SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K


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

For the Fiscal Year Ended       December 31, 2001
                          ---------------------------------------

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [No fee required]

For the transition period from        N/A       to    N/A
                               ----------------    -----------

Commission File Number

                               ISG RESOURCES, INC.
             (Exact name of Registrant as specified in its charter)

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

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

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

Securities registered pursuant to Section 12(b) of the Act:

          Title of each class      Name of each exchange on which registered
          -------------------      -----------------------------------------
                 None                              None

           Securities registered pursuant to Section 12(g) of the Act:
                                      None
                                (Title of Class)

         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__

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ _ _ ]

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant on March 18, 2002 was approximately $0.

         The number of shares of Common Stock  outstanding on March 18, 2002 was
100 shares.

         Documents Incorporated by Reference:  See Item 14(a) List of Exhibits


<PAGE>


                                     PART I

Item 1.       Business

General Development of Business

ISG  Resources,  Inc., a Utah  corporation  (the  "Company"),  is a wholly owned
subsidiary  of  Industrial  Services  Group,  Inc.  ("ISG").  ISG was  formed in
September 1997 and acquired the stock of JTM Industries, Inc. ("JTM") on October
14,  1997.  In 1998,  JTM  acquired  the  stock of  Pozzolanic  Resources,  Inc.
("Pozzolanic"), Power Plant Aggregates of Iowa, Inc. ("PPA"), Michigan Ash Sales
Company, d.b.a. U. S. Ash Company,  together with two affiliated companies, U.S.
Stabilization,  Inc. and Flo Fil Company, Inc., (collectively,  "U.S. Ash"), and
Fly Ash Products,  Inc. ("Fly Ash  Products").  Effective  January 1, 1999, JTM,
Pozzolanic,  PPA, U.S. Ash, Fly Ash Products and their wholly owned subsidiaries
merged with and into the Company (the  "Merger").  Pneumatic  Trucking,  Inc., a
wholly owned  subsidiary of Michigan Ash Sales Company,  was not merged into the
Company.  Consequently,  Pneumatic  became  a  wholly  owned  subsidiary  of the
Company.

The  Company  financed  the  acquisitions   through  the  private  placement  of
$100,000,000 of 10% Senior  Subordinated  Notes due 2008. In connection with the
private placement of the Senior Subordinated Notes, the Company entered into the
Registration Rights Agreement pursuant to which the Company was required to file
an exchange  offer  registration  statement  with the  Securities  and  Exchange
Commission that was declared effective by the Securities and Exchange Commission
on September 4, 1998.

In 1999, the Company  acquired the stock of Best Masonry & Tool Supply ("Best"),
Mineral  Specialties,  Inc.  ("Specialties"),  Irvine Fly Ash, Inc.  ("Irvine"),
Lewis  W.  Osborne,   Inc.   ("Osborne"),   United  Terrazzo  Supply  Co.,  Inc.
("Terrazzo"),  and  Magna  Wall,  Inc.  ("Magna  Wall")  and  sold  all  of  the
outstanding stock of Pneumatic.

In 2000,  ISG  Canada  Limited,  Inc.  ("ISG  Canada")  was  formed and became a
wholly-owned  foreign  subsidiary  of  the  Company,  with  fly  ash  operations
beginning  in  the  second  half  of  2000.  The  Company  acquired  all  of the
partnership  interest of Don's Building  Supply L.L.P.  ("Don's"),  acquired the
stock of Palestine  Concrete  Tile  Company,  Inc.  ("Palestine"),  and acquired
certain  fixed  and  intangible   assets  from  Hanson   Aggregates  West,  Inc.
("Hanson").

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

The purchase prices of the above  acquisitions were allocated based on estimated
fair values of assets and  liabilities at the respective  dates of  acquisition.
Goodwill  resulting  from  the  difference  between  the  purchase  prices  plus
acquisition costs and the fair value of the net assets of the companies acquired
in  1999  totaled  approximately   $20,073,000.   Goodwill  resulting  from  the
difference between the purchase prices plus acquisition costs and the fair value
of the net  assets  of the  companies  acquired  in 2000  totaled  approximately
$19,297,000.  All recorded goodwill is being amortized on a straight-line  basis
over 20 to 25 years. The Company's core business is based on long-term materials
management  contracts with power  producing  utilities and  industrial  clients.
Typical contract terms for coal combustion  products (CCP) management  contracts
are  from  five to  fifteen  years,  with  most  contracts  being  renewed  upon
expiration.  The Company's business strategy has been to pursue key acquisitions
with the primary intent of acquiring  specific  materials  management  contracts
controlled by the entity  acquired as well as complement  the Company's  planned
geographic expansion. Therefore, the contracts recorded as intangible assets are
essential  to  the  continuing  success  of the  Company.  The  Company  devotes
significant  resources to maintaining and expanding these long-term  contractual
relationships. In addition, the Company is focused on serving its client base by
enhancing  the Company's  existing  product  offerings  with the benefits of its
research and development programs,  by cross-marketing  patented products in new
geographical markets, and by continuing to develop new applications for CCPs and
related industrial materials.

Description of Business

The Company  operates  two  principal  business  segments:  CCP  management  and
manufacturing  products  distribution.   See  Footnote  8  in  the  consolidated
financial  statements and notes thereto  included  elsewhere  herein for segment
reporting information.

The CCP division  purchases,  removes and sells fly ash and other by-products of
coal   combustion  to  producers   and  consumers  of  building   materials  and
construction related products throughout the United States. Based upon available
information,  the Company believes it is now the largest manager and marketer of
CCPs in  North  America.  The  Company  enters  into  long-term  CCP  management
contracts,  primarily  with  coal-fired  electric  generating  utilities.  These
utilities are required to manage, or contract to manage, CCPs in accordance with
state and federal environmental  regulations.  In addition, the Company provides
similar materials management services for other industrial clients.

The  manufacturing  products  division  manufactures  and  distributes  building
materials  to  residential  and  commercial  contractors,  primarily  in  Texas,
California,  Georgia, Florida and Louisiana. While the 1998 acquisition strategy
focused on geographical  diversification of the CCP division,  the 1999 and 2000
acquisition  strategy  focused on vertical  integration  into selected  building
products  manufacturers  (especially  in key  geographical  areas) that  utilize
significant  amounts of CCPs as raw materials in their  products.  This strategy
has  secured  an outlet  for a  portion  of  previously  unutilized  CCPs  while
promoting the  increased  use of CCPs as components of building  products in the
future.  Unlike most of its competitors,  the Company has dedicated  significant
resources to the acquisition and development of new  technologies for the use of
CCPs in building products applications.

Principal Products and their Markets by Division

CCP Division

The Company  uses CCPs and other  industrial  materials  to make  products  that
primarily  replace  manufactured or mined  materials,  such as portland  cement,
lime,  agricultural  gypsum, fired lightweight  aggregate,  granite aggregate or
limestone.  The  Company's  focus  on  CCPs  and  related  industrial  materials
development  created a variety  of  applications,  such as  fillers  in  asphalt
shingles and related  products,  that extend beyond the traditional uses of CCPs
and related  industrial  materials.  For purposes of this report,  the Company's
CCP-related  products are broken down into traditional  products and value-added
products.  Traditional  products  are those  products  that the  Company and its
competitors within the industry historically produce with the CCPs.  Value-added
products  are  products  that have been  developed  to utilize  CCPs and related
materials,  which in the past were deemed  waste  products  and usually  sent to
landfills.

The primary  CCPs  managed by the Company are fly ash and bottom ash. Fly ash is
the  fine  residue  and  bottom  ash is the  fraction  composed  of the  heavier
particles that result from the combustion of coal. Utilities firing boilers with
coal first  pulverize the coal and then blow the pulverized  coal into a burning
chamber  where it  immediately  ignites to heat the boiler  tubes.  The  heavier
bottom ash falls to the bottom of the burning  chamber while the lighter fly ash
remains  suspended in the exhaust gases.  Before leaving the exhaust stack,  the
fly ash particles are generally  removed by an electrostatic  precipitator,  bag
house or other collection method. The bottom ash is hydraulically  conveyed to a
collection area, while the fly ash is pneumatically conveyed to a storage silo.

Fly ash is a pozzolan  that,  in the  presence of water,  will  combine  with an
activator  (lime,  portland  cement  or kiln  dust)  to  produce  a  cement-like
material.   It  is  this  characteristic  that  allows  fly  ash  to  act  as  a
cost-competitive  substitute  for other  more  expensive  cementitious  building
materials.  Concrete manufacturers can typically use fly ash as a substitute for
15% to 40% of their cement requirements, depending on the quality of the fly ash
and the  proposed  end-use  application  for the  concrete.  In  addition to its
cost-benefit,  fly ash provides  greater  structural  strength and durability in
certain  construction  applications,  such as road  construction.  Bottom ash is
utilized  as an  aggregate  in  concrete  block  construction  and for road base
construction.

According  to  the  American  Coal  Ash   Association   (the  "ACAA"),   of  the
approximately  108 million tons of CCPs that were generated in the United States
during 2000, fly ash accounted for  approximately  58%, bottom ash accounted for
approximately 16% and flue gas  desulphurization  waste ("scrubber  sludge") and
boiler slag accounted for approximately 26%.

Traditional  Products and  Applications  Traditional CCP products are industrial
materials  that  generally  require  minimal  processing or additives to fulfill
their intended  applications.  The Company typically  provides these products to
its customers directly from its clients' sites or from terminals owned or leased
by the Company.  The Company has been successful in selling significant portions
of the CCPs and other  industrial  materials it manages to  traditional  markets
(e.g., the use of fly ash as pozzolan in portland cement concrete and the use of
bottom ash as a lightweight aggregate).

The following is a brief description of the CCP division's traditional products:

Fly ash is used as (i) a  pozzolan  to  partially  replace  portland  cement  in
ready-mix concrete and concrete products (e.g., concrete pipe); (ii) an additive
to portland cement to produce I-P cement and blended cements;  (iii) an additive
in downhole cementing of oil wells; (iv) a primary constituent in flowable grout
used to fill voids in trenches,  under concrete slabs and underground tanks, and
pipe  voids;  and (v) raw  feed  stock in the  manufacture  of  portland  cement
clinker.

Bottom ash is used as (i) raw feed stock for the  manufacture of portland cement
clinker;  (ii) a lightweight  aggregate for concrete and concrete block; (iii) a
filler in the  manufacture  of clay brick;  and (iv) an  aggregate  in asphaltic
concrete. It can also be mixed with salt as an additive for ice and snow control
or used as backfill for pipe bedding and dry bed material.

Fluidized bed ash is used (i) for stabilization in mud drying; (ii) as a reagent
to solidify liquid wastes in petrochemical and related areas; and (iii) for soil
stabilization to create more solid foundations for vertical construction.

Scrubber  sludge is used as cement  stabilized  road  base  material  and can be
processed to be used in wallboard manufacture.

Boiler slag is used for a variety of  applications,  including  roofing shingles
and cement.

Value-added  Products and  Applications  To diversify its product  offerings and
ensure that it productively uses the CCPs, the Company also develops and markets
value-added  products made from CCPs and related  industrial  materials,  and it
continues  to expand the  breadth of markets  for these  products.  Through  its
research and development program and certain licenses, the Company has broadened
the end use market for CCPs and  related  industrial  materials  by  introducing
several proprietary products made from previously  non-marketable materials. The
Company sells and distributes its products to cement plants,  ready-mix concrete
plants, road contractors,  roofing shingle producers,  soil stabilization firms,
utility  companies  and  waste  management  firms.  Several  of its  proprietary
products  have been utilized by  government  agencies such as the  Department of
Transportation, the Federal Aviation Administration, the Army Corps of Engineers
and the U.S. Bureau of Mines.

The following is a list of the Company's value added products and applications:

Powerlite(R)  is a pyrite free bottom ash which,  when processed by the Company,
produces a high quality aggregate for the concrete block industry.  Powerlite(R)
has exhibited superior flow characteristics,  often making it more economical to
use than other  aggregates.  The Company has provided  customers in the Atlanta,
Georgia  area with more than two  million  tons of  Powerlite(R)  in the past 15
years.

SAM(TM)  (Stabilized  Aggregate  Material)  is  manufactured  by the  Company by
combining several  industrial  materials  received from clients and transforming
them into a well-graded  replacement for natural aggregate.  SAM(TM) can be used
in many other applications, such as road base, sub-base, parking areas, drainage
media and rip-rap.

Pozzalime(TM)/Envira-Cement(R) are the Company's lime-based pozzolanic materials
that  contain  significant  moisture-reduction  properties.   Pozzalime(TM)  and
Envira-Cement(R)  have been  successfully  utilized in  road-base  construction,
road-sub-base  construction,  chemical fixation,  soil  stabilization,  moisture
reduction, mud drying, pH adjustments, acid neutralization, sewage treatment and
mine reclamation.

Gypcem(R) is the Company's processed gypsum,  registered and exclusively sold by
the Company, that has characteristics  allowing it to be used in the manufacture
of portland cement.  With  considerable  handling  capabilities,  the product is
often more economical to use than conventional  mined gypsum.  Under a long-term
contract with Dupont,  the Company designed,  constructed and currently operates
an on-site  processing  facility for the 100,000 tons of Gypcem(R) produced each
year.

Peanut Maker(R) is a gypsum landplaster  developed by the Company for use in the
agricultural  market  as a soil  enhancer.  The  Company  has  transformed  this
previously   unmarketable  material  into  Peanut  Maker(R),  a  beneficial-use,
value-added  product.  Peanut  Maker(R)  has been used on over  60,000  acres of
peanut  crops  annually  for the past 10  years.  It  continues  to be in demand
because of its high calcium content.  The disassociation rate afforded by Peanut
Maker(R)  makes  it more  effective  and  economical  than  traditional  calcium
supplements.  It has been a  recommended  source of calcium by the  Virginia and
North Carolina Extension Services since its invention.

ALSIL(R)/Orbaloid(R)  are  industrial  fillers  developed  by the  Company  from
processed  client-generated  materials  for use in filler  applications  such as
roofing shingles,  carpet and mat backing, and ceramic products. The Company has
two U.S.  patents  and one  Canadian  patent for the use of  ALSIL(R) in roofing
shingles.  The Company has  secured  multiple  contracts  with  various  shingle
manufacturers,  with one  agreement  extending  for the  life of the  customer's
manufacturing plant.

Flexbase(TM)  is a mixture  of fly ash and  scrubber  sludge  which the  Company
processes to form a road-base material.

Stabil-Fill(TM) is a lime-stabilized  fly ash that the Company has developed and
sold  for use as a fill  material  in  lieu of  natural  borrow  materials.  The
resulting  mixture  is  lightweight  and  compacts  with  standard  construction
equipment.  Applications include commercial or industrial property  development,
roadway embankment and subgrade for parking lots, airport runways,  golf courses
or driving ranges, and athletic fields.

Redi-Fill(TM)/Flo  Fil(R) are the  Company's  processed  fly ash and bottom ash,
sold for use as a structural fill and ready-mixed flowable fill.

C-Stone(R) is a crushed  manufactured  aggregate  produced from Class C fly ash.
Possessing cementitious properties,  C-Stone is an economical base material used
in a variety of paving operations, including feedlots, storage pads, and machine
shed floors.

In  addition to these value added  products,  the Company  uses its  traditional
products for non-traditional  applications.  Non-traditional applications of fly
ash include:  (i) use as mineral  filler to replace fine aggregate in bituminous
coatings for roads (asphalt surface);  (ii) for stabilization of soils with high
plasticity  or low load  bearing  abilities;  (iii) to  produce  a filler  grade
material for a variety of products; and (iv) as a binder with calcium sulfate to
replace limestone road base materials.

