UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


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

For the quarterly period ended              June 30, 2002
                                        --------------------------

                                       or

[ ]  TRANSACTION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
EXCHANGE ACT OF 1934

For the transition period from               to
                                 -----------    -----------

Commission File Number:
                          -----------



                               ISG Resources, Inc.
                      ------------------------------------
             (Exact name of registrant as specified in its charter)


                      Utah                                 87-0619697
         ---------------------------------              ------------------
         (State or other jurisdiction of                (I.R.S. Employer
         incorporation or organization)                 Identification No.)


          136 East South Temple, Suite 1300, Salt Lake City, Utah 84111
        ------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (801) 236-9700
                           --------------------------
              (Registrant's telephone number, including area code)


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


     Indicate the number of shares  outstanding of each of the issuer's  classes
of common  stock,  as of the  latest  practicable  date.  As of July 25,  2002 :


     Classes of Common Stock                    Number of shares outstanding
  --------------------------------------     ----------------------------------
      Common Stock, no par value                                 100


<PAGE>






                               ISG Resources, Inc.

                                  ------------

                               INDEX TO FORM 10-Q



                         PART I -- FINANCIAL INFORMATION

<TABLE>
<CAPTION>

Item 1.  Financial Statements                                                      Page
         --------------------                                                      ----

<S>     <C>                                                                        <C>
         Condensed Consolidated Balance Sheets --
         June 30, 2002 and December 31, 2001                                         1

         Unaudited Condensed Consolidated Statements of Operations --
         Three months ended June 30, 2002 and 2001                                   2

         Unaudited Condensed Consolidated Statements of Operations --
         Six months ended June 30, 2002 and 2001                                     3

         Unaudited Condensed Consolidated Statements of Comprehensive Income --
         Three months ended June 30, 2002 and 2001                                   4

         Unaudited Condensed Consolidated Statements of Comprehensive Income --
         Six months ended June 30, 2002 and 2001                                     5

         Unaudited Condensed Consolidated Statements of Cash Flows --
         Six months ended June 30, 2002 and 2001                                     6

         Notes to Unaudited Condensed Consolidated Financial Statements              7

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations                              17

Item 3.  Quantitative and Qualitative Disclosure about Market Risk
          There have been no significant changes since the annual report on Form
          10-K filed for the year ended December 31, 2001.

                           PART II - OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K                                           24
</TABLE>



<PAGE>

<TABLE>
<CAPTION>

                      ISG Resources, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets

                                                                      ------------------------------------------
                                                                           June 30,          December 31,
                                                                       2002 (Unaudited)          2001
                                                                      ------------------------------------------
<S>                                                                    <C>                       <C>
Assets
Current assets:
   Cash and cash equivalents                                             $10,928,663               $ 17,724,156
   Accounts receivable:
      Trade, net of allowance for doubtful accounts of
          $555,000 and $440,000, respectively                             35,597,861                 25,302,639
      Retainage receivable                                                   235,749                    257,989
      Other receivables                                                    1,156,622                    692,828
   Deferred tax assets                                                       696,974                    630,178
   Inventories                                                             8,660,241                  8,528,976
   Other current assets                                                    1,564,275                  1,604,691
                                                                      ------------------------------------------
Total current assets                                                      58,840,385                 54,741,457

Property, plant and equipment, net of accumulated depreciation of
   $20,894,818 and $18,126,675, respectively                              40,074,278                 38,118,552
Intangible assets, net                                                    80,580,597                 83,329,546
Goodwill                                                                  73,848,153                 73,848,153
Debt issuance costs, net                                                   3,243,316                  3,687,475
Other assets                                                                 123,596                     93,706
                                                                      ------------------------------------------
Total assets                                                            $256,710,325               $253,818,889
                                                                      ==========================================

Liabilities and shareholder's equity Current liabilities:
   Accounts payable                                                      $18,206,472                $14,287,253
   Accrued liabilities:
      Payroll                                                              1,549,933                  2,775,553
      Interest                                                             2,510,430                  2,380,899
      Other                                                                2,488,458                  1,924,450
   Income taxes payable                                                      932,884                     10,872
   Other current liabilities                                               1,840,395                  1,951,850
                                                              --------------------------------------------------
Total current liabilities                                                 27,528,572                 23,330,877

Long-term debt                                                           163,573,900                164,643,900
Deferred tax liability                                                    35,204,335                 35,726,641
Payable to Industrial Services Group                                       4,796,444                  4,796,444
Other liabilities                                                            340,652                    766,004

Shareholder's equity:
   Common stock, no par value; 100 shares
    authorized, issued and outstanding                                    34,745,050                 34,745,050
   Cumulative foreign currency translation adjustment                       (65,943)                    (55,636)
   Retained deficit                                                      (9,412,685)                (10,134,391)
                                                              --------------------------------------------------
Total shareholder's equity                                                25,266,422                 24,555,023
                                                              --------------------------------------------------
Total liabilities and shareholder's equity                              $256,710,325               $253,818,889
                                                              ==================================================
</TABLE>


See accompanying notes.


<PAGE>


<TABLE>
<CAPTION>
                      ISG Resources, Inc. and Subsidiaries
            Unaudited Condensed Consolidated Statements of Operations

                                                             -------------------------------------------
                                                                       Three Months Ended
                                                                            June 30,
                                                             -------------------------------------------
                                                                     2002               2001
                                                             -------------------------------------------
<S>                                                                   <C>              <C>
Revenues:
   Product revenues                                                    $54,736,474      $51,442,426
   Service revenues                                                      7,410,951        8,674,633
                                                             -------------------------------------------
                                                                        62,147,425       60,117,059

Costs and expenses:
   Cost of product revenues, excluding depreciation                     39,772,588       38,357,167
   Cost of service revenues, excluding depreciation                      5,718,352        5,599,821
   Depreciation and amortization                                         2,931,191        3,873,482
   New product development                                                 470,321          569,600
   Selling, general and administrative expenses                          6,412,355        6,029,539
                                                             -------------------------------------------
                                                                        55,304,807       54,429,609
                                                             -------------------------------------------
Operating income                                                         6,842,618        5,687,450

Interest income                                                             24,675           94,377
Interest expense                                                        (3,592,627)      (4,007,377)
Other income (expense)                                                     200,836          (24,103)
                                                             -------------------------------------------
Income before income taxes                                               3,475,502        1,750,347
Income tax expense                                                      (1,405,214)      (1,046,774)
                                                             -------------------------------------------
Net income                                                             $ 2,070,288      $   703,573
                                                             ===========================================

See accompanying notes.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                      ISG Resources, Inc. and Subsidiaries
            Unaudited Condensed Consolidated Statements of Operations


                                                             -------------------------------------------
                                                                        Six Months Ended
                                                                            June 30,
                                                             -------------------------------------------
                                                                     2002               2001
                                                             -------------------------------------------
<S>                                                            <C>                  <C>
Revenues:
   Product revenues                                            $    92,601,884      $     85,185,827
   Service revenues                                                 14,101,517            16,616,619
                                                             -------------------------------------------
                                                                   106,703,401           101,802,446


Costs and expenses:
   Cost of product revenues, excluding depreciation                  68,512,420           65,371,460
   Cost of service revenues, excluding depreciation                  10,662,565           11,006,878
   Depreciation and amortization                                      5,902,176            8,018,269
   New product development                                            1,120,030            1,164,818
   Selling, general and administrative expenses                      12,491,649           11,881,941
                                                             --------------------------------------------
                                                                     98,688,840           97,443,366
                                                             -------------------------------------------
Operating income                                                      8,014,561            4,359,080

Interest income                                                          83,011              242,190
Interest expense                                                     (7,284,868)          (8,374,291)
Other income                                                            483,201                9,891
                                                             -------------------------------------------
Income (loss) before income taxes                                     1,295,905           (3,763,130)
Income tax benefit (expense)                                           (574,199)             755,786
                                                             -------------------------------------------
Net income (loss)                                              $         721,706    $     (3,007,344)
                                                             ===========================================

</TABLE>


See accompanying notes.

