<PAGE>   1
 
================================================================================
 
                       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, 1997
 
[ ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
COMMISSION FILE NO. 0-14836
 
                             METAL MANAGEMENT, INC.
             (Exact name of Registrant as specified in its charter)
 
<TABLE>
<C>                                            <C>
                  DELAWARE                                      94-2835068
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                     Identification Number)
</TABLE>
 
                        500 N. DEARBORN ST., SUITE 405,
                               CHICAGO, IL 60610
          (Address of principal executive offices including zip code)
 
Registrant's telephone number, including area code: (312) 645-0700
 
     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), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X No ___
 
     As of August 14, 1997, the Registrant had 14,800,078 shares of Common Stock
outstanding.
 
================================================================================
<PAGE>   2
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                         PAGE
                                                                         ----
<S>        <C>                                                           <C>
PART I: FINANCIAL INFORMATION
ITEM 1:    Financial Statements
           Consolidated Condensed Balance Sheets -- June 30, 1997
           (unaudited) and
           March 31, 1997..............................................    1
           Consolidated Condensed Statements of Operations -- three
           months ended June 30, 1997 and 1996 (unaudited).............    2
           Consolidated Condensed Statements of Cash Flows -- three
           months ended June 30, 1997 and 1996 (unaudited).............    3
           Notes to Consolidated Condensed Financial Statements
           (unaudited).................................................    4
ITEM 2:    Management's Discussion and Analysis of Financial Condition
           and Results
           of Operations...............................................   10
PART II: OTHER INFORMATION
ITEM 1:    Legal Proceedings...........................................   27
ITEM 2:    Changes in Securities.......................................   27
ITEM 6:    Exhibits and Reports on Form 8-K............................   28
           SIGNATURES..................................................   29
           Exhibit Index...............................................   30
</TABLE>
<PAGE>   3
 
PART I: FINANCIAL INFORMATION
 
ITEM 1 -- FINANCIAL STATEMENTS
 
                             METAL MANAGEMENT INC.
 
                     CONSOLIDATED CONDENSED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              JUNE 30, 1997   MARCH 31, 1997
                                                              -------------   --------------
                                                               (UNAUDITED)
                                                                      (IN THOUSANDS)
<S>                                                           <C>             <C>
                           ASSETS
Current assets:
  Cash and cash equivalents.................................    $  3,832         $ 5,718
  Accounts receivable, net..................................      54,334           9,560
  Notes receivable from related parties.....................           0             406
  Inventories...............................................      43,762           8,415
  Prepaid expenses and other assets.........................       4,905           1,609
                                                                --------         -------
       Total current assets.................................     106,833          25,708
Property and equipment, net.................................      53,054          20,208
Goodwill and other intangibles, net.........................      80,892          23,484
Other assets................................................       1,579             725
                                                                --------         -------
       Total assets.........................................    $242,358         $70,125
                                                                ========         =======
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Operating lines-of-credit.................................    $ 12,696         $ 7,887
  Accounts payable..........................................      47,295           5,246
  Other accrued liabilities.................................       8,604           2,746
  Current portion of notes payable to related parties.......      24,423          12,575
  Current portion of long-term debt.........................       9,670          10,809
                                                                --------         -------
       Total current liabilities............................     102,688          39,263
Long-term notes payable to related parties, less current
  portion...................................................      26,158           1,430
Long-term debt, less current portion........................      28,131           3,740
Deferred taxes..............................................       7,467           1,411
Other liabilities...........................................       2,021           1,133
                                                                --------         -------
       Total liabilities....................................     166,465          46,977
Stockholders' equity:
  Common stock..............................................         148             102
  Warrants..................................................      13,876           1,351
  Additional paid-in-capital................................      56,480          16,628
  Retained earnings.........................................       5,389           5,067
                                                                --------         -------
       Total stockholders' equity...........................      75,893          23,148
                                                                --------         -------
       Total liabilities and stockholders' equity...........    $242,358         $70,125
                                                                ========         =======
</TABLE>
 
    The accompanying notes are an integral part of the financial statements
 
                                        1
<PAGE>   4
 
                             METAL MANAGEMENT INC.
 
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                               FOR THE THREE MONTHS ENDED
                                                              -----------------------------
                                                              JUNE 30, 1997   JUNE 30, 1996
                                                              -------------   -------------
                                                                (UNAUDITED, IN THOUSANDS,
                                                                  EXCEPT SHARE AMOUNTS)
<S>                                                           <C>             <C>
Net sales...................................................      $54,435         $15,978
Cost of sales...............................................       48,461          13,978
                                                               ----------       ---------
Gross profit................................................        5,974           2,000
Operating expenses:
  General and administrative................................        3,099           1,278
  Depreciation and amortization.............................        1,251             522
                                                               ----------       ---------
       Total operating expenses.............................        4,350           1,800
                                                               ----------       ---------
Operating income from continuing operations.................        1,624             200
Interest expense............................................       (1,248)           (233)
Other income (expense)......................................           61              38
                                                               ----------       ---------
Income from continuing operations before income taxes and
  discontinued operations...................................          437               5
Provision for income taxes..................................          216               0
                                                               ----------       ---------
Income from continuing operations...........................          221               5
Discontinued operations:
  Gain on sale of assets on former product lines of GPAR,
     net of income taxes of $67 in 1997 and $0 in 1996......          101               0
  Income from operations of former product lines of GPAR,
     net of income taxes of $0 in 1996......................            0             146
                                                               ----------       ---------
Net income..................................................      $   322          $  151
                                                               ==========       =========
Primary earnings per share for:
  Continuing operations.....................................      $  0.02          $ 0.00
  Gain on sale of discontinued operations...................      $  0.00          $ 0.00
  Discontinued operations...................................      $  0.00          $ 0.02
  Net income................................................      $  0.02          $ 0.02
Weighted average primary shares outstanding.................   13,952,000       9,370,000
Fully diluted earnings per share for:
  Continuing operations.....................................      $  0.02          $ 0.00
  Gain on sale of discontinued operations...................      $  0.00          $ 0.00
  Discontinued operations...................................      $  0.00          $ 0.02
  Net income................................................      $  0.02          $ 0.02
Weighted average fully diluted shares outstanding...........   14,559,000       9,370,000
</TABLE>
 
    The accompanying notes are an integral part of the financial statements
 
                                        2
<PAGE>   5
 
                             METAL MANAGEMENT INC.
 
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                  FOR THE THREE MONTHS ENDED
                                                                ------------------------------
                                                                JUNE 30, 1997    JUNE 30, 1996
                                                                -------------    -------------
                                                                  (UNAUDITED, IN THOUSANDS)
<S>                                                             <C>              <C>
Cash flows from continuing operations:
Net income from continuing operations.......................      $    221          $     5
Adjustments to reconcile net income from continuing
  operations to cash flows from continuing operations:
     Depreciation and amortization..........................         1,251              522
     Other..................................................            89                0
  Changes in assets and liabilities, net of acquisitions:
     Accounts receivable, net...............................        (4,276)            (880)
     Inventories............................................         1,917               55
     Accounts payable.......................................           209           (1,525)
     Other..................................................        (3,127)           1,334
                                                                  --------          -------
Cash flows from continuing operations.......................        (3,716)            (489)
Cash flows used by investing activities:
  Marketable securities sold................................             0              962
  Purchases of property and equipment.......................          (952)            (712)
  Acquisitions, net of cash acquired........................        (6,288)            (792)
  Other.....................................................           302                0
                                                                  --------          -------
Net cash used by investing activities.......................        (6,938)            (542)
Cash flows provided (used) by financing activities:
  Net borrowings on lines-of-credit.........................         5,640              148
  Issuances of long-term debt...............................           158                0
  Repayments of long-term debt..............................       (10,844)          (1,093)
  Issuances of common stock.................................        13,557                0
  Other.....................................................           156                0
                                                                  --------          -------
Net cash provided (used) by financing activities............         8,667             (945)
                                                                  --------          -------
Cash flows from discontinued operations.....................           101              591
Net decrease in cash and cash equivalents...................        (1,886)          (1,385)
Cash and cash equivalents at beginning of period............         5,718            3,093
                                                                  --------          -------
Cash and cash equivalents at end of period..................      $  3,832          $ 1,708
                                                                  ========          =======
</TABLE>
 
    The accompanying notes are an integral part of the financial statements
 
                                        3
<PAGE>   6
 
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
NOTE 1 -- INTERIM FINANCIAL STATEMENTS
 
     The accompanying unaudited condensed consolidated financial statements
include the accounts of Metal Management, Inc. and its subsidiaries (herein
referred to as "MTLM" or the "Company") and have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
All significant intercompany accounts, transactions and profits have been
eliminated. Certain information related to the Company's organization,
significant accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These unaudited condensed
consolidated financial statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to fairly state the financial position and the results of operations for the
periods presented and the disclosures herein are adequate to make the
information presented not misleading. Operating results for interim periods are
not necessarily indicative of the results that can be expected for a full year.
These interim financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto included
in the Company's most recent Annual Report on Form 10-K.
 
     In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements in order to conform with the financial statement
presentation of the current period.
 
     The accompanying financial statements include the financial position and
results of operations of Reserve Iron & Metal, L.P. ("Reserve"), which the
Company acquired on May 1, 1997 and The Isaac Group, which the Company acquired
on June 23, 1997 (see Note 2 -- Acquisitions). These acquisitions have been
accounted for using the purchase method of accounting and, accordingly, the
results of these acquisitions are included in the consolidated financial
statements since the dates of acquisition.
 
     On April 9, 1996, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to change the name of the Company from
General Parametrics Corporation ("GPAR") to Metal Management, Inc.
 
     During the first quarter of fiscal 1997, the Company discontinued its
Spectra*Star and consumables business and its VideoShow product and related
product lines businesses. During the second quarter of fiscal 1997, the
Spectra*Star inventory and related production equipment was sold for
approximately $1.3 million in cash and other contingent consideration in the
form of royalties on future revenues from the sale of Spectra*Star printers and
related consumables. The VideoShow business was sold in the third quarter of
fiscal 1997 for consideration in the form of royalties on future revenues from
the sale of VideoShow products. The royalties received during the first quarter
of fiscal 1998 is reflected as an addition to gain on sale.
 
NOTE 2 -- ACQUISITIONS
 
  Acquisitions completed during the three months ended June 30, 1997
 
     On May 1, 1997, the Company acquired Reserve, headquartered in Cleveland,
Ohio. The acquisition of Reserve resulted in the issuance of $5.9 million in
cash, $1.5 million in promissory notes, warrants to purchase up to 1.4 million
shares of common stock and the assumption of debt. The Company entered into
ten-year employment agreements with certain former shareholders of Reserve. The
acquisition of Reserve resulted in a preliminary allocation of excess purchase
price over the fair value of net assets acquired of $7.2 million.
 
     On June 23, 1997, the Company acquired four companies under common
ownership comprising The Isaac Group ("Isaac"), headquartered in Maumee, Ohio.
The Isaac Group is comprised of Ferrex Trading Corporation, The Isaac
Corporation, Paulding Recycling, Inc. and Briquetting Corporation of America.
The acquisition of Isaac resulted in the issuance of 1,942,857 shares of MTLM
common stock, warrants to purchase 462,500 shares of MTLM common stock, at
exercise prices ranging from $10.80 to $11.70 per share, $20,582,300 of
short-term notes, and $15,964,601 of long-term notes. In addition, the Company
guaranteed
 
                                        4
<PAGE>   7
 
      NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
the payment of $8,544,200 of notes of Isaac payable to two former shareholders
of The Isaac Group. In connection with the acquisition, George A. Isaac III
joined the Company as an Executive Vice-President and Director and entered into
a 5 year employment agreement with the Company and a non-compete agreement which
extends for 3 years beyond the term of the employment agreement. As part of the
employment agreement, Mr. Isaac was granted warrants to purchase 76,923 shares
of MTLM common stock at an exercise price of $13.00 per share. In consideration
for entering into a non-compete agreement, the Company granted Mr. Isaac
warrants to purchase 287,500 shares of MTLM common stock at an exercise price of
$11.70 per share. The acquisition of Isaac resulted in a preliminary allocation
of excess purchase price over the fair value of net assets acquired of $48.2
million and a preliminary allocation of an intangible asset from a noncompete
agreement valued at $1.8 million.
 