Manufacturing Products Division

The manufacturing  products division operates principally in Texas,  California,
Georgia  and  Florida.   Its  products   include  standard  masonry  and  stucco
construction materials and supplies, as well as packaged products, many of which
incorporate technologies acquired or developed by the Company. Selected packaged
products  sold  today  based on the  Company's  owned  and  leased  technologies
include:

MagnaWall(R) One Coat Stucco
MagnaWall(R) Three Coat Stucco
Best One Coat Stucco
Best  Masonry(TM)  Cement Type N
Best Scratch and Brown Stucco Cement
Best White Masonry Cement Type N
Best  Masonry(TM)  Cement Type S
Best Mortar Cement Type N
Best Finish Stucco
Hill Country Mortar(TM) Type N

MagnaWall stucco brands feature  national  building code approvals and sales are
increasing  nationwide through  distributorships and private label manufacturing
arrangements.

New Product Development

New product development costs consist of scientific research and development and
market  development  expenditures.  Expenditures  of $2,092,124,  $1,837,076 and
$1,796,032 for the years ended December 31, 2001, 2000, and 1999,  respectively,
were made for research and  development  activities  covering  basic  scientific
research and  application of scientific  advances to the  development of new and
improved  products  and  processes.  Expenditures  of  $215,886,  $494,434,  and
$370,186 for the years ended  December 31, 2001,  2000,  and 1999  respectively,
were  made for  market  development  activities  related  to  promising  new and
improved  products and  processes  identified  during  research and  development
activities.  The Company expenses all new product and market  development  costs
when they are incurred.

In an effort to maximize the  percentage  of products  marketed to end users and
minimize the amount of materials landfilled,  the Company's focused research and
development  efforts have created or caused the Company to acquire the rights to
various new  technologies.  Two of the most promising of these new  technologies
are as follows:

Swiftcrete(TM)  is a  Company-developed  technology to produce a rapid  setting,
high strength  concrete and asphalt repair  material and cement.  The Company is
currently developing applications for the technology in military, homeowner, and
large scale paving and paving repair markets.

Flexcrete(TM) is a Company-developed  fiber reinforced,  non-autoclaved  aerated
concrete that utilizes large volumes of CCPs and requires low energy and capital
cost to produce.  This  technology  produces an aerated  concrete panel or block
with excellent flexural strength, thermal and acoustic insulation properties and
flame  resistance.  It is ideal  for a variety  of  residential  and  commercial
construction applications.

In addition to developing new  technologies  that utilize large volumes of CCPs,
the  Company's  research and  development  program  develops  technologies  that
maintain or improve the quality of CCPs, thereby enhancing their  marketability.
Two of these technologies are:

Carbon fixation is a technology that increases the marketability of fly ash with
high or  unpredictable  levels of residual  carbon.  The  technology is based on
application of a liquid  chemical  additive.  Low capital costs are required for
installation  of  application  equipment.  The company has  exclusive  rights to
market this patented technology within the United States.

Ammonia removal is a Company-developed patented technology that cost-effectively
removes  ammonia from fly ash that has been  contaminated  by pollution  control
devices or natural operating conditions.  The technology is based on application
of a dry chemical  additive.  Low capital costs are required for installation of
application equipment.

Competitive Business Conditions

Coal is the largest  indigenous fossil fuel resource in the United States,  with
current U.S. annual coal production in excess of one billion tons. Approximately
80% of coal  produced is used for  electric  power  generation,  and its use has
grown by  almost  25% over the last  decade.  The  combustion  of coal  provides
cost-effective  electricity  generation,  but  results in a high  percentage  of
residual material,  which serves as the "raw material" for the CCP industry. The
industry manages these CCPs and related materials by developing  end-use markets
for certain CCPs and providing  storage and disposal  services for the remainder
of such materials.

In order to sustain its position as a leader in the CCP management industry, the
Company  relies  on  and  continues  to  implement  the  following   competitive
strengths:

Leading  Market  Position.  The  Company  believes  it is a party  to  more  CCP
management  contracts and manages more CCP tonnage than any of its  competitors.
The Company has aggressively  penetrated its service areas and has won contracts
based  on  its  "one-stop"  approach  to  CCP  and  other  industrial  materials
management services.  This approach combines the Company's marketing,  materials
handling and  technological  capabilities to lower the client's cost of managing
CCPs and other  industrial  materials in accordance  with  applicable  state and
federal regulations.

Geographic  Diversification.  The Company believes it is the only company in the
CCP management  industry with a national scope. This national scope provides the
Company with several significant  competitive benefits,  including mitigation of
the effects of cyclical regional  economies and weather  patterns.  In addition,
the Company's  national scope and storage  capabilities will create  incremental
revenue  through  the  ability to shift  products  among  regions to meet market
demand while minimizing transportation costs.

Superior  Transportation and Logistics Network. The Company's national footprint
features a  transportation  and  logistics  infrastructure  that  supports  long
distance  movements  of  CCPs to key  markets,  as  well  as  materials  storage
capabilities  that enhance product  availability and reliability.  These factors
have allowed the Company to develop national purchasing power with railroads and
other freight  transportation  providers and national purchasing  contracts with
major CCP end-users.

Value-Added Products and Services. The Company's new product development efforts
have  broadened  the  end-use  market for CCPs and other  recyclable  industrial
materials.  The Company has successfully  introduced new patented or trademarked
products  made from  previously  non-marketable  materials  through  proprietary
processes.   These  product  development  efforts  have  reduced  the  materials
management cost to the Company's  clients and improved the Company's revenue mix
and margins.

Strong Client  Relationships.  At December 31, 2001, the Company had contractual
relationships with most of the largest coal powered electrical  utilities in the
United States, based on total electricity  revenues.  The Company has maintained
long-term contracts with certain utilities since 1978, and experienced a renewal
or extension  rate of greater than 90% since  current  management  completed the
acquisition  of JTM in  1997.  The  Company's  clients  rely  on its  marketing,
materials  handling and technological  capabilities to extend the useful life of
their  landfill  sites by  creatively  managing and marketing a broader range of
CCPs than competitors.

Source and Availability of Raw Materials

The Company's primary raw materials are CCPs. According to the American Coal Ash
Association,  more than  two-thirds  of CCPs  produced in 2000 were  disposed in
landfills,  providing  ample  opportunities  for  continuing  increases  in  CCP
utilization.  As long as the majority of  electricity  generated in this country
comes from the use of coal-fired  generation,  the Company believes it will have
an adequate supply of raw materials.


Electric Utility Deregulation

The process of  electric  utility  deregulation  has slowed  substantially  from
previous years'  predictions.  The impact that full deregulation of the industry
will have on the Company is something that cannot be accurately  projected.  The
major area of impact is to the  individual  source of CCPs that the Company uses
to supply materials and products to various markets.  Deregulation  could result
in some  sources  being put out of  service  because  they are not  economically
competitive.  On the other  hand,  deregulation  efforts  have  spurred  renewed
interest in construction of new coal-fired  electricity generating capacity. The
Company  believes  that no  significant  changes  to the  sources  of CCPs under
contract  will occur.  However,  since this change to the industry  continues to
evolve,  the Company  could be  materially  adversely  affected if major changes
occur to specific sources.

Impact of Clean Air Act Amendments on Coal Consumption

The Federal Clean Air Act of 1970 ("Clean Air Act") and  Amendments to the Clean
Air Act ("Clean Air Act Amendments"), and corresponding state laws that regulate
the emissions of materials into the air,  affect the coal industry both directly
and  indirectly.  The coal  industry  may be directly  affected by Clean Air Act
permitting  requirements  and/or  emissions  control  requirements  relating  to
particulate  matter  (e.g.,  "fugitive  dust").  The coal  industry  may also be
impacted  by  future  regulation  of  fine  particulate   matter  measuring  2.5
micrometers   in  diameter  or  smaller.   In  July  1997,   the  United  States
Environmental  Protective  Agency ("EPA")  adopted new, more stringent  National
Ambient Air Quality Standards  ("NAAQS") for particulate  matter and ozone. As a
result,  states will be required to implement  changes to their  existing  state
implementation  plans to attain  and  maintain  compliance  with the new  NAAQS.
Because electric utilities emit nitrogen oxides,  which are precursors to ozone,
the Company's  utility customers are likely to be affected when the revisions to
the NAAQS are implemented by the states.  State and federal regulations relating
to  fugitive  dust  and  coal  combustion  emissions   regulations  relating  to
implementation  of the new  NAAQS  may  reduce  the  Company's  sources  for its
products.  The  extent  of the  potential  impact  of the new  NAAQS on the coal
industry will depend on the policies and control strategies  associated with the
state  implementation  process  under the Clean Air Act,  as well as on  pending
legislative   proposals  to  delay  or  eliminate   aspects  of  the   standard.
Nonetheless, the new NAAQS could have a material adverse effect on the Company's
financial condition and results of operations.

The Clean Air Act  indirectly  affects the Company's  operations by  extensively
regulating the air emissions of sulfur dioxides and other  compounds  emitted by
coal-fired utility power plants. Title IV of the Clean Air Act Amendments places
limits on sulfur dioxide  emissions from electric power generation  plants.  The
limits set baseline emission  standards for such facilities.  Reductions in such
emissions  will occur in two phases;  the first began in 1995  ("Phase  I"), and
applies only to certain identified facilities and the second began on January 1,
2000 ("Phase II') and will apply to most remaining  facilities,  including those
subject to the 1995  restrictions.  The affected  utilities have been and may be
able to meet these requirements by, among other ways,  switching to lower sulfur
fuels,  installing  pollution  control  devices  such  as  scrubbers,   reducing
electricity  generating  levels or  purchasing or trading  "pollution  credits."
Specific emission sources will receive these credits,  which utilities and other
industrial concerns can trade or sell to allow other units to emit higher levels
of sulfur dioxide.

The Clean Air Act Amendments  also require  utilities,  that are currently major
sources of nitrogen oxides in moderate or higher ozone  nonattainment  areas, to
install reasonably  available control technology for nitrogen oxides,  which are
precursors  of ozone.  In addition,  the EPA  currently  plans to implement  the
recently issued,  stricter ozone standards  (discussed above) by 2003. The Ozone
Transport  Assessment Group ("OTAG"),  formed to make recommendations to the EPA
for addressing ozone problems in the eastern United States,  submitted its final
recommendations  to the EPA in June 1997.  Based on the OTAG's  recommendations,
the EPA  announced a proposal  (the "SIP  call")  that would  require 22 eastern
states to make substantial  reductions in nitrogen oxide  emissions.  Under this
proposal, the EPA expects that states will achieve these reductions by requiring
power plants to make  substantial  reductions in their nitrogen oxide emissions.
Installation of reasonably  available control  technology and additional control
measures  required  under  the SIP call  will  make it more  costly  to  operate
coal-fired utility power plants and, depending on the requirements of individual
state  attainment  plans and the  development of revised new source  performance
standards,  could make coal a less attractive  fuel  alternative in the planning
and  building of utility  power  plants in the future.  Any  reduction in coal's
share of the capacity for power  generation could have a material adverse effect
on the Company's financial condition and results of operations.  The effect such
regulation or other requirements that may be imposed in the future could have on
the coal  industry  in  general  and on the  Company  cannot be  predicted  with
certainty.  No assurance can be given that the  implementation  of the Clean Air
Act Amendments or any future regulatory provisions will not materially adversely
affect the Company.

Unburned  carbon  often  remains  in fly ash in  small  amounts.  Under  certain
conditions, that carbon can interfere with concrete's ability to entrain correct
amounts of air. Concrete  producers often deal with this situation by adding air
entraining  chemicals.  However,  these  chemicals  are  expensive  and  must be
constantly monitored to guard against over or underdosing.

The Company is affected  by the Phase I and Phase II emission  standards  as the
quality of fly ash produced as a result of the utilization of lower sulfur fuels
is reduced.  As utilities  take steps to meet more stringent  emissions  control
guidelines,  residual  carbon  in fly ash  becomes  a  growing  problem  for the
Company.  The Company  cannot fully  utilize this lower  quality fly ash in some
products  and  applications.  Therefore,  the Company has  aggressively  pursued
technology and research and development  activities to develop a carbon fixation
process to treat fly ash that  normally  cannot be used due to its quality.  The
Company's carbon fixation technology,  for which a patent has been applied, uses
a liquid  reagent to coat unburned  carbon  particles and hinder their impact on
the concrete mix. Carbon is not removed,  but its effects on air entrainment are
minimized,  thus allowing concrete producers to use significantly less chemicals
at the job site.  The technology  also renders some ash products  usable for the
first time  without  having any  negative  impact on the quality of the finished
concrete.  The Company is successfully  working with several utilities utilizing
this technology.

The Company has filed a  provisional  patent  application  for a  technology  to
control  ammonia in fly ash.  Ammonia is another  emerging  challenge in the ash
marketing  industry.   As  utilities  implement  more  stringent  air  pollution
controls,  many are treating boiler exhaust gases with ammonia to remove nitrous
oxides.  Some of the  unreacted  ammonia is deposited on fly ash  particles.  To
address this challenge,  the Company's new technology uses a chemical reagent to
mitigate  ammonia  effects.  When water is added to the concrete mix  containing
ammoniated  fly ash, the reagent  converts  ammonia to harmless  compounds.  The
treatment  reagent  can be added and  blended  with the dry fly ash at any point
between the fly ash collection process at the power plant and the final delivery
to  the  concrete  producer.  Reagent  dosage  rates  depend  upon  the  ammonia
concentration.  Reagents  can also be added  directly to the  concrete  mix. The
Company is currently working with two utilities to implement the technology.

Material Quality and Quantity

Coal-fired boilers have been impacted by the Clean Air Act and the Clean Air Act
Amendments,  which  established  specific  emissions  levels  concerning  sulfur
dioxide  (SO2) and  nitrous  oxides  (NO) that each  utility  must  meet.  These
emission  levels have  required  utilities  to undertake  many of the  following
changes:  change  their fuel  source(s),  add  scrubbers to capture SO2, add new
boiler burner systems to control NO, add or modify fuel pulverizers/air handling
systems to control NO,  introduce  flue gas  conditioning  materials  to control
particulate  emissions in conjunction with meeting SO2 emissions  targets and in
some very isolated cases shut down a plant.  Amendments to existing  particulate
matter  standards may require  retrofitting of baghouses to control  particulate
emissions.  All of these  changes  can impact the  quantity  and quality of CCPs
produced at a power plant and can add to the costs of  operating a power  plant.
Further,  inappropriate use of material can result in faulty end products. Since
most of the products  marketed by the Company  typically consist of a mixture of
client-supplied  materials, the Company does not exclusively control the quality
of the final end product,  but shares such control with the  manufacturer of the
ingredient  materials.  Therefore,  there is a risk of liability  regarding  the
quality of materials  and end products  marketed by the Company.  In cases where
the Company is responsible  for  end-product  quality,  such as structural  fill
(where  material  is used to fill a cavity  or  designated  area),  the  Company
depends solely on its own quality assurance / quality control programs.

Dependence on Limited Customers

The Company works with a large number of customers  and has long-term  contracts
with most such  customers.  The  Company's  core  business is based on long-term
materials  management  contracts with power producers and industrial clients. As
of December 31, 2001, the Company had over 101 materials  management  contracts,
40 of which  generated more than $1.0 million of annual  revenues each.  Typical
contract terms are from five to fifteen years, with most contracts being renewed
upon  expiration.  The Company is focused on serving its current client base and
plans to aggressively target additional contract  opportunities to increase both
tonnage under management and revenues.

Intellectual Property

The  Company  owns and has  obtained  licenses to various  domestic  and foreign
patents  and  trademarks  related to its  products  and  processes.  While these
patents  and  trademarks  in  the  aggregate  are  important  to  the  Company's
competitive  position, no single patent or trademark is material to the Company.
The Company's license  agreements  generally have a duration that coincides with
the patents covered thereby.

Government Approval

None.