<page>


                      ISG Resources, Inc. and Subsidiaries
            Unaudited Consolidated Statement of Comprehensive Income


                                            -----------------------------------
                                                Three months ended June 30
                                                2002                2001
                                            -----------------------------------

Net income                                     $2,070,288       $703,573
Other comprehensive income net of tax:
   Foreign currency translation adjustment         27,231         13,230
                                            -----------------------------------
Comprehensive income                           $2,097,519       $716,803
                                            ===================================

See accompanying notes.

<PAGE>


                      ISG Resources, Inc. and Subsidiaries
         Unaudited Consolidated Statement of Comprehensive Income (Loss)


                                               --------------------------------
                                                   Six months ended June 30
                                                  2002                2001
                                               --------------------------------

Net income (loss)                                  $721,706      $(3,007,344)
Other comprehensive income (loss) net of tax:
   Foreign currency translation adjustment          (10,307)          25,361
                                               --------------------------------
Comprehensive income (loss)                        $711,399      $(2,981,983)
                                               ================================

See accompanying notes.


<page>

<TABLE>
<CAPTION>
                      ISG Resources, Inc. and Subsidiaries
            Unaudited Condensed Consolidated Statements of Cash Flows


                                                                         --------------------------------------
                                                                                   Six Months Ended
                                                                                       June 30,
                                                                         --------------------------------------
                                                                                 2002              2001
                                                                         --------------------------------------
<S>                                                                        <C>                  <C>

Operating activities
Net income (loss)                                                          $      721,706       $ (3,007,344)
Adjustments to reconcile net income (loss) to net cash provided by
   (used in) operating activities:
     Depreciation and amortization                                              5,902,176          8,018,269
     Amortization of debt issuance costs                                          485,585            474,983
     Loss (gain) on disposal of fixed assets                                     (133,958)            29,983
     Deferred income taxes                                                       (589,102)        (1,129,947)
     Changes in operating assets and liabilities:
         Receivables                                                          (10,736,776)        (9,857,279)
         Inventory                                                               (131,265)          (137,298)
         Other current and non-current assets                                      10,526           (195,367)
         Accounts payable and accrued expenses                                  3,387,138          8,671,532
         Other current and non-current liabilities                                785,205          2,822,127
                                                                         --------------------------------------
Net cash (used in) provided by operating activities                              (298,765)         5,689,659

Investing activities
Purchases of property, plant and equipment                                     (5,540,870)        (5,068,561)
Proceeds on sale of property, plant and equipment                                 565,875             81,340
                                                                         --------------------------------------
Net cash used in investing activities                                          (4,974,995)        (4,987,221)

Financing activities
Payments on long-term debt                                                     (1,070,000)           (82,177)
Debt issuance costs incurred                                                      (41,426)           (90,000)
Payments on long-term liabilities                                                (400,000)                 -
                                                                         --------------------------------------
Net cash used in financing activities                                          (1,511,426)          (172,177)

Effect of exchange rate changes on cash and
    cash equivalents                                                              (10,307)            25,361
                                                                         --------------------------------------
Net increase (decrease) in cash and cash equivalents                           (6,795,493)           555,622
Cash and cash equivalents at beginning of period                               17,724,156          6,986,725
                                                                         --------------------------------------
Cash and cash equivalents at end of period                                 $   10,928,663       $  7,542,347
                                                                         ======================================

Cash paid for interest                                                     $    6,620,900       $  8,167,467
Cash paid (received) for income taxes                                      $      215,135       $ (2,028,047)

</TABLE>

See accompanying notes.


<PAGE>


                               ISG RESOURCES, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation

ISG  Resources,  Inc., a Utah  corporation  (the  "Company"),  is a wholly owned
subsidiary  of  Industrial  Services  Group,  Inc.  ("ISG").  ISG was  formed in
September  1997 and,  through  merger and  acquistion,  acquired  the  following
entities:   JTM   Industries,   Inc.   ("JTM");   Pozzolanic   Resources,   Inc.
("Pozzolanic"); Power Plant Aggregates of Iowa, Inc. ("PPA"); Michigan Ash Sales
Company, d.b.a. U. S. Ash Company,  together with two affiliated companies, U.S.
Stabilization,  Inc. and Flo Fil Company, Inc., (collectively,  "U.S. Ash"); Fly
Ash Products,  Inc.  ("Fly Ash Products);  Best Masonry & Tool Supply  ("Best");
Mineral  Specialties,  Inc.  ("Specialties");  Irvine Fly Ash, Inc.  ("Irvine");
Lewis  W.  Osborne,   Inc.   ("Osborne");   United  Terrazzo  Supply  Co.,  Inc.
("Terrazzo");  Magna Wall,  Inc.  ("Magna  Wall");  Don's Building Supply L.L.P.
("Don's);  Palestine  Concrete Tile Company,  Inc. and certain  associated  real
property  (collectively,  "Palestine");  and certain fixed and intangible assets
from Hanson Aggregates West, Inc. ("Hanson").

In 2000, ISG Canada Limited,  Inc. ("ISG Canada") was formed and became a wholly
owned foreign  subsidiary of the Company,  with fly ash operations  beginning in
the second half of 2000.

Each of the above  acquisitions  was accounted for under the purchase  method of
accounting and, accordingly,  the results of operations of each acquired company
have been included in the consolidated financial statements since the respective
date of acquisition.

These  financial  statements  reflect the  consolidated  financial  position and
results of  operations  of the Company and its wholly  owned  subsidiaries.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  reflect all  adjustments,  consisting of normal recurring
adjustments,  necessary to present  fairly the  financial  position,  results of
operations and cash flows of the Company,  for the respective periods presented.
The results of operations for an interim period are not  necessarily  indicative
of the results,  which may be expected for any other  interim  period or for the
year as a whole.

The  preparation  of  financial   statements,   in  conformity  with  accounting
principles generally accepted in the United States,  requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Certain  information  and footnote  disclosures  normally  included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted.  The accompanying  unaudited  interim  condensed
consolidated  financial  statements  should  be read  in  conjunction  with  the
consolidated  financial  statements and notes in the Company's Form 10-K for the
fiscal year ended December 31, 2001.

The  consolidated  balance  sheet at December  31, 2001 was derived from audited
consolidated financial statements, but does not include all disclosures required
under generally accepted accounting principles.

<page>

2.       Description of Business

The Company operates two principal  business  segments:  coal combustion product
(CCP) management and building materials manufacturing and distribution.  The CCP
division  purchases,  removes  and sells fly ash and other  by-products  of coal
combustion  to producers and  consumers of building  materials and  construction
related products  throughout the United States.  The building materials division
manufactures and distributes masonry  construction  materials to residential and
commercial contractors primarily in Texas, California, Georgia and Florida.

3.       New Product Development Costs

New product development costs consist of scientific research and development and
market development  expenditures.  Expenditures of $414,085 and $510,883 for the
three  months  ended  June  30,  2002  and  June  30,  2001,  respectively,  and
expenditures  of $993,994 and  $1,027,518 for the six months ended June 30, 2002
and  June  30,  2001,  respectively,  were  made for  research  and  development
activities  covering  basic  scientific  research and  application of scientific
advances  to the  development  of  new  and  improved  products  and  processes.
Expenditures of $56,236 and $58,717 for the three months ended June 30, 2002 and
June 30, 2001,  respectively,  and expenditures of $126,036 and $137,300 for the
six months  ended June 30, 2002 and June 30, 2001,  respectively,  were made for
market development activities related to promising new and improved products and
processes  identified  during research and development  activities.  The Company
expenses all new product development costs as they are incurred.

