTTOM"></TD>
<TD WIDTH="127" VALIGN="BOTTOM" COLSPAN=3>
  <p align="right"><I><FONT SIZE=1><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></I></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<I><FONT SIZE=1><P ALIGN="RIGHT">Accumulated</FONT></I></TD>
<TD WIDTH="16" VALIGN="BOTTOM"></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<I><FONT SIZE=1>Treasury</FONT></I></TD>
<TD WIDTH="16" VALIGN="BOTTOM"></TD>
<TD WIDTH="67" VALIGN="BOTTOM" align="center"><I><FONT SIZE=1>Total<br>
  Stockholders'</FONT></I></TD>
<TD WIDTH="20" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM"></TD>
<TD WIDTH="17" VALIGN="BOTTOM"></TD>
<TD WIDTH="53" VALIGN="BOTTOM">
  <p align="center">
<I><FONT SIZE=1>Shares</FONT></I></TD>
<TD WIDTH="20" VALIGN="BOTTOM"></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
  <p align="center"><I><FONT SIZE=1>Amount</FONT></I></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
  <p align="center"><I><FONT SIZE=1>Deficit</FONT></I></TD>
<TD WIDTH="16" VALIGN="BOTTOM"></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
  <p align="center"><I><FONT SIZE=1>Stock</FONT></I></TD>
<TD WIDTH="16" VALIGN="BOTTOM"></TD>
<TD WIDTH="67" VALIGN="BOTTOM" align="center">

<I><FONT SIZE=1>Deficit</FONT>
</I></TD>
<TD WIDTH="20" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="564" VALIGN="BOTTOM" colspan="11">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>Balance, </B>December 31, 1998, as previously reported</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,837,000</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,837&nbsp;</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$(1,043,461</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<FONT SIZE=1><P>)    $</FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$(1,041,624</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Restatement (Note 17)</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,239,114&nbsp;</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(67,216</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,171,898</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="564" VALIGN="BOTTOM" colspan="11">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>Balance, </B>December&nbsp;31, 1998, as restated</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,837,000</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,240,951&nbsp;</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(1,110,677</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<p align="right"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">130,274</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Issuance of common stock for acquisition</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">200,000&nbsp;</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<p align="right"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Issuance of common stock to note holders</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">65,500</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">262,000&nbsp;</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">262,000</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Issuance of common stock for consulting services</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">200,000&nbsp;</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Sale of common stock</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">45,450</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">180,800&nbsp;</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">180,800</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Purchase of treasury stock</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--&nbsp;</font></TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(100,000</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(100,000</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Accretion of redemption value of preferred stock</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P align="RIGHT">&nbsp;(214,097)</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(214,097</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Preferred stock dividends</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(67,622)</FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(67,622</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Net loss</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--&nbsp;</font></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(1,962,348</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(1,962,348</FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="564" VALIGN="BOTTOM" colspan="11">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>Balance,</B> December 31, 1999</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">2,047,950</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,802,032&nbsp;</FONT></B></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(3,073,025</B></FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(100,000</B></FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(1,370,993</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Issuance of common stock for consulting services</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">18,750</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">75,000&nbsp;</FONT></B></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><b><font size="1">--</font></b></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="16" VALIGN="BOTTOM"></TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">75,000</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><b><font size="1">--</font></b></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Accretion of redemption value of preferred stock</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(214,097)</FONT></B></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(214,097</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Preferred stock dividends</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(135,244)</FONT></B></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(135,244</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="72" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<FONT SIZE=1><P>Net loss</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><b><font size="1">--</font></b></TD>
<TD WIDTH="20" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><b><font size="1">--</font></b></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(1,452,062</B></FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><b><font size="1">--</font></b></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(1,452,062</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
</TR>
<TR><TD WIDTH="564" VALIGN="BOTTOM" colspan="11">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="174" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>Balance, </B>December 31, 2000</FONT></TD>
<TD WIDTH="17" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="53" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">2,066,700</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,527,691</B></FONT></TD>
<TD WIDTH="72" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$(4,525,087</B></FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)    $</B></FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(100,000</B></FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
<TD WIDTH="67" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$(3,097,396</B></FONT></TD>
<TD WIDTH="20" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
</TR>
<TR><TD WIDTH="564" VALIGN="BOTTOM" colspan="11">
<hr noshade size="5" color="#000080">
  </TD>
</TR>
</TABLE>

<FONT SIZE=1>
</FONT><P ALIGN="RIGHT"><i>See accompanying notes to consolidated financial
  statements.&nbsp;&nbsp;&nbsp;&nbsp;</i></P>
  <P ALIGN="RIGHT"><b>7</b></P>
  <P ALIGN="RIGHT">&nbsp;</P>
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
<P align="right"><font size="4">Consolidated Statements of Cash Flows</font></P>
<hr noshade size="9" color="#000080">
<TABLE BORDER="0" CELLSPACING=2 WIDTH=625 height="1040">
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="40">
<I><FONT SIZE=3><P><br>
Year ended December&nbsp;31,</I></FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="40">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="40">
<B><FONT SIZE=3><P ALIGN="RIGHT">2000</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="40">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="40">
<FONT SIZE=3><P ALIGN="RIGHT">1999</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="40">&nbsp;</TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="BOTTOM" colspan="6" height="21">
    <hr noshade size="5" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>Cash flows from operating activities:</B></FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>Net loss</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">(1,452,062</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>) </B>          $</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(1,962,348</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="40">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Adjustments to reconcile net
loss to net cash provided<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;by operating activities:</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="40">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="40">
  </TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="40">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="40">
  </TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="40">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Depreciation
and amortization</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<p align="right">
<B><FONT SIZE=3>452,345</FONT></B></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<p align="right"><FONT SIZE=3>301,840</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Amortization
of debt discount</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">322,000</FONT></B></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">322,000</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Issuance
of common stock for consulting services</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">75,000</FONT></B></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<p align="right">
<FONT SIZE=3>200,000</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Cash
provided by (used for):</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Accounts
receivable</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">52,681</FONT></B></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(77,315</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3>)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Prepaid
expenses</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">(9,251</FONT></B></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3>)</FONT></B></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<p align="right"><FONT SIZE=3>438</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<font size="3">&nbsp;&nbsp;</font></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Accounts
payable</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<p align="right">
<B><FONT SIZE=3>666,528</FONT></B></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<p align="right"><FONT SIZE=3>400,230</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<font size="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Accrued
expenses and other liabilities</font></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">744,509</FONT></B></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
  </TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<p align="right">
<FONT SIZE=3>833,458</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="BOTTOM" colspan="6" height="21">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>Net cash provided by operating activities</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">851,750</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">18,303</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="BOTTOM" colspan="6" height="21">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>Cash flows from investing activities:</B></FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">(5,532,911</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(2,724,436</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenditures obtaining permits</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">(168,164</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(470,434</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in other assets</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">(210</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(384</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="BOTTOM" colspan="6" height="21">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>Net cash used for investing activities</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">(5,701,285</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(3,195,254</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="BOTTOM" colspan="6" height="21">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>Cash flows from financing activities:</B></FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Billings and advances from related party</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">607,278</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">2,482,567</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from notes payable</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">495,000</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">409,000</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments on notes payable</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">(800</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(40,600</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Billings and advances from Perma-Fix</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">3,754,410</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<P ALIGN="RIGHT"><font size="3">--</font></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from long-term debt</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<P ALIGN="RIGHT"><b><font size="3">--</font></b></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">150,000</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments on long-term debt</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">(6,353</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(4,872</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of common stock</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<P ALIGN="RIGHT"><b><font size="3">--</font></b></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">180,800</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>Net cash provided by financing activities</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">4,849,535</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">3,176,895</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="BOTTOM" colspan="6" height="21">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>Net decrease in cash </B></FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<P ALIGN="RIGHT"><b><font size="3">--</font></b></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">(56</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>Cash, </B>beginning of year</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<P ALIGN="RIGHT"><b><font size="3">--</font></b></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">56</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="BOTTOM" colspan="6" height="23">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P>Cash, </B>end of year</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" height="21">
<B><FONT SIZE=3><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<P ALIGN="RIGHT"><b><font size="3">--</font></b></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" height="21">
<FONT SIZE=3><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" height="21">
<P ALIGN="RIGHT"><font size="3">--</font></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" height="21">&nbsp;</TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="BOTTOM" colspan="6" height="21">
<hr noshade size="5" color="#000080">
  </TD>
</TR>
</TABLE>

<FONT SIZE=1>
</FONT><P ALIGN="RIGHT"><i>See accompanying notes to consolidated financial
  statements.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</i></P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT"><b>8</b></P>
  <P ALIGN="RIGHT">&nbsp;</P>
  <P ALIGN="RIGHT">&nbsp;</P>
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
  <hr noshade size="9" color="#000080">
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><br>
<b>1.</b>
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P><br>
Summary of<br>
Accounting<br>
Policies</B></P>
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P ALIGN="JUSTIFY"><br>
Nature of Operations<br>
<br>
</U>East Tennessee Materials and Energy Corporation and its wholly-owned subsidiary, First Choice Technical Services, Inc., (the "Company") provide engineering and consulting services to the hazardous mixed waste storage, analysis, treatment and disposal industry. Primary customers of the Company are currently United States Department of Energy contractors. In June 1999, the Company obtained the necessary federal and state permits to operate a facility to treat low-level radioactive and hazardous waste. The Company completed construction of the treatment facility located in Oak Ridge, Tennessee, in June 2001, and the facility became fully operational during the third quarter of 2001. The Company was acquired by Perma-Fix Environmental Services, Inc. effective June&nbsp;25, 2001 (see Note 16).</P>
  </TD>
</TR>
</TABLE>

<FONT SIZE=3></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Principles of Consolidation<br>
<br>
</U>The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany transactions have been eliminated in consolidation.</P>
  </TD>
</TR>
</TABLE>

<FONT SIZE=3></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="29%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P>Plant and Equipment<br>
<br>
</U>Plant and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the assets using the straight-line method.</P>
  </TD>
</TR>
</TABLE>