Effect of Existing or Probable Government Regulation

See discussion  above under the headings  "Impact of Clean Air Act Amendments on
Coal Consumption" and "Material Quality and Quantity".

Cost of Compliance with Environmental Laws

None.

Employees

The Company has a total of 734 employees, of which 713 are full-time employees.

Item 2.       Properties

The Company  operates  its  corporate  headquarters  in Salt Lake City,  Utah in
offices leased under a three-year  lease expiring in July 2002. The total amount
of leased space in the corporate  headquarters is 12,202 square feet. Due to the
Company's national scope of operations, it has a number of other properties used
in its operations.  The following table sets forth certain information regarding
the Company's other principal facilities as of December 31, 2001:
<TABLE>
<CAPTION>

                                                                               Lease
          Location                      Function             Ownership    Termination Date
          --------                      --------             ---------    ----------------
<S>                           <c>                          <c>            <C>
Bay City, MI                  Offices                      Leased         August 31, 2004
Kennesaw, GA                  Offices                      Leased         January 31, 2004
Houston, TX                   Offices                      Leased         August 30, 2004
Pine Bluff, AR                Offices                      Leased         September 30, 2004
Tukwila, WA                   Offices                      Leased         June 30, 2004
Acworth, GA                   Production Facility          Leased         Month to Month
Apex, NV                      Terminal Facility            Leased         July 18, 2020
Carlin, NV                    Terminal Facility            Leased         Month to Month
Delta, UT                     Storage Silos                Leased         Month to Month
Denver, CO                    Terminal Facility            Leased         Month to Month
Doraville, GA                 Terminal Facility            Leased         August 11, 2005
Duluth, GA                    Building Material Store      Leased         Month to Month
Fargo, ND                     Fly Ash Storage              Leased         Month to Month
Fresno, CA                    Terminal Facility            Leased         March 31, 2002
Good Springs, PA              Silo Facility                Leased         Month to Month
Houston, TX                   Production Facility          Leased         July 31, 2004
La Mirada, CA                 Terminal Facility            Leased         January, 31, 2003
Lewisville, Texas             Terminal Facility            Leased         February 28, 2017
Sacramento, CA                Terminal Facility            Leased         February 22, 2003
Salt Lake City, UT            Production Facility          Leased         Month to Month
San Antonio, TX               Production Facility          Leased         May 31, 2004
Stockton, CA                  Terminal Facility            Leased         September 30, 2010
Clinton, TN                   Staging Facility             Owned
Centralia, WA                 Storage Facility             Owned
Dallas, TX - Don's            Production Facility          Owned
Dallas, TX - Palestine        Production Facility          Owned
Franklin, VA                  Staging Facility             Owned
LaMirada, CA                  Production Facility          Owned
Leland, NC                    Transfer Facility            Owned
Ogden, UT                     Storage Facility             Owned
Pacolet, SC                   Terminal Facility            Owned
Palestine, TX                 Production Facility          Owned
Pomona, CA                    Rail Terminal                Owned
San Antonio, TX               Production Facility          Owned
Taylorsville, GA              Lab Facility                 Owned
Winnebago, MN                 Storage Facility             Owned
</TABLE>

Management believes its facilities are in good condition and that the facilities
are  adequate  for its  operating  needs  for  the  foreseeable  future  without
significant modifications or capital investment.

Item 3.       Legal Proceedings

The Company is a  defendant  in various  lawsuits  which are  incidental  to the
Company's  business.  Management,  after  consultation  with its legal  counsel,
believes that any potential liability as a result of these matters will not have
a  material  effect  upon the  Company's  results  of  operations  or  financial
position.

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

None.


                                     PART II

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

The Company's common stock is not publicly traded and is wholly owned by ISG.



<PAGE>


Item 6.       Selected Financial Data

The following table sets forth summary consolidated financial information of the
Company for each of the five years in the period ended  December 31, 2001.  Such
information was derived from the audited  consolidated  financial statements and
notes thereto and should be read in conjunction  with  "Management's  Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  and  the
consolidated financial statements and notes thereto included elsewhere herein.

The selected consolidated financial information for the periods prior to October
14,  1997 set forth below is not  comparable  to  subsequent  periods due to the
step-up  in  basis  resulting  from  the  acquisition  of JTM  by  ISG in  1997.
Additionally,  the  information  set forth  below may not be  comparable  due to
accounting for the 1998, 1999 and 2000 acquisitions using the purchase method of
accounting. Therefore, only information for each acquisition from the respective
acquisition date is included.

<TABLE>
<CAPTION>

                                                                                                 2 1/2 Months  9 1/2 months
                                                                   Years Ended                     Ended        Ended
                                           December 31,  December 31,  December 31, December 31,  December 31,  October 13,
                                               2001           2000         1999        1998        1997          1997
                                               ----           ----         ----        ----        ----          ----
<S>                                           <C>           <C>         <C>         <C>         <C>           <C>
Statement of Income Data:
Revenue                                       $216,231      $180,902    $156,205    $117,293     $12,643       $51,295
Cost  of  products  and  services   sold,
excl. depr.                                    158,228       133,093     108,664      80,116       9,365        40,701
Depreciation and amortization                   15,810        14,954      13,091       9,141         908         5,279
Selling, general and administrative expenses    25,019        26,326      18,962      14,145       1,256         3,633
New product development costs                    2,308         2,332       2,166           -           -             -
Operating income                                14,866         2,672      13,321      13,891       1,114         1,682
Interest expense                                16,968        15,804      13,392       9,338         629         4,160
Net income (loss) before income taxes           (1,626)      (12,749)        285       4,808         517        (2,478)
Net income (loss)                               (2,541)       (9,755)       (362)      2,259         265        (3,090)

Balance Sheet Data:
Working capital (deficiency)                    31,411        24,127       8,972       6,786     (21,648)      (43,594)
Total assets                                   253,819       252,334     220,463     191,732      73,270        58,396
Total debt                                     164,644       165,000     133,500     110,000           -             -
Shareholder's equity                            24,555        27,122      27,162      27,524      25,265         3,623

Other Data:
Cash flows from operating activities            14,711           684      10,204       8,210       1,843           521
Cash flows from investing activities            (5,744)      (35,983)    (33,369)    (86,623)        (19)         (681)
Cash flows from financing activities             1,796        42,315      23,165      75,344       1,189           957
EBITDA (1)                                      31,153        18,010      26,768      23,287       2,054         6,961
EBITDA margin                                    14.4%         10.0%       17.1%       19.9%       16.2%         13.6%
Capital expenditures                             6,422         8,186       8,791       8,574          19           681
Ratio of earnings to fixed charges (2)            .92x          .31x       1.02x       1.42x       1.49x         0.56x
Deficit of earnings to fixed charges            (1,626)      (12,749)          -           -           -        (2,478)

</TABLE>

(1)  EBITDA  represents   earnings  before  interest   expense,   income  taxes,
     depreciation  and  amortization.  EBITDA  should  not be  considered  as an
     alternative  to net income or any other GAAP measure of  performance  as an
     indicator  of the  Company's  performance  or to  cash  flows  provided  by
     operating,  investing or financing activities as an indicator of cash flows
     or a measure of  liquidity.  Management  believes  that  EBITDA is a useful
     adjunct to net income and other  measurements  under GAAP in evaluating the
     Company's  ability  to  service  its  debt  and  is a  conventionally  used
     financial indicator. However, due to possible inconsistencies in the method
     of calculating  EBITDA, the EBITDA measures presented may not be comparable
     to other similarly titled measures of other companies.

(2)  The ratio of earnings to fixed charges is computed by dividing  earnings by
     fixed  charges.  For this purpose,  earnings  include  pre-tax  income from
     continuing  operations plus fixed charges.  Fixed charges include interest,
     whether  expensed or  capitalized,  amortization  of debt  expense and that
     portion of rental expense that is  representative of the interest factor in
     these rentals.


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

The following  discussion and analysis  should be read in  conjunction  with the
consolidated  financial statements and notes thereto of ISG Resources,  Inc. and
its predecessor,  JTM Industries, Inc. and other financial information appearing
elsewhere herein.


General

The Company is a manager and marketer of CCPs in North America. The Company also
manufactures  and distributes  building  materials to residential and commercial
contractors.  The Company  generates  revenues from  marketing and  distributing
products to its customers and providing  materials  management,  engineering and
construction  services to its clients.  The Company was founded in 1997 upon the
acquisition of JTM by ISG (the "JTM Acquisition"). In 1998, the Company acquired
Pozzolanic,   PPA,   the  US  Ash  Group  and  Fly  Ash   Products   (the  "1998
Acquisitions").  In 1999, the Company acquired Specialties and Irvine in the CCP
division and Best,  Osborne,  Terrazzo and Magna Wall in the building  materials
division (the "1999 Acquisitions").

In 2000,  the Company  acquired  Don's and  Palestine in the building  materials
division and Hanson in the CCP division (the "2000 Acquisitions").

The Company's  strategic  objectives  include the  maintenance  and expansion of
long-term  contractual  relationships with electric  utilities,  the increase in
product sales and applications through cross-marketing and vertical integration,
and further technological advances.

Seasonality

The Company's  business is subject to seasonal  fluctuation.  The Company's need
for working capital  accelerates  moderately  during the middle of the year, and
accordingly,  total debt levels  tend to peak in the second and third  quarters,
and decline in the fourth quarter of the year.  The amount of revenue  generated
during  the  middle of the year  generally  depends  upon a number  of  factors,
including  the  level of road and other  construction  using  concrete,  weather
conditions affecting the level of construction, general economic conditions, and
other factors beyond the Company's control.

Results of Operations

Year Ended December 31, 2001 compared to Year Ended December 31, 2000

Product  Revenues.  Product  revenues  increased to $184.2  million in 2001 from
$146.8 million in 2000, an increase of $37.4 million or 25.5%.  This increase is
primarily due to two factors: (1) the revenue added by the Palestine,  Don's and
Hanson  acquisitions;  and (2) internal growth in the CCP division.  The results
from the Palestine  acquistion  were  included in operations  from June 1, 2000,
Don's from March 1, 2000,  and Hanson from  September  15, 2000.  The year ended
December 31, 2001 included a full year of results for these acquisitions. Growth
in the CCP division  included price  increases and growth in certain  regions of
the country from sales to customers.

Service Revenues. Service revenues decreased to $32.1 million in 2001 from $34.1
million in 2000, a decrease of $2.0 million or 5.9%.  This decrease is primarily
due to a decrease in construction related services and other disposal services.

Cost of Products Sold, Excluding Depreciation.  Cost of products sold, excluding
depreciation,  was $135.8 million in 2001 as compared to $108.4 million in 2000,
resulting in cost of products sold, excluding  depreciation,  as a percentage of
product revenues of 73.7% and 73.8% for the respective periods.  Product margins
were  affected by increased  transportation  costs and cost of fly ash offset by
decreased product costs in the MP division as a percentage of revenue.

Cost of Services Sold, Excluding Depreciation.  Cost of services sold, excluding
depreciation  was $22.4  million in 2001 as compared  to $24.7  million in 2000,
resulting in cost of services sold, excluding  depreciation,  as a percentage of
service revenues of 69.8% and 72.4% for the respective periods.  The increase in
service  margins  is the  result  of a sharp  decrease  in  disposal  costs  for
sub-contracted trucking services in 2001, which followed a large increase in the
prior year.

Depreciation and  Amortization.  Depreciation and amortization was $15.8 million
in 2001 as compared  to $15.0  million in 2000,  an increase of $0.8  million or
5.3%. This increase is due primarily to an increase in  amortization  expense of
goodwill related to the 2000 Acquisitions.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative expenses (SG&A) decreased to $25.0 million in 2001 as compared to
$26.3  million in 2000, a decrease of $1.3 million or 4.9%.  This  decrease is a
result of reducing the labor force to become more  efficient in  administration,
and a reduction in the travel and communication  costs. Travel and communication
costs declined from tighter expense control.

New Product  Development.  New product  development  costs consist of scientific
research and development and market development expenditures.  The Company spent
$2.1  million  during  2001  and $1.8  million  during  2000,  on  research  and
development  activities  covering basic  scientific  research and application of
scientific  advances  to  the  development  of new  and  improved  products  and
processes.  The Company  spent $0.2 million and $0.5 million for the years ended
December  31,  2001 and 2000,  respectively,  on market  development  activities
related to promising new and improved  products and processes  identified during
research and development activities.

Interest  Expense.  Interest expense was $17.0 million and $15.8 million in 2001
and 2000, respectively, an increase of $1.2 million or 7.6%. The increase is due
primarily to an increase in the  Company's  outstanding  indebtedness  resulting
from the 2000 Acquisitions offset by a decrease in interest rates.

Income Tax  Expense/Benefit.  Income tax  expense  was $0.9  million in 2001 and
income tax  benefit  was $3.0  million in 2000.  The  increase in the income tax
expense in 2001 is  primarily  due to a decrease in the net loss  before  income
taxes  incurred for the 2001 period which resulted in the Company having taxable
income.  The  difference in the effective  rate as compared to the statutory tax
rate is largely the result of non-deductible goodwill amortization.

Net Income (loss).  As a result of the factors discussed above, the net loss for
2001 was $2.5 million as compared to 2000 net loss of $9.8 million.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Product  Revenues.  Product  revenues  increased to $146.8  million in 2000 from
$120.3 million in 1999, an increase of $26.5 million or 22.0%.  This increase is
primarily due to two factors:  (1) the revenue  added by the 2000  Acquisitions;
and (2)  internal  growth in the CCP  division,  primarily  as a result of price
increases and value growth.

Service Revenues. Service revenues decreased to $34.1 million in 2000 from $35.9
million in 1999, a decrease of $1.8 million or 5.0%.  This decrease is primarily
due to a decrease in construction related services and other disposal services.

Cost of Products Sold, Excluding Depreciation.  Cost of products sold, excluding
depreciation,  was $108.4  million in 2000 as compared to $83.4 million in 1999,
resulting in cost of products sold, excluding  depreciation,  as a percentage of
product revenues of 73.8% and 69.3% for the respective periods.  The decrease in
product  margins as a percent of revenue is  primarily  due to lower  margins on
product  revenues  derived from the 1999 and 2000  Acquisitions  in the building
materials division and an increase in the share of revenue paid to utilities for
materials in the CCP division.

Cost of Services Sold, Excluding Depreciation.  Cost of services sold, excluding
depreciation  was $24.7  million in 2000 as compared  to $25.2  million in 1999,
resulting in cost of services sold, excluding  depreciation,  as a percentage of
service  revenues  of 72.4% and 70.2% for the  respective  periods.  The  slight
decrease in service  margins is primarily  due to an increase in disposal  costs
for sub-contracted trucking services in 2000.

Depreciation and  Amortization.  Depreciation and amortization was $15.0 million
in 2000 as compared  to $13.1  million in 1999,  an increase of $1.9  million or
14.2%. This increase is due primarily to an increase in amortization  expense of
goodwill  related  to the 2000  Acquisitions  and an  increase  in  depreciation
expense  related to new  acquisitions  of property,  plant and equipment  during
2000.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses (SG&A) increased $7.4 million or 38.8% to $26.3 million
in 2000 as compared to $19.0 million in 1999.  This increase is primarily due to
five factors:  (1) a full year of SG&A in 2000 related to the 1999  Acquisitions
as compared  to 1999,  which only  included  SG&A from the  respective  dates of
acquisition  forward;  (2) the  SG&A  added  by the  2000  Acquisitions;  (3) an
increase in total  personnel  costs  associated  with the Company's  self-funded
health  insurance  plan and an  increase  in  incentive  and other  compensation
associated  with the 1999 and 2000  Acquisitions;  (4) an increase in  property,
automobile and general  liability  insurance costs  associated with the 1999 and
2000 Acquisitions; and (5) an increase in sales and marketing efforts.