4.       Inventories

The Company  accounts for inventory  balances  using the lower of cost or market
method on a first-in, first-out basis. Inventories consist of:


                                June 30,             December 31,
                                  2002                   2001
                           --------------------- ---------------------
         Raw Materials         $     999,119           $     958,796
         Finished Goods            7,661,122               7,570,180
                           --------------------- ---------------------
                                $  8,660,241           $   8,528,976
                           ===================== =====================

5.   Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible  Assets."  In  accordance  with  the  guidelines  of this  accounting
principle,  goodwill  and  indefinite  lived  intangible  assets  are no  longer
amortized, but will be assessed for impairment on at least an annual basis.

Pursuant to SFAS No. 142, the Company  completed its  reassessment of previously
recognized  intangible assets including evaluation of the remaining useful lives
of its  intangibles.  The Company  believes the useful  lives of its  intangible
assets are appropriate.


<PAGE>



Provided below is a reconciliation of previously  reported  financial  statement
information  to  adjusted  amounts  that  reflect  the  elimination  of goodwill
amortization:
<TABLE>
<CAPTION>

                                            Six Months Ended                 Three Months Ended
                                     June 30, 2002     June 30, 2001      June 30, 2002      June 30, 2001
                                     ----------------- ------------------ ------------------ ----------------
<S>                                   <C>               <C>                <C>                <C>
Net income (loss):
    As reported                       $ 721,706         $ (3,007,344)      $  2,070,288       $    703,573
    Add back:
        Goodwill amortization
             net of tax                       -            2,027,704                  -          1,013,852
                                     ----------------- ------------------ ------------------ ----------------
Adjusted net income (loss)           $  721,706        $    (979,640)      $  2,070,288        $ 1,717,425
                                     ================= ================== ================== ================
</TABLE>

The following table as of June 30, 2002, summarizes the gross carrying value and
accumulated  amortization  for each major class of intangible asset based on the
Company's  reassessment  of previously  recognized  intangible  assets and their
remaining amortization lives in accordance with the adoption of SFAS No. 142:
<TABLE>
<CAPTION>

                                    June 30, 2002                     December 31, 2001
                         Gross Carrying       Accumulated       Gross Carrying    Accumulated       Amortizable
                             Amount           Amortization          Amount        Amortization          Life
                        ------------------ ------------------- ----------------- --------------- -------------------
<S>                          <C>                  <C>              <C>              <C>             <C>
Supply contracts             $100,148,521         $21,858,228      $100,227,490     $19,402,631     10 to 20 years
Patents                         2,446,584             606,280         2,446,584         541,897       19 years
Licenses                        1,000,000             550,000         1,000,000         400,000      40 months
                        ------------------ ------------------- ----------------- ---------------
Total amortizable
    intangible assets        $103,595,105         $23,014,508      $103,674,074     $20,344,528
                        ================== =================== ================= ===============
</TABLE>


The total  intangible  amortization  expense for these assets for the six months
ended June 30, 2002 and 2001 was $2.8 million and $3.2 million, respectively.

The  estimated  amortization  expense for the next five fiscal  years  beginning
January 1, 2002 is as follows:

     For the year ended December 31, 2002                            $5,497,213
     For the year ended December 31, 2003                             5,497,213
     For the year ended December 31, 2004                             5,197,213
     For the year ended December 31, 2005                             5,197,213
     For the year ended December 31, 2006                             5,197,213

The  transitional  accounting  provisions of SFAS No. 142 require the Company to
identify and measure  goodwill  impairment at each of its reporting  units.  For
purposes of this measurement,  the Company identified three reporting units. The
Company is in the process of evaluating the impairment, if any, of the goodwill,
in these three reporting units. Under the transitional  accounting provisions of
SFAS No.  142,  the Company is required  to  complete  Step 1  (determining  and
comparing the fair value of the reporting units to the reporting units' carrying
value) of the  transitional  impairment  test within six months of adopting SFAS
No.  142.  If Step 1 of the  goodwill  impairment  test is  failed in any of the
reporting  units,  thereby  indicating  a potential  impairment,  the Company is
required  to  complete  Step 2 of the test for  that  reporting  unit as soon as
possible,  but no later  than  the end of 2002.  Under  Step 2, the  Company  is
required to  calculate  the implied fair value of goodwill and compare it to the
carrying value of goodwill.

<page>

The  Company  completed  Step 1  described  above,  which  indicated  a possible
impairment.  The Company is therefore required to complete Step 2, however, as a
result of the  pending  merger of the  Company  as  described  further in note 9
below, the completion of Step 2 in the process is still pending.

6.     Long-term Debt

Long-term debt consists of the following:

                                              June 30,          December 31,
                                                2002                2001
                                           ---------------- --------------------
   10% Senior Subordinated Notes due 2008     $100,000,000    $   100,000,000
   Secured Credit Facility                      63,573,900         64,643,900
                                           ---------------- --------------------
                                              $163,573,900    $   164,643,900
                                           ================ ====================

At June 30,  2002,  $63,573,900  million  of the  Secured  Credit  Facility  was
outstanding, with no amount being unused and available.

7.     Recent Accounting Pronouncements

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations".  SFAS No. 143 requires alternative  accounting treatment of assets
which are in the process of  retirement.  The Company was required to adopt SFAS
No. 143 effective January 1, 2002. As expected,  there was no significant effect
on results of operations or financial position.

In August 2001, the Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets".  This Statement  addresses financial  accounting
and  reporting  for the  impairment  or  disposal  of  long-lived  assets.  This
Statement  supersedes FASB Statement No. 121,  "Accounting for the Impairment of
Long-Lived  Assets  and  for  Long-Lived  Assets  to be  Disposed  Of ," and the
accounting  and  reporting  provisions  of APB  Opinion No. 30,  "Reporting  the
Results of  Operations  and  Reporting the Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual,  and Infrequently  Occurring Events and
Transactions,"  for the  disposal  of a segment  of a  business  (as  previously
defined  in that  opinion).  The  Company  was  required  to adopt  SFAS No. 144
effective January 1, 2002. The Company currently has no indicators of impairment
of any of its  long-lived  assets.  As such,  adoption of this  Statement had no
impact on the Company's financial statements.

8.    Reportable Segments

As discussed in note 2, the Company operates in two reportable segments: the CCP
division and the  manufacturing  products  division.  The CCP division  consists
primarily  of three  operating  regions  that  manage and  market  CCPs in North
America.  The  manufacturing  products  division consists of six legal entities:
Best, Osborne,  Terrazzo,  Magna Wall,  Palestine,  and Don's. The Company's two
reportable  segments are managed separately based on fundamental  differences in
their operations.

The Company  evaluates  financial  performance based on earnings from operations
before interest expense, income taxes, depreciation,  and amortization (EBITDA).
The  Company  derives a majority  of its  revenues  from CCP sales and the chief
operating  decision  makers  rely on  EBITDA to assess  the  performance  of the
segments and make  decisions  about  resources to be allocated to the  segments.
Accordingly,  EBITDA is  included in the  information  reported  below.  Certain
expenses are  maintained at the  Company's  corporate  headquarters  and are not
allocated to the segments.  Such expenses  primarily  include interest  expense,
corporate   overhead  costs,  and  certain   non-recurring   gains  and  losses.
Inter-segment  sales are generally  accounted for at cost and are  eliminated in
consolidation.

Amounts  included in the "Other" column include  financial  information  for the
Company's corporate, R&D and other administrative business units.

In adopting  SFAS No. 142, the Company  reevaluated  the  allocation  of certain
intangible  assets to the  segments.  Information  for the three  months and six
months  ended  June 30,  2001 has  been  restated  to  conform  to this  revised
presentation.