<FONT SIZE=3></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="29%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Permits<br>
<br>
</U>Permits include the costs of obtaining permits for the treatment of hazardous and low-level radioactive waste. These costs are amortized on a straight-line basis over the life of the related permit, which is generally ten years. Amortization expense was approximately $339,000 and $170,000 for the years ended December&nbsp;31, 2000 and 1999, respectively. The Company capitalized $13,367 and $39,393 of interest expense to permits during 2000 and 1999, respectively.</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="27" VALIGN="TOP"></TD>
<TD WIDTH="134" VALIGN="TOP"></TD>
<TD WIDTH="433" VALIGN="TOP">
&nbsp;
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="right"><b>9</b></p>
<p>&nbsp;</TD>
</TR>
<TR><TD WIDTH="27" VALIGN="TOP"></TD>
<TD WIDTH="134" VALIGN="TOP"></TD>
<TD WIDTH="433" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="594" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="27" VALIGN="TOP">&nbsp;<br>
    <br>
  </TD>
<TD WIDTH="134" VALIGN="TOP"><br>
  <br>
  &nbsp;</TD>
<TD WIDTH="433" VALIGN="TOP">
<U><P ALIGN="JUSTIFY"><br>
<br>
Goodwill<br>
<br>
</U>Goodwill is stated at cost less accumulated amortization. Goodwill is amortized using the straight-line method over a period of ten years. Amortization expense was approximately $12,000 for each of the years ended December 31, 2000 and 1999, respectively.</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="27" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="133" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="434" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Lease Acquisition Costs<br>
<br>
</U>Lease acquisition costs represent the costs incurred to obtain the Company's building lease. These costs are being amortized over the life of the related lease, which is ten years. Amortization of lease acquisition costs was approximately $34,000 and $30,000 for the years ended December&nbsp;31, 2000 and 1999, respectively.</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="27" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="133" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="434" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Impairments<br>
<br>
</U>Assets are evaluated for impairment when events change or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. When any such impairment exists, the related assets are written down to fair value.</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="27" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="131" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="436" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Revenue Recognition<br>
<br>
</U>Revenues are recognized at the time services are rendered.</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="168" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="436" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Income Taxes<br>
<br>
</U>Deferred income taxes are provided for temporary differences in the recognition of income and expense for financial reporting and income tax purposes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets, liabilities and tax carryforwards that will result in taxable or deductible amounts in future periods based upon enacted tax laws and rates applicable to the periods in which the differences are expected to affect&nbsp;</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="29%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
<p align="right">&nbsp;
<p align="right">&nbsp;
<p align="right"><b>10</b></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="100%" VALIGN="TOP" colspan="2">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080">
    <p>&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
 taxable income. Deferred tax liabilities are recognized when incurred; deferred tax assets, when necessary, are reduced by a valuation allowance when it is more likely than not that the asset will not be realized.<br>
  </TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P>Fair Value of Financial Instruments<br>
<br>
</U>Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2000. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, accrued expenses and due to stockholder. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the notes payable and long-term debt are estimated based on the current rates available to the Company for debt of the same remaining maturities and approximates its carrying amount.</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="29%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Use of Estimates<br>
<br>
</U>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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="27" VALIGN="TOP">
<P><b>2.</b></TD>
<TD WIDTH="135" VALIGN="TOP">
<B><P>Acquisition of<br>
First Choice</B></P>
  </TD>
<TD WIDTH="432" VALIGN="TOP">
<P ALIGN="JUSTIFY">Effective January&nbsp;1, 1999, the Company acquired all of the outstanding common stock of First Choice Technical Services, Inc. ("FCTS") in exchange for 50,000 shares of the Company's common stock valued at $200,000 and the assumption of $39,035 of liabilities. The acquisition was recorded using the purchase method of accounting. Accordingly,&nbsp;</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="27" VALIGN="TOP">
  </TD>
<TD WIDTH="135" VALIGN="TOP">
  </TD>
<TD WIDTH="432" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="27" VALIGN="TOP">
  </TD>
<TD WIDTH="135" VALIGN="TOP">
  </TD>
<TD WIDTH="432" VALIGN="TOP">
<p align="right">&nbsp;
<p align="right">&nbsp;
<p align="right">&nbsp;
<p align="right">&nbsp;
<p align="right"><b>11</b></TD>
</TR>
<TR><TD WIDTH="594" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
<hr noshade size="9" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="27" VALIGN="TOP">
  </TD>
<TD WIDTH="135" VALIGN="TOP">
  </TD>
<TD WIDTH="432" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="27" VALIGN="TOP">
  </TD>
<TD WIDTH="135" VALIGN="TOP">
  </TD>
<TD WIDTH="432" VALIGN="TOP">
 the purchase price was allocated to the net assets acquired based upon the estimated fair market values. The excess of the purchase price over the estimated fair value of the net assets acquired was approximately $120,000, which has been accounted for as goodwill and is being amortized over its estimated useful life of ten years. The operating results of FCTS are included in the Company's results of operations from the date of acquisition. FCTS is an engineering and consulting firm that provides services related to hazardous mixed waste storage, analysis, treatment and
disposal.</TD>
</TR>
<TR><TD WIDTH="27" VALIGN="TOP">
<P><b>3.</b></TD>
<TD WIDTH="135" VALIGN="TOP">
<B><P>Recission of ICM<br>
Merger</B></P>
  </TD>
<TD WIDTH="432" VALIGN="TOP">
<P ALIGN="JUSTIFY">In June 1999, the Company's Board approved a merger with International Credit &amp; Mercantile, Inc. ("ICM"). The merger was rescinded on July&nbsp;20, 2000, and the stock purchase agreement was terminated. The acquisition of ICM was not recorded in the Company's financial statements as a result of the recission.</TD>
</TR>
<TR><TD WIDTH="27" VALIGN="TOP">
  </TD>
<TD WIDTH="135" VALIGN="TOP">
  </TD>
<TD WIDTH="432" VALIGN="TOP">
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="27" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="135" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="432" VALIGN="TOP">
<P ALIGN="JUSTIFY">In connection with this merger, a consultant was granted an option to purchase 125,000 shares of common stock at an exercise price of $4 per share. In connection with the recission of the merger, this option was canceled.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>4.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Plant and Equipment</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Plant and equipment consist of the following:</TD>
</TR>
</TABLE>

<FONT SIZE=1></FONT>
<div align="right">
  <TABLE BORDER="0" CELLSPACING=2 WIDTH=502>
<TR><TD WIDTH="74" VALIGN="BOTTOM">
<P></TD>
  <TD WIDTH="301" VALIGN="BOTTOM">
<I><FONT SIZE=2>December&nbsp;31,</FONT></I></TD>
<TD WIDTH="83" VALIGN="BOTTOM">
<I><FONT SIZE=2><P ALIGN="RIGHT">Estimated<br>
Useful Lives</I></FONT></P>
  </TD>
<TD WIDTH="24" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="78" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">2000</B></FONT></TD>
<TD WIDTH="28" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="61" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1999</FONT></TD>
<TD WIDTH="56" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="705" VALIGN="BOTTOM" colspan="8">
    <hr noshade size="5" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="74" VALIGN="BOTTOM">
<P></TD>
  <TD WIDTH="301" VALIGN="BOTTOM">
<FONT SIZE=2>Plant equipment</FONT></TD>
<TD WIDTH="83" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">5 years</FONT></TD>
<TD WIDTH="24" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="78" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">22,500</B></FONT></TD>
<TD WIDTH="28" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="61" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">22,500</FONT></TD>
<TD WIDTH="56" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="74" VALIGN="BOTTOM">
<P></TD>
  <TD WIDTH="301" VALIGN="BOTTOM">
<FONT SIZE=2>Transportation equipment</FONT></TD>
<TD WIDTH="83" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">5 years</FONT></TD>
<TD WIDTH="24" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="78" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">34,253</B></FONT></TD>
<TD WIDTH="28" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="61" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">34,253</FONT></TD>
<TD WIDTH="56" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="74" VALIGN="BOTTOM">
<P></TD>
  <TD WIDTH="301" VALIGN="BOTTOM">
<FONT SIZE=2>Office equipment and furniture</FONT></TD>
<TD WIDTH="83" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">3-7 years</FONT></TD>
<TD WIDTH="24" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="78" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">6,436</B></FONT></TD>
<TD WIDTH="28" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="61" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">19,443</FONT></TD>
<TD WIDTH="56" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="74" VALIGN="BOTTOM">
<P></TD>
  <TD WIDTH="301" VALIGN="BOTTOM">
<FONT SIZE=2>Construction in progress</FONT></TD>
<TD WIDTH="83" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="24" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="78" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">9,440,131</B></FONT></TD>
<TD WIDTH="28" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="61" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">3,898,338</FONT></TD>
<TD WIDTH="56" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="705" VALIGN="BOTTOM" colspan="8">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="74" VALIGN="BOTTOM">&nbsp;</TD>
  <TD WIDTH="301" VALIGN="BOTTOM"></TD>
<TD WIDTH="83" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="24" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="78" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">9,503,320</B></FONT></TD>
<TD WIDTH="28" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="61" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">3,974,534</FONT></TD>
<TD WIDTH="56" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="74" VALIGN="BOTTOM">
<P></TD>
  <TD WIDTH="301" VALIGN="BOTTOM">
<p align="left"><FONT SIZE=2>Less accumulated depreciation</FONT></TD>
  <center>
<TD WIDTH="83" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="24" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="78" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">(23,032</B></FONT></TD>
<TD WIDTH="28" VALIGN="BOTTOM">
<B><FONT SIZE=2><P>)</B></FONT></TD>
<TD WIDTH="61" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(16,689</FONT></TD>
<TD WIDTH="56" VALIGN="BOTTOM">
<FONT SIZE=2><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="705" VALIGN="BOTTOM" colspan="8">
    <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="74" VALIGN="BOTTOM">&nbsp;</TD>
  <TD WIDTH="301" VALIGN="BOTTOM"></TD>
<TD WIDTH="83" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="24" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="78" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">9,480,288</B></FONT></TD>
<TD WIDTH="28" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="61" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">3,957,845</FONT></TD>
<TD WIDTH="56" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="705" VALIGN="BOTTOM" colspan="8">
    <hr noshade size="5" color="#000080">
  </TD>
</TR>
</TABLE>


  </center>
</div>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right"><b>12</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;
    <p>&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company incurred approximately $6.6 million of additional costs to complete the construction of its treatment facility. The Company capitalized $448,112 and $226,778 of interest expense to construction in progress during 2000 and 1999, respectively.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>5.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Commitments</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Operating Lease<br>
<br>
</U>The Company conducts its operations from a leased facility. This lease is classified as an operating lease and expires in January 2008. As of December&nbsp;31, 2000, future minimum rental payments required under this lease are as follows:</P>
  </TD>
</TR>
</TABLE>


<P ALIGN="RIGHT">
<div align="left">
  <TABLE BORDER="0" CELLSPACING=2 WIDTH=628>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
<P></TD>
<TD WIDTH="304" VALIGN="BOTTOM" COLSPAN=2>
<I>Year ending December&nbsp;31, </I></TD>
<TD WIDTH="79" VALIGN="BOTTOM" COLSPAN=2>&nbsp;</TD>
<TD WIDTH="33" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="404" VALIGN="BOTTOM" colspan="5">
  <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="194" VALIGN="BOTTOM">2001</TD>
<TD WIDTH="104" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<P ALIGN="RIGHT">24,000</TD>
<TD WIDTH="33" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="194" VALIGN="BOTTOM">2002</TD>
<TD WIDTH="104" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<P ALIGN="RIGHT">48,000</TD>
<TD WIDTH="33" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="194" VALIGN="BOTTOM">2003</TD>
<TD WIDTH="104" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<P ALIGN="RIGHT">119,000</TD>
<TD WIDTH="33" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="194" VALIGN="BOTTOM">2004</TD>
<TD WIDTH="104" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<P ALIGN="RIGHT">125,000</TD>
<TD WIDTH="33" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="194" VALIGN="BOTTOM">2005</TD>
<TD WIDTH="104" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<P ALIGN="RIGHT">125,000</TD>
<TD WIDTH="33" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="194" VALIGN="BOTTOM">Thereafter</TD>
<TD WIDTH="104" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<P ALIGN="RIGHT">260,000</TD>
<TD WIDTH="33" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM"></TD>
<TD WIDTH="404" VALIGN="BOTTOM" colspan="5">
  <hr noshade size="3" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="194" VALIGN="BOTTOM">Total</TD>
<TD WIDTH="104" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<P ALIGN="RIGHT">701,000</TD>
<TD WIDTH="33" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="184" VALIGN="BOTTOM">
  </TD>
<TD WIDTH="404" VALIGN="BOTTOM" colspan="5">
  <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
</TABLE>