     The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company, Reserve and Isaac as if these
acquisitions had occurred on April 1, 1997 and a summary of consolidated results
of operations of the Company, MacLeod Group ("MacLeod"), HouTex Metals Company,
Inc. ("HouTex"), Reserve and Isaac as if these acquisitions had occurred on
April 1, 1996. The MacLeod and HouTex acquisitions were completed by the Company
during the fourth quarter of fiscal 1997. The unaudited pro forma results have
been prepared for comparative purposes only and include certain adjustments,
such as additional depreciation expense as a result of a step-up in basis of the
fixed assets, additional amortization expense as a result of goodwill and
interest expense related to acquisition debt. The pro forma results do not
purport to be indicative of the results of operations which actually would have
resulted had the acquisitions been in effect on April 1, 1997 and 1996,
respectively (in thousands, except share data).
 
<TABLE>
<CAPTION>
                                                    UNAUDITED            UNAUDITED
                                                THREE MONTHS ENDED   THREE MONTHS ENDED
                                                  JUNE 30, 1997        JUNE 30, 1996
                                                ------------------   ------------------
<S>                                             <C>                  <C>
Net sales......................................      $108,100             $103,890
Net loss from continuing operations............      $ (1,130)            $   (234)
Net loss per share from continuing
  operations...................................      $  (0.08)            $  (0.02)
</TABLE>
 
  Pending acquisitions
 
     On May 16, 1997, the Company signed a definitive agreement to merge Cozzi
Iron & Metal, Inc. ("Cozzi"), headquartered in Chicago, Illinois with and into a
subsidiary of the Company. Cozzi will be the surviving entity. The closing of
the Cozzi merger is subject to shareholder approval and is also subject to
certain other conditions precedent. At the closing of this merger, the
shareholders of Cozzi will receive 11.5 million shares of common stock, 1.5
million warrants to purchase common stock, and $6.0 million in cash.
 
     On March 18, 1997, the Company signed a binding letter of intent to acquire
Proler Southwest, Inc., and Proler Steelworks LLC ("Proler"). Proler Southwest,
Inc. and Proler Steelworks LLC have operations in Houston, Texas and Jackson,
Mississippi, respectively. The transaction is expected to be effected by the
Company acquiring all of the equity interests in Proler Southwest, Inc., and
Proler Steelworks LLC in exchange for $15.0 million in cash subject to increase
based on Proler's earnings prior to March 18, 1997, a $2.0 million promissory
note subject to certain adjustments for income taxes, 1.75 million shares of
common stock and warrants to purchase 375,000 shares of common stock.
 
     On July 23, 1997, the Company signed a binding letter of intent to acquire
Superior Forge, Inc. ("Superior"), of Huntington Beach, California. Superior
uses and generates aluminum and aluminum scrap in its various operations. In the
transaction, the shareholders of Superior will receive 1,080,000 shares of
common stock and $1.8 million in cash.
 
     On July 30, 1997, the Company signed a binding letter of intent to acquire
Houston Compressed Steel Corp. ("Houston Compressed"), headquartered in Houston,
Texas. The shareholders of Houston Compressed
 
                                        5
<PAGE>   8
 
      NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
will receive 310,345 shares of common stock subject to an adjustment based on
the closing price of MTLM stock on the day the transaction closes.
 
     On August 4, 1997, the Company signed a binding letter of intent to
purchase Newell Phoenix, L.L.C.'s 50% membership interest in Salt River
Recycling, L.L.C. ("Salt River"), an Arizona limited liability company. Cozzi
currently owns a 50% interest in Salt River which will be acquired by the
Company upon the closing of the Cozzi merger. In the transaction, Newell
Phoenix, L.L.C. will receive either 100,000 shares of common stock or $1,500,000
in cash, at Newell Phoenix, L.L.C.'s election.
 
     On August 4, 1997, the Company signed a binding letter of intent to
purchase all of the scrap metal-related business operations and assets,
excluding real estate, of Goldin Industries, Inc., Goldin Industries Louisiana,
Inc., and Goldin of Alabama, Inc. (the "Goldin Companies"). The Goldin
Companies, headquartered in Gulfport, Mississippi, operate five facilities,
including one near New Orleans, Louisiana, two in Mobile, Alabama, and two in
Gulfport, and principally processes industrial ferrous and non-ferrous metals.
In the transaction, the shareholders of the Goldin Companies will receive
$7,150,000 in cash, 112,500 shares of common stock, and warrants to purchase an
aggregate of 150,000 shares of common stock.
 
     On August 5, 1997, the Company signed a binding letter of intent to
acquire, in a merger, FPX, Inc. ("FPX"), which has a 50% ownership interest in
PerlCo, L.L.C. ("PerlCo"), a Tennessee limited liability company. Cozzi
currently owns a 50% interest in PerlCo which will be acquired by the Company
upon the closing of the Cozzi merger. The Company will acquire, through merger,
Southern Tin Compress Corporation ("Southern Tin"), which owns the real estate
and certain equipment associated with the PerlCo operations. In the transaction,
the shareholders of FPX and Southern Tin will receive an aggregate of 789,740
shares of common stock (subject to adjustment in certain circumstances) and
warrants to purchase an aggregate of 125,000 shares of common stock. Also at
closing, certain affiliates of the FPX shareholders will be repaid up to
$2,000,000 owed to it from PerlCo.
 
     The closing of the pending transactions are subject to, among other things,
execution of mutually acceptable definitive merger and related agreements,
successful completion of due diligence, obtaining corporate approvals,
government approvals as necessary, and other customary conditions to closing.
The acquisitions of the 50% joint venture interests in Salt River and PerlCo are
also subject to the consummation of the Cozzi merger.
 
NOTE 3 -- INVENTORIES
 
     Inventories consisted of the following at (in thousands):
 
<TABLE>
<CAPTION>
                                                             JUNE 30,   MARCH 31,
                                                               1997       1997
                                                             --------   ---------
<S>                                                          <C>        <C>
Ferrous metals.............................................  $36,269     $2,707
Non-ferrous metals.........................................    6,448      4,754
Other......................................................    1,045        954
                                                             -------     ------
                                                             $43,762     $8,415
                                                             =======     ======
</TABLE>
 
NOTE 4 -- DEBT AND EQUITY TRANSACTIONS COMPLETED DURING THE QUARTER ENDED JUNE
          30, 1997
 
     During the quarter ended June 30, 1997, the Company completed several
financing and capital transactions which raised additional cash and refinanced
or paid down existing debt. The transactions were as follows:
 
          1. During April 1997, the Board of Directors approved a private sale
     of up to 2,025,000 restricted shares of the Company's common stock at $7.25
     per share (the "Private Placement"), including the sale
 
                                        6
<PAGE>   9
 
      NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
     of 260,000 shares, collectively, to five directors of the Company,
     including Gerard M. Jacobs, T. Benjamin Jennings, Donald F. Moorehead, Jr.,
     George O. Moorehead and Harold Rubenstein. The Company raised approximately
     $14.7 million in cash through the Private Placement. A purchaser of the
     restricted stock who is not a director or employee of the Company exchanged
     consideration comprised of cash and a short term note. At June 30, 1997,
     the balance due on the note was $1.75 million plus accrued interest. The
     Company received payment of the note and accrued interest on July 3, 1997.
 
          2. On April 15, 1997, Clend Investment converted $1.0 million of its
     note payable into 182,481 restricted shares of common stock of the Company.
 
          3. On April 30, 1997, the Company paid its $960,000 and $695,000 notes
     payable due to Mike and Zalman Melnik, respectively.
 
          4. On May 21, 1997, Mike and Zalman Melnik exercised certain warrants
     ("Limited Warrants") to purchase 150,000 shares of restricted common stock
     in exchange for aggregate cash payments to the Company of $600,000. Also,
     on May 21, 1997, Clend Investment exercised its Limited Warrants to
     purchase 180,000 shares of restricted common stock in exchange for a
     $720,000 reduction of the amount owed by the Company pursuant to the Clend
     Note.
 
          5. On May 29, 1997, the Company made a payment of all principal and
     interest due on a $3.0 million mortgage note payable. Also, on May 29,
     1997, Ian MacLeod and the Company agreed to amend the acquisition agreement
     dated January 1, 1997, whereby the Company agreed to issue 160,000
     restricted shares of common stock of the Company in exchange for a $1.0
     million reduction of a $5.6 million note ("Promissory Note A") due to Ian
     MacLeod. In addition, Ian MacLeod agreed to eliminate the restrictions on
     the Company's ability to incur indebtedness involving the MacLeod
     subsidiaries and to release stock pledges involving MacLeod. At the same
     time, the Company made a $1.6 million payment on Promissory Note A and
     executed a note to refinance the remaining $3.0 million principal portion
     of Promissory Note A into a 5 year note due June 29, 2002 which accrues
     interest at 8.5%.
 
          6. On May 30, 1997, the Company entered into a $6.0 million revolving
     and term loan agreement with a commercial bank under which the Company
     received proceeds of $4.5 million. The loans are due on May 30, 1998 and
     bear interest equal to 1% above the lenders' prime rate. The proceeds from
     the loans were utilized to repay the remaining $3.28 million balance on the
     Clend Note (thereby ceasing the issuance of any additional Limited
     Warrants), to repay a $600,000 note payable to Ian MacLeod, and for working
     capital purposes.
 
          7. On June 23, 1997, in connection with the acquisition of Isaac, the
     Company entered into a credit agreement with a commercial lender which
     provides a revolving line of credit up to an amount of $37 million, subject
     to certain terms and conditions. The line expires on June 23, 1998 and
     borrowings are secured by substantially all of Isaac's assets. The credit
     agreement also provides Isaac shareholders with an irrevocable letter of
     credit that secures an aggregate of $27.4 million of notes issued by MTLM
     to the former Isaac shareholders and the Isaac notes payable to
     shareholders.
 
                                        7
<PAGE>   10
 
      NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
NOTE 5 -- CHANGES IN STOCKHOLDERS' EQUITY
 
     Changes in stockholders' equity during the three months ended June 30, 1997
are as follows ($ in thousands):
 
<TABLE>
<CAPTION>
                                                      COMMON              PAID-IN   RETAINED
                                        # OF SHARES   STOCK    WARRANTS   CAPITAL   EARNINGS    TOTAL
                                        -----------   ------   --------   -------   --------    -----
<S>                                     <C>           <C>      <C>        <C>       <C>        <C>
Balance at March 31, 1997.............  10,154,740     $102    $ 1,351    $16,628    $5,067    $23,148
  Equity issued in Private stock
     offering.........................   2,025,000       20          0     14,661         0     14,681
  Equity issued for acquisitions......   1,942,857       20     11,513     21,030         0     32,563
  Conversion of debt to equity........     342,481        3          0      1,997         0      2,000
  Exercise of options/warrants........     335,000        3       (822)     2,151         0      1,332
  Other...............................           0        0      1,834         13         0      1,847
  Net income for the three months
     ended June 30, 1997..............           0        0          0          0       322        322
                                        ----------     ----    -------    -------    ------    -------
Balance at June 30, 1997..............  14,800,078     $148    $13,876    $56,480    $5,389    $75,893
                                        ==========     ====    =======    =======    ======    =======
</TABLE>
 
  Equity Transactions Subsequent to June 30, 1997
 
     On August 8, 1997, the Company issued 21,000 shares of Series A Convertible
Preferred Stock, par value $.01 per share (stated value of $1,000 per share), to
two institutional investors for an aggregate purchase price of $21.0 million.
The net proceeds received by the Company were $19.95 million. The discount of
$1.05 million will be capitalized to preferred stock through accretion over the
3 year term of the preferred stock. The Company intends to utilize the proceeds
principally to fund future acquisitions and to repay certain debt obligations.
 
     Dividends on the Convertible Preferred Stock accrue, whether or not
declared by the Board of Directors, at an annual rate of 6% of the Stated Value
of each outstanding share of Convertible Preferred Stock. The Conversion
features of the Preferred Stock are subject to shareholder approval and vary
based on conditions, including the price of the common stock, at the time of
conversion. The Company expects to classify the preferred stock as temporary
equity.
 