Information about reportable segments, and reconciliation of such information to
the consolidated totals as of and for the three months and six months ended June
30, 2002 and June 30, 2001, is as follows:

<TABLE>
<CAPTION>

                                                          Manufacturing                          Consolidated
                                             CCP              Products              Other              Total
                                        ----------------- ------------------ ------------------ -------------------
<S>                                        <C>                 <C>               <C>                  <C>
Three months ended 6/30/02:
Revenue                                     $ 49,202,249        $12,873,341          $  71,835        $ 62,147,425
EBITDA                                        11,226,580          1,406,176        (2,633,436)           9,999,320
Depreciation and
   Amortization                                2,678,150            180,746             72,295           2,931,191
Goodwill                                      44,832,605         29,015,548                  -          73,848,153
Total Assets                                 207,515,037         48,325,588            869,700         256,710,325
Expenditures for PP&E                          2,422,364             60,075                  -           2,482,439

Three months ended 6/30/01:
Revenue                                     $ 46,697,505        $13,360,252           $ 59,302        $ 60,117,059
EBITDA                                        10,371,545          1,576,359        (2,316,698)           9,631,206
Depreciation and
   Amortization                                3,116,242            658,924             98,316           3,873,482
Goodwill                                      46,028,319         29,865,658                  -          75,893,977
Total Assets                                 208,089,809         48,963,708          1,287,432         258,340,949
Expenditures for PP&E                          1,402,516          1,097,633             66,851           2,567,000

Six months ended 6/30/02:
Revenue                                     $ 82,217,384        $24,345,027          $ 140,990        $106,703,401
EBITDA                                        17,160,176          2,558,719        (5,235,946)          14,482,949
Depreciation and
   Amortization                                5,390,203            366,546            145,427           5,902,176
Goodwill                                      44,832,605         29,015,548                  -          73,848,153
Total Assets                                 207,515,037         48,325,588            869,700         256,710,325
Expenditures for PP&E                          5,183,996            186,323            170,551           5,540,870

Six months ended 6/30/01:
Revenue                                     $ 76,802,042        $24,877,799          $ 122,605        $101,802,446
EBITDA                                        15,253,285          2,405,590        (5,029,445)          12,629,430
Depreciation and
   Amortization                                6,584,907          1,272,849            160,513           8,018,269
Goodwill                                      46,028,319         29,865,658                  -          75,893,977
Total Assets                                 208,089,809         48,963,708          1,287,432         258,340,949
Expenditures for PP&E                          3,459,800          1,421,844            186,917           5,068,561

</TABLE>



<PAGE>



9.       Subsequent Events

On July 16, 2002, ISG, the parent company of ISG Resources,  signed a definitive
agreement  with  Headwaters,  Inc. to be acquired by  Headwaters in exchange for
consideration  which is  currently  estimated to be  approximately  $246,000,000
consisting  of cash of  approximately  $31,000,000,  the  issuance of  2,000,000
shares of  Headwaters  common stock with an assumed value of  $30,000,000,  cash
requirements of approximately $181,000,000 to retire ISG and ISG Resources debt,
and direct costs to be incurred by Headwaters to consummate  the  acquisition of
approximately  $4,000,000.  It is anticipated  that the  transaction  will close
during the year 2002. Further information regarding the transaction is available
in documents  filed with the Securities and Exchange  Commission on Form 8-K, on
July 18, 2002. After the merger,  Headwaters,  Inc. will allocate goodwill among
the reporting units based on fair market value at the close of the merger.

On July 2, 2002,  as part of an amendment  to an  employment  agreement,  and in
connection with the  aforementioned  merger agreement,  an agreement was reached
with an  employee  who had  earlier  been  granted a phantom  stock  right.  The
agreement is to waive the phantom  stock right  contingent  upon the  successful
completion of the merger.

10.      Condensed Consolidating Financial Information

The Company's debt facilities are guaranteed by domestic  subsidiaries only. ISG
Canada  was  formed  in  2000  and  had  minimal  operations  in  comparison  to
consolidated results.  Because ISG Canada's operations increased during 2001, it
is no longer  considered a "minor"  subsidiary as defined under  Regulation  S-X
Rule 3-10. As such, the Company is required to disclose condensed  consolidating
financial information in its periodic reports.


<PAGE>

<TABLE>
<CAPTION>


The condensed consolidating balance sheet as of June 30, 2002 is as follows:

                                                              ISG         Manufactured          ISG
                           Consolidated   Eliminations     Resources        Products           Canada
                          --------------------------------------------------------------- -----------------
<S>                        <C>           <C>           <C>               <C>              <C>
Assets
Current assets:
Cash and cash equivalents $ 10,928,663       $      -    $ 9,797,987       $    857,535     $     273,141
Accounts receivable         36,990,232              -     29,915,336          6,776,796           298,100
     Inventories             8,660,241              -      3,483,347          4,970,537           206,357
     Other current assets    2,261,249              -      2,079,481            181,768                 -
                          --------------------------------------------------------------- -----------------
Total current assets        58,840,385              -     45,276,151         12,786,636           777,598

Property, plant and         40,074,278              -     32,722,889          6,523,404           827,985
equipment

Intangible assets, net      83,823,913              -     83,823,913                  -                 -
Goodwill                    73,848,153              -     44,832,605         29,015,548                 -
Investment in subsidiaries           -     (47,769,336)   47,769,336                  -                 -
Other assets                   123,596              -        123,596                  -                 -
                          ---------------------------------------------------------------------------------
Total assets               $256,710,325   $(47,769,336) $254,548,490       $ 48,325,588     $   1,605,583
                          =============================================================== =================

Liabilities and
shareholder's
     equity
Current liabilities:
Accounts payable         $  18,206,472     $        -   $  15,570,660      $  2,635,812      $          -
Accrued expenses             6,548,821              -       6,312,313           236,508                 -
Other current liabilities    2,773,279              -       1,923,490           827,425            22,364
                          --------------------------------------------------------------- -----------------
Total current liabilities   27,528,572              -      23,806,463         3,699,745            22,364

Long-term debt             163,573,900              -     163,573,900                 -                 -
Deferred tax liabilities    35,204,335              -      35,204,335                 -                 -
Payable to Parent            4,796,444              -       4,796,444                 -                 -
Intercompany account                 -         28,959       1,675,282        (2,881,549)        1,177,308
payable
Other liabilities              340,652              -         159,701           180,951                 -

Shareholder's equity:
Common stock                34,745,050        (28,496)     34,745,050            28,496                 -
Cumulative translation
adjustment                     (65,943)       (48,334)              -                 -           (17,609)
Additional paid in capital           -    (41,200,074)              -        40,552,264           647,810
Retained (deficit)          (9,412,685)    (6,521,391)     (9,412,685)        6,745,681          (224,290)
 earnings
                          --------------------------------------------------------------- -----------------
Total shareholder's equity  25,266,422    (47,798,295)     25,332,365        47,326,441           405,911
                          --------------------------------------------------------------- -----------------
Total liabilities and
  shareholder's equity     $256,710,325  $(47,769,336)  $ 254,548,490     $  48,325,588      $  1,605,583
                          =============================================================== =================

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


The condensed consolidating balance sheet as of December 31, 2001 is as follows:

                                                              ISG         Manufactured          ISG
                           Consolidated   Eliminations     Resources        Products           Canada
                          --------------------------------------------------------------- -----------------
<S>                        <C>           <C>             <C>             <C>                 <C>
Assets
Current assets:
Cash and cash equivalents $ 17,724,156   $          -    $ 17,002,493    $      477,075        $  244,588
Accounts receivable         26,253,456              -     20,182,923          5,875,011           195,522
Inventories                  8,528,976              -      3,923,243          4,544,632            61,101
Other current assets         2,234,869              -      2,095,752            139,117                -
                          --------------------------------------------------------------- -----------------
Total current assets        54,741,457              -     43,204,411         11,035,835           501,211

Property, plant and         38,118,552              -     30,533,497          6,745,493           839,562
equipment