Unsuccessful  Acquisition  Costs.  Costs of $1.5  million  incurred  related  to
unsuccessful  business  acquisitions  were  charged  to expense in 2000 when the
Company  determined that such  acquisitions  would not occur. No such costs were
expensed in 1999.

On February 24, 1999,  the Company  entered into an option  agreement to acquire
the stock of Tatum  Industries,  Inc.  (Tatum).  As part of that agreement,  the
Company  agreed to loan  Tatum  approximately  $50,000  per month for  operating
expenses and loan servicing.  Tatum's note to the Company accrued interest at 8%
and was payable on demand.  Additionally,  the Company leased Tatum's  building,
transferred  certain  equipment  and  incurred  approximately  $0.1  million  of
leasehold improvements to the property. On October 27, 2000, the Company advised
Tatum that the  Company was  terminating  the option  agreement  and the Company
advised Tatum that the note to the Company, totaling approximately $1.1 million,
would be due and payable on March 1, 2001. In December  2000,  Tatum advised the
Company that they would not be able to repay the note and the Company's  attempt
to purchase the outstanding  stock of Tatum was  unsuccessful.  As a result,  in
2000,  the  Company   expensed   approximately   $1.1  million  in  unsuccessful
acquisition  costs,  which is  included  in the $1.5  million  discussed  above.
However,  the Company  continued  to lease the  building  from Tatum and use the
equipment in its operations.

In 2001, in  conjunction  with the Company's  decision to abandon its production
operations at Tatum's facility, the Company recognized $291,000 as an impairment
loss on the owned assets,  based upon an offer the Company  received to purchase
the assets.  This loss is recognized in operating  income and is included in the
aggregate total of selling,  general and  administrative  expense.  These assets
were sold in December 2001.

New Product  Development.  New product  development  costs consist of scientific
research and development and market development expenditures.  The Company spent
$1.8  million  for  each  of  the  years  ended  December  31,  2000  and  1999,
respectively,  on research and development  activities covering basic scientific
research and  application of scientific  advances to the  development of new and
improved products and processes. The Company spent $0.5 million and $0.4 million
for the  years  ended  December  31,  2000 and  1999,  respectively,  on  market
development  activities  related to  promising  new and  improved  products  and
processes identified during research and development activities.

Interest  Expense.  Interest expense was $15.8 million and $13.4 million in 2000
and 1999,  respectively,  an increase of $2.4 million or 17.9%.  The increase is
due primarily to an increase in the Company's outstanding indebtedness resulting
from the 2000 Acquisitions and an increase in interest rates.

Income Tax  Expense/Benefit.  Income tax  benefit  was $3.0  million in 2000 and
income tax expense was $0.6 million in 1999, resulting in effective tax rates of
23.5% and 227.1%.  The decrease in the  effective  tax rate in 2000 is primarily
due to an increase in the net loss before  income  taxes  incurred  for the 2000
period.  The  difference in the effective  rate as compared to the statutory tax
rate is largely the result of non-deductible goodwill amortization.

Net Income (loss).  As a result of the factors discussed above, the net loss for
2000 was $9.8 million as compared to 1999 net loss of $.4 million.

Liquidity and Capital Resources

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

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

This increase in the funds available to the Company was accomplished through the
addition of a Tranche B feature,  pursuant to which two of the existing  lenders
(the  "Tranche B Lenders")  agreed to provide the  additional  $15.0  million in
funding. No amount is available pursuant to the Tranche B revolving loans unless
all amounts under the Tranche A (existing) revolving loans have been borrowed in
full  and are  outstanding.  Under  the  amended  and  restated  Secured  Credit
Facility,  at the option of the Company,  both the Tranche A Revolving Loans and
the Tranche B Revolving Loans may be maintained as Eurodollar Loans or Base Rate
Loans.

Eurodollar  loans will bear  interest  at a per annum rate equal to the rate per
annum  (rounded  upwards,  if  necessary,  to the  nearest  1/100 of 1  percent)
determined by the  Administrative  Agent to be equal to the quotient by dividing
(a) Interbank  Offered Rate for such Eurodollar Loan for such Interest Period by
(b) 1 minus the Reserve  Requirement  for such Eurodollar Loan for such Interest
Period,  and by then adding  thereto the  applicable  LIBOR  margin  (which is a
percentage  ranging  from 1.75% to 3.5% for the  Tranche A and 1.75% to 2.5% for
the Tranche B,  depending  primarily  upon the Company's  Leverage  Ratio).  All
capitalized terms are defined in the Secured Credit Facility.

Base Rate Loans will bear  interest  at a per annum rate equal to the rate which
is the higher of (a) the  Federal  Funds rate for such day plus  one-half of one
percent  (0.5%) and (b) the Prime rate for such day and by then  adding  thereto
the applicable ABR Margin (which is a percentage ranging from 0.50% to 2.25% for
the Tranche A and 0.50% to 1.25% for the Tranche B depending  primarily upon the
Company's  Leverage  Ratio).  Any change in the Base Rate due to a change in the
Federal Funds Rate or to the Prime Rate shall be effective on the effective date
of such  change.  All  capitalized  terms are as defined in the  Secured  Credit
Facility.

The Company  will pay  certain  fees with  respect to any unused  portion of the
amended and restated Secured Credit Facility.

The amended and  restated  Secured  Credit  Facility  maintains  the term of the
original Secured Credit Facility obtained on March 4, 1998, and is guaranteed by
ISG and existing future subsidiaries of the Company (the  "Guarantors"),  and is
secured by a first priority security interest in all of the capital stock of the
Company  and all of the  capital  stock  of each of the  Guarantors,  as well as
certain present and future assets and properties of the Company and any domestic
subsidiaries.

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

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

At December 31, 2001 the Company had $17.7  million in cash or cash  equivalents
and $64.6 million of the Secured Credit Facility was outstanding, with no amount
being unused and  available.  The Company had working  capital of  approximately
$31.4  million,  an increase of $7.3 million  over the working  capital of $24.1
million as of  December  31, 2000 due to an  increase  in cash,  trade  accounts
receivable,  inventories,  and a decrease in accrued interest, offset in part by
increases in accounts payable,  accrued payroll, and a decrease in an income tax
receivable.  Accounts  receivable and inventories  have increased as a result of
growth in the CCP division,  while the decrease in accrued  interest  represents
decreasing  interest rates. The increase in accounts payable results from growth
in the CCP division.

The Company  intends to make capital  expenditures  over the next several  years
principally to construct storage, loading and processing facilities for CCPs and
to  replace  existing  capital  equipment.  During  2001,  capital  expenditures
amounted to approximately $6.4 million.  Future capital expenditures made in the
ordinary course of business will be funded by cash flow from operations.

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

Contractual Obligations and Commercial Commitments

The Company has various contractual  obligations as outlined by the table below.
The Company's long-term debt consists of a Secured Credit Facility provided by a
syndicate of banks, due in 2003, and of Senior  Subordinated Notes, due in 2008.
The  Company's  operating  lease  obligations   represent  rent  for  buildings,
equipment,  vehicles,  and railcars.  See Notes 4 and 7 in the audited financial
statements for additional information regarding contractual obligations.

<TABLE>
<CAPTION>

Contractual Obligations                                 Payments Due by Period (in thousands)
------------------------------------ --------- --------- ---------- ---------- ---------- ----------- -----------
                                      Total      2002      2003       2004       2005        2006     Thereafter
------------------------------------ --------- --------- ---------- ---------- ---------- ----------- -----------
<S>                                  <C>          <C>      <C>          <C>        <C>         <C>      <c>
Long Term Debt                       $164,644     $   -    $64,644      $   -      $   -       $   -    $100,000
------------------------------------ --------- --------- ---------- ---------- ---------- ----------- -----------
Operating Leases                       30,306     8,457      7,099      4,829      2,761       1,659       5,501
------------------------------------ --------- --------- ---------- ---------- ---------- ----------- -----------
Unconditional Purchase Obligations     42,405     8,043      8,170      6,977      3,063       2,902      13,250
------------------------------------ --------- --------- ---------- ---------- ---------- ----------- -----------
Unconditional Sales Obligations         7,800       720        840        960        960         720       3,600
------------------------------------ --------- --------- ---------- ---------- ---------- ----------- -----------
Other Contractual Obligations           2,990     2,154        759          -          -           -           -
------------------------------------ --------- --------- ---------- ---------- ---------- ----------- -----------
</TABLE>


Critical Accounting Principles and Estimates

In response to the SEC's Release numbers 33-8040  "Cautionary  Advice  Regarding
Disclosure  About  Critical  Accounting   Policies"  and  33-8056,   "Commission
Statement about Management's  Discussion and Analysis of Financial Condition and
Results of  Operations,"  the  Company has  identified  the  following  critical
accounting  policies  that affect the more  significant  judgments and estimates
used  in  the  preparation  of  the  consolidated   financial  statements.   The
preparation  of  the  consolidated   financial  statements  in  conformity  with
accounting  principles  generally  accepted in the United  States  requires  the
Company to make  estimates  and  judgments  that affect the  Company's  reported
amounts  of  assets  and   liabilities,   revenues   and  expenses  and  related
disclosures.  The Company's significant accounting policies are included in Note
2 to the Consolidated Financial Statements.

The Company  evaluates its estimates  and  judgments on an on-going  basis.  The
Company bases its estimates on historical  experience and on assumptions that it
believes to be reasonable under the circumstances.  The Company's experience and
assumptions  form the basis for its judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual results
may  vary  from  what the  Company  anticipates  and  different  assumptions  or
estimates  about the future  could  change its  reported  results.  The  Company
believes the following accounting policies are the most critical to the Company,
in that they are important to the portrayal of its financial statements and they
require the Company's  most  difficult,  subjective or complex  judgments in the
preparation of its consolidated financial statements:

Revenue Recognition

The Company recognizes revenue from the sale of product when persuasive evidence
of a sale  exists,  the product has been  shipped,  the sales price is fixed and
determinable and collection of the resulting  receivable is reasonably  assured.
Revenues are generated from the sales of both product and services.  CCP Product
revenues generally include transportation charges associated with delivering the
material.  Service revenues under long-term contracts are recognized  concurrent
with the removal of the material and are  generally  based on the number of tons
of  material  removed at an  established  price per ton.  Service  revenue  from
construction-related projects are billed on a time and materials basis such that
revenues and costs are  recognized  when the time is incurred and the  materials
are used. Service revenues are incidental to the Company's primary business.

Allowances for Doubtful Accounts

Allowances  for doubtful  accounts are  estimated  at the  individual  operating
divisions based on estimates of losses related to customer  receivable  balances
and reviewed by the corporate  office for  reasonableness.  The Company develops
estimates by using standard quantitative measures based on historical knowledge,
the current economic conditions and, in some cases, evaluating specific customer
accounts for risk of loss.  The  establishment  of reserves  requires the use of
judgment  and  assumptions  regarding  the  potential  for losses on  receivable
balances.  Though the Company  considers  these  balances  adequate  and proper,
changes in economic conditions in specific markets in which the Company operates
could have a material effect on reserve balances required.

Property, Plant and Equipment

Property, plant and equipment acquired as part of the acquisitions were recorded
at  estimated  fair market  value at the dates of the  respective  acquisitions.
Property,  plant  and  equipment  acquired  subsequent  thereto,   renewals  and
betterments are recorded at cost and are  depreciated on a  straight-line  basis
over the  estimated  useful  lives of such assets.  Maintenance  and repairs are
expensed as incurred. Upon sale or retirement, the costs and related accumulated
depreciation are eliminated from property, plant and equipment and any resulting
gain or loss is included in income.  Depreciation is provided over the estimated
useful lives or lease terms, if less, using the straight-line method. Changes in
circumstances such as technological advances,  changes to the Company's business
model or  changes in the  Company's  capital  strategy  can result in the actual
useful lives  differing from the Company's  estimates.  In those cases where the
Company determines that the useful life of property,  plant and equipment should
be shortened,  the Company would  depreciate the net book value in excess of the
salvage  value,  over its  revised  remaining  useful  life  thereby  increasing
depreciation  expense.  See further  discussion  below with regard to impairment
testing.

Impairment  Testing of Long-Lived Assets,  Including Fixed Assets,  Goodwill and
Other Acquired Intangible Assets

The Company has made acquisitions in the past that included a significant amount
of fixed  assets,  goodwill and other  intangible  assets.  The cost of acquired
companies was allocated  first to  identifiable  assets based on estimated  fair
values.  Cost allocated to  identifiable  assets,  including  fixed assets,  are
amortized on a straight-line  basis over the remaining estimated useful lives of
the assets, as determined  principally by the underlying  characteristics of the
assets  acquired,  net of  assumed  liabilities.  Intangible  assets  consist of
goodwill, contracts, patents and licenses, and assembled workforce.

Effective in 2002, as discussed in New Accounting Pronouncements,  goodwill will
no longer be  amortized  but will be subject  to an annual  (or,  under  certain
circumstances, more frequent) impairment test based on its estimated fair value.
Other  intangible  assets will  generally  continue to be  amortized  over their
useful lives and also will be subject to an  impairment  test based on estimated
fair  value.  Estimated  fair  value is  typically  less  than  values  based on
undiscounted  operating earnings because fair value estimates include a discount
factor in valuing future cash flows.  There are many  assumptions  and estimates
underlying  the  determination  of an impairment  loss.  Another  estimate using
different,  but still  reasonable,  assumptions  could  produce a  significantly
different result.  Therefore,  additional impairment losses could be recorded in
the future.  Fixed assets are not included in the new accounting  pronouncement;
thus,  the  fixed  asset  policies  noted  above are not  expected  to change in
adopting the new accounting pronouncement.

Currently,  the Company  assesses the  impairment of fixed assets,  identifiable
intangibles and goodwill  whenever events or changes in  circumstances  indicate
that the carrying value may not be  recoverable.  Factors the Company  considers
important that could trigger an impairment review include the following:

     o    A  significant  underperformance  relative to expected  historical  or
          projected future operating results;
     o    A significant change in the manner of our use of the acquired asset or
          the strategy for our overall business;
     o    A significant negative industry or economic trend;

When  the  Company  determines  that  one or more  of the  above  indicators  of
impairment  exists,  the Company  evaluates the carrying amounts of the affected
assets. The evaluation, which involves significant management judgment, is based
on various analyses  including cash flow and profitability  projections.  To the
extent such  projections  indicate that future  undiscounted  cash flows are not
sufficient to recover the carrying amounts of the related long-lived assets, the
carrying  amount of the  underlying  assets will be reduced,  with the reduction
charged  to  expense,  so that the  carrying  amount  is  equal  to fair  value,
primarily  determined  based on future  discounted cash flows,  using a discount
rate determined by management to be  commensurate  with the risk inherent in the
Company's current business model.

Net intangible  assets,  and goodwill  amounted to $157.2 million as of December
31, 2001.  Net fixed assets  amounted to $38.1  million as of December 31, 2001.
The effect of eliminating amortization for goodwill and assembled workforce will
approximate $4.1 million annually.  For further information,  see the discussion
under New Accounting Pronouncements.

Inventory

The Company's  inventories are valued at the lower of cost or market method on a
first-in,  first-out  basis.  Under  certain  market  conditions,  estimates and
judgments  regarding  the  valuation of inventory are employed by the Company to
properly value inventory.

Accounting for Income Taxes

The provision  for income taxes is based upon the Company's  estimate of taxable
income or loss for each respective  accounting period. The Company recognizes an
asset or liability for the deferred tax  consequences  of temporary  differences
between the tax bases of assets and  liabilities  and their reported  amounts in
the financial statements.  These temporary differences will result in taxable or
deductible  amounts  in future  years  when the  reported  amounts of assets are
recovered or liabilities  are settled.  The Company also  recognizes as deferred
tax assets the future tax benefits from net operating loss carryforwards.