NOTE 6 -- SUPPLEMENTAL CASH FLOW INFORMATION
 
     Supplemental cash flow information is summarized as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                                             ------------------
                                                        JUNE 30, 1997   JUNE 30, 1996
                                                        -------------   -------------
<S>                                                     <C>             <C>
Interest paid.........................................     $1,369           $251
Income taxes paid.....................................     $  784           $  8
</TABLE>
 
                                        8
<PAGE>   11
 
      NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
     In connection with the Company's acquisitions, the net cash paid was as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS
                                                                  ENDED
                                                              JUNE 30, 1997
                                                              -------------
<S>                                                           <C>
Fair value of assets acquired...............................    $167,159
Liabilities assumed.........................................     (90,011)
Stock and warrants issued...................................     (32,563)
Promissory notes and other consideration issued.............     (38,089)
                                                                --------
Cash paid...................................................       6,496
  Less: cash acquired.......................................        (208)
                                                                --------
Net cash paid for acquisitions..............................    $  6,288
                                                                ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS
                                                                  ENDED
                                                              JUNE 30, 1997
                                                              -------------
<S>                                                           <C>
Non cash investing and financing activities:
  Conversion of debt to stock and warrants..................     $2,720
  Exchange of a note receivable for common stock............     $1,750
</TABLE>
 
NOTE 7 -- RECENTLY ISSUED ACCOUNTING STANDARDS
 
     Statement of Financial Accounting Standards (SFAS) No. 128 -- Earnings per
Share, was issued by the Financial Accounting Standards Board (FASB) in February
1997. The Company is required to adopt this statement in its third quarter of
fiscal 1998. This statement replaces current earnings per share (EPS) reporting
requirements and requires a dual presentation of basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
 
     SFAS No. 129 -- Disclosure of Information about Capital Structure, was
issued by the FASB in February 1997. The Company is required to adopt this
statement in its third quarter of fiscal 1998. This statement establishes
standards for disclosing information about the Company's capital structure. The
adoption of this statement will not have an effect on the Company's consolidated
financial statements.
 
     SFAS No. 130 -- Reporting Comprehensive Income, and SFAS No. 131 --
Disclosures about Segments of an Enterprise and Related Information, were issued
by the FASB in June 1997 and are effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income, which includes net income and changes in equity
except those resulting from investments by, or distributions to, stockholders.
SFAS No. 131 establishes standards for disclosures related to business operating
segments. The Company is currently evaluating the impact that these statements
will have on the consolidated financial statements.
 
NOTE 8 -- EARNINGS PER SHARE
 
     Primary earnings per share is based upon weighted average common shares
outstanding and common stock equivalents, when dilutive. Common stock
equivalents have been determined assuming the exercise of all dilutive stock
options and warrants adjusted for the assumed repurchase of common stock, at the
average market price, from the exercise proceeds. The fully diluted per share
computation assumes the repurchase of common stock at the ending market price.
For the quarter ended June 30, 1996, common share equivalents were excluded from
this computation since they did not have a dilutive effect of 3% or more.
 
                                        9
<PAGE>   12
 
     This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements in this Form 10-Q which address
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such things as future acquisitions
(including the amount and nature thereof), business strategy, expansion and
growth of the Company's business and operations and other such matters are
forward-looking statements. Although the Company believes the expectations
expressed in such forward-looking statements are based on reasonable assumptions
within the bounds of its knowledge of its business, a number of factors could
cause actual results to differ materially from those expressed in any
forward-looking statements, whether oral or written, made by or on behalf of the
Company. Many of these factors have previously been identified in filings or
statements made by or on behalf of the Company. See also "Factors Influencing
Future Results and Accuracy of Forward Looking Statements" below.
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included under
Item 1. In addition, reference should be made to the audited consolidated
financial statements and notes thereto and related Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's most recent Annual Report on Form 10-K.
 
GENERAL OVERVIEW
 
     The Company was founded in 1981 and re-incorporated in Delaware in June
1986. Prior to April 11, 1996, the Company was called General Parametrics
Corporation and operated as a manufacturer and marketer of color thermal and dye
sublimation printers and related consumables, including ribbons, transparencies
and paper. This business was discontinued by the Company during fiscal 1997. On
April 9, 1996, the Company's stockholders approved an amendment to the Company's
Certificate of Incorporation to change the name of the Company from General
Parametrics Corporation to Metal Management, Inc. Effective April 15, 1996, the
Company formally changed its NASDAQ stock symbol to "MTLM". On April 25, 1996,
the Board of Directors of the Company approved a change in the Company's fiscal
year end from October 31 to March 31, effective April 1, 1996.
 
     The Company entered the scrap metal recycling industry on April 11, 1996,
through its merger with EMCO Recycling Corp. ("EMCO"), headquartered in Phoenix,
Arizona. As part of the strategic redirection, in April 1996, management
announced plans to exit the Spectra*Star printer and consumables business. On
July 16 1996, Mannesmann Tally ("Tally") acquired the inventory and related
production equipment of the Spectra*Star business for approximately $1.3 million
in cash and provided additional contingent consideration in the form of
royalties on future sales of Spectra*Star printers and related consumables. The
Company discontinued and sold its VideoShow and related products lines business
("VideoShow") in December 1996 for consideration substantially in the form of
royalties on future sales of VideoShow equipment. The VideoShow consideration is
not expected to be material to the Company.
 
     The Company and its wholly-owned subsidiaries are engaged in the business
of dismantling, processing, marketing, brokering and recycling of both ferrous
and non-ferrous metals with the goal of becoming one of the largest recyclers of
scrap metal in North America. The Company operates twenty-four recycling centers
in six states, including those operated through joint ventures, and resells
processed scrap metal and other materials to domestic and foreign customers.
MTLM intends to continue its expansion principally through acquisition to
consolidate the highly fragmented scrap metal recycling industry. The Company
believes that no single company is a significant processor of scrap metal on a
national scale, although certain companies are
 
                                       10
<PAGE>   13
 
significant processors on a local or regional scale. The Company's business
operations, as of June 30, 1997, consisted of the following:
 
<TABLE>
<CAPTION>
               SUBSIDIARY                                 LOCATION(S)                  DATE ACQUIRED
               ----------                                 -----------                  -------------
<S>                                          <C>                                      <C>
EMCO.....................................    Phoenix, Arizona                         April 11, 1996
MacLeod..................................    Los Angeles, California                  January 1, 1997
HouTex...................................    Houston, Texas                           January 7, 1997
Reserve..................................    Cleveland, Ohio and Chicago, Illinois    May 1, 1997
Isaac....................................    Maumee, Defiance, Bryan, Dayton and      June 23, 1997
                                             Cleveland, Ohio
</TABLE>
 
     Pending acquisitions as of August 14, 1997 include:
 
<TABLE>
<CAPTION>
                COMPANY                                           LOCATION(S)
                -------                                           -----------
<S>                                        <C>
Cozzi..................................    Chicago, Illinois and Pittsburgh, Pennsylvania
Proler.................................    Houston, Texas and Jackson, Mississippi
Superior...............................    Huntington Beach, California
Houston Compressed.....................    Houston, Texas
Salt River.............................    Phoenix, Arizona
Goldin Companies.......................    Gulfport, Mississippi, Mobile, Alabama and
                                           New Orleans, Louisiana
PerlCo.................................    Memphis, Tennessee
</TABLE>
 
ACQUISITION STRATEGY
 
     MTLM believes that similar to the solid waste industry, the scrap metal
recycling industry has recently begun to experience market consolidation due to,
among other things: (1) significant capital requirements caused by expanding
equipment needs and by more stringent environmental regulations; and (2) the
desire of owners of independent scrap metal processors to sell closely-held
businesses to companies with access to public capital markets.
 
     MTLM seeks to acquire significant processors of scrap metal in large
metropolitan markets which will serve as regional platform companies and to
follow these acquisitions with "tuck-in" acquisitions of smaller processors.
MTLM believes that this consolidation strategy will allow MTLM to improve its
operating margins and profitability by: (1) increasing its market share, which
is expected to enhance customer relationships and enhance supply capabilities;
(2) spreading the cost of management and administrative staff, and utilizing
equipment and other assets, across larger operations; and (3) transferring
technology and best demonstrated processing and marketing strategies among
acquired recycling operations. The Company is continuously evaluating
acquisition opportunities.
 
RESULTS OF OPERATIONS (Q1 FISCAL 1998 VS. Q1 FISCAL 1997)
 
     During the quarter ended June 30, 1997 ("Q1 fiscal 1998"), the Company
acquired Reserve Iron & Metal, L.P. ("Reserve") and four companies under common
ownership comprising The Isaac Group ("Isaac"). Reserve was acquired on May 1,
1997 and Isaac was acquired on June 23, 1997. Both acquisitions are accounted
for under the purchase method of accounting, and accordingly, their results from
operations are included from the dates of acquisition. The Company's results
from operations during the quarter ended June 30, 1996 ("Q1 fiscal 1997") only
include the operations of EMCO which was acquired on April 11, 1996.
 
                                       11
<PAGE>   14
 
     Consolidated net sales for the quarter ended June 30, 1997 and 1996 in
broad product categories were as follows ($ in thousands):
 
<TABLE>
<CAPTION>
                                                      1997                               1996
                                         -------------------------------    -------------------------------
              COMMODITY                    WEIGHT      NET SALES     %        WEIGHT      NET SALES     %
              ---------                    ------      ---------     -        ------      ---------     -
<S>                                      <C>           <C>          <C>     <C>           <C>          <C>
Ferrous metals (tons)................       216,587     $26,385      49%        42,000     $ 4,944      31%
Non-ferrous metals (pounds)..........    28,273,526      17,636      32%    19,000,000      10,835      68%
Brokerage (tons).....................       142,709       9,111      17%            --           0       0%
Other................................            --       1,303       2%            --         199       1%
                                                        -------     ----                   -------     ----
                                                        $54,435     100%                   $15,978     100%
                                                        =======     ====                   =======     ====
</TABLE>
 
     Ferrous sales represented 49% and 31% of consolidated net sales for the
three months ended June 30, 1997 and 1996, respectively. The increase in ferrous
sales, both in tons sold and as a percentage of total net sales, is due to the
acquisitions of HouTex, Reserve and Isaac, which primarily sell ferrous metals.
This increase in ferrous sales was partially offset by a $1.1 million decrease
in ferrous sales at EMCO during the quarter ended June 30, 1997 as compared to
same quarter last year attributable primarily to pricing pressures in the
Phoenix market as a result of increased competition. The average selling price
per ton for ferrous metals was $121.82 and $117.71 for the three months ended
June 30, 1997 and 1996, respectively.
 
     Non-ferrous sales increased primarily due to the acquisition of MacLeod,
which primarily sells non-ferrous metals. Non-ferrous sales at EMCO decreased by
$2.0 million during the quarter ended June 30, 1997 compared to the comparable
period in 1996 because of a reduction in volume due to increased competition.
The average selling price per pound for non-ferrous metals was $.62 and $.57 for
the three months ended June 30, 1997 and 1996, respectively. The increase in
price per pound is attributable to the volume of copper sold by MacLeod, which
generally sells for a higher price per pound compared to other non-ferrous
metals.
 
     A portion of Reserve and Isaac's business involves the brokering of scrap
iron and other metals for sale to foundries, mills and other brokers. Brokered
metals are shipped directly to the customer from the supplier, thereby,
requiring no processing of the metals and no inventory holding cost. For the
three months ended June 30, 1997, the Company realized a 9% gross profit margin
on brokered sales. Gross margins on brokered sales will vary depending on the
type of metals and markets in which metals are brokered.
 
     Consolidated gross margin for the three months ended June 30, 1997 was $6.0
million, or 11% of net sales compared to $2.0 million, or 12.5% of net sales for
the comparable period in 1996. The Company believes the change in gross margin
reflects the broadening of its business from one operation in the quarter ended
June 30, 1996 to five operations in the quarter ended June 30, 1997. The price
of scrap metal is affected by regional and seasonal variations. Furthermore,
prices for scrap metal are also impacted by broad and global cyclical movements
and as such equilibrates supply and demand.
 