</div>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Beginning February 2003, the Company will be required to pay an additional amount equal to .5% of gross annual sales with a maximum combined annual base and percentage of sales lease amount not to exceed $200,000. Rent expense for the years ended December&nbsp;31, 2000 and 1999 was approximately $103,000 and $105,000, respectively. </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Permits<br>
<br>
</U>The Company is subject to various regulatory requirements, including the procurement of requisite licenses and permits at its treatment facility. These licenses and permits are subject to periodic renewal without which the Company would not be able to operate its treatment facility. The Company believes that once a license or permit is issued, it&nbsp;</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
<p align="right"><b>13</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;
    <p>&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
 will be renewed at the end of its term if the facility operations are in compliance with the applicable regulatory requirements.</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<U><P ALIGN="JUSTIFY">Legal<br>
<br>
</U>The Company is involved in various litigation in the normal course of conducting its business. The Company is currently not a party to any litigation or governmental proceeding which management believes could have a material adverse affect on their financial position or results of operations.</P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>6.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Notes Payable </B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Notes payable consist of notes with maturities of one year or less. The majority of the notes shown below are past due as of December&nbsp;31, 2000. However, $887,600 of the notes were settled prior to or pursuant to the acquisition of the Company by Perma-Fix (see Note 16).</TD>
</TR>
</TABLE>

<FONT SIZE=1></FONT>
<div align="left">
  <TABLE BORDER="0" CELLSPACING=2 WIDTH=624>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<I><FONT SIZE=1><P>December&nbsp;31,</I></FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">2000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1999</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="432" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>Prime + 6% (15.5 % at December 31, 2000) unsecured notes payable to stockholders, interest and principal due January 2000, guaranteed by certain stockholders and related parties of the Company</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">50,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>Prime + 4% (13.5% at December 31, 2000) unsecured notes payable to stockholders, interest and principal due in January and February of 2000, guaranteed by certain stockholders and related parties of the Company</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">44,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">44,000</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>Prime +1% (10.5 % at December 31, 2000) unsecured note payable to a bank, interest and principal due January 2000, guaranteed by certain stockholders and related parties of the Company</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">13,600</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">14,400</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>Unsecured notes payable to stockholders, interest ranging from 12% to 14% payable monthly, principal and all unpaid accrued interest due January 2000, guaranteed by certain stockholders and related parties of the Company</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">100,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>10% note payable to stockholder, interest and principal due July 2000, secured by the assignment of certain accounts receivable of the Company and guaranteed by certain stockholders and related parties of the Company</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">60,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM"></TD>
<TD WIDTH="9" VALIGN="BOTTOM"></TD>
<TD WIDTH="49" VALIGN="BOTTOM"></TD>
<TD WIDTH="10" VALIGN="BOTTOM"></TD>
<TD WIDTH="43" VALIGN="BOTTOM"></TD>
<TD WIDTH="16" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="580" VALIGN="BOTTOM" colspan="7">
    <p align="right">&nbsp;</p>
    <p align="right">&nbsp;</p>
    <p align="right"><b>14</b></p>
    <p align="right">&nbsp;
    <p align="right">&nbsp;</TD>
</TR>
<TR><TD WIDTH="580" VALIGN="BOTTOM" colspan="7">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM"></TD>
<TD WIDTH="9" VALIGN="BOTTOM"></TD>
<TD WIDTH="49" VALIGN="BOTTOM"></TD>
<TD WIDTH="10" VALIGN="BOTTOM"></TD>
<TD WIDTH="43" VALIGN="BOTTOM"></TD>
<TD WIDTH="16" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<I><FONT SIZE=1>December&nbsp;31,</FONT></I></TD>
<TD WIDTH="9" VALIGN="BOTTOM"></TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">2000</FONT></B></TD>
<TD WIDTH="10" VALIGN="BOTTOM"></TD>
<TD WIDTH="43" VALIGN="BOTTOM"><P ALIGN="RIGHT"><font size="1">1999</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="432" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>10% unsecured note payable to former stockholder, interest and principal due March 2000, guaranteed by a stockholder of the Company.</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">25,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">25,000</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>5.18% note payable to a bank, interest payable monthly, principal and all unpaid accrued interest due March 2000, secured by a pledge of a certificate of deposit belonging to a related party, guaranteed by certain stockholders and related parties of the Company.</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">100,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>10.08% unsecured note payable, interest and principal due October 2000, guaranteed by certain stockholders and related parties of the Company.</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">40,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">40,000</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>20% note payable to stockholder, principal and interest due September 2000, secured by the assignment of certain accounts receivable of the Company and guaranteed by certain stockholders and related parties of the Company</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">145,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="275" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>9.75% unsecured note payable, interest payable quarterly, principal and all unpaid accrued interest due March 2001, guaranteed by a stockholder of the Company</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">350,000</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><font size="1">--</font></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="402" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="275" VALIGN="BOTTOM">
<FONT SIZE=1><P>Total</FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="49" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">927,600</B></FONT></TD>
<TD WIDTH="10" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="43" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">433,400</FONT></TD>
<TD WIDTH="16" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="402" VALIGN="BOTTOM" colspan="6">
<hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
</TABLE>


</div>


<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align="right"><b>15</b></P>
<P align="right">&nbsp;</P>
<P align="right">&nbsp;</P>
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
<hr noshade size="9" color="#000080" align="right">
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><br>
<b>7.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P><br>
Long-Term Debt</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY"><br>
Long-term debt consists of the following:</TD>
</TR>
</TABLE>


<TABLE BORDER="0" CELLSPACING=2 WIDTH=610>
<TR><TD WIDTH="177" VALIGN="BOTTOM"><br>
  </TD>
  <TD WIDTH="231" VALIGN="BOTTOM"><I><FONT SIZE=1>December&nbsp;31,</FONT>
</I></TD>
<TD WIDTH="11" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="center">2000</FONT></B></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
  <p align="center">
<FONT SIZE=1>1999</FONT></p>
  </TD>
<TD WIDTH="30" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM"></TD>
  <TD WIDTH="389" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="231" VALIGN="BOTTOM">
<FONT SIZE=1><P>Prime + 4% (13.5 % at December 31, 2000) unsecured notes payable to stockholders, interest payable monthly, principal and all unpaid accrued interest due June 2003, guaranteed by certain stockholders and related parties of the Company</FONT></TD>
<TD WIDTH="11" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,498,000</B></FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,498,000</FONT></TD>
<TD WIDTH="30" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM"></TD>
  <TD WIDTH="231" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="30" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="231" VALIGN="BOTTOM">
<FONT SIZE=1><P>5.59% unsecured note payable to former stockholder, interest and principal of $3,310 due monthly through February 2002, guaranteed by a stockholder of the Company</FONT></TD>
<TD WIDTH="11" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">75,000</B></FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">75,000</FONT></TD>
<TD WIDTH="30" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM"></TD>
  <TD WIDTH="231" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="30" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="231" VALIGN="BOTTOM">
<FONT SIZE=1><P>8.99% note payable to bank, interest  and principal of $710 due monthly through September 2003, secured by a Company vehicle.</FONT></TD>
<TD WIDTH="11" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">21,653</B></FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">28,006</FONT></TD>
<TD WIDTH="30" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM"></TD>
  <TD WIDTH="389" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM"></TD>
  <TD WIDTH="231" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,594,653</B></FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,601,006</FONT></TD>
<TD WIDTH="30" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="231" VALIGN="BOTTOM">
<FONT SIZE=1><P>Less unamortized debt discount (see below)</FONT></TD>
<TD WIDTH="11" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(831,200</B></FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(1,153,200</FONT></TD>
<TD WIDTH="30" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="231" VALIGN="BOTTOM">
<FONT SIZE=1><P>Less current portion</FONT></TD>
<TD WIDTH="11" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">(748,750</B></FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">
<B><FONT SIZE=1><P>)</B></FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(42,764</FONT></TD>
<TD WIDTH="30" VALIGN="BOTTOM">
<FONT SIZE=1><P>)</FONT></TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM"></TD>
  <TD WIDTH="389" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="231" VALIGN="BOTTOM">
<FONT SIZE=1><P>Total</FONT></TD>
<TD WIDTH="11" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">14,703</B></FONT></TD>
<TD WIDTH="9" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">405,042</FONT></TD>
<TD WIDTH="30" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="177" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="389" VALIGN="BOTTOM" colspan="6">
<hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;<br>
  </TD>
<TD WIDTH="24%" VALIGN="TOP"><br>
  &nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY"><br>
The above unsecured notes payable to stockholders were settled in June 2001 pursuant to the acquisition of the Company by Perma-Fix (see Note 16). Accordingly, this debt has been classified as current at December&nbsp;31, 2000. Aggregate maturities of the Company's note payable to bank over future years are as follows: 2001
<font face="Symbol">--</font> $6,950;  2002 <font face="Symbol">--</font> $8,530; and 2003&nbsp;-- $6,173.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company issued common stock (see Note 12) and preferred stock (see Note 11) to the unsecured note payable holders. Common stock issued during 1998 and 1999 totaled 337,000 and 65,500 shares, respectively, valued at $1,610,000, or $4.00 per share. No value was assigned to the Series A cumulative preferred stock issued in connection with these notes. The $1,610,000 was recorded as a debt discount and is being amortized to interest expense over the term of the notes. During 2000 and 1999, $322,000 and $322,000, respectively,&nbsp;</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
<p align="right"><b>16</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
<hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
 of the debt discount was amortized to interest expense. As of December&nbsp;31, 2000, the unamortized debt discount was $831,200.</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>8.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Employee<br>
Benefit Plan </B></P>
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company has a defined contribution employee benefit plan under the provisions of Section 401(k) of the Internal Revenue Code. Prior to January&nbsp;1, 1999, the Company participated in the  401(k) Plan of its majority stockholder, Performance Development Corporation ("PDC"). Effective January&nbsp;1, 1999, the Company adopted its own separate 401(k) Plan at which time the assets and liabilities associated with its employees were transferred from the PDC Plan to the Company's new 401(k) Plan (the "Plan"). All employees who have completed one year of service and attained age 21 are eligible to participate in the Plan. The Company contributes an amount equal to 100% of the employees' salary deferral not to exceed 2% of the employees' compensation plus 50% of any deferral above 2%, but not exceeding 6% of the employees' compensation.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">From November 1998 through June 2000, the Company did not submit employee or employer matching contributions to the Plan. Amounts due to the Plan for employee contributions, employer matching contributions and estimated lost earnings on these contributions were $302,718 and $202,537 as of December&nbsp;31, 2000 and 1999, respectively, and are included in accrued expenses. Included in these amounts are employer matching contributions of $46,754 and $11,319 for 2000 and 1999, respectively. These delinquent contributions were paid to the Company's Plan by Perma-Fix in connection with the closing of the acquisition of the Company by Perma-Fix (see Note 16). </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
&nbsp;
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="right"><b>17</b>
<p align="right">&nbsp;
<p align="right">&nbsp;
<p align="right">&nbsp;</TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
<hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>9.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Accrued Expenses</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Accrued expenses consist of the following:</TD>
</TR>
</TABLE>