Intangible assets, net      87,017,021              -     87,017,021                  -                 -
Goodwill, net               73,848,153              -     44,832,605         29,015,548                 -
Investment in subsidiaries           -   $(45,476,666)    45,476,666                  -                 -
Other assets                    93,706              -         93,706                  -                 -
                          ---------------------------------------------------------------------------------
Total assets               $253,818,889  $(45,476,666)  $251,157,906      $ 46,796,876        $1,340,773
                          =============================================================== =================

Liabilities and
shareholder's
     equity
Current liabilities:
Accounts payable           $ 14,287,253  $          -     $ 12,411,354     $  1,875,899   $            -
Accrued expenses             7,080,902              -       6,875,103           205,799                -
Other current liabilities    1,962,722              -       1,427,299           505,484            29,939
                          --------------------------------------------------------------- -----------------
Total current liabilities   23,330,877              -      20,713,756         2,587,182            29,939

Long-term debt             164,643,900              -     164,643,900                 -                 -
Deferred tax liabilities    35,726,641              -      35,726,641                 -                 -
Payable to Parent            4,796,444              -       4,796,444                 -                 -
Intercompany account                 -         23,201          27,888        (1,120,636)        1,069,547
payable
Other liabilities              766,004              -         638,618           127,386                 -

Shareholder's equity:
Common stock                34,745,050        (28,496)     34,745,050            28,496                 -
Cumulative translation
adjustment                     (55,636)         (38,829)            -                 -           (16,807)
Additional paid in capital           -      (40,960,169)            -        40,533,259           426,910
Retained (deficit)         (10,134,391)      (4,472,373)  (10,134,391)        4,641,189          (168,816)
 earnings
                          --------------------------------------------------------------- -----------------
Total shareholder's equity  24,555,023      (45,499,867)   24,610,659        45,202,944           241,287
                          --------------------------------------------------------------- -----------------
Total liabilities and
  shareholder's equity     $253,818,889   $ (45,476,666)  $251,157,906     $ 46,796,876       $ 1,340,773
                          =============================================================== =================
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

The condensed  consolidating  statement of  operations  for the six months ended
June 30, 2002 is as follows:

                                                                          ISG       Manufactured        ISG
                                    Consolidated     Eliminations      Resources      Products        Canada
                                    -------------- ----------------- -------------- ------------------------------
<S>                                 <C>            <C>               <C>             <C>              <C>
Revenues                            $106,703,401   $           -     $ 81,915,920    $24,351,199      $436,282
Costs and expenses:
Cost of products and services,
  excluding depreciation              79,174,985               -       59,212,166     19,557,672       405,147
Depreciation and amortization          5,902,176               -        5,485,323        366,546        50,307
Selling, general and administrative
  expenses                            12,491,649               -       10,065,531      2,402,874        23,244
New product development                1,120,030               -        1,120,030              -             -
                                    -------------- ----------------- -------------- ------------------------------
                                      98,688,840               -       75,883,050     22,327,092       478,698
                                    -------------- ----------------- -------------- ------------------------------
Operating income (loss)                8,014,561               -        6,032,870      2,024,107       (42,416)
Equity interest in subsidiary income           -      (2,049,018)       2,049,018              -             -
Interest income (expense)             (7,201,857)              -       (7,210,999)         9,142
Other income (expense), net              483,201               -          425,016         71,243       (13,058)
                                    -------------- ----------------- -------------- ------------------------------
Income (loss) before income tax        1,295,905      (2,049,018)       1,295,904      2,104,492       (55,474)
Income tax  expense                     (574,199)              -         (574,199)             -             -
                                    -------------- ----------------- -------------- ------------------------------
Net income (loss)                    $   721,706    $ (2,049,018)     $   721,706    $ 2,104,492    $  (55,474)
                                    ============== ================= ============== ==============================
</TABLE>

<TABLE>
<CAPTION>

The condensed  consolidating  statement of  operations  for the six months ended
June 30, 2001 is as follows:

                                                                          ISG       Manufactured        ISG
                                    Consolidated     Eliminations      Resources      Products        Canada
                                    -------------- ----------------- -------------- ------------------------------
<S>                                  <C>              <C>           <C>             <C>                <C>
Revenues                             $101,802,446        $ (88,808)    $76,190,317    $24,945,733        $755,204
Costs and expenses:
Cost of products and services,
excluding depreciation                 76,378,338                 -     55,492,567     20,199,306         686,465
Depreciation and amortization           8,018,269                 -      6,745,420      1,228,014          44,835
Selling, general, and
administrative expenses                11,881,941                 -      9,765,671      2,093,194          23,076
New product development                 1,164,818                 -      1,164,818              -               -
                                    -------------- ----------------- -------------- ------------------------------
                                       97,443,366                 -     73,168,476     23,520,514         754,376
                                    -------------- ----------------- -------------- ------------------------------
Operating income                        4,359,080          (88,808)      3,021,841      1,425,219             828
Equity interest in subsidiary income            -       (1,418,958)      1,418,958              -               -
Interest expense                      (8,132,101)                -      (8,122,314)        (9,787)              -
Other income (expense), net                 9,891           88,808         (81,615)         2,698               -
                                    -------------- ----------------- -------------- ------------------------------
Income (loss) before income tax       (3,763,130)       (1,418,958)     (3,763,130)     1,418,130             828
Income tax benefit                        755,786                 -        755,786              -               -
                                    -------------- ----------------- -------------- ------------------------------
Net income (loss)                    $(3,007,344)     $ (1,418,958)   $ (3,007,344)    $1,418,130          $  828
                                    ============== ================= ============== ==============================
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


The  condensed  consolidating  statement  of cash flow  information  for the six
months ended June 30, 2002 is as follows:

                                                                             ISG       Manufactured        ISG
                                         Consolidated   Eliminations     Resources      Products        Canada
                                         -------------  -------------- -------------- --------------  ------------
<S>                                       <C>              <C>          <C>            <C>           <C>
Net cash used in operating activities     $ (298,765)        $326,119     $(231,231)     $(133,079)    $(260,574)

Net cash provided by (used in) investing
activities                                (4,974,995)       (316,615)    (5,461,848)        513,537       289,931

Net cash used in financing activities     (1,511,426)               -    (1,511,426)              -             -

Effect of exchange rate changes on cash
  and cash equivalents                       (10,307)         (9,504)              -              -         (803)
                                         -------------------------------------------------------------------------

Net increase (decrease) in cash and cash
  equivalents                             (6,795,493)               -    (7,204,505)        380,458        28,554

Cash and cash equivalents at beginning
of period                                  17,724,156               -     17,002,493        477,075       244,588
                                         -------------------------------------------------------------------------
Cash and cash equivalents at end of
period                                    $10,928,663           $   -    $ 9,797,988       $857,533     $ 273,142
                                         =========================================================================
</TABLE>

<TABLE>
<CAPTION>

The  condensed  consolidating  statement  of cash flow  information  for the six
months ended June 30, 2001 is as follows:
                                                                            ISG       Manufactured        ISG
                                         Consolidated   Eliminations     Resources      Products         Canada
                                         -------------  -------------- -------------- --------------  -------------
<S>                                        <C>              <C>           <C>           <C>             <C>
Net cash provided by (used in) operating   $5,689,659       $ 127,188     $6,547,079    $  (819,604)     $(165,004)
activities

Net cash provided by (used in) investing
activities                                (4,987,221)       (156,267)     (5,698,484)       490,326        377,204

Net cash used in financing activities       (172,177)               -      (172,177)              -              -

Effect of exchange rate changes on cash
  and cash equivalents                         25,361          29,079              -              -        (3,718)
                                         --------------------------------------------------------------------------

Net increase (decrease) in cash and cash
  equivalents                                 555,622               -        676,418       (329,278)       208,482

Cash and cash equivalents at beginning
of period                                   6,986,725               -      5,954,992       1,054,079       (22,346)
                                         --------------------------------------------------------------------------
Cash and cash equivalents at end of        $7,542,347           $   -     $6,631,410       $724,801       $186,136
period
                                         ==========================================================================
</TABLE>


<PAGE>


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

The  following  discussion  and analysis of financial  condition  and results of
operations   should  be  read  in  conjunction  with  the  Unaudited   Condensed
Consolidated Financial Statements and Notes thereto included elsewhere herein.