     Consolidated general and administrative expenses were $3.1 million and $1.3
million for the three months ended June 30, 1997 and 1996, respectively. The
increase in general and administrative expenses reflects the incremental
expenses incurred from the Company's acquisitions. Corporate overhead has also
increased due to additions in corporate staff and corporate expenses (i.e.
legal, audit, travel, etc.) to support the acquisition pace the Company is
pursuing.
 
     Depreciation and amortization expense increased from $522,000 for the three
months ended June 30, 1996 to $1.3 million for the three months ended June 30,
1997. The increase is attributed to the significant acquisitions of Isaac and
Reserve.
 
     Interest expense increased from $233,000 for the three months ended June
30, 1996 to $1.2 million for the three months ended June 30, 1997 due to the
issuance and assumption of debt associated with the acquisitions of MacLeod,
Reserve and Isaac.
 
     Income tax expense for the three months ended June 30, 1997 was $216,000
for an effective tax rate of 49%. The effective tax rate is higher than the
statutory rate primarily due to the permanent difference represented by
non-deductible goodwill amortization.
 
                                       12
<PAGE>   15
 
     Net income from continuing operations was $221,000 ($.02 per share) for the
three months ended June 30, 1997 as compared to $5,000 ($0.00 per share) for the
comparable prior period. The increase reflects that the Company operated with
five operations during the quarter ended June 30, 1997 compared to only one
operation in the comparable prior period.
 
     Income from discontinued operations was $101,000 ($.00 per share) for the
three months ended June 30, 1997 as compared to $146,000 ($.02 per share) for
the comparable prior period. Income during the quarter ended June 30, 1997
mainly reflects the royalty income received by the Company from the sale of its
Spectra*Star business, net of certain expenses paid. The quarter ended June 30,
1996 includes the full operation of the Spectra*Star business which was sold
during July 1996.
 
                        LIQUIDITY AND CAPITAL RESOURCES
 
     The Company continues to pursue acquisitions in the scrap metal recycling
industry and anticipates financing these acquisitions through the issuance of
debt or equity. The Company will require substantial capital to fund future
acquisitions and current operations. There can be no assurance that any
additional financing will be available, or, in the event that it is, that it
will be available in the amounts and on terms acceptable to the Company.
 
CASH FLOWS FROM CONTINUING OPERATIONS
 
     The Company's net cash flows from continuing operations decreased during
the three months ended June 30, 1997 from the comparable period in 1996. The
decrease mainly reflects an increase in accounts receivable and the exchange of
a note receivable for $1.75 million in connection with the Private Placement.
This note was collected with accrued interest on July 3, 1997.
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
     During the three months ended June 30, 1997, the Company purchased
approximately $.9 million of property and equipment and utilized cash of
approximately $6.3 million for the acquisitions of and transaction costs related
to Reserve and Isaac. Management anticipates the Company will continue to make
acquisitions, make capital expenditures for new equipment, and upgrade and
expand existing equipment and facilities. The Company expects that these
expenditures may increase in the future due to the internal growth of the
Company and business combinations.
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
     During the quarter ended June 30, 1997, the Company received proceeds from
a private offering of 2,025,000 shares of restricted common stock which
aggregated to $13.0 million. Subsequent to the end of the quarter, the Company
received payment of $1.75 million which brought total proceeds raised from the
private offering to approximately $14.7 million. The proceeds from the private
offering were used to fund the acquisition of Reserve and used to pay debt
associated with the acquisitions of MacLeod and HouTex. Borrowings on
lines-of-credit increased to fund working capital requirements. The Company
anticipates growing through acquisitions and will require additional debt or
equity to fund pending acquisitions.
 
CASH FLOWS FROM DISCONTINUED OPERATIONS
 
     The Company's cash flows from discontinued operations for the quarter ended
June 30, 1997 reflects royalty income received from the sale of the Spectra*Star
business. Cash flows during the comparable period last year reflect the cash
generated by the operations of the Spectra*Star business.
 
FINANCIAL CONDITION
 
     The Company's principal sources of funding are its existing cash and cash
equivalents balances, collection of accounts receivable and proceeds from lines
of credit and other borrowing agreements. At June 30, 1997, the Company had $3.8
million in cash and cash equivalents versus $5.7 million at March 31, 1997.
 
                                       13
<PAGE>   16
 
  Significant Cash Transactions During the Quarter
 
     During the quarter, the Company completed certain significant debt and
equity transactions. The Company raised approximately $13.0 million in cash
during the quarter from the Private Placement. The Company also entered into a
$6.0 million revolving and term loan with a commercial bank and received
proceeds of $4.5 million from that loan. During the quarter, the Company paid
approximately $10.0 million of notes which were issued in connection with the
acquisition of MacLeod and HouTex and utilized $5.9 million of cash for the
acquisition of Reserve.
 
  Significant Cash Transactions Subsequent to June 30, 1997
 
     On August 8, 1997, the Company issued 21,000 shares of Series A Convertible
Preferred Stock, par value $.01 per share (stated value of $1,000 per share), to
two institutional investors for an aggregate purchase price of $21.0 million.
The net proceeds received by the Company were $19.95 million. On July 3, 1997,
the Company also collected a $1.75 million short-term note receivable which was
received in connection with the Private Placement.
 
  Cash Requirements for Pending Acquisitions
 
     In connection with each of the pending acquisitions, the Company has agreed
that the cash portion (excluding transaction costs) of the purchase price will
not exceed (in thousands):
 
<TABLE>
<CAPTION>
<S>                                                             <C>
Cozzi.......................................................    $ 6,000
Proler......................................................     15,000
Superior....................................................      1,800
Salt River..................................................      1,500
Goldin Companies............................................      7,150
                                                                -------
Total.......................................................    $31,450
                                                                =======
</TABLE>
 
     There can be no assurance that any of these acquisitions will close. The
Company's existing cash and cash equivalents will not be sufficient to fund all
of these acquisitions. The Company is seeking other financing sources to meet
such obligations but no assurances can be provided that such financing will be
available when needed, or that, if available, it will be on satisfactory terms.
 
  Cash Requirements for Maturing Debt Obligations
 
     In connection with the Isaac acquisition, the Company issued approximately
$20.6 million of short-term notes of which $10.6 million is due on November 15,
1997 and $10.0 million is due on February 15, 1998. In addition, the Company has
guaranteed $8.5 million of notes recorded by Isaac to two former shareholders of
Isaac, of which $2.8 million is due on February 15, 1998. The Company may extend
the due date on the $10.6 million note by three one-month periods by issuing to
the note holders warrants to purchase 100,000 shares of common stock per
extension. The Company's existing cash and cash equivalents may not be
sufficient to fund these obligations. The Company is seeking other financing
sources to meet such obligations but no assurances can be provided that such
financing will be available when needed, or that, if available, it will be on
satisfactory terms.
 
  Working Capital Availability and Requirements
 
     Accounts receivable balances increased from $9.6 million at March 31, 1997
to $54.3 million at June 30, 1997 due to the recent acquisitions of Reserve and
Isaac. Accounts receivable at EMCO, MacLeod and HouTex remained unchanged during
the two periods. Accounts payable increased from $5.2 million at March 31, 1997
to $47.3 million at June 30, 1997 due to the recent acquisitions.
 
                                       14
<PAGE>   17
 
     Inventory levels vary at each of the Company's subsidiaries based on levels
determined by managers of each respective subsidiary. Inventory on hand
consisted of the following ($ in thousands):
 
<TABLE>
<CAPTION>
                                                                 JUNE 30, 1997     MARCH 31, 1997
                                                                ---------------    --------------
                         COMMODITY                               VALUE      %      VALUE      %
                         ---------                               -----      -      -----      -
<S>                                                             <C>        <C>     <C>       <C>
Ferrous metals..............................................    $36,269     83%    $2,707     32%
Non-ferrous metals..........................................      6,448     15%     4,754     57%
Other.......................................................      1,045      2%       954     11%
                                                                -------    ----    ------    ----
                                                                $43,762    100%    $8,415    100%
                                                                =======    ====    ======    ====
</TABLE>
 
     The increase in value of ferrous metals is primarily due to the
acquisitions of Reserve and Isaac which mainly sell ferrous metals. The value of
non-ferrous metals also increased due to the acquisition of Reserve as well as
an increase in inventory levels at certain of the Company's businesses since
March 31, 1997.
 
     Property and equipment increased from $20.2 million at March 31, 1997 to
$53.1 million at June 30, 1997, as a result of various business acquisitions and
increased capital expenditures at the Company's existing businesses. The Company
expects to make substantial investments in additional equipment and property for
expansion, for replacement of assets, and in connection with future
acquisitions. In particular, EMCO may require substantial capital investment to
replace old equipment and to put into service additional processing equipment.
 
     The Company and its wholly-owned subsidiaries have various revolving lines
of credit with commercial lenders which provide for revolving credit at interest
rates that range from 0% to 1.75% in excess of the lenders' prime rates. The
Company's ability to borrow under the lines of credit is based primarily on its
accounts receivable and inventory balances. At June 30, 1997, the Company had
approximately $8.1 million available under its various lines of credit.
 
     Scrap metal recycling companies have substantial ongoing working capital
and capital equipment requirements in order to continue to operate and grow. For
example, through June 30, 1997, the Company advanced approximately $6.5 million
to EMCO for working capital requirements. As a result, the Company will seek
equity or debt financing to fund future improvements and expansion of its scrap
metal recycling businesses as well as to make other acquisitions of scrap metal
recycling facilities. There can be no assurance that such financing will be
available when needed, or that, if available, it will be on satisfactory terms.
The failure to obtain financing may cause the Company to default on certain
existing debt obligations and would hinder the Company's ability to make
continued investments in capital equipment and pursue expansions, which could
materially adversely affect results of operations and financial condition. Any
equity financing which is undertaken would result in dilution to the
then-existing stockholders of the Company. See "Factors Influencing Future
Results -- Risk of Dilution to Existing Stockholders."
 
               FACTORS INFLUENCING FUTURE RESULTS AND ACCURACY OF
                           FORWARD-LOOKING STATEMENTS
 
     In the normal course of its business, the Company, in an effort to help
keep its stockholders and the public informed about the Company's operations,
may from time to time issue or make certain statements, either in writing or
orally, that are or contain forward-looking statements, as that term is defined
in the U.S. federal securities laws. Generally, these statements relate to
business plans or strategies, projected or anticipated benefits from
acquisitions made by or to be made by the Company, or projections involving
anticipated revenues, earnings, or other aspects of operating results. The words
"expect," "believe," "anticipate," "project," "estimate," and similar
expressions are intended to identify forward-looking statements. The Company
cautions readers that such statements are not guarantees of future performance
or events and are subject to a number of factors that may tend to influence the
accuracy of the statements and the projections upon which the statements are
based, including but not limited to those discussed below. As noted elsewhere in
this report, all phases of the Company's operations are subject to a number of
uncertainties, risks, and other influences, many of which are outside the
control of the Company, and any one of which, or a
 
                                       15
<PAGE>   18
 
combination of which, could materially affect the results of the Company's
operations and whether forward-looking statements made by the Company ultimately
prove to be accurate.
 
     The following discussion outlines certain factors that could affect the
Company's consolidated results of operations for fiscal 1998 and beyond and
cause them to differ materially from those that may be set forth in
forward-looking statements made by or on behalf of the Company.
 
GENERAL
 
     The Company's Board of Directors intends to actively pursue acquisitions
and mergers in scrap metal recycling. Depending on the nature and size of
potential acquisitions, mergers and other transactions, if any, the Company's
cash flows from operating and investing activities, together with its cash, cash
equivalents and marketable securities may not be sufficient in the future.
Therefore, the Company will have to supplement these sources of liquidity with
additional sources of funds such as borrowings or stock offerings. No assurance
can be provided that such financing will be available or available on reasonable
terms.
 