<TABLE BORDER="0" CELLSPACING=2 WIDTH=628>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="224" VALIGN="BOTTOM">
<I><P>December&nbsp;31, </I></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<B><P ALIGN="center">2000</B></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="73" VALIGN="BOTTOM">
<P ALIGN="center">1999</TD>
<TD WIDTH="27" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM"></TD>
  <TD WIDTH="407" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="224" VALIGN="BOTTOM">
<P>Accrued 401(k) plan contributions (see Note 8)</TD>
<TD WIDTH="10" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">352,018</B></TD>
<TD WIDTH="10" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$</TD>
<TD WIDTH="73" VALIGN="BOTTOM">
<P ALIGN="RIGHT">202,537</TD>
<TD WIDTH="27" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="224" VALIGN="BOTTOM">
<P>Accrued compensation</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">156,332</B></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="73" VALIGN="BOTTOM">
<P ALIGN="RIGHT">130,365</TD>
<TD WIDTH="27" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="224" VALIGN="BOTTOM">
<P>Accrued interest</TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">412,457</B></TD>
<TD WIDTH="10" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="73" VALIGN="BOTTOM">
<P ALIGN="RIGHT">128,094</TD>
<TD WIDTH="27" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM"></TD>
  <TD WIDTH="407" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM"></TD>
  <TD WIDTH="224" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="10" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="63" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">920,807</B></TD>
<TD WIDTH="10" VALIGN="BOTTOM">
<P ALIGN="RIGHT">$</TD>
<TD WIDTH="73" VALIGN="BOTTOM">
<P ALIGN="RIGHT">460,996</TD>
<TD WIDTH="27" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM"></TD>
  <TD WIDTH="407" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>10.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Payroll Tax Liability</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company was delinquent in the payment of payroll taxes to the Internal Revenue Service ("IRS"). The Company entered into an installment agreement with the IRS for the payment of the delinquent payroll taxes over a term of approximately eight years. The installment agreement was a condition to closing of the acquisition by Perma-Fix Environmental Services, Inc. (see Note 16). Amounts due for  payroll taxes were $923,496 and $625,000 as of December&nbsp;31, 2000 and 1999, respectively. Future payments of payroll taxes under the installment agreement as of December&nbsp;31, 2000 are as follows:</TD>
</TR>
</TABLE>


<P ALIGN="RIGHT"><TABLE BORDER="0" CELLSPACING=2 WIDTH=624>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="413" VALIGN="BOTTOM" colspan="4">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="327" VALIGN="BOTTOM">
<P>2001</TD>
<TD WIDTH="19" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="55" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">20,022</B></TD>
<TD WIDTH="12" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="327" VALIGN="BOTTOM">
<P>2002</TD>
<TD WIDTH="19" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="55" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">10,010</B></TD>
<TD WIDTH="12" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="327" VALIGN="BOTTOM">
<P>2003</TD>
<TD WIDTH="19" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="55" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">60,065</B></TD>
<TD WIDTH="12" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="327" VALIGN="BOTTOM">
<P>2004</TD>
<TD WIDTH="19" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="55" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">80,088</B></TD>
<TD WIDTH="12" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="327" VALIGN="BOTTOM">
<P>2005</TD>
<TD WIDTH="19" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="55" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">200,213</B></TD>
<TD WIDTH="12" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="327" VALIGN="BOTTOM">
<P>Thereafter</TD>
<TD WIDTH="19" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="55" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">553,098</B></TD>
<TD WIDTH="12" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="413" VALIGN="BOTTOM" colspan="4">
    <hr noshade size="3" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="327" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">$</B></TD>
<TD WIDTH="55" VALIGN="BOTTOM">
<B><P ALIGN="RIGHT">923,496</B></TD>
<TD WIDTH="12" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="413" VALIGN="BOTTOM" colspan="4">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="413" VALIGN="BOTTOM" colspan="4"></TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="413" VALIGN="BOTTOM" colspan="4">
    <p align="right">&nbsp;</p>
    <p align="right">&nbsp;</p>
    <p align="right">&nbsp;</p>
    <p align="right"><b>18</b>
    <p align="right">&nbsp;</TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="413" VALIGN="BOTTOM" colspan="4"></TD>
</TR>
<TR><TD WIDTH="591" VALIGN="BOTTOM" colspan="5">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="178" VALIGN="BOTTOM"></TD>
  <TD WIDTH="413" VALIGN="BOTTOM" colspan="4"></TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>11.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Redeemable Series A Cumulative Preferred Stock</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company has authorized 1,000,000 shares of preferred stock consisting of 500,000 shares designated as Series A cumulative preferred stock which is nonvoting and nonconvertible. The Company issued 110,687 shares of Series A preferred stock in 1997 in exchange for $553,435 of engineering and administrative services provided by its majority stockholder, PDC, (see Note 14). During 1998 and 1999, the Company issued 134,800 and 25,000 shares of Series A preferred stock, respectively, in connection with the issuance of notes payable. No value was assigned to this preferred stock (see Note 7). Total Series A preferred stock issued and outstanding were 270,487 and 245,487 at December&nbsp;31, 2000 and 1999, respectively.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Dividends on the Series A preferred stock are cumulative and accrue at $.50 per preferred share annually from June&nbsp;30, 1999 to June&nbsp;30, 2003 and from June&nbsp;30, 2004 to June&nbsp;30, 2013 at the greater of (i) $1.00 per preferred share annually or (ii) one percent of the Company's gross revenue for the preceding 12 months divided by $100,000. The Company recorded preferred stock dividends of $67,622 and $135,244 during 1999 and 2000, respectively. These dividends were unpaid at December&nbsp;31, 2000 and are included in the carrying value of the Series A preferred stock.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Series A preferred stock is redeemable at the option of the holder upon the later of June&nbsp;30, 2003 or the fifth anniversary of the issuance of the Series A preferred stock. The Company may redeem the Series A preferred stock at any time after June&nbsp;30, 2003. The Company is required to redeem all Series A preferred stock upon a change of control or public offering. All outstanding shares of the Series A preferred stock was converted to common stock in March 2001 (see Note 16). The redemption price is equal to the liquidation value of $5 per preferred share plus the contingent redemption value plus all accrued and unpaid dividends. The contingent redemption value is equal to the greater of (i) $1.00 per preferred share or (ii) an amount per share equal to one percent of the Company's gross revenues for the preceding 12 months divided by $100,000. The excess of the minimum&nbsp;</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
&nbsp;
<p>&nbsp;</p>
<p align="right"><b>19</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  &nbsp;
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
<hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
 redemption value of $1,622,922 over the initial carrying value of $553,435 is being accreted and recorded as preferred stock dividends from the issuance date to the redemption date (June&nbsp;30, 2003). The Company recorded preferred stock dividends related to the accretion of the redemption value of the Series A preferred stock of $214,097, $214,097 and $107,049  during 2000, 1999 and 1998, respectively. The carrying value of the Series A preferred stock was $1,291,544 and $942,203 at December&nbsp;31, 2000 and 1999, respectively.</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>12.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Common Stock</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">During 1998 and 1999, the Company issued 337,000 and 65,500 shares of common stock to note holders valued at $1,348,000 and $262,000, respectively. The value of these shares was accounted for as a debt discount as more fully described in Note 7. During 1999, the Company issued 50,000 shares of common stock in connection with the First Choice acquisition valued at $200,000 (see Note 2), 50,000 shares of common stock for consulting services valued at $200,000, and sold 45,450 shares of common stock for $180,800. During 2000, the Company issued 18,750 shares of common stock for consulting services valued at $75,000.<br>
<br>
The Company recorded dividends in connection with its Series A preferred stock as more fully described in Note 11. Dividends and accretion of the redemption value of preferred stock recorded in 2000, 1999 and 1998 were $349,341, $281,719 and $107,049, respectively, and reduced the amount available to common stockholders. </P>
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right"><b>20</b>
<p align="right">&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  &nbsp;
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
<hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>13.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Income Taxes</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company files its tax returns using the cash basis of accounting which requires adjustments to the Company's net loss recorded using the accrual basis of accounting. The components of deferred tax assets and liabilities consist of the following:</TD>
</TR>
</TABLE>

<FONT SIZE=2></FONT>
<TABLE BORDER="0" CELLSPACING=2 WIDTH=629>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
<I><FONT SIZE=2><P>December&nbsp;31,</I></FONT></TD>
<TD WIDTH="14" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">2000</B></FONT></TD>
<TD WIDTH="8" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1999</FONT></TD>
<TD WIDTH="13" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM"></TD>
  <TD WIDTH="404" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
<FONT SIZE=2><P>Deferred tax assets:</FONT></TD>
<TD WIDTH="14" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="13" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size="2">Depreciation and amortization</font></TD>
<TD WIDTH="14" VALIGN="BOTTOM"><font size="2">$</font></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
  <p align="right">
<FONT SIZE=2>6,800</FONT></TD>
<TD WIDTH="8" VALIGN="BOTTOM"><font size="2">$</font></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">2,800</FONT></TD>
<TD WIDTH="13" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size="2">Accrual to cash conversion</font></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
  <p align="right">
<FONT SIZE=2>1,188,100</FONT></TD>
<TD WIDTH="8" VALIGN="BOTTOM"></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
  <p align="right"><FONT SIZE=2>630,300</FONT></TD>
<TD WIDTH="13" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net operating loss
carryforward</font></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">863,100</FONT></TD>
<TD WIDTH="8" VALIGN="BOTTOM"></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">897,600</FONT></TD>
<TD WIDTH="13" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size="2">Valuation allowance</font></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(1,978,000</FONT></TD>
<TD WIDTH="8" VALIGN="BOTTOM">
<FONT SIZE=2>)</FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM"><FONT SIZE=2>(1,430,800</FONT></TD>
<TD WIDTH="13" VALIGN="BOTTOM"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM"></TD>
  <TD WIDTH="404" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
<FONT SIZE=2><P>Deferred tax assets</FONT></TD>
<TD WIDTH="14" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">80,000</FONT></TD>
<TD WIDTH="8" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">99,900</FONT></TD>
<TD WIDTH="13" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM"></TD>
  <TD WIDTH="261" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="14" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="13" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
<FONT SIZE=2><P>Deferred tax liabilities:</FONT></TD>
<TD WIDTH="14" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="8" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="54" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="13" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
&nbsp;&nbsp;&nbsp;&nbsp;<font size="2">Accrual to cash conversion</font></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(80,000</FONT></TD>
<TD WIDTH="8" VALIGN="BOTTOM">
<FONT SIZE=2>)</FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(99,900</FONT></TD>
<TD WIDTH="13" VALIGN="BOTTOM"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM"></TD>
  <TD WIDTH="404" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="3" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="261" VALIGN="BOTTOM">
<FONT SIZE=2><P>Net deferred tax assets</FONT></TD>
<TD WIDTH="14" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><b>--</b></TD>
<TD WIDTH="8" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="54" VALIGN="BOTTOM">
<P ALIGN="RIGHT"><b>--</b></TD>
<TD WIDTH="13" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="179" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="404" VALIGN="BOTTOM" colspan="6">
<hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The net deferred tax asset is reduced by a valuation allowance due to the uncertainty associated with the realization of the net deferred tax asset. The valuation increased $ 547,200 during 2000 from the allowance of $ 1,430,800 at December&nbsp;31, 1999.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">At December&nbsp;31, 2000, the Company had unused net operating loss carryforwards of approximately $ 2,300,000, which expire in varying amounts during 2018 through 2019.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<p align="right"><b>21</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  &nbsp;
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
<hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>14.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Related Party Transactions</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company incurred expenses for engineering and administrative services rendered by its majority stockholder, PDC, in the approximate amount of $1,188,500 and $2,008,000 during 2000 and 1999, respectively. PDC also advanced approximately $436,000 during 1999, which was paid back during 2000. Amounts due PDC for services and advances at December&nbsp;31, 2000 and 1999 were $4,489,845 and $3,882,567, respectively.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company derived revenue of approximately $69,300 and $38,500 during 2000 and 1999, respectively, from providing subcontract services to PDC. Accounts receivable from this stockholder at December&nbsp;31, 2000 and 1999 were $-0- and $34,557, respectively.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Notes payable of the Company have been personally guaranteed by certain stockholders (see Notes 6 and 7).</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>15.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Supplemental Cash Flow Information</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Supplemental cash flow information is as follows:</TD>
</TR>
</TABLE>