New Accounting Pronouncements


In  1998,  the  Financial  Accounting  Standards  Board  issued  SFAS  No.  133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities,"  which was
subsequently  amended  by SFAS No.  137  "Accounting  for  Derivative  Financial
Instruments and Hedging  Activities - Deferral of the Effective Date of SFAS No.
133" and SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
requiring  that  every  derivative  instrument,   including  certain  derivative
instruments  embedded in other  contracts,  be recorded in the balance  sheet as
either an asset or liability and measured at its fair value.  The statement also
requires that changes in the  derivative's  fair value be recognized in earnings
unless specific hedge  accounting  criteria are met. SFAS No. 133, as amended by
SFAS No. 137 and SFAS No. 138, is effective for all fiscal years beginning after
June 15, 2000. As expected, the adoption of SFAS No. 133 did not have a material
impact on the Company's financial condition or results of operations.

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting Standards (SFAS) No. 141, "Business  Combinations," and No.
142, "Goodwill and Other Intangible Assets."

SFAS No. 141 requires  that the purchase  method of  accounting  be used for all
business   combinations   initiated   after   June   30,   2001.   Use   of  the
pooling-of-interests  method is no longer permitted.  SFAS No. 141 also includes
guidance on the  initial  recognition  and  measurement  of  goodwill  and other
intangible  assets  acquired in a business  combination  that is completed after
June 30, 2001.

SFAS No. 142 no longer permits the amortization of goodwill and indefinite-lived
intangible  assets.  Instead,  these  assets must be reviewed  annually (or more
frequently  under certain  conditions)  for  impairment in accordance  with this
statement.  This  impairment  test uses a fair value  approach  rather  than the
undiscounted  cash  flows  approach   previously   required  by  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  Of."  Intangible  assets  that do not have  indefinite  lives will
continue to be amortized  over their useful lives and reviewed for impairment in
accordance with SFAS No. 121 or SFAS No. 142 (see discussion  below),  which the
Company is required to adopt effective January 1, 2002.

The Company is currently  evaluating  its  intangible  assets in relation to the
provisions of SFAS No. 142 to determine the impact that adoption of SFAS No. 142
will have on its results of operations or financial position. In accordance with
SFAS No. 142, the Company  anticipates that the amounts  classified as assembled
workforce will be reclassified  to goodwill.  The Company  anticipates  that all
amortization  of goodwill and all  amortization  of assembled  workforce will no
longer be  recorded  in the  financial  statements.  The  effect of  eliminating
amortization for goodwill and assembled workforce will approximate $4,100,000 in
the year ending December 31, 2002. The useful lives of the intangible  contracts
are presently  being evaluated and it is possible that the Company may determine
that  the  useful  lives  of  the  intangible   contracts  should  change  after
evaluation.  The  Company  is  uncertain  as to the net  impact,  if  any,  such
evaluation  will have on  amortization  expense for the year ending December 31,
2002.

In the future,  goodwill will be evaluated by the fair value  method,  comparing
the estimated fair value with the recorded value of the assets and  liabilities,
as recommended in the Statement.  The effect of impairment of goodwill,  if any,
has not yet been evaluated. The Statement requires recognition of any impairment
of goodwill in the first quarter of the fiscal year. A restatement  of quarterly
financial  results may be required  for the year ended  December 31, 2002 if the
two-step  valuation  process is not completed by the filing of the first quarter
financial  statements.  The effect of any impairment recognized at transition to
the Statement will be recognized as a change in accounting principle.

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations".  SFAS No. 143 requires alternative  accounting treatment of assets
which are in the  process of  retirement.  The Company is required to adopt SFAS
No. 143 effective  January 1, 2002. The Company  anticipates that there will not
be a significant effect on results of operations or financial position.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal of Long-Lived Assets." This Statement  addresses  financial  accounting
and  reporting  for the  impairment  or  disposal  of  long-lived  assets.  This
Statement  supersedes FASB Statement No. 121,  "Accounting for the Impairment of
Long-Lived  Assets  and  for  Long-Lived  Assets  to Be  Disposed  Of,"  and the
accounting  and  reporting  provisions  of APB  Opinion No. 30,  "Reporting  the
Results of  Operations  and  Reporting the Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions,"  for the  disposal  of a segment  of a  business  (as  previously
defined in that Opinion).  This Statement also amends ARB No. 51,  "Consolidated
Financial  Statements,"  to  eliminate  the  exception  to  consolidation  for a
subsidiary  for which  control  is likely to be  temporary.  This  Statement  is
effective for years beginning after December 15, 2001 (i.e.  January 1, 2002 for
calendar  year  companies).  The  Company  anticipates  that there will not be a
significant effect on results of operations or financial position.

Forward-Looking Information

Statements  included in this  Management's  Discussion and Analysis of Financial
Condition  and  Results  of  Operations  and  other  items of this Form 10-K may
contain  forward-looking  statements.  Such forward-looking  statements are made
pursuant to the safe harbor  provisions  of the  Private  Securities  Litigation
Reform  Act of  1995.  Such  statements  may  relate,  but  not be  limited  to,
projections of revenues, income or loss, capital expenditures,  plans for growth
and future operations,  financing needs, as well as assumptions  relating to the
foregoing.  Forward-looking  statements  are  inherently  subject  to risks  and
uncertainties,  some of which cannot be predicted  or  quantified.  When used in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations",  and elsewhere in this Form 10-K the words "estimates",  "expects",
"anticipates",  "forecasts", "plans", "intends" and variations of such words and
similar  expressions  are intended to identify  forward-looking  statements that
involve risks and  uncertainties.  Future events and actual results could differ
materially  from  those  set  forth  in,   contemplated  by  or  underlying  the
forward-looking statements.

Item 7a. Qualitative and Quantitative Disclosures about Market Risk

In 1997,  the SEC issued new rules (Item 305 of Regulation  S-K) which  requires
disclosure  of  material  risks as defined by Item 305,  related to market  risk
sensitive financial  instruments.  As defined,  the Company currently has market
risk sensitive  instruments related to interest rates. As disclosed in Note 4 of
the audited  consolidated  financial  statements,  the  Company has  outstanding
long-term debt of $164.6 million at December 31, 2001. The Company currently has
a maturity  of  approximately  six years for  $100.0  million of long term debt,
which is at a fixed  rate of 10.0%.  The  remainder  of long  term  debt  ($64.6
million) is at a rate  averaging  8.2% for the year ended  December  31, 2001 as
compared to 9.7% for the year ended December 31, 2000.

A  hypothetical  10%  change in market  interest  rates over the next year could
impact the  Company's  earnings  or cash flows as the  interest  rate on a large
portion of the long-term debt is variable.  The Company believes a 10% change in
market  interest rates would not have a material effect on the fair value of the
Company's publicly traded long-term debt.

The Company does not purchase or hold any derivative  financial  instruments for
trading purposes. The Company has not undertaken any additional actions to cover
interest  rate market risk and is not a party to any other  interest rate market
risk management activities.


Item 8. Consolidated Financial Statements and Supplementary Data

The consolidated  audited financial  statements for the year ending December 31,
2001 are attached hereto at pages F-1 through F-32.

Item 9.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure

None.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

The Company's  directors and executive  officers,  and their respective ages and
positions  with the Company,  are set forth below in tabular form.  Biographical
information on each person is set forth following the tabular information. There
are no family relationships  between any of the Company's directors or executive
officers.  The  Company's  board of  directors  is  currently  comprised  of two
members,  each of whom is elected for a term of one year. Executive officers are
chosen by and serve at the discretion of the board of directors.

Name                    Age        Position with Company

R Steve Creamer.......  50 Chairman of the Board and Chief Executive Officer
Raul A. Deju..........  56 President and Chief Operating Officer
J.I. Everest, II......  45 Chief Financial Officer, Treasurer, and Assistant
                           Secretary
Brett A. Hickman......  40 Senior Vice President, General Counsel and Secretary
Joseph M. Silvestri...  40 Director

R Steve Creamer.  Mr.  Creamer is the Chairman of the Board and Chief  Executive
Officer of the Company and ISG.  Immediately  prior to his  employment  with the
Company,  Mr.  Creamer  was CEO  (from  1992 to 1997)  and the  founder  of ECDC
Environmental L.C., the largest rail-served industrial waste management facility
in North  America.  Prior to that, Mr. Creamer served as CEO of Creamer & Noble,
an engineering firm based in St. George,  Utah. He earned a B.S. degree in Civil
and Environmental Engineering from Utah State University in 1973. Mr. Creamer is
a Professional Engineer.

Raul A. Deju.  Dr.  Deju is the  President  and Chief  Operating  Officer of the
Company and ISG.  Dr. Deju served as a Director of Rockwell  Hanford  Operations
through 1981, Senior Vice President of International Technologies,  Inc. through
1987 and Regional  President of several  subsidiaries of WMX Technologies,  Inc.
through 1995. Dr. Deju served as Chairman and CEO of DGL  International  through
1997,  and Board  Chairman  of Isadra,  Inc.  Dr.  Deju has been on the Board of
Directors  of various  national and  international  WMX  subsidiaries,  Advanced
Sciences,  Inc.  and  Isadra,  Inc.  Dr.  Deju is a member  of ISG's  Boards  of
Directors.  Dr.  Deju is an  advisor to a  committee  of the U.S.  Secretary  of
Commerce and has served on the U.S.  Environmental  Protection  Agency  Advisory
Committee.  Dr. Deju received a B.S.  degree in Mathematics  and Physics in 1966
and a Ph.D. degree in Engineering  Geology in 1969 from the New Mexico Institute
of Mining and Technology.

J.I.  Everest,  II. Mr. Everest is the Chief  Financial  Officer,  Treasurer and
Assistant  Secretary of the Company and ISG. He is responsible for all financial
functions of the Company.  Immediately prior to his employment with the Company,
he served as Vice President of Finance for ECDC  Environmental,  Inc. (from 1993
to  1997).   From  1988  to  1993,   Mr.   Everest  was  Director  of  Financial
Analysis/Treasury  of USPCI,  Inc. Mr. Everest earned an M.B.A.  degree (Finance
Concentration)  in 1994  from the  University  of Texas at  Austin  and a B.B.A.
degree from Southern Methodist University in 1979. Mr. Everest is a C.P.A.

Brett A. Hickman. Mr. Hickman is the Senior Vice President,  General Counsel and
Secretary of the Company.  From December 1993 until  February  1998, Mr. Hickman
was General Counsel,  Western Division of Laidlaw Environmental  Services,  Inc.
Prior to that,  Mr.  Hickman was an attorney  with Davis & Lavender in Columbia,
South Carolina.  Mr. Hickman earned a B.A. degree in Political  Science from The
Citadel in 1983 and a J.D. degree from the University of South Carolina in 1986.

Joseph M. Silvestri.  Mr. Silvestri has been a director of the Company since its
acquisition by ISG. Mr.  Silvestri has been employed by Citibank Venture Capital
Ltd. (CVC) since 1990 and has served as a Vice  President  there since 1995. Mr.
Silvestri  is  a  director  of  ISG,   International  Media  Group,   Polyfibron
Technologies, Frozen Specialties, Glenoit Mills, Euramax and Triumph Group.

Compliance with Section 16(a) of the Securities Exchange Act of 1934.

Section  16(a)  of the  Securities  Exchange  Act of  1934,  and the  rules  and
regulations promulgated thereunder, require the Company's executive officers and
directors,  and  persons  who  beneficially  own  more  than  ten  percent  of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the  Securities and Exchange  Commission
and the National  Association of Securities Dealers Automated  Quotations System
and to furnish the Company with copies thereof.  None of the Company's executive
officers  and  directors  and  ten-percent  owners of ISG own any  shares in the
Company. Accordingly, no such reports have been, or need to be, filed.

<PAGE>


Item 11.      Executive Compensation

The following  table shows the  compensation  paid by the Company to its current
Chairman and Chief Executive  Officer,  and the Company's other most highly paid
executive officers.

<TABLE>
<CAPTION>

                           Summary Compensation Table

                               Annual Compensation

                                                                                          Other Annual
Name and Principal Position(1)              Fiscal Year     Salary (2)       Bonus      Compensation (3)
------------------------------              -----------     ----------       -----      ----------------
<S>                                              <C>        <C>           <C>                  <C>
R Steve Creamer                                  2001       $285,516      $    -0-             $5,000
Chairman and Chief Executive Officer             2000        262,340        65,000              5,000
                                                 1999        260,000        34,667              5,000

Raul A. Deju                                     2001        270,782           -0-             $5,000
President and Chief Operating Officer            2000        250,016        62,500              5,000
                                                 1999        250,016        33,333              5,000

J.I. Everest, II                                 2001        218,339           -0-             $5,000
Chief Financial Officer, Treasurer and           2000        204,310        50,000              5,000
Assistant Secretary                              1999        204,561        26,667              5,000

Brett Hickman                                    2001        162,469           -0-             $5,000
Senior Vice President, General Counsel and       2000        159,010        37,500              5,000
Secretary                                        1999        150,010        20,000              5,000

Jerry B. Smith                                   2001        126,793        55,569             $5,000
Vice President                                   2000        126,463        10,000              5,000
                                                 1999        118,958         8,760              5,000

(1)  Positions indicated were as of December 31, 2001.

(2)  Includes  amounts,  if any, deferred by the named individual for the period
     in question  pursuant to Section 401(k) of the Internal  Revenue Code under
     the Company's 401(k) Savings Plan (the "401(k) Plan").

(3)  Amounts shown under Other Annual  Compensation  include amounts paid by the
     Company as matching and/or profit sharing contributions to the 401(k) Plan,
     but do not include perquisites and other personal benefits provided to each
     of the named  executives,  the aggregate  value of which did not exceed the
     lesser of $50,000 or 10% of any such named  executive's  annual  salary and
     bonus.
</TABLE>



Item 12. Security Ownership of Certain Beneficial Owners and Management

The Company is wholly owned by ISG. The following table sets forth the number of
shares of ISG's common  stock  beneficially  owned as of March 18, 2002,  (i) by
each person who is known by the Company to own beneficially  more than 5% of the
Company's  common stock,  (ii) by each director and director  nominee,  (iii) by
each of the  Company's  named  executive  officers,  and (iv) by all  directors,
director nominees and executive  officers,  as a group, as reported by each such
person.

<TABLE>
<CAPTION>

                                                          Beneficial Ownership of        Beneficial Ownership of
                                                                Common Stock               Preferred Stock (7)
                                                                ------------               -------------------
     Name and Address of Beneficial Owner                   Number of                    Number of
     ------------------------------------                     Shares       Percent         Shares       Percent
                                                              ------       -------         ------       -------
     <S>                                                     <C>            <C>           <C>           <C>
     Citicorp Venture Capital, Ltd. (1).................      187,425        37.9         41,813        41.8
     R Steve Creamer (2)(3).............................      150,266        30.4         34,052        34.0
     J.I. Everest, II (3)...............................       49,467        10.0          9,925         9.9
     CCT Partners IV, LP (4)............................       33,075         6.7          4,732         4.7
     Raul A. Deju ......................................       45,317         9.2          5,023         5.0
     Joseph M. Silvestri................................          980         0.2            140         0.1
     Brett A. Hickman...................................        4,950         1.0          1,001         1.0
     All directors and executive officers as a group
     (8 persons) (2)(3)(5)(6)...........................      252,341       50.81         50,141        50.1
</TABLE>


(1)  The address of Citicorp  Venture  Capital,  Ltd. is: 399 Park Avenue,  14th
     Floor, New York, NY 10043.

(2)  Includes 112,700 shares owned by Mr. Creamer's two adult sons and one minor
     child.

(3)  Messrs.  Creamer and Everest beneficially own shares in ISG through Creamer
     Investments,  Inc., a Nevada corporation,  ("Creamer"),  successor to RACT,
     Inc., a Utah  corporation,  which directly owns shares in ISG. The business
     address of Creamer is: 136 East South Temple,  Suite 1300,  Salt Lake City,
     Utah 84111.