General

ISG  Resources,  Inc., a Utah  corporation  (the  "Company"),  is a wholly owned
subsidiary  of  Industrial  Services  Group,  Inc.  ("ISG").  ISG was  formed in
September  1997 and,  through  merger and  acquistion,  acquired  the  following
entities:   JTM   Industries,   Inc.   ("JTM");   Pozzolanic   Resources,   Inc.
("Pozzolanic"); Power Plant Aggregates of Iowa, Inc. ("PPA"); Michigan Ash Sales
Company, d.b.a. U. S. Ash Company,  together with two affiliated companies, U.S.
Stabilization,  Inc. and Flo Fil Company, Inc., (collectively,  "U.S. Ash"); Fly
Ash Products,  Inc.  ("Fly Ash Products);  Best Masonry & Tool Supply  ("Best");
Mineral  Specialties,  Inc.  ("Specialties");  Irvine Fly Ash, Inc.  ("Irvine");
Lewis  W.  Osborne,   Inc.   ("Osborne");   United  Terrazzo  Supply  Co.,  Inc.
("Terrazzo");  Magna Wall,  Inc.  ("Magna  Wall");  Don's Building Supply L.L.P.
("Don's);  Palestine  Concrete Tile Company,  Inc. and certain  associated  real
property  (collectively,  "Palestine");  and certain fixed and intangible assets
from Hanson Aggregates West, Inc. ("Hanson").

In 2000, ISG Canada Limited,  Inc. ("ISG Canada") was formed and became a wholly
owned foreign  subsidiary of the Company,  with fly ash operations  beginning in
the second half of 2000.

The Acquisitions were accounted for under the purchase method of accounting and,
accordingly,  the results of operations of the  respective  companies  have been
included  in  the  consolidated   financial   statements  since  the  respective
acquisition  dates.   Accordingly,   the  financial  condition  and  results  of
operations of the Company after the Acquisitions are not directly  comparable to
the historical financial condition or results of operations.

The Company operates two principal  business  segments:  coal combustion product
(CCP) management and building materials manufacturing and distribution.  The CCP
division  purchases,  removes  and sells fly ash and other  by-products  of coal
combustion  to producers and  consumers of building  materials and  construction
related products throughout the United States and Canada. The building materials
division   manufactures  and  distributes  masonry  construction   materials  to
residential and commercial contractors primarily in Texas,  California,  Georgia
and Florida.

The  Company's  revenues  are  subject  to a pattern  of  seasonal  fluctuation,
concurrent with the construction  industry.  Because the Company's  products are
used as raw materials in other products,  the amount of revenue generated during
the year generally depends upon a number of factors, including the level of road
and other construction using concrete, weather conditions affecting the level of
construction,   general  economic  conditions,  and  other  factors  beyond  the
Company's control.

<page>
Results of Operations

Three Months Ended June 30, 2002 compared to Three Months Ended June 30, 2001

Revenues.   Revenues  were  $62.1  million  in  the  second   quarter  of  2002,
representing  an  increase of $2.0  million or 3.4%,  as compared to revenues of
$60.1 million in the second quarter of 2001. Product revenues increased to $54.7
million in the second  quarter of 2002 from $51.4 million in the second  quarter
of 2001,  representing  an increase of $3.3  million or 6.4%.  Service  revenues
decreased to $7.4 million in the second quarter of 2002 from $8.7 million in the
second quarter of 2001,  representing  a decrease of $1.3 million or 14.6%.  The
increase in product revenues results from 1) increased revenue in the California
market due to new terminals opening; and 2) other overall revenue increases from
new  customers  in certain  markets.  The  decrease  in service  revenues is due
primarily to a decrease in  construction  services  during the second quarter of
2002 as compared to the second quarter of 2001.

Cost of Product  Revenues,  Excluding  Depreciation.  Cost of product  revenues,
excluding  depreciation,  was  $39.8  million  in the  second  quarter  of 2002,
representing an increase of $1.4 million or 3.7%, as compared to cost of product
revenues,  excluding  depreciation,  of $38.4  million in the second  quarter of
2001. The increase in the cost of product revenues is as a result of an increase
in volume noted  above.  As a percentage  of product  revenues,  cost of product
revenues,  excluding  depreciation,  decreased to 72.7% in the second quarter of
2002 from 74.6% in the second quarter of 2001.  This increase in product margins
is primarily due to higher  margins  related to higher  quality ash  production,
with an increased focus on enhancing margins, together with manufactured product
division  margin  increases  as a result  of better  pricing  and  product  cost
control.

Cost of Service  Revenues,  Excluding  Depreciation.  Cost of service  revenues,
excluding  depreciation  remained  relatively  consistent at $5.7 million in the
second  quarter of 2002,  as  compared  to cost of service  revenues,  excluding
depreciation,  of $5.6  million in the second  quarter of 2001.  Costs  remained
almost  identical as a result of costs in service revenues being mostly fixed in
nature as opposed to variable costs. As a percentage of service  revenues,  cost
of service revenues,  excluding  depreciation,  increased to 77.2% in the second
quarter of 2002 from 64.6% in the second quarter of 2001. This decline in margin
is primarily the result of continuing  fixed costs as applied against  declining
revenues.

Depreciation and Amortization. Depreciation and amortization was $2.9 million in
the second quarter of 2002, representing a decrease of $1.0 million or 24.3%, as
compared to depreciation  and amortization of $3.9 million in the second quarter
of 2001. This decrease  resulted  primarily from the adoption of SFAS No. 142 as
described below. See also the notes to the financial statement.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  ("SG&A")  were $6.4  million in the second  quarter of
2002,  representing  an  increase of $0.4  million or 6.3%,  as compared to SG&A
expenses  of $6.0  million in the second  quarter of 2001.  SG&A  expenses  as a
percent to total revenues  remained  relatively  consistent at 10.0% in 2002 and
10.3% in 2001.

New Product  Development.  New product  development  costs consist of scientific
research and development and market development  expenditures.  Expenditures for
scientific  research  and  development  in the second  quarter of 2002 were $0.4
million compared to $0.5 million in the second quarter of 2001. Expenditures for
new market  development in the second  quarter of 2002 and 2001 remained  fairly
constant at $0.06 million.  The  continuation of new product  development  costs
demonstrates  the Company's  commitment to developing and marketing  value added
products that utilize CCPs and related materials.

<page>
Interest  Expense.  Interest  expense  decreased  to $3.6  million in the second
quarter of 2002 from $4.0 million in the second quarter of 2001,  primarily as a
result of a decrease in interest rates on the Company's  lines of credit and the
decrease in outstanding indebtedness on the line of credit. The average interest
rate on the Company's lines of credit during the second quarter of 2002 was 5.4%
as compared to 8.7% during the same quarter of 2001.

Income Taxes. Income tax expense was $1.4 million in the second quarter of 2002,
representing  an increase  of $0.4  million as compared to income tax expense of
$1.0 million in the second quarter of 2001.  This increase in income tax expense
reflects an increase in the income  before taxes in the second  quarter of 2002,
primarily resulting from decreased interest expense,  increased revenues,  and a
decrease in the cost of product revenues.

Net Income.  As a result of the factors discussed above, net income increased to
$2.1 million in the second quarter of 2002 from a $0.7 million net income in the
second quarter of 2001.