  <TABLE BORDER="0" CELLSPACING=2 WIDTH=631>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<I><FONT SIZE=2><P>Year ended December&nbsp;31, </I></FONT></TD>
<TD WIDTH="32" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="47" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">2000</B></FONT></TD>
<TD WIDTH="14" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="50" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1999</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM"></TD>
  <TD WIDTH="410" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<B><FONT SIZE=2><P>Interest paid</B></FONT></TD>
<TD WIDTH="32" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$</B></FONT></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right">
<B><FONT SIZE=2><P>30,160</B></FONT></TD>
<TD WIDTH="14" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="50" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">147,131</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM"></TD>
  <TD WIDTH="410" VALIGN="BOTTOM" colspan="6">
    <hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<B><FONT SIZE=2><P>Non-cash investing and financing activities:</B></FONT></TD>
<TD WIDTH="32" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right">&nbsp;</TD>
<TD WIDTH="14" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="50" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
&nbsp;&nbsp;&nbsp;&nbsp;<font size="2">Capital lease obligation for equipment</font></TD>
<TD WIDTH="32" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$</FONT></B></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right"><P ALIGN="RIGHT"><b><font size="2">--</font></b></TD>
<TD WIDTH="14" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$</FONT></TD>
<TD WIDTH="50" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">22,500</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of common stock for
acquisition</font></TD>
<TD WIDTH="32" VALIGN="BOTTOM"></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right"><P ALIGN="RIGHT"><b><font size="2">--</font></b></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="50" VALIGN="BOTTOM" align="right">
<FONT SIZE=2>200,000</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<font size="2"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Note payable issued
for payment of<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounts payable</font></TD>
<TD WIDTH="32" VALIGN="BOTTOM"></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right"><P ALIGN="RIGHT"><b><font size="2">--</font></b></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="50" VALIGN="BOTTOM" align="right"><FONT SIZE=2>40,000</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of treasury stock in
exchange<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for note payable</font></TD>
<TD WIDTH="32" VALIGN="BOTTOM"></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right">
<B><FONT SIZE=2><br>
--</FONT></B></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="50" VALIGN="BOTTOM" align="right">
<FONT SIZE=2>100,000</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
<font size="2">&nbsp;</font></TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<font size="2"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Common stock issued for
notes payable</font></TD>
<TD WIDTH="32" VALIGN="BOTTOM"></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right"><b><font size="2">--</font></b></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="50" VALIGN="BOTTOM" align="right">
<FONT SIZE=2><P ALIGN="RIGHT">262,000</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrual of preferred stock
dividends</font></TD>
<TD WIDTH="32" VALIGN="BOTTOM"></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right">
<B><FONT SIZE=2>135,244</FONT></B></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="50" VALIGN="BOTTOM" align="right"><FONT SIZE=2>67,622</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion of redemption value of<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;preferred stock</font></TD>
<TD WIDTH="32" VALIGN="BOTTOM"></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right"><B><FONT SIZE=2>214,097</FONT></B></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="50" VALIGN="BOTTOM" align="right">
<FONT SIZE=2><P ALIGN="RIGHT">214,097</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="249" VALIGN="BOTTOM">
<font size="2"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b>Common stock issued for
consulting<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;services</font></TD>
<TD WIDTH="32" VALIGN="BOTTOM"></TD>
<TD WIDTH="47" VALIGN="BOTTOM" align="right">
<B><FONT SIZE=2>75,000</FONT></B></TD>
<TD WIDTH="14" VALIGN="BOTTOM"></TD>
<TD WIDTH="50" VALIGN="BOTTOM" align="right"><FONT SIZE=2>200,000</FONT></TD>
<TD WIDTH="18" VALIGN="BOTTOM"></TD>
</TR>
<TR><TD WIDTH="176" VALIGN="BOTTOM">
  </TD>
  <TD WIDTH="410" VALIGN="BOTTOM" colspan="6">
<hr noshade size="5" color="#000080" align="right">
  </TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
&nbsp;
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="right"><b>22</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  &nbsp;
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
<hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
  </TD>
<TD WIDTH="24%" VALIGN="TOP">
  </TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>16.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Perma-Fix Acquisition</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">On June <I>25, </I>2001, the Company was acquired by Perma-Fix Environmental Services, Inc. ("Perma-Fix") pursuant to the terms of the Stock Purchase Agreement, dated January 18, 2001, (the "Purchase Agreement"). Pursuant to the terms of the Purchase Agreement, all of the outstanding voting stock of the Company was acquired by Perma-Fix and the Company with (a) the Company acquiring 20% of its own outstanding shares of voting common stock (held as treasury stock), and (b) Perma-Fix acquiring all of the remaining outstanding shares of the Company's voting common stock (the "Acquisition"). As a result, Perma-Fix now owns all of the issued and outstanding voting capital stock of the Company.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">In March 2001, in contemplation of the Acquisition, the Company's Series A Preferred stockholders converted each preferred share into three shares of common stock and the Series A Preferred Stock was eliminated. In addition, the Company's Board authorized the issuance of 1,500,000 shares of preferred stock, of which 1,467,396 were designated as Series B Preferred Stock as described below.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Perma-Fix issued 1,597,576 shares of its common stock valued at $2,396,000, or $1.50 per share, in exchange for all of the Company's remaining outstanding common stock. Of the common shares issued, 947,733 were issued in satisfaction of $357,600 of the Company's notes payable and $1,064,000 of long-term debt (see Notes 6 and 7). In addition, as partial consideration of the Acquisition, the Company issued shares of its newly designated Series B Preferred Stock to former common shareholders of the Company having a stated value of approximately $1,285,000. The Series B Preferred Stock is non-voting and non-convertible, has a $1.00 liquidation preference per share and may be redeemed at $1.00 per share at the option of the Company at any time after one year from the date of issuance. Following the first 12 months after the original issuance of the Series B Preferred Stock, the holders of the Series B Preferred Stock will be entitled to receive,&nbsp;</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
<p align="right"><b>23</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  &nbsp;
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  &nbsp;
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  &nbsp;
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
 when, as, and if declared by the Board of Directors of the Company out of legally available funds, dividends at the rate of 5% per year per share applied to the amount of $1.00 per share, which shall be fully cumulative. As a condition to the closing of the acquisition,
Perma-Fix also issued 346,666 shares of the Common Stock to certain creditors of the Company in satisfaction of $520,000 of the Company's liabilities, of which $350,000 was in satisfaction of an unsecured note payable (see Note 6). At the date of closing,
Perma-Fix advanced funds to the Company to pay certain liabilities to the IRS ($50,000), 401(k) plans ($1,336,000) and certain long-term debt holders ($434,000), in the aggregate amount of $1,820,000.</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Prior to the date of acquisition, Perma-Fix provided design and construction services under a subcontract agreement with the Company. As of the date of acquisition, Perma-Fix had loaned and advanced the Company approximately $2.3 million for working capital purposes and had billed approximately $9.8 million under the subcontract agreement, of which approximately $2,641,000 had been billed during 2000. As of December&nbsp;31, 2000, $3,754,410 was due Perma-Fix for billings and advances related to the construction of the facility.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">As a condition to the closing of the Acquisition, the Company entered into an installment agreement with the IRS relating to withholding taxes owing by the Company in the amount of $923,496 ("Installment Agreement") (see Note 10). The Installment Agreement provides for the payment of such withholding taxes over a term of approximately eight years. In addition, as a condition to such closing, one of the Company's shareholders, Performance Development Corporation ("PDC"), and two corporations affiliated with PDC, PDC Services Corporation ("PDC Services") and Management Technologies, Inc. ("MTI") each entered into an installment agreement with the IRS relating to withholding taxes owing by each of PDC, PDC Services and MTI ("PDC Installment Agreement"). The PDC Installment Agreement provides for the payment of semi-annual installments over a term of&nbsp;</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
<p align="right"><b>24</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  &nbsp;
  <p>&nbsp;
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
 eight years in the aggregate amount of approximately $3,714,000. The Installment Agreement and the PDC Installment Agreement provide that (a)
Perma-Fix does not have any liability for any taxes, interest or penalty with respect to the Company,
PDC, PDC Services or MTI; (b) the Company will be solely liable for paying the obligations of the Company under the Installment Agreement; (c) the IRS will not assert any liability against
Perma-Fix, the Company or any current or future related affiliate of Perma-Fix for any tax, interest or penalty of
PDC, PDC Services or MTI; and (d) as long as the payments by the Company under the Installment Agreement are made timely, the IRS will not file a notice of a federal tax lien, change or cancel the Installment Agreement.
Perma-Fix did not acquire any interest in PDC, PDC Services or MTI.</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Prior to the closing of the Acquisition, PDC had advanced monies to, and performed certain services for the Company aggregating approximately $3,700,000 (see Note 14). Amounts due to PDC for such advances and services were $4,489,845 and $3,882,567 at December&nbsp;31, 2000 and 1999, respectively. In payment of such advances and services and as a condition to closing, the Company issued a promissory note, dated June 7, 2001, to PDC in the principal amount of approximately $3,700,000. The promissory note is payable over eight years to correspond to payments due to the IRS under the PDC Installment Agreement. PDC has directed the Company to make all payments under the promissory note directly to the IRS to be applied to PDC's obligations under the PDC Installment Agreement.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">In connection with the closing of the Acquisition, Perma-Fix also made corrective contributions to the Company's 401(k) Plan and to the PDC 401(k) Plan. The amounts paid to the PDC Plan by Perma-Fix reduced the Company's accounts payable to PDC.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company recently completed the construction of its low-level radioactive and hazardous waste ("mixed waste") treatment facility in Oak Ridge, Tennessee. The 125,000 square-foot facility, located on&nbsp;</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
&nbsp;
<p>&nbsp;</p>
<p align="right"><b>25</b></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="101%" VALIGN="TOP" colspan="3">
<P align="center"><b><font face="Arial" size="4">East Tennessee Materials and
Energy Corporation</font></b></P>
<P>&nbsp;</P>
  <P align="right"><font size="4">Notes to Consolidated Financial Statements</font></P>
    <hr noshade size="9" color="#000080" align="right">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
  </TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP"></TD>
<TD WIDTH="24%" VALIGN="TOP"></TD>
<TD WIDTH="71%" VALIGN="TOP">
 the grounds of the Oak Ridge K-25 Weapons Facility of the Department of Energy ("DOE"), will use
Perma-Fix's various proprietary technologies to treat mixed waste coming from governmental, institutional and commercial generators nationwide. The Company operates under both a hazardous waste treatment and storage permit and a license to store and treat low-level radioactive waste. The Company also has three subcontracts with
Bechtel-Jacobs Company, LLC, DOE's site manager, which were awarded in 1998 and cover the treatment of legacy, operational and remediation nuclear waste. The facility began accepting waste in June 2001 and became fully operational during the third quarter of 2001.</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">Upon the acquisition of the Company, Perma-Fix accrued for the estimated closure costs, determined pursuant to RCRA guidelines, for the Company's facility. This accrual, recorded at $2,025,000, represents the potential future liability to close and remediate the facility, should such a cessation of operations ever occur. No insurance or third party recovery was taken into account in determining the cost estimates or reserve, nor do the cost estimates or reserve reflect any discount for present value purposes. These estimated closure costs were not accrued by the Company at December&nbsp;31, 1999 or 2000 since the construction of the facility had not been completed.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=4 WIDTH=624>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P><b>17.</b></TD>
<TD WIDTH="24%" VALIGN="TOP">
<B><P>Restatement</B></TD>
<TD WIDTH="71%" VALIGN="TOP">
<P ALIGN="JUSTIFY">The Company's financial statements for the year ended December&nbsp;31, 1998 were restated to correct the valuation of common and preferred stock issued to certain note holders and to record the accretion of the Series A preferred stock redemption value as discussed in Note 11. As a result of this restatement, the accumulated deficit at December&nbsp;31, 1998 was increased by $67,216. The Company's restated net loss applicable to common stockholders for the year ended December&nbsp;31, 1998 was increased to $997,350 compared to the amount previously reported of $930,134.</TD>
</TR>
</TABLE>