LIMITED OPERATING HISTORY
 
     Prior to the EMCO merger in April 1996, the Company had no history of
operations in the scrap metal recycling industry. The acquired companies have
not previously operated as subsidiaries of a public holding company subject to
formal accounting and reporting requirements. Consequently, in order to
transition the acquired companies, the Company will have to continue to
establish information systems, internal controls, and hire managers with
appropriate skills to insure the timeliness and accuracy of financial reports.
During fiscal 1997, the Company announced restatement of certain financial
results and amended its second and third quarter reports on Form 10-Q due to
accounting errors at EMCO. In addition, the acquired companies have historically
been organized in a manner in which its management and ownership were the same.
The management of the acquired companies have not previously reported to
management responsible for diverse operations and have had limited experience in
executing consolidation strategies on the scale being pursued by the Company.
Furthermore, the success of the consolidation strategy is dependent in part on
the ability of the Company's management to oversee diverse operations and to
successfully integrate processing, marketing and other resources of the acquired
companies. The Company's management team has not previously had experience in
such capacity.
 
IMMEDIATE AND FUTURE CAPITAL REQUIREMENTS
 
     The Company is pursuing an aggressive acquisition strategy which requires
substantial amounts of capital. For example, to accomplish only the acquisitions
of Cozzi and Proler, the Company will be required to have $21.0 million to fund
the cash portions of purchase consideration. The Company is evaluating various
financing strategies and alternatives to obtain sufficient capital to close the
acquisitions of Cozzi and Proler and to provide working capital support and to
fund future acquisitions; however, no assurance can be provided that sufficient
funds on acceptable terms will become available. Failure to raise sufficient
capital to close the Cozzi and Proler acquisitions, or other acquisitions could
adversely affect the Company and its stock price.
 
SHORT TERM BORROWING STRATEGIES TO FUND ACQUISITIONS
 
     The Company intends to continue an acquisition strategy which will utilize
seller note obligations with short term as well as long term maturities. The
issuances of seller notes may provide restrictive covenants on the Company. For
example, the seller notes issued to acquire HouTex, MacLeod, Reserve and Isaac
provided restrictions on the ability of the Company to unilaterally direct or
control the operations of HouTex, MacLeod, Reserve or Isaac until the seller
notes were repaid. The seller notes issued also provided pledges of the stock of
the acquired entities and certain other restrictive covenants. The seller notes
issued to acquire Reserve and Isaac remain unpaid, and no assurance can be
provided that the Company will access capital on acceptable terms in adequate
time frames to repay these notes or other seller note obligations issued in the
future. An inability to repay seller note obligations would have adverse
consequences to the Company.
 
                                       16
<PAGE>   19
 
SUBSTANTIAL LEVERAGE
 
     As a result of the recent mergers and acquisitions, the Company, as of June
30, 1997, had approximately $166.5 million in consolidated liabilities. In order
to pursue expansion and acquisition opportunities, the Company expects to incur
additional debt, either through bank or credit lines or the sale of debt
securities in registered or unregistered transactions, as well as any additional
equity financing it may undertake. The servicing of such present and future debt
of the Company will utilize cash either in the form of cash on hand or cash
generated by operating and financing activities.
 
     As of June 30, 1997, the Company had a long-term debt (including current
portions of long-term debt) to total capital ratio of 54%. The degree to which
the Company is leveraged could have adverse consequences to the Company
including the following: (1) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired; (2) a substantial
portion of the Company's cash flow from operations will be dedicated to the
payment of principal and interest; and (3) the Company will be more vulnerable
to an economic downturn in the scrap metal recycling industry which has
historically been sensitive to changes in general economic conditions.
 
RISK OF EXPANSION AND CONSOLIDATION STRATEGIES
 
     The Company currently plans to continue to pursue additional acquisitions
in the scrap metal recycling industry. There can be no assurance that any
previously announced or unannounced mergers will be consummated nor that, if
they are, the Company will be able to effectively manage disparate business
enterprises. The ability of the Company to achieve its expansion objectives and
to manage its growth effectively depends on a variety of factors, including the
ability to identify appropriate acquisition targets and to negotiate acceptable
terms for their acquisition, the integration of new businesses into the
Company's operations and the availability of capital. The inability to control
or manage growth effectively or to successfully integrate future new business
into the Company's operations would have a material adverse effect on the
Company's financial condition and results of operations. There can be no
assurance that the Company will be able to successfully expand or that growth
and expansion will result in profitability. There can be no assurance that the
Company will be able to realize any of the other anticipated benefits of future
mergers or acquisitions that it may undertake or achieve its financial goals and
operational objectives in execution of its consolidation strategy.
 
COMPANY MANAGEMENT FACTORS
 
     Due to the limited experience of the Company's management in the scrap
metal recycling business, the Company relies substantially on the scrap metal
recycling experience of the current management teams at each of its wholly-owned
subsidiaries. While certain of the management personnel of the acquired
facilities have executed employment agreements, there can be no assurance that
such personnel will continue to serve at the acquired businesses. The loss of a
significant number of management personnel of the Company's acquired businesses
could have a material adverse effect on the Company's efforts to effectively
manage and integrate these operations. In addition, the loss of executive
officers of the Company would also adversely impact the Company's performance
and ability to successfully expand the business.
 
     A condition of the Cozzi merger agreement contemplates the Company
appointing Albert A. Cozzi to be the President and Chief Operating Officer of
the Company. While Mr. Cozzi has substantial experience in the scrap metal
industry and would be an important part of the Company's senior management team,
no assurance can be provided that the Cozzi merger will close.
 
POTENTIAL CHANGES IN MANAGEMENT AND GOVERNANCE
 
  Changes in Management
 
     Upon the closing of the Cozzi merger, material changes will occur in the
management and governance structure of the Company. The Cozzi merger agreement
contemplates that T. Benjamin Jennings will remain
 
                                       17
<PAGE>   20
 
as the Chairman of the Board and Chief Development Officer of the Company,
Gerard M. Jacobs will remain as Chief Executive Officer of the Company, Robert
C. Larry will remain as Chief Financial Officer of the Company, and Albert A.
Cozzi will be appointed President and Chief Operating Officer of the Company. In
addition, the Cozzi merger agreement contemplates that an Executive Committee
will be formed comprised of Messrs. Albert A. Cozzi, Jacobs, Jennings, and
possibly other individuals. The Company has not previously operated with a Chief
Operating Officer or with an Executive Committee. There can be no assurance that
these changes in management structure will be successful in carrying out the
acquisition and operating plans of the Company.
 
  Changes in Governance
 
     Upon the closing of the Cozzi merger, the Cozzi merger agreement
contemplates that the Company's Board of Directors will likely be comprised of
directors equally nominated by the shareholders of Cozzi and by Messrs. Jacobs
and Jennings. The Cozzi merger agreement contemplates that two outside directors
will be nominated who are mutually agreeable to both sides of the Cozzi merger.
The Cozzi merger is an example of the willingness of the Company to rapidly
change the management and governance of the Company, if necessary or desirable.
No assurance can be provided that the proposed changes in management and
governance as contemplated in the Cozzi merger agreement will occur or that a
subsequent acquisition or merger will not similarly change the management and
governance structure of the Company nor can there be assurance that any changes
to the corporate governance will be advantageous to the Company.
 
CONTROL OF COMPANY BY MANAGEMENT, PRINCIPAL STOCKHOLDERS AND MEMBERS OF THE
BOARD OF DIRECTORS
 
     As a result of the acquisitions, Messrs. Jacobs and Jennings, together with
other members of the Board of Directors and other Principal Stockholders, have
sufficient voting power to control the outcome of all matters (including the
election of directors and future mergers, acquisitions or sale of assets)
submitted to stockholders for approval and may be deemed to have effective
control over the affairs and management of the Company. Messrs. Jacobs and
Jennings along with the existing members of the Board of Directors of the
Company, currently beneficially own approximately 40% of the Company's issued
and outstanding common stock. To date, the Directors of the Company have voted
in support of initiatives recommended by Messrs. Jacobs and Jennings. There can
be no assurance that such support will continue in the future with respect to
voting by Directors. The Cozzi merger, if consummated, will result in 66%
ownership of the Company's common stock by management, members of the Board of
Directors and Cozzi shareholders which further concentrates ownership and
control among principals of the Company.
 
IMPACT OF THE COZZI DEFINITIVE AGREEMENTS ON MANAGEMENT OF THE COMPANY AND
STRATEGIC ACTIONS CONSIDERED BY THE COMPANY PRIOR TO CLOSING OF THE COZZI MERGER
 
     On May 16, 1997, the Company executed a definitive agreement to merge a
subsidiary of the Company with Cozzi. The definitive agreement requires the
Company to seek approval from Cozzi shareholders prior to executing certain
strategic actions up to the closing of the Cozzi merger or termination thereof.
Actions that require approval by the Cozzi shareholders included but are not
limited to:
 
     1. Amendments to or changes of the Company's charter or bylaws.
 
     2.Issuance of equity, except those contemplated by Section 5.2(b) of the
       merger agreement.
 
     3.Changes in management of the Company or changes in the compensation
       provided to officers and directors of the Company.
 
     4.Acquisitions of companies, except those contemplated by Section 5.2(e) of
       the merger agreement.
 
     5. Incurrence of any indebtedness or other significant financing
transactions.
 
     No assurance can be provided that the Cozzi merger will be consummated.
 
                                       18
<PAGE>   21
 
CYCLICALITY OF OPERATING RESULTS
 
     The operating results of the scrap metal recycling processing industry in
general, are highly cyclical in nature as they tend to reflect and amplify the
general national economic condition. In periods of national recession or periods
of minimal economic growth, the operations of scrap metal recycling companies
have been materially adversely affected. During recessions or periods of minimal
economic growth, the automobile and the construction industries typically
experience major cutbacks in production, resulting in decreased demand for
steel, copper and aluminum supplies. For example, the scrap metal recycling
industry was adversely affected for a period of five years from approximately
1988 to 1993. Future economic downturns would materially and adversely affect
the operating results of the Company. The ability of the Company to withstand
significant economic downturns in the future will depend in part on the amount
of cash maintained and availability under lines of credit for the Company.
Recently, EMCO has required substantial cash infusions from the Company. The
Company believes that EMCO will require additional working capital funding
during fiscal 1998.
 
PRICE FLUCTUATIONS
 
     The Company's results of operations have been in the past, and the results
of operations of the overall Company are expected to be, subject to price
fluctuations that occur in the metals commodities markets. A further decline in
commodity prices could further reduce revenues and net income prospectively.
Such losses could have a material adverse effect on the Company's results of
operations and liquidity of the Company.
 
DEPENDENCE ON SCRAP SUPPLIERS
 
     The Company's scrap recycling operations are dependent upon the supply of
scrap materials from its suppliers. Few of such suppliers are bound by long-term
supply arrangements, and therefore they have no obligation to continue to supply
scrap materials to the Company. In the event that substantial numbers of scrap
suppliers cease supplying scrap materials to the Company, the financial
condition and results of operations of the Company would be materially and
adversely affected.
 
CONCENTRATION OF CUSTOMERS AND CREDIT RISK
 
     For the three months ended June 30, 1997, the Company's ten largest
customers represented 49.9% of consolidated net sales and 39.8% of net accounts
receivable. Customers which represented at least 10% of net sales for the three
months ended June 30, 1997 were David J. Joseph and Company (10.7% of net sales
and 5.7% of accounts receivable) and Republic Engineered Steel, Inc. (10.1% of
net sales and 15.0% of accounts receivable). The loss of any one of the
Company's significant customers could affect the Company's results of operations
and cash flows.
 
     Financial instruments that potentially subject the Company to significant
concentration of credit risk are primarily trade accounts receivable. The
Company sells its products primarily to scrap metal brokers and steel mills
located in the United States. Generally, the Company does not require collateral
or other security to support customer receivables. Historically, the Company's
wholly-owned subsidiaries have not experienced material losses from the
noncollection of receivables, however, certain of the Company's subsidiaries
have significant balances owing from customers that operate in cyclical
industries and leveraged conditions which may impair the collectibility of
receivables.
 