Six Months Ended June 30, 2002 compared to Six Months Ended June  30, 2001

Revenues.  Revenues  were  $106.7  million  in the  first  six  months  of 2002,
representing  an  increase of $4.9  million or 4.8%,  as compared to revenues of
$101.8 million in the first six months of 2001.  Product  revenues  increased to
$92.6  million in the first six  months of 2002 from $85.2  million in the first
six months of 2001,  representing  an increase of $7.4 million or 8.7%.  Service
revenues  decreased to $14.1  million in the first six months of 2002 from $16.6
million in the first six months of 2001, representing a decrease of $2.5 million
or 15.1%.  The increase in product revenue results from 1) increased  revenue in
the California market due to new terminals opening; and 2) other overall revenue
increases  from new  customers  in  certain  markets.  The  decrease  in service
revenues is due  primarily  to a decrease in  construction  services  during the
first six months of 2002 as compared to the same period of 2001.

Cost of Product  Revenues,  Excluding  Depreciation.  Cost of product  revenues,
excluding  depreciation,  was $68.5  million  in the  first six  months of 2002,
representing an increase of $3.1 million or 4.8%, as compared to cost of product
revenues,  excluding  depreciation,  of $65.4 million in the first six months of
2001. The increase in the cost of product revenues is as a result of an increase
in volume noted  above.  As a percentage  of product  revenues,  cost of product
revenues, excluding depreciation,  decreased to 74.0% in the first six months of
2002 from  76.7% in the  first six  months of 2001.  This  increase  in  product
margins  is  primarily  due to higher  margins  related  to higher  quality  ash
production,  with  an  increased  focus  on  enhancing  margins,  together  with
manufactured product division margin increases as a result of better pricing and
product cost control.

Cost of Service  Revenues,  Excluding  Depreciation.  Cost of service  revenues,
excluding  depreciation  was $10.7  million  in the  first  six  months of 2002,
representing  a decrease of $0.3 million or 3.1%, as compared to cost of service
revenues,  excluding  depreciation,  of $11.0 million in the first six months of
2001.  This  decrease is due  primarily  to a decrease  in revenue as  discussed
above. As a percentage of service revenues, cost of service revenues,  excluding
depreciation,  increased  to 75.6% in the first six months of 2002 from 66.2% in
the first six months of 2001.  This decline in margin is primarily the result of
continuing fixed costs as applied against declining revenues.

Depreciation and Amortization. Depreciation and amortization was $5.9 million in
the first six months of 2002,  representing a decrease of $2.1 million or 26.4%,
as compared to  depreciation  and  amortization of $8.0 million in the first six
months of 2001. This decrease  resulted  primarily from the adoption of SFAS No.
142 as described below. See also the notes to the financial statement.

<page>
Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  ("SG&A") were $12.5 million in the first six months of
2002,  representing  an  increase of $0.6  million or 5.1%,  as compared to SG&A
expenses of $11.9  million in the first six months of 2001.  SG&A  expenses as a
percent to total revenues were 11.7% in 2001 and 2002.

New Product  Development.  New product  development  costs consist of scientific
research and development and market development  expenditures.  Expenditures for
scientific  research and  development  in the first six months of 2002 were $1.1
million  compared to $1.0 million in the first six months of 2001.  Expenditures
for new  market  development  in the  first  six  months  of 2002 and 2001  also
remained  fairly  constant  at $0.1  million.  The  continuation  of new product
development  costs  demonstrates  the Company's  commitment  to  developing  and
marketing value added products that utilize CCPs and related materials.

Interest  Expense.  Interest expense  decreased to $7.3 million in the first six
months of 2002 from $8.4 million in the first six months of 2001, primarily as a
result of a decrease in interest rates on the Company's  lines of credit and the
decrease in outstanding indebtedness on the line of credit. The average interest
rate on the  Company's  lines of credit  during the first six months of 2002 was
5.3% as compared to 9.5% during the first six months of 2001.

Income  Taxes.  Income tax expense  was $0.6  million in the first six months of
2002,  representing a decrease of $1.4 million as compared to income tax benefit
of $0.8  million in the first six months of 2001.  This  increase  in income tax
expense  reflects a increase in the income  before taxes in the first six months
of  2002,  primarily  resulting  from  decreased  interest  expense,   increased
revenues, and a decrease in the cost of product revenues.

Net Income.  As a result of the factors discussed above, net income increased to
$.7 million in the first six months of 2002 from a $3.0  million net loss in the
first six months of 2001.


Liquidity and Capital Resources

The Company  financed  the 1998 and 1999  Acquisitions  through the  issuance of
$100.0 million,  10% Senior Subordinated Notes due in 2008 and borrowings on its
Secured Credit  Facility (as  subsequently  amended and  restated).  The Company
financed the  acquisition of Palestine by obtaining a $15.0 million  increase in
the Secured Credit Facility on May 26, 2000  (discussed  below) and receiving an
equity  contribution of  approximately  $9.7 million from ISG on April 19, 2000.
Operating and capital  expenditures  have been financed  primarily  through cash
flow from operations and borrowings under the Secured Credit Facility.

The Secured Credit Facility has been amended a number of times. On May 26, 2000,
the Secured  Credit  Facility was amended and  restated to, among other  things,
increase the  borrowings  available  to the Company from $50.0  million to $65.0
million.

On August 8, 2000, the amended and restated  secured credit  agreement dated May
26, 2000 was amended in order to modify certain debt covenants  contained in the
credit agreement.  Primarily,  a minimum  consolidated  Earnings Before Interest
Expense,  Income Tax Expense,  Depreciation  Expense,  and Amortization  Expense
(EBITDA)  debt  covenant was added.  The minimum  consolidated  EBITDA  covenant
requires the Company to maintain a minimum  EBITDA  amount as of the last day of
every fiscal quarter through June 30, 2003 at levels set forth in the agreement.

<page>
On March 30, 2001, the amended and restated  secured credit  agreement dated May
26,  2000 and  subsequently  amended on August 8, 2000,  was amended in order to
modify  certain  debt  covenants  contained  in the  agreement.  The amended and
restated secured credit facility  continues to require the Company to not exceed
a maximum leverage ratio, to not drop below a minimum  interest  coverage ratio,
to not drop  below a minimum  consolidated  EBITDA  level,  and to  comply  with
certain other financial and non-financial covenants.

On May 8,  2002,  the  Company  reached  agreement  with its  lenders on a fifth
amendment  to the  secured  credit  facility.  Among other  considerations,  the
amendment authorizes up to $10 million for any asset impairment which may result
from the adoption of new accounting pronouncements.

As further  detailed in  Subsequent  Events  below,  a definitive  agreement was
reached on July 16, 2002 between ISG, the parent of ISG Resources, to merge with
Headwaters,  Inc.  The debt of ISG and ISG  Resources  will be retired  upon the
successful closing of the merger.

At June 30, 2002, the Company had $10.9 million in cash and cash equivalents and
$63.6 million of the Secured  Credit  Facility was  outstanding,  with no amount
being unused and available. The Company had working capital of approximately $31
million, which is the same amount of working capital at December 31, 2001.

The Company  intends to make capital  expenditures  over the next several  years
principally to construct storage, loading and processing facilities for CCPs and
to replace  existing  capital  equipment.  During the six months  ended June 30,
2002,  capital  expenditures  amounted to  approximately  $5.5 million,  as $2.5
million  was  expended  in the three  months  ended June 30,  2002.  The Company
typically expends cash in the first four or five months of the year as terminals
and other  facilities are built and replaced in preparation for the construction
season beginning in May. The Company expects that capital  expenditures  made in
the ordinary course of business will be funded by cash flow from operations.

The  Company  anticipates  that its  principal  use of cash will be for  working
capital requirements, debt service requirements and capital expenditures.  Based
upon current and anticipated levels of operations, the Company believes that its
cash flow from operations will be adequate to meet its anticipated  requirements
for working capital,  capital  expenditures  and interest  payments for the next
several  years.  There  can  be no  assurance,  however,  that  cash  flow  from
operations  will be sufficient to service the Company's debt and the Company may
be  required to  refinance  all or a portion of its  existing  debt or to obtain
additional  financing.  These increased borrowings may result in higher interest
payments.  There can be no assurance that any such refinancing would be possible
or that any  additional  financing  could be obtained.  The  inability to obtain
additional financing could have a material adverse effect on the Company.