<p ALIGN="JUSTIFY">&nbsp;</p>


<p ALIGN="JUSTIFY">&nbsp;</p>
<p ALIGN="JUSTIFY">&nbsp;</p>
<p align="right"><b>26</b></p>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>5
<FILENAME>interim.htm
<DESCRIPTION>UNAUDITED INTERIM FINANCIAL STATEMENTS
<TEXT>
<html>

<head>
<title>Exhibit 99.2 - Unaudited Financial Statements</title>
</head>

<body>

<TABLE BORDER="0" CELLSPACING=1 CELLPADDING=2 WIDTH=604>
<TR><TD VALIGN="TOP" COLSPAN=6 HEIGHT=21 width="594">
<B><P ALIGN="CENTER">East Tennessee Materials &amp; Energy Corporation</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=6 HEIGHT=21 width="594">
<B><P ALIGN="CENTER">Consolidated Balance Sheets</B></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">June 25, 2001</FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">December 31, 2000</FONT></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>(Amounts in Thousands)</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">(unaudited)</FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="594" VALIGN="TOP" COLSPAN=6 HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2>
<P>ASSETS</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>Current assets</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Cash</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT"> $</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT SIZE=2>1 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-   </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Accounts receivable, net</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 170 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                          213 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Prepaid expenses</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                    -   </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                            14 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
  </TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 171 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                          227 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>Property and equipment, net</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">            17,506 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                       9,480 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>Intangibles and other assets</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Permits, net</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">              1,227 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                       1,277 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Lease acquisition costs, net</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 198 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                          213 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Goodwill, net</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                   90 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                            96 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Other assets</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                   10 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                            10 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
  </TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other assets</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">              1,525 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                       1,596 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P>        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19,202 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,303 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=18>
  <hr noshade size="6" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=18>
  <hr noshade size="6" color="#000080">
  <P></P></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>LIABILITIES AND STOCKHOLDERS' DEFICIT</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>Current liabilities</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Accounts payable</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;878 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,128 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Accrued expenses</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 549 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                          921 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Due to related party</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">              5,050 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                       4,490 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Due to Perma-Fix</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">            12,122 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                       3,754 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Notes payable</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 778 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                          928 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Current maturities of long-term debt</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 832 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                          749 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Current portion of payroll tax liability</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                   20 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                            20 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
  </TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">            20,229 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                     11,990 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>Long-term liabilities</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Long-term debt, less current maturities</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                   13 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                            15 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Payroll tax liability, less current portion</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 903 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                          903 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Long-term closure costs</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">              2,025 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                             -   </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Other long-term liabilities</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                 220 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                          200 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
  </TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long-term liabilities</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">              3,161 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                       1,118 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
  </TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">            23,390 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                     13,108 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>Redeemable Series A Cumulative Preferred Stock</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                    -   </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                       1,292 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="340" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>Stockholders' deficit</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=34><P></P></TD>
<TD WIDTH="330" VALIGN="TOP" COLSPAN=2 HEIGHT=34>
<FONT SIZE=2><P>Common stock; no par value;authorized 4,000,000 shares; issued 2,878,161 and 2,066,700 shares</FONT></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=34>
<FONT SIZE=2><P ALIGN="RIGHT">              2,820 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=34><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=34>
<FONT SIZE=2><P ALIGN="RIGHT">                       1,528 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Accumulated deficit</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">           (6,908)</FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                    (4,525)</FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Less treasury stock at cost, 25,000 shares</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">              (100)</FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                       (100)</FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
  </TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' deficit</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">           (4,188)</FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">                    (3,097)</FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=17>
  <hr noshade size="3" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=17>
  <hr noshade size="3" color="#000080">
  </TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P>        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' deficit</FONT></TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19,202 </FONT></TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=18>
<FONT SIZE=2><P ALIGN="RIGHT"> $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,303 </FONT></TD>
</TR>
<TR><TD WIDTH="18" VALIGN="TOP" HEIGHT=18></TD>
<TD WIDTH="314" VALIGN="TOP" HEIGHT=18>
  </TD>
<TD WIDTH="8" VALIGN="TOP" HEIGHT=18></TD>
<TD WIDTH="104" VALIGN="TOP" HEIGHT=18>
<hr noshade size="6" color="#000080">
  </TD>
<TD WIDTH="10" VALIGN="TOP" HEIGHT=18></TD>
<TD WIDTH="100" VALIGN="TOP" HEIGHT=18>
<hr noshade size="6" color="#000080">
  </TD>
</TR>
</TABLE>

<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="616" height="757">
  <tr>
    <td VALIGN="TOP" COLSPAN="7" HEIGHT="21"><b>
      <p ALIGN="CENTER">East Tennessee Materials &amp; Energy Corporation</b></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="7" HEIGHT="21"><b>
      <p ALIGN="CENTER">Unaudited Consolidated Statements of Operations</b></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="35%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p ALIGN="CENTER">For the six months ended</font></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="35%" VALIGN="TOP" COLSPAN="3" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="CENTER">June 25,</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="CENTER">June 30,</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p>(Amounts in Thousands Except for Per Share Data)</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="CENTER">2001</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="CENTER">2000</font></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="35%" VALIGN="TOP" HEIGHT="21" colspan="3">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="22">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="22">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="22">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="22">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="22">
      <p></p>
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="22">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="22">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p>Revenues</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;167</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;550</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p>Cost of Goods Sold</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">127</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">337</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p>Gross Profit</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">40</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">213</font></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p>Selling, General and Administrative</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">2,279</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">876</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p>Depreciation and Amortization</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">130</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">237</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p>Loss from Operations</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">(2,369)</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">(900)</font></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p>Other Income (Expense):</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="59%" VALIGN="TOP" COLSPAN="2" HEIGHT="21"><font SIZE="2">
      <p>Interest Expense</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">(14)</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">(101)</font></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p>Net Loss</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">(2,383)</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">(1,001)</font></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p>Preferred Stock Dividends</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">(1,954)</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">(175)</font></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" COLSPAN="3" HEIGHT="21"><font SIZE="2">
      <p>Net Loss Applicable to Common Stock</font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,337)</font></td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,176)</font></td>
  </tr>
  <tr>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="56%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="15%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="6%" VALIGN="TOP" HEIGHT="21">
      <p></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP" HEIGHT="21">
      <hr noshade size="6" color="#000080">
    </td>
  </tr>
</table>
<p ALIGN="left">&nbsp;</p>
<p ALIGN="left">&nbsp;</p>
<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="644">
  <tr>
    <td VALIGN="TOP" COLSPAN="8" HEIGHT="21" width="634"><b>
      <p ALIGN="CENTER">East Tennessee Materials &amp; Energy Corporation</b></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="8" HEIGHT="21" width="634"><b>
      <p ALIGN="CENTER">Unaudited Consolidated Statements of Cash Flows</b></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="182" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p ALIGN="CENTER">Six Months Ended</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="182" VALIGN="TOP" COLSPAN="3" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="CENTER">June 25,</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="CENTER">June 30,</font></td>
  </tr>
  <tr>
    <td WIDTH="444" VALIGN="TOP" COLSPAN="5" HEIGHT="17"><font SIZE="2">
      <p>(Amounts in thousands, Except for Share Amounts)</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="CENTER">2001</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="CENTER">2000</font></td>
  </tr>
  <tr>
    <td WIDTH="634" VALIGN="TOP" COLSPAN="8" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="444" VALIGN="TOP" COLSPAN="5" HEIGHT="17"><font SIZE="2">
      <p>Cash flows from operating activities:</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="61" VALIGN="TOP" COLSPAN="2" HEIGHT="17"><font SIZE="2">
      <p>Net loss</font></td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,383)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,001)</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Adjustments to reconcile net loss to net</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>&nbsp;&nbsp;&nbsp;cash used by operating activities:</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Depreciation and amortization</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">130</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">237</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Amortization of debt discount</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">161</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">161</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Long-term closure costs</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">2,025</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Issuance of Common Stock for services</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">75</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Cash provided by (used for):</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="356" VALIGN="TOP" COLSPAN="2" HEIGHT="17"><font SIZE="2">
      <p>Accounts receivable</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(102)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(98)</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="356" VALIGN="TOP" COLSPAN="2" HEIGHT="17"><font SIZE="2">
      <p>Prepaid expenses</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">14</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">5</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="356" VALIGN="TOP" COLSPAN="2" HEIGHT="17"><font SIZE="2">
      <p>Accounts payable</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(250)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(105)</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="356" VALIGN="TOP" COLSPAN="2" HEIGHT="17"><font SIZE="2">
      <p>Accrued expenses and other liabilities</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(376)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">199</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="356" VALIGN="TOP" COLSPAN="2" HEIGHT="17"></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p>Net cash used by operating activities</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(781)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(527)</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="444" VALIGN="TOP" COLSPAN="5" HEIGHT="17"><font SIZE="2">
      <p>Cash flows from investing activities:</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Capital expenditures, net of disposals</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(8,040)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(2,050)</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Expenditures obtaining permits</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(22)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(91)</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Net cash used by investing activities</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(8,062)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(2,141)</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="444" VALIGN="TOP" COLSPAN="5" HEIGHT="17"><font SIZE="2">
      <p>Cash flows from financing activities:</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Billings and advances from related party</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">560</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">2,130</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Proceeds from notes payable and long term debt</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">495</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Payments on notes payable and long term debt</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(84)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(7)</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Billings and advances from Perma-Fix</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">8,368</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">50</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Net cash provided by financing activities</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">8,844</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">2,668</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="444" VALIGN="TOP" COLSPAN="5" HEIGHT="17"><font SIZE="2">
      <p>Net Increase (Decrease) in cash</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">1</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="444" VALIGN="TOP" COLSPAN="5" HEIGHT="17"><font SIZE="2">
      <p>Cash, beginning of period</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="444" VALIGN="TOP" COLSPAN="5" HEIGHT="18"><font SIZE="2">
      <p>Cash, ending of period</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="18"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="18"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="18">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="18">
      <hr noshade size="6" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="444" VALIGN="TOP" COLSPAN="5" HEIGHT="17"><font SIZE="2">
      <p>Supplemental cash flow information:</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Cash paid for interest</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">$</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font SIZE="2">11</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="425" VALIGN="TOP" COLSPAN="4" HEIGHT="17"><font SIZE="2">
      <p>Non cash investing and financing activities:</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Accrual of preferred stock dividends</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">67</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">67</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Accretion of redemption value of preferred stock</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">107</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">107</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Conversion of Series A Preferred Stock to M&amp;EC Common Stock</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">1,466</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="396" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>Note payable offset with accounts receivable</font></td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">(145)</font></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
  </tr>
  <tr>
    <td WIDTH="11" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="21" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="16" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="332" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="82" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="81" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>