OPERATING LOSSES AT EMCO
 
     EMCO has incurred operating losses and required capital infusions since the
April 1996 merger. Management believes that the losses have resulted primarily
from unfavorable market conditions in Arizona, from operation of antiquated and
inefficient machinery and equipment, from lack of certain machinery and
equipment, and from certain operational issues. During fiscal 1997, in an effort
to abate such operating losses,
 
                                       19
<PAGE>   22
 
the Company initiated efforts to restructure the operations of EMCO. The
restructuring has reduced expenses by primarily eliminating the utilization of
certain leased equipment, reducing the size of the workforce, and reducing the
cost of outside processing from certain vendors. In addition, as a part of the
restructuring program, EMCO management initiated a review of the buying and
selling departments. The Company is not certain whether it will be able to
accomplish a successful restructuring of EMCO's business.
 
     As part of the Cozzi merger, the Company will own 50% of the Salt River
joint venture owned by Cozzi in Phoenix, Arizona. On August 4, 1997, the Company
signed a letter of intent to purchase the other 50% interest of the joint
venture from Newell Phoenix L.L.C. It is the Company's intention to combine the
operations of Salt River with the EMCO operations. There can be no assurance
that either the Cozzi or the Newell Phoenix transaction will close, or if both
transactions close, there can be no assurance that any integration or
consolidation of EMCO's business with Salt River will be successful.
 
RISK OF DILUTION TO EXISTING STOCKHOLDERS
 
     The Company's strategy of expansion and additional acquisitions will
require it to issue additional shares of common stock or securities convertible
into common stock as consideration for additional acquisitions. Common stock may
be issued at a discount to the market price and issuance of a material amount of
common stock or such securities would result in significant dilution to the
then-existing stockholders of the Company. For example, the Cozzi merger, if
consummated, will result in the issuance of an additional 11.5 million shares of
common stock and warrants to purchase at least 3.0 million shares of common
stock. The Company expects to be required to seek equity financing to meet
future capital requirements, which would also result in additional dilution. See
"Immediate and Future Capital Requirements."
 
VOLATILITY OF STOCK PRICE
 
     The Company's stock price has been, and in the future is expected to be,
volatile and to experience market fluctuation as a result of a number of
factors, including, but not limited to, merger and acquisition announcements and
developments, current and anticipated results of operations, future product
offerings by the Company or its competitors and factors unrelated to the
operating performance of the Company. The trading price of the Company's Common
Stock may also vary as a result of changes in the business, operations or
financial results of the Company, prospects of general market and economic
conditions, additional future proposed acquisitions by the Company and other
factors. Failure in any quarter to meet the investment community's revenues or
earnings expectations, if any, could have an adverse impact on the Company's
stock price, as could sales of large amounts of stock by existing stockholders.
In addition, sales of substantial amounts of the Company's common stock in the
public market could adversely affect the market price of the Company's common
stock. In the event the market price were adversely affected by such sales, the
Company's access to equity capital markets could be adversely affected and
issuances of common stock by MTLM in connection with acquisitions, or otherwise,
could dilute future earnings per share.
 
     Management believes that the investment public has factored the closing of
the Cozzi and Proler mergers as well as potential future acquisitions into the
Company's current stock price. If the Cozzi, Proler or any future acquisitions
do not close, an adverse impact may occur on the Company's stock price.
 
POTENTIAL REDEMPTION OF SERIES A PREFERRED STOCK
 
     On August 8, 1997, the Company issued 21,000 shares of Series A Convertible
Preferred Stock, par value $.01 per share (stated value of $1,000 per share)
(the "Series A Preferred Stock"). If the convertibility provisions of the Series
A Preferred Stock are not approved by the Stockholders, the Company will be
required to redeem the Series A Preferred Stock at a redemption price equal to
the sum of $1,000 per share plus all accrued and unpaid dividends plus interest
at an annual rate of 15% on the stated value of $1,000 per share from the date
the Series A Preferred Stock was purchased to the redemption date. If the
Company has obtained Stockholder approval ("Stockholder Approval") of the
convertibility provisions of the Series A Preferred Stock, but has not filed a
registration statement (the "Registration Statement") covering the common stock
issuable upon conversion of the Series A Preferred Stock, within thirty days of
receiving
 
                                       20
<PAGE>   23
 
Stockholder Approval, or if the Registration Statement is not declared effective
within 120 days after Stockholder Approval is obtained, then the Company will be
obligated to pay the holders of the Series A Preferred Stock a fee of $420,000
per month, equal to 2.0% of the stated value of the Series A Preferred Stock, in
cash or in the form of additional shares of Preferred Stock.
 
     The Company also will be obligated to redeem the shares of Series A
Preferred Stock at a redemption price equal to 120% of the sum of $1,000 per
share plus all accrued and unpaid dividends if any of the following occur: (i)
the Registration Statement is not declared effective within 120 days after
Stockholder Approval is obtained or if it has been declared effective but the
effectiveness lapses for any reason other than due to factors solely within the
control of the holders of the Series A Preferred Stock; (ii) the Company
breaches in any material respect certain agreements entered into in connection
with the sale of the Series A Preferred Stock; (iii) the Company sells all or
substantially all of its assets, engages in a transaction in which more than 50%
of the voting power of the Company is disposed of, or merges or consolidates
with any entity other than Cozzi, immediately following which the Company's
prior stockholders do not own at least 50% of the surviving entity; or (iv) the
Common Stock is no longer listed for quotation on the NASDAQ National Market
System or another national securities exchange. There can be no assurances that
if the Company were required to redeem the shares of Series A Preferred Stock,
it would have sufficient cash, or be able to obtaining financing on reasonable
terms, if at all, to fund this redemption. If the Company were unable to redeem
the shares of Series A Preferred Stock, then the Company would be obligated to
pay additional dividends and fees to the holders of the Series A Preferred
Stock. The payment of these additional dividends and fees could have a material
adverse effect on the Company's financial condition and results of operations.
 
ENVIRONMENTAL MATTERS
 
  COMPREHENSIVE REGULATORY REQUIREMENTS
 
     The Company and its subsidiaries are subject to significant government
regulation including stringent environmental laws and regulations. Among other
things, these laws and regulations impose comprehensive local, state, federal,
foreign and supranational statutory and regulatory requirements concerning,
among other matters, the treatment, acceptance, identification, storage,
handling, transportation and disposal of industrial by-products, hazardous and
solid waste materials, waste water, stormwater effluent, air emissions, soil
contamination, surface and ground water pollution, employee health and safety,
operating permit standards, monitoring and spill containment requirements,
zoning, and land use, among others. Various laws and regulations set
prohibitions or limits on the release of contaminants into the environment. Such
laws and regulations also require permits to be obtained and manifests to be
completed and delivered in connection with any shipment of prescribed materials
so that the movement and disposal of such material can be traced and the persons
responsible for any mishandling of such material can be identified. This
regulatory framework imposes significant compliance burdens, costs and risks on
the Company and its subsidiaries. Violation of such laws and regulations may
give rise to significant liability of the Company, including fines, damages,
fees and expenses.
 
     Releases of certain industrial by-products and waste materials are subject
to particular laws and regulations. While the specific provisions of releases
related laws and regulations vary among jurisdictions, such laws and regulations
typically require that the relevant authorities be notified promptly, that the
release be cleaned up promptly, and that remedial action be taken by the
responsible party and/or owner of the site to restore the environment to levels
protective of human health and the environment. Generally, the governmental
authorities are empowered to act to clean up and remediate releases and
environmental damage and to charge the costs of such cleanup to one or more of
the owners of the property, the person responsible for the spill, the generator
of the contaminant and certain other parties or to direct the responsible party
to take such action. Such authorities may also impose a tax or other liens to
secure such parties' reimbursement obligations. Environmental laws and
regulations impose strict operational requirements on the performance of certain
aspects of hazardous or toxic substances remedial work. These requirements
specify complex methods for identification, monitoring, storage, treatment and
disposal of waste materials managed during a project. Failure to meet these
requirements could result in substantial fines and other penalties.
 
                                       21
<PAGE>   24
 
     Environmental legislation and regulations have changed rapidly in recent
years, and it is likely that the Company and its subsidiaries will be subject to
even more stringent environmental standards in the future. For example, the
ultimate effect of the regulations to be implemented under the Clean Air Act
Amendments of 1990 (the "Clean Air Act") on the Company and its subsidiaries,
and the actual amount of any capital expenditures required thereby, will depend
on how the Clean Air Act is interpreted and implemented pursuant to regulations
that are currently being developed and on such additional factors as the
evolution of environmental control technologies and the economic viability of
such operations at the time. For these reasons, future capital expenditures for
environmental control facilities cannot be predicted with accuracy; however, one
may expect that environmental control standards will become increasingly
stringent and that the expenditures necessary to comply with them could increase
substantially.
 
     Local, state, federal, foreign and supranational governments and agencies
have also from time to time proposed or adopted other types of laws, regulations
or initiatives with respect to the scrap metal recycling industry. Included
among them are laws, regulations and initiatives intended to ban or restrict the
intrastate, interstate or international shipment of wastes, to impose higher
taxes or fees on certain shipments of waste, or to classify or reclassify
certain categories of non-hazardous wastes as hazardous. Certain local, state,
federal, foreign and international governments and agencies have promulgated
"flow control" or other regulations, which attempt to require that all waste (or
certain types of waste) generated within the jurisdiction in question must go to
certain disposal sites. From time to time legislation is considered that would
enable or facilitate such laws, regulations or initiatives. Due to the
complexity of regulation of the industry and to public and political pressure,
implementation of existing or future laws, regulations or initiatives by
different levels of governments may be inconsistent and are difficult to
foresee.
 
     The principal services of the Company and its subsidiaries are detailed in
and regulated by various permits and licenses governing their scrap metal
recycling operations. Government agencies continually monitor the performance of
a permit or license holder in relation to the terms of its permit or license.
The Company and its subsidiaries' facilities are subject to periodic unannounced
inspection by local, state and federal authorities to ensure compliance with
permit and license terms and applicable laws and regulations. The Company and
its subsidiaries work with the authorities to remedy any deficiencies found
during such inspections. If serious violations are found or deficiencies, if
any, are not remedied, the Company and its subsidiaries could incur substantial
fines and could be required to close a site.
 
     Governmental authorities have a wide variety of powerful administrative
enforcement actions and remedial orders available to them to cause compliance
with environmental laws or to remedy or punish violations of such laws. Such
orders may be directed to various parties, including present or former owners or
operators of the concerned sites, or parties that have or had control over the
sites. In certain instances, fines and treble damages may be imposed. In the
event that administrative actions fail to cure a perceived problem or where the
relevant regulatory agency so desires, an injunction or temporary restraining
order or damages may be sought in a court proceeding. Some laws give private
parties the right, in addition to existing common laws claims, to file claims
for injunctive relief or damages against the owners or operators of the site.
 
     The Company believes that with heightened legal, political and citizen
awareness and concerns, all companies in the scrap metal recycling industry may
be faced, in the normal course of operating their businesses, with fines and
penalties and the need to expend substantial funds for capital projects,
remedial work and operating activities, such as environmental contamination
monitoring, and related activities. Regulatory or technological developments
relating to the environment may require companies engaged in the scrap metal
recycling industry to modify, supplement or replace equipment and facilities at
costs which may be substantial. Because the scrap metal recycling industry has
the potential for discharge of materials into the environment, a material
portion of the capital expenditures by the Company and its subsidiaries is
expected to relate, directly or indirectly, to such equipment and facilities.
Moreover, it is possible that future developments, such as increasingly strict
requirements of environmental laws and regulations, and enforcement policies
will require even more significant capital investments in this regard.
 
     Due to the nature of the scrap metal recycling business, it is possible
that inquiries or claims based upon environmental laws may be made in the future
by governmental bodies or individuals against the Company
 
                                       22
<PAGE>   25
 
and any other scrap metal recycling entities that the Company may acquire. The
location of the Company's facilities in large urban areas may increase the risk
of scrutiny and claims. The Company is unable to predict whether any such future
inquiries or claims will in fact arise or the outcome of such matters.
Additionally, it is not possible to predict the total size of all capital
expenditures or the amount of any increases in operating costs or other expenses
that may be incurred by the Company to comply with the environmental
requirements applicable to the Company and its operations, or whether all such
cost increases can be passed on to customers through product price increases.
Moreover, environmental legislation has been enacted, and may in the future be
enacted, to create liability for past actions that were lawful at the time taken
but that have been found to affect the environment and to create public rights
of action for environmental conditions and activities. As is the case with scrap
recyclers in general, if damage to persons or the environment has been caused,
or is in the future caused, by hazardous materials activities of the Company or
its subsidiaries, the Company or its subsidiaries may be fined and held liable
for such damage. In addition, the Company and such subsidiaries may be required
to remedy such conditions and/or change procedures. Thus, there can be no
assurance that potential liabilities, expenditures, fines and penalties
associated with environmental laws and regulations will not be imposed on the
Company in the future or that such liabilities, expenditures, fines or penalties
will not have a material adverse effect on the Company.
 