(4)  The address of CCT Partners IV, LP is the same as that of Citicorp  Venture
     Capital, Ltd.

(5)  An  employee,  pursuant to his  employment  contract,  has been  granted an
     economic interest in one percent of all outstanding shares of the Company's
     common  stock as of the date of his  employment  agreement.  This  economic
     interest vested immediately upon execution of the employment agreement, but
     the right is  contingent  upon the  occurrence  of certain  future  events.
     Because  such  events  have not  occurred  as of  December  31,  2001,  and
     management  presently  believes that such events are unlikely to occur,  no
     compensation expense has been calculated or recorded.

(6)  Certain key  executives,  pursuant to the ISG 1999 Stock Option Plan,  have
     1,360.75 options  exercisable within 60 days, with 4,083 shares exercisable
     in the future.

(7)  Effective  January 29, 2002,  ISG issued 30,000 shares of newly  authorized
     Preferred Stock for $3,000,000 in order to raise funds to eliminate certain
     obligations of ISG. Such Preferred Stock is included in the above ownership
     totals.

Item 13.      Certain Relationships and Related Transactions

None.


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      1.  Financial Statements
             See Index to Financial Statements on page F-1.

         2.  Financial Statement Schedules
             All financial  statement schedules have been omitted because either
             they are not required or the  information  required to be set forth
             therein is included in the  consolidated  financial  statements  or
             notes thereto.

         3.  Exhibits

<PAGE>


       Exhibit
        Number            Description of Exhibit

          *2.1      Amended and Restated  Secured Credit  Facility dated May 26,
                    2000 and Exhibits.

          *2.2      First  Amendment  dated  August 8, 2000 to the  Amended  and
                    Restated Credit Agreement dated May 26, 2000.

          *2.3      Third  Amendment and Limited  Waiver dated March 30, 2001 to
                    the  Amended and  Restated  Credit  Agreement  dated May 26,
                    2000.

          *3.1      Purchase  Agreement  dated  March 2, 2000 by and between ISG
                    Resources,  Inc. ISG Manufactured Products, Inc. and Charlie
                    A. Meador,  Stephen D. Smith,  Victoria L. Smith,  Deanna R.
                    Smith,  Charlie  E.  Meador  and  Blake  A.  Meador  for the
                    purchase  of the Don's  Building  Supply  limited  liability
                    partnership.

          *3.2      Stock  Purchase  Agreement  dated  April  30,  2000  and the
                    Amendment to the Stock Purchase Agreement dated May 16, 2000
                    by and between ISG Resources,  Inc. and Dale & Brenda, Ltd.,
                    Dan & Dorenda,  Ltd.,  Daniel  Andrew Smith Family Trust and
                    the Dale  Wayne  Smith  Family  Trust and Dale W.  Smith and
                    Danny A. Smith for the purchase of the outstanding  stock of
                    Palestine Concrete Tile Company.

          *3.3      Asset  Purchase  Agreement  dated  September  5, 2000 by and
                    between ISG Resources, Inc. and Hanson Aggregates West, Inc.

          **12.1    Statement  re  Computation  of  Ratio of  Earnings  to Fixed
                    Charges.

----------

             *       Previously Filed.
             **      Filed herewith.



<PAGE>


                                   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.

                                            ISG Resources, Inc.
                                            (Registrant)

Date:  March 20, 2002                By:      /s/  R Steve Creamer
                                            ---------------------------------
                                            R Steve Creamer, Chairman and Chief
                                            Executive

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

   Signature                          Title                            Date
   ---------                          -----                            ----

 /s/ R Steve Creamer       Chairman and Chief Executive Officer   March 20, 2002
--------------------
 R Steve Creamer

 /s/ Raul A Deju           President and Chief Operating Officer  March 20, 2002
------------------------
 Raul A. Deju

 /s/ J.I. Everest, II      Chief Financial Officer, Treasurer     March 20, 2002
------------------------   and Assistant Secretary
 J.I. Everest, II

 /s/ Joseph M. Silvestri   Director                               March 20, 2002
------------------------
 Joseph M. Silvestri

<page>








CONSOLIDATED FINANCIAL STATEMENTS
ISG Resources, Inc. and Subsidiaries
Years  Ended  December  31, 2001 and 2000 and for Each of the
Three Years in the Period Ended December 31, 2001
with Report of Independent Auditors





<PAGE>




                      ISG Resources, Inc. and Subsidiaries

                        Consolidated Financial Statements

                   Years Ended December 31, 2001 and 2000 and
        for Each of the Three Years in the Period Ended December 31, 2001




                                    Contents

Report of Independent Auditors .............................................F-1


Audited Consolidated Financial Statements

Consolidated Balance Sheets ................................................F-2
Consolidated Statements of Operations ......................................F-4
Consolidated Statements of Comprehensive Loss...............................F-5
Consolidated Statements of Shareholder's Equity.............................F-6
Consolidated Statements of Cash Flows ......................................F-7
Notes to Consolidated Financial Statements .................................F-8




<PAGE>


                         Report of Independent Auditors

The Board of Directors
ISG Resources, Inc. and Subsidiaries

We have audited the accompanying  consolidated  balance sheets of ISG Resources,
Inc.  and  Subsidiaries  as of  December  31,  2001  and  2000  and the  related
consolidated statements of operations,  comprehensive loss, shareholder's equity
and cash flows for each of the three  years in the  period  ended  December  31,
2001.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

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




Salt Lake City, Utah
March 8, 2001

                                      F-1
<PAGE>

                      ISG Resources, Inc. and Subsidiaries

                           Consolidated Balance Sheets

                                                        December 31
                                                    2001             2000
                                           -------------------------------------
Assets
Current assets:
   Cash and cash equivalents                  $   17,724,156   $   6,986,725
   Accounts receivable:
     Trade, net of allowance for doubtful
       accounts of $440,000 in 2001 and
       $501,000 in 2000                           25,302,639      24,321,302
     Retainage receivable                            257,989         146,000
     Income taxes receivable                               -       2,196,988
     Other receivables                               692,828         686,684
   Deferred tax assets                               630,178         851,325
   Inventories                                     8,528,976       6,663,633
   Other current assets                            1,604,691       1,057,890
                                           -------------------------------------
Total current assets                              54,741,457      42,910,547

Property, plant and equipment:
   Land and improvements                           6,167,877       4,536,470
   Buildings and improvements                     10,718,413       8,795,437
   Vehicles and other operating equipment         36,973,546      32,299,254
   Furniture, fixtures and office equipment        1,269,968       1,238,316
                                           -------------------------------------
                                                  55,129,804      46,869,477
   Accumulated depreciation                      (18,126,675)    (12,777,609)
                                           -------------------------------------
                                                  37,003,129      34,091,868
   Construction in progress                        1,115,423       3,668,688
                                           -------------------------------------
                                                  38,118,552      37,760,556

Other assets:
   Intangible assets, net                        157,177,699     167,076,486
   Debt issuance costs, net                        3,687,475       4,524,473
   Other assets                                       93,706          62,313
                                           -------------------------------------
Total assets                                    $253,818,889    $252,334,375
                                           =====================================

                                      F-2

<PAGE>

                                                       December 31
                                                  2001              2000
                                          -------------------------------------
Liabilities and shareholder's equity
Current liabilities:
   Accounts payable                         $    14,287,253  $   10,704,637
   Accrued expenses:
     Payroll                                      2,775,553       2,406,172
     Interest                                     2,380,899       2,849,902
     Other                                        1,924,450       1,826,232
   Income taxes payable                              10,872              --
   Other current liabilities                      1,951,850         996,153
                                          -------------------------------------
Total current liabilities                        23,330,877      18,783,096

Long-term debt                                  164,643,900     165,000,000
Deferred tax liabilities                         35,726,641      37,702,524
Payable to Industrial Services Group              4,796,444       2,244,022
Other liabilities                                   766,004       1,482,848

Commitments and contingencies

Shareholder's equity:
   Common stock, no par value; 100
     shares authorized, issued and
     outstanding                                 34,745,050      34,745,050
   Cumulative foreign currency
     translation adjustment                         (55,636)        (29,904)
   Retained deficit                             (10,134,391)     (7,593,261)
                                          -------------------------------------
Total shareholder's equity                       24,555,023      27,121,885

                                          -------------------------------------
Total liabilities and shareholder's equity     $253,818,889    $252,334,375
                                          =====================================


See accompanying notes.
                                      F-3
<PAGE>
<TABLE>
<CAPTION>

                      ISG Resources, Inc. and Subsidiaries

                      Consolidated Statements of Operations


                                                                        Year Ended December 31
                                                             2001                 2000                1999
                                                    ---------------------------------------------------------------
<S>                                                        <C>                  <C>                 <C>
Revenues:
   Product revenues                                        $184,160,729         $146,818,172        $120,319,575
   Service revenues                                          32,070,030           34,083,689          35,885,697
                                                    ---------------------------------------------------------------
                                                            216,230,759          180,901,861         156,205,272
Costs and expenses:
   Cost of products sold, excluding depreciation            135,810,469          108,368,626          83,442,725
   Cost of services sold, excluding depreciation             22,417,139           24,723,948          25,221,695
   Depreciation and amortization                             15,809,569           14,954,431          13,091,131
   Unsuccessful acquisition costs                                     -            1,525,386                   -
   Selling, general and administrative expenses              25,019,279           26,326,402          18,962,157
   New product development                                    2,308,010            2,331,510           2,166,218
                                                    ---------------------------------------------------------------
                                                            201,364,466          178,230,303         142,883,926
                                                    ---------------------------------------------------------------
Operating income                                             14,866,293            2,671,558          13,321,346

Interest income                                                 455,265              172,708              44,100
Interest expense                                            (16,968,174)         (15,804,378)        (13,391,944)
Miscellaneous income, net                                        20,895              211,420             311,675
                                                    ---------------------------------------------------------------
Income (loss) before income tax expense (benefit)            (1,625,721)         (12,748,692)            285,177
Income tax expense (benefit)                                    915,409           (2,993,677)            647,589
                                                    ---------------------------------------------------------------
Net loss                                               $     (2,541,130)     $    (9,755,015)    $      (362,412)
                                                    ===============================================================
</TABLE>

See accompanying notes.


                                      F-4
<PAGE>

                      ISG Resources, Inc. and Subsidiaries

                  Consolidated Statements of Comprehensive Loss


                                              Year ended December 31
                                        2001            2000           1999
                                     ------------------------------------------

Net loss                              $(2,541,130)   $(9,755,015)    $(362,412)
Other comprehensive loss, net of tax:
   Foreign currency translation
     adjustment                           (25,732)       (29,904)            -
                                     ------------------------------------------
Comprehensive loss                    $(2,566,862)   $(9,784,919)    $(362,412)
                                     ======================================----



See accompanying notes.


                                      F-5
<PAGE>
<TABLE>
<CAPTION>

                      ISG Resources, Inc. and Subsidiaries
                 Consolidated Statements of Shareholder's Equity

                                                                                  Cumulative
                                                                                   Foreign
                                                                                   Currency         Retained            Total
                                                                Additional        Translation       (Deficit)        Shareholder's
                                            Common Stock      Paid-In Capital     Adjustment        Earnings            Equity
                                         -------------------------------------------------------------------------------------------

<S>                                          <C>                 <C>             <C>              <C>                <C>
Balance at December 31, 1998                 $         100       $ 24,999,950    $         -      $  2,524,166       $ 27,524,216
   Change to no par value                       24,999,950        (24,999,950)             -                 -                  -
   Net loss                                              -                  -              -          (362,412)          (362,412)
                                         -------------------------------------------------------------------------------------------
Balance at December 31, 1999                    25,000,050                  -              -         2,161,754         27,161,804
   Contribution from parent                      9,745,000                  -              -                 -          9,745,000
   Foreign currency translation
     adjustment                                          -                  -        (29,904)                -            (29,904)
   Net loss                                              -                  -              -        (9,755,015)        (9,755,015)
                                         -------------------------------------------------------------------------------------------
Balance at December 31, 2000                    34,745,050                  -        (29,904)       (7,593,261)        27,121,885
   Foreign currency translation
     adjustment                                          -                  -        (25,732)                -            (25,732)
   Net loss                                              -                  -              -        (2,541,130)        (2,541,130)
                                         -------------------------------------------------------------------------------------------
Balance at December 31, 2001                   $34,745,050         $        -       $(55,636)     $(10,134,391)       $24,555,023
                                         ===========================================================================================

</TABLE>

See accompanying notes.

                                      F-6

<PAGE>

<TABLE>
<CAPTION>

                      ISG Resources, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

                                                                      Year ended December 31
                                                            2001             2000             1999
                                                     ------------------------------------------------------
<S>                                                    <C>               <C>               <C>
Operating activities
Net loss                                               $   (2,541,130)   $   (9,755,015)   $    (362,412)
Adjustments to reconcile net loss to net cash
   provided by operating activities:
     Depreciation and amortization                         15,809,569        14,954,431       13,091,131
     Amortization of debt issuance costs                      937,451           831,145          702,032
     Deferred income taxes                                 (1,754,736)       (1,897,729)      (2,229,539)
     Loss on sale of assets                                   575,122            69,298           24,168
     Gain on sale of subsidiary                                     -                 -         (333,749)
     Changes in operating assets and liabilities:
         Receivables                                       (1,099,470)          290,482       (2,755,382)
         Inventories                                       (1,865,343)         (732,216)      (1,733,832)
         Other current and non-current assets                (578,194)          832,073         (879,189)
         Accounts payable                                   3,582,616          (427,303)       4,485,877
         Income taxes                                       2,207,860        (3,902,666)       1,257,583
         Accrued expenses                                      (1,404)        1,296,436         (929,504)
         Other current and non-current liabilities           (561,147)         (875,141)        (776,804)
                                                     ------------------------------------------------------
Net cash provided by operating activities                  14,711,194           683,795        9,560,380

Investing activities
Purchase of businesses, net of cash acquired                        -       (27,130,514)     (24,866,989)
Proceeds from sale of subsidiary                                    -                 -          750,000
Additions to intangible assets                                      -        (1,275,703)        (877,349)
Purchases of property, plant and equipment                 (6,421,602)       (8,185,589)      (8,790,870)
Proceeds from sales of property, plant and equipment          677,702           609,210          415,994
                                                     ------------------------------------------------------
Net cash used in investing activities                      (5,743,900)      (35,982,596)     (33,369,214)

Financing activities
Proceeds from long-term debt                                        -       168,500,000      127,000,000
Payments on other liabilities                                (300,000)                -                -
Payments on long-term debt                                   (356,100)     (137,000,000)    (103,500,000)
Debt issuance costs                                          (100,453)         (529,609)        (335,149)
Increase in payable to Industrial Services Group            2,552,422         1,600,039          643,983
Cash contributions from Parent                                      -         9,745,000                -
                                                     ------------------------------------------------------
Net cash provided by financing activities                   1,795,869        42,315,430       23,808,834

Effect of exchange rate changes on cash and cash
   equivalents                                                (25,732)          (29,904)               -
                                                     ------------------------------------------------------
Net increase in cash and cash equivalents                  10,737,431         6,986,725                -
Cash and cash equivalents at beginning of period            6,986,725                 -                -
                                                     ------------------------------------------------------
Cash and cash equivalents at end of period             $   17,724,156    $    6,986,725    $           -
                                                     ======================================================

Cash paid for interest                                 $   16,449,462    $   14,293,589    $  12,605,495
                                                     ======================================================
Cash paid for income taxes                             $      408,856    $    1,276,277    $     902,123
                                                     ======================================================

See accompanying notes.
</TABLE>
                                      F-7
<PAGE>

                      ISG Resources, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

1.  Basis of Presentation

ISG  Resources,  Inc., a Utah  corporation  (the  "Company"),  is a wholly owned
subsidiary  of  Industrial  Services  Group,  Inc.  ("ISG").  ISG was  formed in
September 1997 and acquired the stock of JTM Industries, Inc. ("JTM") on October
14,  1997.  In 1998,  JTM  acquired  the  stock of  Pozzolanic  Resources,  Inc.
("Pozzolanic"), Power Plant Aggregates of Iowa, Inc. ("PPA"), Michigan Ash Sales
Company, d.b.a. U. S. Ash Company,  together with two affiliated companies, U.S.
Stabilization,  Inc. and Flo Fil Company, Inc., (collectively,  "U.S. Ash"), and
Fly  Ash  Products,   Inc.  ("Fly  Ash  Products")   (collectively,   the  "1998
Acquisitions").  Effective January 1, 1999, JTM, Pozzolanic,  PPA, U.S. Ash, Fly
Ash  Products  and their  wholly  owned  subsidiaries  merged  with and into the
Company (the "Merger").  Pneumatic Trucking,  Inc., a wholly owned subsidiary of
Michigan  Ash Sales  Company,  was not merged  into the  Company.  Consequently,
Pneumatic became a wholly owned subsidiary of the Company.