Critical Accounting Policies

The Company has not had significant  changes to its accounting policies with the
exception  of the  adoption  of SFAS No.  142,  "Goodwill  and Other  Intangible
Assets,"  and SFAS No.  144,  "Accounting  for the  Impairment  or  Disposal  of
Long-Lived Assets."

<page>
Under SFAS No. 142, the Company no longer amortizes its goodwill.  However,  the
Company is required to assess  goodwill for  impairment  at least  annually at a
level within the Company referred to as a reporting unit, as defined by SFAS No.
142.  Impairment of goodwill is deemed to exist when the carrying  amount of the
goodwill for the  reporting  unit  exceeds its implied  fair value.  In order to
determine if such impairment  exists, the Company is required to complete Step 1
(determining  and  comparing  the  fair  value  of the  reporting  units  to the
reporting  units'  carrying  value)  impairment  test.  Note that in the year of
adoption,  the  Company  is  required  to  complete  Step 1 within six months of
adopting  SFAS No. 142. If Step 1 of the goodwill  impairment  test is failed in
any of the Company's reporting units, thereby indicating a potential impairment,
the Company is required to  complete  Step 2 of the  impairment  test as soon as
possible.  In the year of  adoption,  this is required to be  completed no later
than the end of the year of adoption (December 31, 2002 for the Company).  Under
Step 2, the Company is required to calculate  the implied fair value of goodwill
and compare it to the carrying value of goodwill. The Company has completed Step
1 of the transitional  accounting  provisions of SFAS No. 142 as required above,
and  determined  that  a  possible  impairment  existed.  However,  due  to  the
transaction  between  Headwaters,  Inc. and Industrial Services Group, Inc. (the
parent  company of ISG  Resources),  the  completion of Step 2 of the process is
still pending. After the merger,  Headwaters,  Inc. will allocate goodwill among
the reporting units based on fair market value at the close of the merger.


Under SFAS No. 144,  the Company  evaluates  its  long-lived  assets  other than
goodwill  (amortizable  intangible assets,  property,  plant and equipment,  and
other such  assets) for  impairment.  In order to perform this  evaluation,  the
Company  groups its long-lived  assets with other assets and  liabilities at the
lowest level for which  identifiable  cash flows are largely  independent of the
cash flows of other assets and  liabilities.  Consistent  with SFAS No. 121, the
Company  continues to consider  whether  indicators  of impairment of long-lived
assets are present.  If indicators exist, the Company determines whether the sum
of the estimated  undiscounted  future cash flows  attributable to the assets in
question are less than their carrying amount.  If so, the Company  recognizes an
impairment  loss based on the excess of the  carrying  amount of the assets over
their  respective  fair  values.  The Company  currently  has no  indicators  of
impairment of any of its long-lived assets.

Recent Accounting Pronouncements

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations".  SFAS No. 143 requires alternative  accounting treatment of assets
which are in the process of  retirement.  The Company was required to adopt SFAS
No. 143 effective January 1, 2002. As expected,  there was no significant effect
on results of operations or financial position.

In August 2001, the Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets".  This Statement  addresses financial  accounting
and  reporting  for the  impairment  or  disposal  of  long-lived  assets.  This
Statement  supersedes FASB Statement No. 121,  "Accounting for the Impairment of
Long-Lived  Assets  and  for  Long-Lived  Assets  to be  Disposed  Of ," and the
accounting  and  reporting  provisions  of APB  Opinion No. 30,  "Reporting  the
Results of  Operations  and  Reporting the Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual,  and Infrequently  Occurring Events and
Transactions,"  for the  disposal  of a segment  of a  business  (as  previously
defined  in that  opinion).  The  Company  was  required  to adopt  SFAS No. 144
effective January 1, 2002. The Company currently has no indicators of impairment
of any of its  long-lived  assets.  As such,  adoption of this  statement had no
impact on the Company financial statements.

<page>

Subsequent Events

On July 16, 2002, ISG, the parent company of ISG Resources,  signed a definitive
agreement  with  Headwaters,  Inc. to be acquired by  Headwaters in exchange for
consideration  which is  currently  estimated to be  approximately  $246,000,000
consisting  of cash of  approximately  $31,000,000,  the  issuance of  2,000,000
shares of  Headwaters  common stock with an assumed value of  $30,000,000,  cash
requirements of approximately $181,000,000 to retire ISG and ISG Resources debt,
and direct costs to be incurred by Headwaters to consummate  the  acquisition of
approximately  $4,000,000.  It is anticipated  that the  transaction  will close
during the year 2002. Further information regarding the transaction is available
in documents  filed with the Securities and Exchange  Commission on Form 8-K, on
July 18, 2002.



<PAGE>



                              ISG Resources, Inc.

                                  -------------

                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

                  None

Item 2.  Changes in Securities and Use of Proceeds

                  None

Item 3.  Defaults upon Senior Securities

                  None

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

                  None

Item 5.  Other Information

                  None

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

            Item                                                         Exhibit
             No.                       Item Title                            No.

           (2)        Plan of acquisition, reorganization,
                      arrangement, liquidation or succession:
                      Incorporated by reference to Form 8-K
                      filed July 18, 2002

            (3)       Articles of Incorporation and By-Laws:
                      Not Applicable

            (4)       Instruments defining the rights of
                      security holders, including indentures:
                      Not Applicable

           (10)      Material Contracts:  Not Applicable

           (11)      Statement regarding computation of per
                     share  earnings  is  not  required   because  the  relevant
                     computations  can be clearly  determined  from the material
                     contained in the Financial Statements included herein.

            (15)      Letter re unaudited interim financial
                      information:  Not Applicable

            (18)      Letter re change in accounting
                      principles:  Not Applicable

            (19)      Report furnished to security holders:
                      Not Applicable

            (22)      Published report regarding matters
                      submitted to vote of security holders:
                      Not Applicable

            (23)      Consents of expert and counsel:
                      Not Applicable



            (99)      Other Exhibits:  Incorporated by
                      reference to Form 8-K filed July 18, 2002

                      99.1 Certification of CEO

                      99.2 Certification of CFO


(b)      Reports on Form 8-K

                  A report  on Form 8-K was filed on July 18,  2002 to  announce
         the acquisition of Industrial  Services Group, Inc., the parent company
         of ISG Resources by  Headwaters,  Inc. The items  reported on that Form
         8-K included: Item 2 - Probable Acquisition by Headwaters Inc. and Item
         7 - Financial  Statements  and Exhibits.  The financial  statements and
         exhibits included:

          1.   Audited financial  statements of Industrial  Services Group, Inc.
               and Subsidiaries for the years ended December 31, 2001, 2000, and
               1999

          2.   Unaudited financial statements of Industrial Services Group, Inc.
               and subsidiaries for the quarter ended March 31, 2002

          3.   Unaudited pro forma  financial  information  for Headwaters  Inc.
               with combined financial statements for the quarter and six months
               ended March 31, 2002 and the year ended September 30, 2001.

          4.   Exhibit 10.75 - Agreement and plan of merger  between  Headwaters
               and Industrial Services Group, Inc. dated July 15, 2002

          5.   Exhibit 10.75.1 - Form of Registration  Rights Agreement  between
               Headwaters and  Stockholders of Industrial  Services Group, to be
               dated as of Closing.

          6.   Exhibit 99 - Press  release  announcing  signing of a  definitive
               agreement with Industrial Services Group, Inc.


<PAGE>


                                   SIGNATURES


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


Date:  August 9, 2002                  ISG RESOURCES, INC.



                                        /s/ J. I. Everest, II
                                      ----------------------------------------
                                      J. I. Everest, II
                                      Chief Financial Officer and Treasurer
                                      (As  both a duly  authorized  officer of
                                      the  Company  and as  principal
                                      financial officer of the Company)