     In addition, public interest groups, local citizens, local municipalities
and other persons or organizations may have a right to seek relief from court
for purported violations of law. In some jurisdictions, recourse to the courts
for individuals under common law principles such as trespass or nuisance have
been or may be enhanced by legislation providing members of the public with
statutory rights of action to protect the environment. In such cases, even if a
scrap metals recycling facility is operated in full compliance with applicable
laws and regulations, local citizens and other persons and organizations may
seek compensation for damages caused by the operation of the facility. In some
cases, the operation of scrap metal recycling facilities is subjected to
heightened public scrutiny because of residential or other non-industrial
property uses that have developed around such facilities. So-called "Not In My
Backyard" ("NIMBY") grass roots community opposition to such facilities can
materially interfere with such facilities' on-going operations and growth.
 
  SIGNIFICANT POTENTIAL ENVIRONMENTAL LIABILITY
 
     General
 
     The Company and its subsidiaries are subject to potential liability and may
also be required from time to time to clean up or take certain remediation
action with regard to sites currently or formerly used in connection with their
operations. Furthermore, the Company and its subsidiaries may be required to pay
for all or a portion of the costs of clean up or remediation at sites the
Company and its subsidiaries never owned or on which they never operated if they
are found to have arranged for transportation, treatment or disposal of
pollutants or hazardous substances on or to such sites. The Company and its
subsidiaries are also subject to potential liability for environmental damage
that their assets or operations may cause nearby landowners, particularly as a
result of any contamination of drinking water sources or soil, including damage
resulting from conditions existing prior to the acquisition of such assets or
operations. Any substantial liability for environmental damage could materially
adversely affect the operating results and financial condition of the Company,
and could materially adversely affect the marketability and price of the
Company's stock. Risk factors include the following:
 
     Incompleteness of Site Investigations
 
     As part of its pre-transaction "due diligence" investigations, the Company
typically hires an environmental consulting firm to conduct transaction screen
reviews, or Phase I and/or Phase II site assessments of the sites owned or
leased by particular acquisition or merger candidates (the "Pre-Transaction Site
Assessments"). However, such Pre-Transaction Site Assessments have not covered
(and will not in the future cover) all of the sites owned or leased by the
companies which are acquired by or merge with the Company or its subsidiaries.
Moreover, such Pre-Transaction Site Assessments which have occurred have not
been designed or expected (and will not in the future be designed or expected)
to disclose all material contamination that may be present. For example, the
Company does not include soil sampling or core borings
 
                                       23
<PAGE>   26
 
as a standard part of its Pre-Transaction Site Assessments, even though such
sampling and core borings might increase the chances of finding contamination on
a particular site. Failure to conduct soil sampling and core borings on a
particular site could result in the Company failing to identify a seriously
contaminated site prior to an acquisition or merger, and could materially
adversely affect the Company.
 
     Likelihood of Contamination at Some Sites
 
     Pre-Transaction Site Assessments of the Company's current subsidiaries'
sites conducted by independent environmental consulting firms have revealed that
some soil, surface water and/or groundwater contamination is likely at certain
of such sites, and have recommended that certain additional investigations and
remediation be conducted. Based upon its review of these reports, the Company
believes that it is likely that contamination exists at certain of its
subsidiaries' sites and that it is likely that additional investigation,
monitoring and remediation will be required at some of the sites. Also based
upon its review of these reports, the Company believes that such contamination
is likely to include, but not be limited to: polychlorinated biphenyls (PCBs);
total petroleum hydrocarbons; volatile organic compounds (VOCs); antimony;
arsenic; cadmium; copper; lead; mercury; silver; zinc; waste oil; toluene; meta-
and para-xylenes; baghouse dust; and/or aluminum dross. The ultimate extent of
such contamination cannot be stated with any certainty at this point, and there
can be no assurance that the cost of remediation will be immaterial. The
existence of such contamination could result in federal, state, local or private
enforcement or cost recovery actions against the Company, possibly resulting in
disruption of Company operations, and substantial fines, penalties, damages,
costs and expenses being imposed against the Company and its subsidiaries.
 
     The Company has supplied its Pre-Transaction Site Assessments to the
management of its subsidiaries, who are responsible for reviewing them,
examining ongoing operations, and taking any necessary steps to achieve and/or
maintain compliance with the environmental laws, including but not limited to
any necessary remedial measures or operational changes. The Company expects to
require future cash outlays as it incurs the actual costs relating to the
remediation of environmental liabilities. No assurance can be provided that such
costs will not be significant. The Company and its subsidiaries expect cash
flows from operations to provide the funds for environmental capital, operating
and remediation expenditures; however, no assurance can be given that such cash
flows will be adequate for this purpose.
 
     Uncertain Costs of Environmental Compliance and Remediation
 
     It must be emphasized that, as a result of certain factors which impact
upon the Company and its subsidiaries' future expenditures to comply with
environmental requirements -- such as new local, state and federal laws and
regulations; the developing nature of administrative standards promulgated under
Superfund and other environmental laws, and changing interpretations of such
laws; uncertainty regarding adequate control levels, testing and sampling
procedures, new pollution control technology and cost benefit analysis based on
market conditions; the incompleteness of information regarding the condition of
certain sites; the lack of standards and information for use in the
apportionment of remedial responsibilities; the numerous choices and costs
associated with diverse technologies that may be used in remedial actions at
such sites; the possible ability to recover indemnification or contribution from
third parties; and the time periods over which eventual remediation may occur --
the estimated costs for future environmental compliance (capital expenditures or
increases in operating costs or other expenditures) and remediation cannot be
accurately predicted and are necessarily imprecise; however, such costs could be
material to future quarterly or annual results of operations of the Company. In
addition to not being possible to predict the amount or timing of future costs
of environmental compliance and remediation, it is not possible to predict
whether or not such costs can be passed on to customers through price increases.
 
     Lack of Environmental Impairment Insurance
 
     The Company and its subsidiaries do not carry environmental impairment
liability insurance. The Company and its subsidiaries operate under general
liability insurance policies, which Company management considers to be adequate
to protect the Company and its subsidiaries' assets and operations from other
risks but which does not cover environmental damage. If the Company and its
subsidiaries were to incur significant
 
                                       24
<PAGE>   27
 
liability for environmental damage not covered by environmental impairment
insurance, or for other claims in excess of its general liability insurance and
umbrella coverage, the Company's financial condition could be materially
adversely affected.
 
     Risks Associated With Certain By-Products
 
     While the majority of the Company's metal products are currently exempt
from applicable solid waste regulations, the scrap metal recycling operations of
the Company's subsidiaries produce significant amounts of by-products.
Heightened environmental risk is associated with certain of these by-products
For example, the Company's EMCO subsidiary operates a shredder for which the
primary feed materials are automobile hulks and obsolete household appliances.
Approximately twenty percent (20%) of the weight of an automobile hulk consists
of material (shredder fluff) which remains after the segregation of ferrous and
saleable non-ferrous metals. Federal environmental regulations require shredder
fluff to pass a toxic leaching test to avoid classification as a hazardous
waste. The Company's EMCO subsidiary endeavors to have hazardous contaminants
removed from the feed material prior to shredding and as a result the Company
believes the shredder fluff generated is properly not considered a hazardous
waste. Should the laws, regulations or testing methods change with regard to
shredder fluff disposal, the Company and its EMCO subsidiary may incur
additional significant expenditures.
 
     Potential Superfund Liability
 
     The Company's Reserve subsidiary has received a notice from the United
States Environmental Protection Agency (the "EPA") that Reserve and numerous
other parties are considered potentially responsible parties (a "PRP") and may
be obligated under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("Superfund" or "CERCLA") to pay a portion of the cost of
remedial investigation, feasibility studies and ultimately remediation to
correct alleged releases of hazardous substances at the Standard Scrap
Metal/Chicago International Exporting Removal Action Site. Superfund may impose
joint and several liability for the costs of remedial investigations and actions
on the entities that arranged for disposal of certain wastes, the waste
transporters that selected the disposal sites, and the owners and operators of
such sites. Responsible parties (or any one of them) may be required to bear all
of such costs regardless of fault, legality of the original disposal, or
ownership of the disposal site. Based upon its analysis of the situation, the
management of Reserve currently does not expect such potential liability to be
in excess of $100,000.
 
     Unregistered Storage Tanks
 
     Underground storage tanks (UST's) exist at several of the Company's
subsidiaries' sites. UST's are subject to various federal, state and local laws
on their operation. In the event a release of regulated product has occurred,
the Company may incur significant costs to investigate and remediate the
release.
 
     Environmental consultants to the Company have reported that an underground
storage tank (UST) located at one of the Company's EMCO subsidiary's yards had
not been reported to the Arizona environmental authorities as required by law.
EMCO, as the lessee, reported the matter to the owner of the property, and
believes that such report is the extent of its obligations with respect to this
matter. However, there can be no assurance that any failure of the owner to
report will not result in liability or the assessment of penalties against the
Company or EMCO. Environmental consultants to the Company have also reported
that an above-ground storage tank at the Company's HouTex subsidiary is required
to be registered but is not yet registered.
 
     Employee Health and Safety Issues
 
     The Company and its subsidiaries are regulated by federal, state and local
agencies responsible for employee health and safety, including OSHA. A total of
two accidental deaths of, and one serious accidental injury to, employees have
occurred at the Company's HouTex and Reserve subsidiaries during the past three
years. Reserve has been fined by OSHA in regard to such incidents. HouTex has
also been cited and fined by
 
                                       25
<PAGE>   28
 
OSHA for alleged failure to establish energy control procedures and employee
training in regard to mobile shearing equipment. No assurance can be given that
potential liabilities of the Company or its subsidiaries in regard to such death
and injuries, or in regard to any future deaths of or injuries to employees of
the Company's subsidiaries, will not be material.
 
     Recommendations of Environmental Consultants
 
     Environmental consultants to the Company have recommended that a variety of
remedial actions be undertaken in regard to its subsidiaries, including: the
sampling of soil, surface and ground water at its various facilities; the
remediation of any existing contamination under applicable regulations; the
development of Spill Prevention Control and Countermeasure Plans ("SPCC"); the
completion of certain actions in regard to Storm Water Pollution Prevention
Plans; the timely completion and/or filing of certain annual reports and
summaries required by governmental agencies; the completion of Oil Discharge and
Response Plans; and the remediation of certain materials suspected of containing
asbestos. If these recommendations were to be not followed by the Company and
its subsidiaries for an indefinite period of time, one or more of the sites
might, potentially, be subject to a governmental enforcement action, the
imposition of fines, penalties and damages, and/or require remediation at some
future time at a cost which the Company cannot guarantee would not be material.
 
  COMPLIANCE HISTORY
 
     The Company's subsidiaries have, in the past, been found not to be in
compliance with certain environmental laws and regulations, and have incurred
fines associated with such violations which have not been material in amount.
The Company's subsidiaries have also paid a portion of the costs of certain
remediation actions at certain sites. No assurance can be given that additional
compliance issues and liabilities will not occur in the future, or that the
fines, penalties, damages and expenses might not be material.
 