<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>

<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>

<b>
<p ALIGN="CENTER">East Tennessee Materials &amp; Energy Corporation<br>
Notes to Consolidated Financial Statements<br>
June 25, 2001<br>
(unaudited)</p>
</b>
<p ALIGN="JUSTIFY">Reference is made herein to the notes to consolidated
financial statements included in the Audited Consolidated Financial Statements
of East Tennessee Materials &amp; Energy Corporation (&quot;M&amp;EC&quot; or
the &quot;Company&quot;)<font SIZE="2"> </font>for the year ended December 31,
2000.<br>
</p>
<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="590">
  <tr>
    <td WIDTH="4%" VALIGN="TOP">
      <p ALIGN="JUSTIFY">1.</td>
    <td WIDTH="96%" VALIGN="TOP"><b>
      <p ALIGN="JUSTIFY">Summary of Accounting Policies</p>
      <p ALIGN="JUSTIFY">&nbsp;</b><u>Nature of Operations</u>. M&amp;EC<font SIZE="2"> </font>was
      formed in December 1997, to build and operate a mixed waste treatment
      facility to process waste pursuant to three broad spectrum contracts that
      were awarded to M&amp;EC. We hired individuals with the skills to benefit
      our company, and during the period of construction we provided engineering
      and consulting services to the hazardous mixed waste storage, analysis,
      treatment and disposal industry. Primary customers of the Company are
      currently United States Department of Energy contractors. In June 1999,
      the Company obtained the necessary federal and state permits to operate a
      facility to treat low-level radioactive and hazardous waste. The Company
      completed construction of the treatment facility located in Oak Ridge,
      Tennessee (the &quot;Oak Ridge Facility&quot;), in June 2001, and the Oak
      Ridge Facility became operational during the third quarter of 2001. The
      Company was acquired by Perma-Fix Environmental Services, Inc (&quot;Perma-Fix&quot;).
      effective June&nbsp;25, 2001.</p>
      <u>
      <p ALIGN="JUSTIFY">Significant Accounting Policies</u>. Our accounting
      policies are as set forth in the notes to consolidated financial
      statements referred to above.</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="4%" VALIGN="TOP">
      <p ALIGN="JUSTIFY">2.</td>
    <td WIDTH="96%" VALIGN="TOP"><b>
      <p ALIGN="JUSTIFY">Property, Plant and Equipment</p>
      </b>
      <p ALIGN="JUSTIFY">The Company incurred approximately $8.0 million of
      additional costs to complete the construction of its treatment facility.
      The Company capitalized approximately $423,000 and $162,000 of interest
      expense to construction in progress during the six months ending June 25,
      2001 and June 30, 2000, respectively.</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="4%" VALIGN="TOP">
      3.</td>
    <td WIDTH="96%" VALIGN="TOP"><b>
      <p ALIGN="JUSTIFY">Perma-Fix Acquisition</p>
      </b>
      <p ALIGN="JUSTIFY">On June <i>25, </i>2001, the Company was acquired by
      Perma-Fix Environmental Services, Inc. (&quot;Perma-Fix&quot;) pursuant to
      the terms of the Stock Purchase Agreement, dated January 18, 2001, (the
      &quot;Purchase Agreement&quot;). Pursuant to the terms of the Purchase
      Agreement, all of the outstanding voting stock of the Company was acquired
      by Perma-Fix and the Company with (a) the Company acquiring 20% of its own
      outstanding shares of voting common stock (held as treasury stock), and
      (b) Perma-Fix acquiring all of the remaining outstanding shares of the
      Company's voting common stock (the &quot;Acquisition&quot;). As a
      result, Perma-Fix now owns all of the issued and outstanding voting
      capital stock of the Company.</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="4%" VALIGN="TOP">
    </td>
    <td WIDTH="96%" VALIGN="TOP">&nbsp;
      <p>&nbsp;</p>
      <p>&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="4%" VALIGN="TOP">
      <p ALIGN="JUSTIFY"></td>
    <td WIDTH="96%" VALIGN="TOP">
      <p ALIGN="JUSTIFY">In March 2001, in contemplation of the Acquisition, the
      Company's Series A Preferred stockholders converted each preferred share
      into three shares of common stock and the Series A Preferred Stock was
      eliminated. In addition, the Company's Board authorized the issuance of
      1,500,000 shares of preferred stock, of which 1,467,396 were designated as
      Series B Preferred Stock as described below.</p>
      <p ALIGN="JUSTIFY">Perma-Fix issued 1,597,576 shares of its common stock
      valued at $2,396,000, or $1.50 per share, in exchange for all of the
      Company's remaining outstanding common stock. Of the common shares
      issued, 947,733 were issued in satisfaction of $357,600 of the Company's
      notes payable and $1,064,000 of long-term debt. In addition, as partial
      consideration of the Acquisition, the Company issued shares of its newly
      designated Series B Preferred Stock to former common shareholders of the
      Company having a stated value of approximately $1,285,000. The Series B
      Preferred Stock is non-voting and non-convertible, has a $1.00 liquidation
      preference per share and may be redeemed at $1.00 per share at the option
      of the Company at any time after one year from the date of issuance.
      Following the first 12 months after the original issuance of the Series B
      Preferred Stock, the holders of the Series B Preferred Stock will be
      entitled to receive, when, as, and if declared by the Board of Directors
      of the Company out of legally available funds, dividends at the rate of 5%
      per year per share applied to the amount of $1.00 per share, which shall
      be fully cumulative. As a condition to the closing of the acquisition,
      Perma-Fix also issued 346,666 shares of the Common Stock to certain
      creditors of the Company in satisfaction of $520,000 of the Company's
      liabilities, of which $350,000 was in satisfaction of an unsecured note
      payable. At the date of closing, Perma-Fix advanced funds to the Company
      to pay certain liabilities to the IRS ($50,000), 401(k) plans ($1,336,000)
      and certain long-term debt holders ($434,000), in the aggregate amount of
      $1,820,000.</p>
      <p ALIGN="JUSTIFY">Prior to the date of acquisition, Perma-Fix provided
      design and construction services under a subcontract agreement with the
      Company. As of the date of acquisition, Perma-Fix had loaned and advanced
      the Company approximately $2.3 million for working capital purposes and
      had billed approximately $9.8 million under the subcontract agreement, of
      which approximately $2,641,000 had been billed during 2000. As of December&nbsp;31,
      2000 and June 25, 2001, $3,754,410 and 12,122,000, respectively was due
      Perma-Fix for billings and advances related to the construction of the
      facility.</p>
      <p ALIGN="JUSTIFY">As a condition to the closing of the Acquisition, the
      Company entered into an installment agreement with the IRS relating to
      withholding taxes owing by the Company in the amount of $923,496
      (&quot;Installment Agreement&quot;). The Installment Agreement provides
      for the payment of such withholding taxes over a term of approximately
      eight years. In addition, as a condition to such closing, one of the
      Company's shareholders, Performance Development Corporation (&quot;PDC&quot;),
      and two corporations affiliated with PDC, PDC Services Corporation (&quot;PDC
      Services&quot;) and Management Technologies, Inc. (&quot;MTI&quot;) each
      entered into an installment agreement with the IRS relating to withholding
      taxes owing by&nbsp;</p>
      <p ALIGN="JUSTIFY">&nbsp;
      <p ALIGN="JUSTIFY">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="4%" VALIGN="TOP">
    </td>
    <td WIDTH="96%" VALIGN="TOP"> each of PDC, PDC Services and MTI (&quot;PDC
      Installment Agreement&quot;). The PDC Installment Agreement provides for
      the payment of semi-annual installments over a term of eight years in the
      aggregate amount of approximately $3,714,000. The Installment Agreement
      and the PDC Installment Agreement provide that (a) Perma-Fix does not have
      any liability for any taxes, interest or penalty with respect to the
      Company, PDC, PDC Services or MTI; (b) the Company will be solely liable
      for paying the obligations of the Company under the Installment Agreement;
      (c) the IRS will not assert any liability against Perma-Fix, the Company
      or any current or future related affiliate of Perma-Fix for any tax,
      interest or penalty of PDC, PDC Services or MTI; and (d) as long as the
      payments by the Company under the Installment Agreement are made timely,
      the IRS will not file a notice of a federal tax lien, change or cancel the
      Installment Agreement. Perma-Fix did not acquire any interest in PDC, PDC
      Services or MTI.&nbsp;
      <p ALIGN="JUSTIFY">Prior to the closing of the Acquisition, PDC had
      advanced monies to, and performed certain services for the Company
      aggregating approximately $3,700,000. Amounts due to PDC for such advances
      and services were $4,490,000 and $5,050,000 at December&nbsp;31, 2000 and
      June 25, 2001, respectively. In payment of such advances and services and
      as a condition to closing, the Company issued a promissory note, dated
      June 7, 2001, to PDC in the principal amount of approximately $3,700,000.
      The promissory note is payable over eight years to correspond to payments
      due to the IRS under the PDC Installment Agreement. PDC has directed the
      Company to make all payments under the promissory note directly to the IRS
      to be applied to PDC's obligations under the PDC Installment Agreement.</p>
      <p ALIGN="JUSTIFY">In connection with the closing of the Acquisition,
      Perma-Fix also made corrective contributions to the Company's 401(k)
      Plan and to the PDC 401(k) Plan. The amounts paid to the PDC Plan by Perma-Fix
      reduced the Company's accounts payable to PDC.</p>
      <p ALIGN="JUSTIFY">The Company recently completed the construction of its
      low-level radioactive and hazardous waste (&quot;mixed waste&quot;)
      treatment facility in Oak Ridge, Tennessee. The 125,000 square-foot
      facility, located on the grounds of the Oak Ridge K-25 Weapons Facility of
      the Department of Energy (&quot;DOE&quot;), will use Perma-Fix's various
      proprietary technologies to treat mixed waste coming from governmental,
      institutional and commercial generators nationwide. The Company operates
      under both a hazardous waste treatment and storage permit and a license to
      store and treat low-level radioactive waste. The Company also has three
      subcontracts with Bechtel-Jacobs Company, LLC, DOE's site manager, which
      were awarded in 1998 and cover the treatment of legacy, operational and
      remediation nuclear waste. The facility began accepting waste in June 2001
      and became fully operational during the third quarter of 2001.</p>
      <p>Upon the acquisition of the Company, Perma-Fix accrued
      for the estimated closure costs, determined pursuant to RCRA guidelines,
      for the Company's facility. This accrual, recorded at $2,025,000,
      represents the potential future liability to close and remediate the
      facility, should such a cessation of operations ever occur. No insurance
      or third party&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="4%" VALIGN="TOP">
    </td>
    <td WIDTH="96%" VALIGN="TOP">&nbsp;
      <p>&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="4%" VALIGN="TOP">
    </td>
    <td WIDTH="96%" VALIGN="TOP">&nbsp;
      <p>&nbsp;</p>
      <p> recovery was taken into account in determining the cost
      estimates or reserve, nor do the cost estimates or reserve reflect any
      discount for present value purposes. These estimated closure costs were
      not accrued by the Company until June 2001 since the construction of the
      facility had not been substantially completed until then.</td>
  </tr>
</table>
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</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>6
<FILENAME>proforma1.htm
<DESCRIPTION>UNAUDITED PRO FORMA FINANCIAL INFORMATION
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 99.3 - Unaudited Pro Forma Financial Information</TITLE>
</HEAD>
<BODY>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="620">
  <tr>
    <td VALIGN="TOP" COLSPAN="12" HEIGHT="18" width="589"><b>
      <p ALIGN="CENTER">Unaudited Pro Forma Condensed Combined</b></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="12" HEIGHT="18" width="589"><b>
      <p ALIGN="CENTER">Statement of Operations</b></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="12" HEIGHT="18" width="589"><b>
      <p ALIGN="CENTER">For the year ended December 31, 2000</b></td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="14" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="155" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="14" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="155" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="15"><font SIZE="2">
      <p>(Amounts in Thousands Except for Per Share Data)</font></td>
    <td WIDTH="74" VALIGN="TOP" COLSPAN="2" HEIGHT="15"><font SIZE="2">
      <p ALIGN="CENTER">Perma-Fix</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="15"><font SIZE="2">
      <p ALIGN="CENTER">DSSI</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="15"><font SIZE="2">
      <p ALIGN="CENTER">M&amp;EC</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="15">
      <p></p>
    </td>
    <td WIDTH="83" VALIGN="TOP" COLSPAN="2" HEIGHT="15"><font SIZE="2">
      <p>Adjustments</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="15"><font SIZE="2">
      <p>Pro Forma</font></td>
  </tr>
  <tr>
    <td WIDTH="514" VALIGN="TOP" HEIGHT="15" colspan="12">
      <hr noshade size="3" color="#000080" align="right">
    </td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Revenues</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;59,139</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,381</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;906</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p>$</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;63,426</font></td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Cost of goods sold</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">40,910</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">1,938</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">559</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">43,407</font></td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="14" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="155" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p>Gross profit</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">18,229</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">1,443</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">347</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">20,019</font></td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Selling, general and administrative</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">12,765</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">1,269</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">1,291</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">15,325</font></td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Depreciation and amortization</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">3,651</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">127</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">452</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">1,266</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24"><font SIZE="1">
      <p>(a),(b),<br>
      (g)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">5,496</font></td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24"></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="14" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="155" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p>Income (loss) from operations</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">1,813</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">47</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(1,396)</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(1,266)</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(802)</font></td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Other income (expense):</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="177" VALIGN="TOP" COLSPAN="2" HEIGHT="24"><font SIZE="2">