In 1999, the Company  acquired the stock of Best Masonry & Tool Supply ("Best"),
Mineral  Specialties,  Inc.  ("Specialties"),  Irvine Fly Ash, Inc.  ("Irvine"),
Lewis  W.  Osborne,   Inc.   ("Osborne"),   United  Terrazzo  Supply  Co.,  Inc.
("Terrazzo"),  and  Magna  Wall,  Inc.  ("Magna  Wall")  and  sold  all  of  the
outstanding stock of Pneumatic.

In 2000,  ISG  Canada  Limited,  Inc.  ("ISG  Canada")  was  formed and became a
wholly-owned  foreign  subsidiary  of  the  Company,  with  fly  ash  operations
beginning in the second half of 2000.  During 2000, the Company  acquired all of
the partnership interest of Don's Building Supply L.L.P. ("Don's),  acquired the
stock of Palestine  Concrete Tile Company,  Inc. and acquired  certain fixed and
intangible assets from Hanson Aggregates West, Inc. ("Hanson").

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

The purchase prices of the above  acquisitions were allocated based on estimated
fair values of assets and  liabilities at the respective  dates of  acquisition.
Goodwill  resulting  from  the  difference  between  the  purchase  prices  plus
acquisition costs and the fair value of the net assets of the companies acquired
in  1999  totaled  approximately   $20,073,000.   Goodwill  resulting  from  the
difference between the purchase prices plus acquisition costs and the fair value
of the net  assets  of the  companies  acquired  in 2000  totaled  approximately
$19,297,000.  All recorded goodwill is being amortized on a straight-line  basis
over 20 to 25 years.

                                      F-8
<PAGE>

                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1.  Basis of Presentation (continued)

The  following  pro forma  combined  financial  information  for the year  ended
December 31, 2000 reflects  operations as if all of the above  acquisitions  and
the related  financing  transactions had occurred as of January 1, 2000. The pro
forma  combined  financial  information is presented for  illustrative  purposes
only,  does not purport to be indicative of the Company's  results of operations
as of the date hereof,  and is not necessarily  indicative of what the Company's
actual  results  would  have  been  had  the   acquisitions  and  the  financing
transactions been consummated on such date.

                         Revenues                         $ 196,468,000
                         Net loss                         $  (8,914,000)

2.  Description of Business and Summary of Significant Accounting Policies

Description of Business

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

Principles of Consolidation

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

Reclassifications

Certain  reclassifications have been made to the prior years' amounts to conform
to the current year presentation.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, bank deposits, and highly liquid
financial  instruments  purchased  with  original  maturities of three months or
less.

                                      F-9
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.   Description  of Business  and Summary of  Significant  Accounting  Policies
     (continued)

Foreign Currency Translation

The results of operations for the Company's foreign subsidiary,  ISG Canada, are
translated  into U.S dollars  using average  exchange  rates during each period;
assets and  liabilities  are translated  using exchange rates at the end of each
period.  Translation  gains and  losses are  reported  as a  component  of other
comprehensive income in the Company's  consolidated  statements of comprehensive
income.

Revenue Recognition

Revenue from the sale of products is recognized  primarily upon passage of title
to  the  customer,   which  generally   coincides  with  physical  delivery  and
acceptance.  CCP  product  revenues  generally  include  transportation  charges
associated with delivering the material.

Service revenues include revenues earned under long-term contracts to dispose of
residual materials created by coal-fired power generation and revenues earned in
conjunction with certain construction-related  projects, which are incidental to
the primary  business.  Typical  long-term  disposal  contracts are from five to
fifteen  years,  with most  contracts  being  renewed upon  expiration.  Service
revenues  under the  long-term  contracts  are  recognized  concurrent  with the
removal  of the  material  and are  typically  based  on the  number  of tons of
material  removed  at an  established  price per ton.  The  construction-related
projects are generally  billed on a time and  materials  basis;  therefore,  the
revenues and costs are  recognized  when the time is incurred and the  materials
are used.

Cost of CCP products sold are primarily amounts paid to the utility companies to
purchase  product together with storage and  transportation  costs of delivering
the product to the customer.  Cost of services  sold includes  landfill fees and
transportation charges to deliver the product to the landfill.  Overhead charges
incurred by a facility  which  generates  both product and service  revenues are
allocated  to cost of  products  sold and  cost of  services  sold  based on the
percentage of revenue.

                                      F-10

<PAGE>

                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.   Description  of Business  and Summary of  Significant  Accounting  Policies
     (continued)

Concentrations of Credit Risk

Concentrations  of credit  risk in  accounts  receivable  are limited due to the
large number of customers  comprising the Company's customer base throughout the
United States.  No single customer  provides 10 percent or more of the Company's
revenue.  The Company performs ongoing credit evaluations of its customers,  but
does  not  require   collateral  to  support   customer   accounts   receivable.
Historically, the Company has not had significant uncollectible accounts.

New Product Development

New product development costs consist of scientific research and development and
market  development  expenditures.  Expenditures  of $2,092,124,  $1,837,076 and
$1,796,032 for the years ended December 31, 2001, 2000, and 1999,  respectively,
were made for research and  development  activities  covering  basic  scientific
research and  application of scientific  advances to the  development of new and
improved  products  and  processes.  Expenditures  of  $215,886,  $494,434,  and
$370,186 for the years ended  December 31, 2001,  2000,  and 1999  respectively,
were  made for  market  development  activities  related  to  promising  new and
improved  products and  processes  identified  during  research and  development
activities.  The Company expenses all new product and market  development  costs
when they are incurred.

Inventories

The Company  accounts for inventory  balances  using the lower of cost or market
method on a first-in,  first-out basis.  Inventories consist of the following at
December 31:



                                               2001                2000
                                        ------------------- -------------------
            Raw materials                      $  958,796          $1,062,436
            Finished goods                      7,570,180           5,601,197
                                        ------------------- -------------------
                                               $8,528,976          $6,663,633
                                        =================== ===================

Property, Plant and Equipment

Property,  plant and equipment acquired in the acquisitions described above were
recorded at estimated  fair value at the dates of the  respective  acquisitions.
Property,  plant  and  equipment  acquired  subsequent  thereto,   renewals  and
betterments are recorded at cost.

                                      F-11
<page>

                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2.   Description  of Business  and Summary of  Significant  Accounting  Policies
     (continued)

Property, Plant and Equipment (continued)

Maintenance and repairs are expensed as incurred.  Upon sale or retirement,  the
costs and related accumulated  depreciation are eliminated from property,  plant
and equipment and any resulting gain or loss is included in income. Depreciation
is provided over the estimated  useful lives or lease terms, if less,  using the
straight-line method as follows:

         Land improvements                          1 to 20 years
         Buildings and improvements                 3 to 40 years
         Vehicles and other operating equipment     2 to 12 years
         Furniture, fixtures and office equipment   1 to 7 years

Depreciation expense was approximately $5,930,000, $5,482,000 and $4,996,000 for
the years ended December 31, 2001, 2000 and 1999, respectively.

Intangible Assets

The cost of acquired  companies is allocated first to identifiable  assets based
on estimated fair values. Costs allocated to identifiable  intangible assets are
amortized on a straight- line basis over the remaining estimated useful lives of
the assets,  as determined  principally by the underlying terms of the contracts
and  patents  acquired  and  the  underlying  characteristics  of the  assembled
workforce  acquired.  The  excess of the  purchase  price over the fair value of
identifiable  assets  acquired,  net of  liabilities  assumed,  is  recorded  as
goodwill and amortized on a straight-line  basis over the estimated useful life.
The  estimated  useful life for goodwill is determined  based on the  individual
characteristics  of the  acquired  entity  and  ranges  from  20  years  for the
Company's building materials  acquisitions to 25 years for the Company's fly ash
acquisitions.

Intangible  assets  consist of goodwill,  contracts,  patents and licenses,  and
assembled  workforce.   Amortization   expense  was  approximately   $9,880,000,
$8,994,000, and $8,095,000 for the years ended December 31, 2001, 2000 and 1999,
respectively  and is provided  over the estimated  period of benefit,  using the
straight-line method as follows:

             Goodwill                                         20 to 25 years
             Contracts                                        10 to 20 years
             Patents and licenses                             13 to 19 years
             Assembled workforce                                     8 years
                                      F-12
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2.   Description  of Business  and Summary of  Significant  Accounting  Policies
     (continued)

Debt Issuance Costs

Debt  issuance  costs relate to costs  incurred  with the issuance of the Senior
Subordinated  Notes  and the  Secured  Credit  Facility.  These  costs are being
amortized to interest  expense over the respective lives of the debt issues on a
straight-line   basis,   which   approximates  the  effective  interest  method.
Amortization expense was approximately  $937,000,  $831,000 and $702,000 for the
years ended December 31, 2001, 2000 and 1999, respectively.

Income Taxes

Provisions  for federal and state income taxes are  calculated  based on current
tax laws.  Deferred  taxes are  provided to  recognize  the income tax effect of
amounts that are included in different reporting periods for financial statement
and tax purposes.

The  Company  files a  consolidated  income tax  return  with its  parent,  ISG.
Deductions of ISG are used to offset taxable income or increase  taxable losses,
thereby increasing net operating loss carryovers,  of the Company.  As a result,
the Company and ISG have an informal arrangement whereby the Company compensates
ISG for the tax  effect  of the use of ISG's  deductions.  This  arrangement  is
reflected in the Company's payable to ISG.

Fair Value of Financial Instruments

Financial  instruments  included in various  categories  within the accompanying
consolidated balance sheets consist of the following at December 31:
<TABLE>
<CAPTION>

                                        2001                         2000
                              Carrying         Fair         Carrying        Fair
                                Value          Value         Value          Value
                             -------------  ------------   ------------ -------------
<S>                            <C>           <C>            <C>           <C>
Short-term assets              $43,977,612   $43,977,612    $32,140,711   $32,140,711
Short-term liabilities          23,320,005    23,320,005     18,783,096    18,783,096
Long-term debt:
   Senior subordinated notes   100,000,000    88,000,000    100,000,000    65,000,000
   Secured credit facility      64,643,900    64,643,900     65,000,000    65,000,000
Other liabilities                  400,300       313,365      1,241,769       979,310
</TABLE>
                                      F-13
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2.   Description  of Business  and Summary of  Significant  Accounting  Policies
     (continued)

Fair Value of Financial Instruments (continued)

The carrying value of short-term  assets and liabilities  approximate fair value
due to the  short-term  nature of the  instruments.  The  carrying  value of the
secured credit facility approximates the fair value due to the variable interest
rate features of the instrument. The fair value of the senior subordinated notes
is based on quoted market prices. The fair value of certain other liabilities is
based on the present  value of future  cash flows  discounted  at the  Company's
estimated incremental borrowing rate.

Long-lived Assets

The Company  regularly  evaluates  the carrying  amounts of  long-lived  assets,
including  goodwill  and  other  intangible  assets,  as  well  as  the  related
amortization  periods,  to determine whether  adjustments to these amounts or to
the useful  lives are required  based on current  circumstances  or events.  The
evaluation,  which involves significant management judgment, is based on various
analyses including cash flow and profitability  projections.  To the extent such
projections  indicate that future  undiscounted cash flows are not sufficient to
recover the  carrying  amounts of the related  long-lived  assets,  the carrying
amount of the underlying  assets will be reduced,  with the reduction charged to
expense,  so  that  the  carrying  amount  is  equal  to fair  value,  primarily
determined based on future discounted cash flows. No impairment of the Company's
intangible assets has been indicated to date. However,  the Company has recorded
impairment of certain fixed assets as discussed below.

During the year ended December 31, 2001, the Company recorded an impairment loss
of  approximately  $291,000 on property  which was no longer used in operations.
The loss was  recognized  in operating  income and was included in the aggregate
total  of  selling,   general  and  administrative  expenses  in  the  Company's
consolidated statements of operations for 2001.

During the year ended  December 31, 2000,  an impairment  loss of  approximately
$478,000 was recognized on property that related to construction of a carbon ash
burnout unit.  The loss was  recognized in operating  income and was included in
the  aggregate  total  for   depreciation  and  amortization  in  the  Company's
consolidated statements of operations for 2000.

                                      F-14
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2.   Description  of Business  and Summary of  Significant  Accounting  Policies
     (continued)

Use of Estimates

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

New Accounting Pronouncements

In  1998,  the  Financial  Accounting  Standards  Board  issued  SFAS  No.  133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities,"  which was
subsequently  amended  by SFAS No.  137  "Accounting  for  Derivative  Financial
Instruments and Hedging  Activities - Deferral of the Effective Date of SFAS No.
133" and SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
requiring  that  every  derivative  instrument,   including  certain  derivative
instruments  embedded in other  contracts,  be recorded in the balance  sheet as
either an asset or liability and measured at its fair value.  The statement also
requires that changes in the  derivative's  fair value be recognized in earnings
unless specific hedge  accounting  criteria are met. SFAS No. 133, as amended by
SFAS No. 137 and SFAS No. 138, is effective for all fiscal years beginning after
June 15, 2000. As expected, the adoption of SFAS No. 133 did not have a material
impact on the Company's financial condition or results of operations.

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting Standards (SFAS) No. 141, "Business  Combinations," and No.
142, "Goodwill and Other Intangible Assets."

SFAS No. 141 requires  that the purchase  method of  accounting  be used for all
business   combinations   initiated   after   June   30,   2001.   Use   of  the
pooling-of-interests  method is no longer permitted.  SFAS No. 141 also includes
guidance on the  initial  recognition  and  measurement  of  goodwill  and other
intangible  assets  acquired in a business  combination  that is completed after
June 30, 2001.

                                      F-15
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2.   Description  of Business  and Summary of  Significant  Accounting  Policies
     (continued)

New Accounting Pronouncements (continued)

SFAS No. 142 no longer permits the amortization of goodwill and indefinite-lived
intangible  assets.  Instead,  these  assets must be reviewed  annually (or more
frequently  under certain  conditions)  for  impairment in accordance  with this
statement.  This  impairment  test uses a fair value  approach  rather  than the
undiscounted  cash  flows  approach   previously   required  by  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  Of."  Intangible  assets  that do not have  indefinite  lives will
continue to be amortized  over their useful lives and reviewed for impairment in
accordance with SFAS No. 121 or SFAS No. 142 (see discussion  below),  which the
Company is required to adopt effective January 1, 2002.