EFFECT OF ANTITAKEOVER PROVISIONS OF DELAWARE LAW, THE COMPANY'S CHARTER
DOCUMENTS AND EMPLOYMENT AGREEMENTS
 
     The Company is a corporation governed by the laws of the state of Delaware.
Certain provisions of Delaware law and the charter documents of the Company may
have the effect of delaying, deferring or preventing changes in control or
management of the Company. Specifically, the Company's Board of Directors may
issue shares of Preferred Stock without stockholder approval on such terms as
the Board may determine. The rights of the holders of Common Stock of the
Company are subject to, and may be adversely affected by, the rights of any
Preferred Stock that may be issued in the future. The Company is subject to the
provisions of Section 203 of the Delaware General Corporation Law, which has the
effect of making changes in control of a company more difficult. The Company
entered into employment agreements with Gerard M. Jacobs, T. Benjamin Jennings
and George O. Moorehead. Such agreements provide for certain payments to be made
to such persons in the event of a change of control of the Company. The effects
of the antitakeover protections of Delaware corporate law, the Company charter
documents and these employment agreements could be to make it more difficult for
a third party to acquire, or could discourage a third party from acquiring, a
majority of the outstanding stock of Company.
 
     The Cozzi merger, if consummated, contemplates a shareholder agreement
among Messrs. Jacobs, Jennings and the Cozzi shareholders which could discourage
a third party from acquiring a majority of the outstanding common stock of the
Company. Upon closing of the Cozzi merger, the Company expects to enter into
employment agreements with Albert, Frank and Greg Cozzi as well as new
employment agreements with Gerard M. Jacobs and T. Benjamin Jennings. Prior to
the closing, the Cozzi merger agreement forbids the Company from initiating
discussions or negotiations with third parties or responding to solicitations by
third persons relating to any merger, sale or other disposition of any
substantial part of the Company's assets, without an approval from Cozzi.
 
                                       26
<PAGE>   29
 
                          PART II -- OTHER INFORMATION
 
ITEM 1: LEGAL PROCEEDINGS
 
     The Company's Reserve subsidiary is currently involved in a legal
proceeding in which Reserve Iron & Metal Limited Partnership (a Delaware Limited
Partnership) and P. Joseph Iron & Metal, Inc. (its sole general partner) are
named as defendants. The court in which such proceedings are pending and the
date of the proceeding is: George Abboud v. Reserve Iron & Metal Limited
Partnership, Cuyahoga County Court of Common Pleas, Case No. 304772, George
Abboud v. P. Joseph Iron & Metal, Inc., Cuyahoga County Court of Common Pleas,
Case No. 304772, March 27, 1996.
 
     Claimant George Abboud has alleged that Reserve Iron & Metal, as his
employer, intentionally required Mr. Abboud to work under conditions in which an
injury to Mr. Abboud was substantially certain to occur. Reserve Iron & Metal
has denied this allegation and believes evidence will show that Mr. Abboud
negligently performed his work, which caused his injury. Claimant George Abboud
seeks money damages in an amount in excess of $25,000 to be determined at trial.
No trial date has been set. Discovery is still pending.
 
     Certain of the sellers of Reserve (the "Indemnifying Parties") have agreed
to indemnify the Company and its affiliates against a portion of specified
potential liabilities. As is customary with certain types of potential
liabilities, Reserve's insurance carriers have accepted the defense of Reserve,
but have done so subject to reserving their respective rights to deny coverage
under certain circumstances. Assuming, for hypothetical purposes, that insurance
coverage would not be available or would be inadequate, such potential
liabilities, were they to become actual liabilities, could be significant. Any
amounts payable by the Indemnifying Parties will be funded by reducing the
purchase price note owed by the Company and/or by increasing the exercise price
on warrants issued to such Indemnifying Parties as part of the original terms of
the Purchase Agreement and the ten-year employment agreements, respectively.
With reference to these certain potential liabilities, Reserve has advised the
Company it believes it has adequate insurance coverage and has denied any
liability for these potential liabilities. There can be no assurance, however,
that Reserve will not suffer actual liability or that it will have adequate
insurance to cover the liability and in such case, the Company could be
materially and adversely affected.
 
ITEM 2: CHANGES IN SECURITIES
 
     (c) Sales and/or Issuances of unregistered shares during the three months
ended June 30, 1997: Each of the private placements of common stock described
below was made to a limited number of investors, including accredited investors,
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
 
     On April 15, 1997, Clend Investment, beneficially owned, in part, by Mike
Melnik, a director of the Company, converted $1.0 million of its note payable
into 182,481 shares of unregistered common stock. On May 29, 1997, Ian MacLeod,
a director of the Company, converted $1.0 million of a note payable into 160,000
shares of unregistered common stock.
 
     In April 1997, the Board of Directors approved a private placement of up to
2,025,000 shares unregistered common stock at $7.25 per share (the "Private
Placement"). The Private Placement was fully subscribed and all shares available
for sale have been issued. Five directors of the Company, including Gerard M.
Jacobs, T. Benjamin Jennings, Donald F. Moorehead, Jr., George O. Moorehead and
Harold Rubenstein collectively purchased 260,000 shares in the Private
Placement. A purchaser of 1.0 million shares of unregistered common stock in the
Private Placement, who is not a director or employee, provided consideration
comprised of $5.0 million in cash and a short term note. The note and all
accrued interest was collected on July 3, 1997.
 
     In connection with the Company's acquisition of Reserve on May 1, 1997, the
Company issued warrants to purchase 1.575 million shares of unregistered common
stock, at exercise prices ranging from $3.50 to $9.90 per share (exercise prices
are subject to adjustment). A total of 840,000 of the warrants were issued to
Paul D. Joseph, a Director of the Company.
 
                                       27
<PAGE>   30
 
     In connection with the Company's acquisition of Isaac on June 23, 1997, the
Company issued 1,942,857 shares of unregistered common stock valued at $21.1
million and warrants to purchase 462,500 shares of unregistered common stock at
exercise prices ranging from $10.80 to $11.70 per share. A total of 540,856
shares of the unregistered common stock and all 462,500 warrants were issued to
George A. Isaac, III, a director of the Company.
 
     On June 23, 1997, the Company and George A. Isaac III entered into a 5 year
employment agreement whereby warrants to purchase 76,923 shares of unregistered
Common stock were issued at an exercise price of $13.00 per share. Also, the
Company granted Mr. Isaac warrants to purchase 287,500 shares of unregistered
common stock at an exercise price of $11.70 per share in consideration for
entering into a non-compete agreement which extends 3 years beyond the final
date of employment.
 
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
 
     (a) Exhibits
 
          See Exhibit Index
 
     (b) Reports on Form 8-K
 
          The following reports on Form 8-K were filed during the first quarter
     of fiscal 1998:
 
          (1) Form 8-K dated April 30, 1997 reporting the terms of the Reserve,
     Cozzi and Proler acquisitions.
 
          (2) Amendment Number 2 on Form 8-K on April 26, 1997, dated January 1,
     1997, to provide interim financial statements and pro forma financial
     information relating to the acquisition of the MacLeod Companies.
 
          (3) Amendment Number 2 on Form 8-K on April 26, 1997, dated January 7,
     1997, to provide interim financial statements and pro forma financial
     information relating to the acquisition of the HouTex Metals Company, Inc.
 
          (4) Form 8-K on May 15, 1997, dated May 1, 1997, disclosing the terms
     of the acquisition agreement with Reserve Iron & Metal, L.P.
 
          (5) Form 8-K dated June 2, 1997 reporting the signing of a definitive
     merger agreement with Cozzi Iron and Metal.
 
          (6) Form 8-K on July 8, 1997, dated June 23, 1997, disclosing the
     terms of the acquisition agreement with the Isaac Group.
 
                                       28
<PAGE>   31
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          METAL MANAGEMENT, INC.
 
                                          By:     /s/ GERARD M. JACOBS
                                            ------------------------------------
                                                      Gerard M. Jacobs
                                                  Director, President and
                                                  Chief Executive Officer
 
                                          By:   /s/ T. BENJAMIN JENNINGS
                                            ------------------------------------
                                                    T. Benjamin Jennings
                                              Director, Chairman of the Board
                                               and Chief Development Officer
 
                                          By:      /s/ ROBERT C. LARRY
                                            ------------------------------------
                                                      Robert C. Larry
                                                  Vice President, Finance
                                                and Chief Financial Officer
 
                                          Date: August 14, 1997
 
                                       29
<PAGE>   32
 
                             METAL MANAGEMENT, INC.
 
                                 EXHIBIT INDEX
 
NUMBER AND DESCRIPTION OF EXHIBIT
---------------------------------
 2.1  Purchase Agreement, dated as of March 10, 1997, between
      Registrant and BancBoston Ventures, Inc. (incorporated by
      reference to Exhibit 2.1 of the Registrant's report on Form
      8-K dated May 15, 1997).

 2.2  Purchase Agreement, dated as of January 17, 1997, among
      Registrant, P. Joseph Iron & Metal, Inc., the sole general
      partner of Reserve Iron & Metal Limited Partnership, and
      Paul D. Joseph, Steven Joseph and Scott Joseph (incorporated
      by reference to Exhibit 2.2 of the Registrant's report on
      Form 8-K dated May 15, 1997).

 2.3  First Amendment to Purchase Agreement, dated as of March 6,
      1997, among Registrant, P. Joseph Iron & Metal, Inc., the
      sole general partner of Reserve Iron & Metal Limited
      Partnership, and Paul D. Joseph, Steven Joseph and Scott
      Joseph (incorporated by reference to Exhibit 2.3 of the
      Registrant's report on Form 8-K dated May 15, 1997).

 2.4  Second Amendment to Purchase Agreement, dated May 1, 1997,
      among Registrant, P. Joseph Iron & Metal, Inc., the sole
      general partner of Reserve Iron & Metal Limited Partnership,
      and Paul D. Joseph, Steven Joseph and Scott Joseph
      (incorporated by reference to Exhibit 2.4 of the
      Registrant's report on Form 8-K dated May 15, 1997).

 2.5  Merger agreement dated May 16, 1997 among the Registrant,
      CIM Acquisition, Co., Cozzi Iron & Metal, Inc., Albert A.
      Cozzi, Frank J. Cozzi and Gregory P. Cozzi (sole
      shareholders of Cozzi) (incorporated by reference to Exhibit
      2.10 of the Registrant's report on Form 10-K for the year
      ended March 31, 1997).

 2.6  Form of Stockholders Agreement for Metal Management Inc.
      (incorporated by reference to Exhibit 2.11 of the
      Registrant's report on Form 10-K for the year ended March
      31, 1997).

 2.7  Purchase Agreement -- Common Stock of The Isaac Corporation,
      Ferrex Trading Corporation, Paulding Recycling, Inc. and
      Briquetting Corporation of America and Plan of Merger By and
      Among Registrant, Isaac Acquisition Corporation and Ferrex
      Trading Corporation, dated June 23, 1997 (incorporated by
      reference to Exhibit 2.1 of the Registrant's report on Form
      8-K dated July 8, 1997).

 3.1  Amended and Restated Bylaws, as amended through May 24, 1997
      (incorporated by reference to Exhibit 3.1 of the
      Registrant's report on Form 10-K for the year ended March
      31, 1997).

 3.2  Certificate of Designations, Preferences and Rights of
      Series A Convertible Preferred Stock of the Registrant.

 4.1  Securities Purchase Agreement, dated August 8, 1997, between
      the Registrant and Proprietary Convertible Investment Group,
      Inc. and Advantage Fund Limited.

 4.2  Registration Rights Agreement, dated August 8, 1997, between
      the Registrant and Proprietary Convertible Investment Group,
      Inc. and Advantage Fund Limited.

10.1  Employment Agreement dated May 1, 1997 between the
      Registrant and Paul D. Joseph (incorporated by reference to
      Exhibit 10.19 of the Registrant's report on Form 10-K for
      the year ended March 31, 1997).

10.2  Employment Agreement dated June 23, 1997 between the
      Registrant and George A. Isaac, III (incorporated by
      reference to Exhibit 2.2 of the Registrant's report on Form
      8-K dated July 8, 1997).

10.3  Credit Agreement among The Isaac Corporation, Ferrex Trading
      Corporation, Paulding Recycling, Inc. and Briquetting
      Corporation of America and BT Commercial Corporation, dated
      as of June 23, 1997 (incorporated by reference to Exhibit
      2.3 of the Registrant's report on Form 8-K dated July 8,
      1997).

11.1  Computation of Net income per share.

27.1  Financial Data Schedule.



 
                                       30