      <p>Interest income</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">41</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">41</font></td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="177" VALIGN="TOP" COLSPAN="2" HEIGHT="24"><font SIZE="2">
      <p>Interest expense</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(2,657)</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(175)</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(384)</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24"><font SIZE="1">
      <p>(c),(h)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(3,216)</font></td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="177" VALIGN="TOP" COLSPAN="2" HEIGHT="24"><font SIZE="2">
      <p>Other income (expense)</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">247</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(196)</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">119</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">195</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24"><font SIZE="1">
      <p>(f)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">365</font></td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="177" VALIGN="TOP" COLSPAN="2" HEIGHT="24"></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24"></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="14" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="155" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p>Net income (loss)</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(556)</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(149)</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(1,452)</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(1,455)</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(3,612)</font></td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Preferred stock dividends</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(206)</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(349)</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">349</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24"><font SIZE="1">
      <p>(d)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT">(206)</font></td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24"></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Net income (loss) applicable to Common Stock</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(762)</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(149)</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      $&nbsp;&nbsp;(1,801)</font></td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      $&nbsp;&nbsp;(1,106)</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      $&nbsp;&nbsp;&nbsp;(3,818)</font></td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="14" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="155" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="6" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Basic and diluted net loss per common share</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.04)</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.16)</font></td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="14" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="155" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24">
      <hr noshade size="6" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="218" VALIGN="TOP" COLSPAN="3" HEIGHT="24"><font SIZE="2">
      <p>Weighted average number of common shares outstanding</font></td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      21,558</font></td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="24">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      1,944</font></td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="24"><font SIZE="1">
      <p><br>
      (e)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="24"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      23,502</font></td>
  </tr>
  <tr>
    <td WIDTH="33" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="14" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="155" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="16">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="8" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="60" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="51" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="5" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="69" VALIGN="TOP" HEIGHT="16">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="16">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="16">
      <hr noshade size="6" color="#000080">
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="651">
  <tr>
    <td VALIGN="TOP" COLSPAN="10" HEIGHT="21" width="629"><b>
      <p ALIGN="CENTER">Unaudited Pro Forma Condensed Combined</b></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="10" HEIGHT="21" width="629"><b>
      <p ALIGN="CENTER">Statement of Operations</b></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="10" HEIGHT="21" width="629"><b>
      <p ALIGN="CENTER">For the six months ended June 30, 2001</b></td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="17"><font SIZE="2">
      <p>(Amounts in Thousands Except for Per Share Data)</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="CENTER">Perma-Fix</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p ALIGN="CENTER">M&amp;EC</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p>Adjustments</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="17"><font SIZE="2">
      <p>Pro Forma</font></td>
  </tr>
  <tr>
    <td WIDTH="629" VALIGN="TOP" HEIGHT="17" colspan="10">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Revenues</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;36,552</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;167</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p>$</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;36,719</font></td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Cost of goods sold</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">26,257</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">127</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">26,384</font></td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p>Gross profit</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">10,295</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">40</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">10,335</font></td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Selling, general and administrative</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">6,905</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">2,279</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">9,184</font></td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Depreciation and amortization</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">2,032</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">130</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">451</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28"><font SIZE="1">
      <p>(a),(b)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">2,613</font></td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28"></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p>Income (loss) from operations</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">1,358</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(2,369)</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(451)</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(1,462)</font></td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Other income (expense):</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="242" VALIGN="TOP" COLSPAN="2" HEIGHT="28"><font SIZE="2">
      <p>Interest income</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">16</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">16</font></td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="242" VALIGN="TOP" COLSPAN="2" HEIGHT="28"><font SIZE="2">
      <p>Interest expense</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(2,592)</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(14)</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">10</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28"><font SIZE="1">
      <p>(c)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(2,596)</font></td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="242" VALIGN="TOP" COLSPAN="2" HEIGHT="28"><font SIZE="2">
      <p>Other income (expense)</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(18)</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">-</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(18)</font></td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="242" VALIGN="TOP" COLSPAN="2" HEIGHT="28"></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p>Net loss</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(1,236)</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(2,383)</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(441)</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(4,060)</font></td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Preferred stock dividends</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(82)</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(1,954)</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">1,922</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28"><font SIZE="1">
      <p>(d)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">(114)</font></td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28"></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Net loss applicable to Common Stock</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,318)</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,337)</font></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,481</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,174)</font></td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="6" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Basic and diluted net loss per common share</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.06)</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.17)</font></td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28">
      <hr noshade size="6" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="277" VALIGN="TOP" COLSPAN="3" HEIGHT="28"><font SIZE="2">
      <p>Weighted average number of common shares<br>
      &nbsp;&nbsp;&nbsp;outstanding</font></td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      22,711</font></td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="28">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      1,944</font></td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="28"><font SIZE="1">
      <p><br>
      (e)</font></td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="28"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      24,655</font></td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="18">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="18">
      <hr noshade size="6" color="#000080">
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="18">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="18">
      <hr noshade size="6" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="27" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="20" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="214" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="72" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="4" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="70" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="71" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="32" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
    <td WIDTH="65" VALIGN="TOP" HEIGHT="17">
      <p></p>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p><strong>Notes to Unaudited Pro Forma Condensed Combined Financial Statements</strong></p>
<p><strong>Note 1 - Basis of Presentation</strong></p>
<p>The unaudited pro forma statements of operations combine the historical
consolidated statements of operations of Perma-Fix Environmental Services, Inc.
for the year ended December 31, 2000, and the six months ended June 30, 2001,
with the historical statements of income for DSSI for the period from January 1,
2000 through the date of acquisition of August 31, 2000 and the historical
statements of income East Tennessee Materials &amp; Energy Corp.
(&quot;M&amp;EC&quot;) for the year ended December 31, 2000, and the six months
ended June 25, 2001. The pro forma balance sheet has been omitted as the amounts
for DSSI and M&amp;EC are included in the Company's quarterly report on Form
10-Q for the quarter ended June 30, 2001.</p>
<p>The unaudited pro forma financial statements exclude the effect of any
operating income improvements which may be achieved upon combining the resources
of the companies and exclude costs associated with the integration and
consolidation of the companies.</p>
<p><strong>Note 2 - Pro Forma Adjustments</strong></p>
<p>Perma-Fix Environmental Services, Inc. acquired DSSI on August 31, 2000, and
acquired M&amp;EC on June&nbsp;25, 2001, in transactions accounted for as purchases.
The pro forma adjustments consist of the following:</p>
<table WIDTH="653">
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25">(a)</td>
    <td width="555">The excess of the purchase price over the net assets acquired of
      approximately $9,149,000 was assigned to permits in accordance with
      purchase accounting. Amortization expense for acquired permits with an
      estimated useful life of ten years was recorded in the annual amount of
      $915,000.<br>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25">(b)</td>
    <td width="555">Amortization expense for goodwill on M&amp;EC's statements in the annual
      amount of $12,000 is reversed as this asset was not recorded in accordance
      with purchase accounting.<br>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25">(c)</td>
    <td width="555">Reduce interest expense to reflect elimination of notes payable settled
      upon acquisition.<br>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25">(d)</td>
    <td width="555">Preferred Stock dividends for Series A were eliminated pursuant to the
      conversion of Series A to Common Stock prior to acquisition. Recorded
      Preferred Stock dividends for the six months ended June 30, 2001 on the
      Preferred Stock Series B issued at closing. Dividends accrue at an annual
      rate of 5% beginning one year after acquisition.<br>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25">(e)</td>
    <td width="555">Adjusted weighted average shares for the1,944,242 shares of Common Stock
      issued at closing for consideration and extinguishment of certain debt of
      M&amp;EC.</td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25"></td>
    <td width="555">&nbsp;
      <p>&nbsp;</p>
      <p>&nbsp;</p>
      <p>&nbsp;</td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25"></td>
    <td width="555">&nbsp;
      <p>&nbsp;</p>
      <p>&nbsp;
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25">(f)</td>
    <td width="555">Eliminate management fees of $195,000 from DSSI parent company for the
      eight months ended August 31, 2000, prior to DSSI acquisition.<br>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25">(g)</td>
    <td width="555">Increase DSSI depreciation of $183,000 for write up of fixed assets to
      market value, and increase amortization of $180,000 for permits for DSSI.<br>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="53"></td>
    <td width="25">(h)</td>
    <td width="555">Increase interest expense of $552,000 for debt acquired in relation to
      DSSI acquisition.</td>
  </tr>
</table>
<p><strong>Note 3 - Federal Income Tax Consequences of the Mergers</strong></p>
<p>The unaudited pro forma financial statements assume that the mergers qualify
as taxable transactions for federal income tax purposes.</p>
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