The Company is currently  evaluating  its  intangible  assets in relation to the
provisions of SFAS No. 142 to determine the impact that adoption of SFAS No. 142
will have on its results of operations or financial position. In accordance with
SFAS No. 142, the Company  anticipates that the amounts  classified as assembled
workforce will be reclassified  to goodwill.  The Company  anticipates  that all
amortization  of goodwill and all  amortization  of assembled  workforce will no
longer be  recorded  in the  financial  statements.  The  effect of  eliminating
amortization for goodwill and assembled workforce will approximate $4,100,000 in
the year ending December 31, 2002. The useful lives of the intangible  contracts
are presently  being evaluated and it is possible that the Company may determine
that  the  useful  lives  of  the  intangible   contracts  should  change  after
evaluation.  The  Company  is  uncertain  as to the net  impact,  if  any,  such
evaluation  will have on  amortization  expense for the year ending December 31,
2002.

In the future,  goodwill will be evaluated by the fair value  method,  comparing
the estimated fair value with the recorded value of the assets and  liabilities,
as recommended in the Statement.  The effect of impairment of goodwill,  if any,
has not yet been evaluated. The Statement requires recognition of any impairment
of goodwill in the first quarter of the fiscal year. A restatement  of quarterly
financial  results for the year ended  December  31, 2002 may be required if the
two-step  valuation  process is not completed by the filing of the first quarter
financial  statements.  The effect of any impairment recognized at transition to
the Statement will be recognized as a change in accounting principle.

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations".  SFAS No. 143 requires alternative  accounting treatment of assets
which are in the  process of  retirement.  The Company is required to adopt SFAS
No. 143 effective  January 1, 2002. The Company  anticipates that there will not
be a significant effect on results of operations or financial position.


                                      F-16
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2.   Description  of Business  and Summary of  Significant  Accounting  Policies
     (continued)

New Accounting Pronouncements (continued)

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal of Long-Lived Assets." This Statement  addresses  financial  accounting
and  reporting  for the  impairment  or  disposal  of  long-lived  assets.  This
Statement  supersedes FASB Statement No. 121,  "Accounting for the Impairment of
Long-Lived  Assets  and  for  Long-Lived  Assets  to Be  Disposed  Of,"  and the
accounting  and  reporting  provisions  of APB  Opinion No. 30,  "Reporting  the
Results of  Operations  and  Reporting the Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions,"  for the  disposal  of a segment  of a  business  (as  previously
defined in that Opinion).  This Statement also amends ARB No. 51,  "Consolidated
Financial  Statements,"  to  eliminate  the  exception  to  consolidation  for a
subsidiary  for which  control  is likely to be  temporary.  This  Statement  is
effective for years beginning after December 15, 2001 (i.e.  January 1, 2002 for
calendar  year  companies).  The  Company  anticipates  that there will not be a
significant effect on results of operations or financial position.

3.  Intangible Assets

Intangible assets consist of the following at December 31:

                                               2001               2000
                                          ------------------ ------------------
            Goodwill                      $    83,610,925     $   83,610,925
            Contracts                         100,227,490        100,227,490
            Patents and licenses                3,446,584          3,787,431
            Assembled work force                2,815,233          2,815,233
                                          ------------------ ------------------
                                              190,100,232        190,441,079
            Less accumulated amortization     (32,922,533)       (23,364,593)
                                          ------------------ ------------------
                                             $157,177,699       $167,076,486
                                          ================== ==================

                                      F-17
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4.  Long-term Debt

Secured Credit Facility

On March 4, 1998, the Company  obtained a Secured Credit Facility  provided by a
syndicate of banks.  The Secured  Credit  Facility,  which matures  September 4,
2003, enables the Company to obtain revolving secured loans from time to time to
finance certain  permitted  acquisitions,  to pay fees and expenses  incurred in
connection with certain acquisitions,  to repay existing  indebtedness,  and for
working  capital and  general  corporate  purposes.  The  Company  financed  the
acquisitions  through the issuance of  $100,000,000  of 10% Senior  Subordinated
Notes due 2008  (discussed  below) and borrowings on its Secured Credit Facility
(as  subsequently  amended,  restated,  and  increased).  Operating  and capital
expenditures have been financed  primarily through cash flow from operations and
borrowings under the Secured Credit Facility.

On May 26, 2000, the Secured Credit  Facility was amended and restated to, among
other things,  increase the borrowings available to the Company from $50,000,000
to $65,000,000.

This increase in the funds available to the Company was accomplished through the
addition of a Tranche B feature,  pursuant to which two of the existing  lenders
(the  "Tranche B  Lenders"),  agreed to provide the  additional  $15,000,000  in
funding. No amount is available pursuant to the Tranche B revolving loans unless
all amounts under the Tranche A (existing) revolving loans have been borrowed in
full  and are  outstanding.  Under  the  amended  and  restated  Secured  Credit
Facility,  at the option of the Company,  both the Tranche A Revolving Loans and
the Tranche B Revolving Loans may be maintained as Eurodollar Loans or Base Rate
Loans.

Eurodollar  loans will bear  interest  at a per annum rate equal to the rate per
annum  (rounded  upwards,  if  necessary,  to the  nearest  1/100 of 1  percent)
determined by the  Administrative  Agent to be equal to the quotient by dividing
(a) the London Interbank Offered Rate for such Eurodollar Loan for such Interest
Period by (b) 1 minus the Reserve  Requirement for such Eurodollar Loan for such
Interest  Period,  and by then adding thereto the applicable LIBOR margin (which
is a percentage ranging from 1.75% to 3.50% for the Tranche A and 1.75% to 2.50%
for the Tranche B, primarily  depending upon the Company's  Leverage Ratio). All
capitalized terms are defined in the Secured Credit Facility.

                                      F-18
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4.  Long-term Debt (continued)

Secured Credit Facility (continued)

Base Rate Loans will bear  interest  at a per annum rate equal to the rate which
is the higher of (a) the  Federal  Funds rate for such day plus  one-half of one
percent  (0.5%) and (b) the Prime rate for such day and by then  adding  thereto
the applicable ABR Margin (which is a percentage ranging from 0.50% to 2.25% for
the Tranche A and .50% to 1.25% for the Tranche B, primarily  depending upon the
Company's  Leverage  Ratio).  Any change in the Base Rate due to a change in the
Federal Funds Rate or to the Prime Rate shall be effective on the effective date
of such  change.  All  capitalized  terms are as defined in the  Secured  Credit
Facility.

The Company will also pay certain fees with respect to any unused portion of the
amended and restated Secured Credit Facility.

The amended and  restated  Secured  Credit  Facility  maintains  the term of the
original  Secured  Credit  Facility  obtained on March 4, 1998, is guaranteed by
ISG,   existing,   and  future   domestic   subsidiaries  of  the  Company  (the
"Guarantors"),  and is secured by a first priority  security  interest in all of
the capital  stock of the  Company  and all of the capital  stock of each of the
Guarantors,  as well as certain  present and future assets and properties of the
Company and any domestic subsidiaries.

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

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

At  December  31,  2001,   $64,643,900  of  the  Secured  Credit   Facility  was
outstanding, with no amount being unused and available.

                                      F-19
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4.  Long-term Debt (continued)

Senior Subordinated Notes

On April 22, 1998,  the Company  completed a private  placement of  $100,000,000
aggregate  principal  amount  of 10%  Senior  Subordinated  Notes  due 2008 (the
"Senior Subordinated  Notes") to finance the 1998 Acquisitions.  Interest on the
Senior Subordinated Notes is payable semi-annually on April 15 and October 15 of
each year. The Senior  Subordinated  Notes will mature on April 15, 2008 and are
guaranteed fully and  unconditionally and on a joint and several basis by all of
the Company's existing and future restricted domestic  subsidiaries,  as defined
in the indenture. See Note 11.

The Senior  Subordinated  Notes are  redeemable  at the option of the Company at
various times throughout the term of the Senior Subordinated Notes at redemption
prices specified in the indenture.

Upon the  occurrence  of a change of  control or an asset sale as defined in the
indenture, the Company is required to make an offer to repurchase all or part of
the Senior Subordinated Notes at prices specified in the indenture.

The payment of principal,  interest,  and  liquidated  damages as defined in the
indenture,  if any, on the Senior Subordinated Notes is subordinated in right of
payment  to the prior  payment  of all  senior  indebtedness  as  defined in the
indenture,  whether  outstanding  on the  date of the  indenture  or  thereafter
incurred.  The indenture for the Company's  Senior  Subordinated  Notes contains
various limitations on the incurrence of additional  indebtedness,  the issuance
of preferred stock,  consolidations or mergers,  sales of assets, and restricted
payments,  including dividends,  for the Company and restricted  subsidiaries as
defined in the indenture.

In connection with the private placement of the Senior  Subordinated  Notes, the
Company entered into the  Registration  Rights  Agreement  pursuant to which the
Company was required to file an exchange offer  registration  statement with the
Securities and Exchange Commission that was declared effective by the Securities
and Exchange Commission on September 4, 1998.

The aggregate maturities of all long-term debt for the five years subsequent to
December 31, 2001 are as follows:  $0 in 2002,  $64,643,900 in 2003, $0 in 2004,
$0 in 2005 and 2006, and $100,000,000 thereafter.

                                      F-20
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

5.  Employee Benefit Plan

Eligible  employees of the Company may participate in a 401(k) savings plan (the
"Plan")  sponsored  by the  Company.  The Plan  requires  the  Company  to match
employee  contributions,  as defined,  up to 6% of the employees'  compensation.
Expenses related to the Plan were approximately $572,000,  $488,000 and $458,000
for the years ended December 31, 2001, 2000, and 1999, respectively.

6.  Income Taxes

Income tax expense (benefit) consists of the following:

                                    Year ended December 31
                         2001                 2000                1999
                   ------------------------------------------------------------
Current:
   U.S. federal     $    1,800,701        $     (961,266)   $    2,150,860
   State                   869,444              (134,682)          726,268
                   ------------------------------------------------------------
                         2,670,145            (1,095,948)        2,877,128
Deferred:
   U.S. federal         (1,096,766)           (1,853,840)       (1,847,270)
   State                  (657,970)              (43,889)         (382,269)
                   ------------------------------------------------------------
                        (1,754,736)           (1,897,729)       (2,229,539)
Total:
   U.S. federal            703,935            (2,815,106)          303,590
   State                   211,474              (178,571)          343,999
                   ------------------------------------------------------------
                      $    915,409        $   (2,993,677)   $      647,589
                   ============================================================

                                      F-21

<PAGE>

                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

6.  Income Taxes (continued)

Reconciliation of income tax expense (benefit) at the U.S. statutory rate to the
Company's tax expense (benefit) is as follows:

                                              Year ended December 31
                                      2001            2000            1999
                                ------------------------------------------------
     35% of income (loss)
        before income tax             $(569,002)    $(4,461,308)    $   99,812

     Add:
        Non-deductible goodwill       1,215,772       1,170,888        901,551
        Other, net                      268,639         296,743       (353,774)
                                ------------------------------------------------
                                      $ 915,409     $(2,993,677)    $  647,589
                                ================================================

The major  components of the deferred tax assets and  liabilities as of December
31 are as follows:

                                                   2001               2000
                                            ------------------------------------
Deferred tax assets:
   Bad debt reserves                         $       170,957      $     193,873
   State NOL Carryforward                            202,224                  -
   Accruals not currently deductible
     for tax purposes                                256,997            696,570
                                            ------------------------------------
Total gross deferred tax assets                      630,178            890,443

Deferred tax liabilities:
  Fixed asset basis differences                    2,645,189          2,862,317
  Intangible asset basis differences              33,050,193         34,878,740
  Other                                               31,259                585
                                            ------------------------------------
Total gross deferred tax liabilities              35,726,641         37,741,642
                                            ------------------------------------
Net deferred tax liabilities                    $(35,096,463)      $(36,851,199)
                                            ====================================

In 2000,  the  Company  generated  state neg  loss  carryforwards  of
approximately $3,111,000. These carryforwards, if not used, will expire in 2007.

                                      F-22

<PAGE>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

7.  Commitments and Contingencies

Lease Obligations

Certain  facilities  and  equipment  are leased under  non-cancelable  operating
leases,  which  generally have renewal terms,  expiring in various years through
2011.  Future  minimum  payments  under leases with initial terms of one year or
more consisted of the following:

                2002                                 $  8,457,157
                2003                                    7,099,524
                2004                                    4,828,602
                2005                                    2,760,660
                2006                                    1,659,488
                Thereafter                              5,501,000
                                                  -------------------
                Total minimum lease payments          $30,306,431
                                                  ===================

Total rental expense was approximately  $10,353,000,  $8,067,000, and $7,595,000
for the years ended December 31, 2001, 2000 and 1999 respectively.

Sale and Purchase Commitments

Certain of the Company's  contracts with its customers and suppliers require the
Company to make minimum sales and purchases over ensuing years,  approximated as
follows:

                                               Minimum             Minimum
                                                Sales             Purchases
                                          -------------------------------------

                2002                         $   720,000           $ 8,043,120
                2003                             840,000             8,169,840
                2004                             960,000             6,976,560
                2005                             960,000             3,063,280
                2006                             720,000             2,902,000
                Thereafter                     3,600,000            13,250,000
                                          -------------------------------------
                                              $7,800,000           $42,404,800
                                          =====================================

                                      F-23
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

7.  Commitments and Contingencies (continued)

Sale and Purchase Commitments (continued)

Actual minimum sales and purchases  under  contracts  with minimum  requirements
approximated the following for the years ended December 31:

                                               Minimum             Minimum
                                                Sales             Purchases
                                          -------------------------------------

                1999                           $806,000            $5,930,000
                2000                           $364,000            $6,637,000
                2001                           $240,000            $8,562,060

Royalty Commitments

In connection  with a 1998  acquisition,  the Company agreed to pay a minimum of
$500,000 per year  commencing in 1999 and continuing  through 2003 for royalties
related to the sale of certain  Class C fly ash. An amendment to this  agreement
changed the terms to a payment of $50,000 per month through  March 1, 2003.  The
current  portion of this liability is recorded in other current  liabilities and
the  long-term  portion  is  recorded  in  other  long-term  liabilities  in the
accompanying consolidated balance sheets.

In 2000, the Company entered into a license agreement for certain technology for
which the Company agreed to pay a minimum of $40,000 in 2000,  $220,000 in 2001,
$327,000 in 2002,  and $500,000 in 2003 for royalties on net sales.  The license
agreement states that if the Company  terminates the license  agreement prior to
December 31, 2003, the Company will still have an obligation to pay the licensor
the minimum  royalty each month through and including  December  2003, as if the
agreement had never been terminated.

Other Obligations

In 2001, the Company entered into a consulting  agreement for certain technology
for which the Company  agreed to pay  $25,000 per month from  October 1, 2001 to
September 1, 2002. In addition,  the Company entered into a consulting agreement
for  marketing  fly ash in  conjunction  with a supply  contract  for  which the
Company agreed to pay $10,000 per month from October 1, 2001 to June 1, 2003.

                                      F-24
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

7.  Commitments and Contingencies (continued)

Other Obligations (continued)

In connection with the purchase of land for total  consideration of $1.5 million
during  the second  quarter  of 2001,  the  Company  incurred  a purchase  money
obligation  of $1.1  million.  The total  outstanding  balance  of  $800,000  is
classified in other current  liabilities  on the  consolidated  balance sheet at
December 31, 2001 and will be paid in full in 2002.  The $1.1 million is treated
as a non-cash item on the statement of cash flows.

Legal Proceedings

There are various legal  proceedings  against the Company  arising in the normal
course of business.  While it is not currently  possible to predict or determine
the  outcome of these  proceedings,  it is the  opinion of  management  that the
outcome  will not have a material  adverse  effect on the  Company's  results of
operations, financial position or liquidity.

Employment Agreements

The Company has employment  agreements with certain of its employees.  The terms
of these  agreements  began to  expire  in 2001  with  annual  extensions  to be
exercised by mutual consent of both parties. Considering these extensions, these
employment   agreements   provide  for  total   annual  base   compensation   of
approximately  $2,279,000 in 2002,  $1,668,000 in 2003,  and $86,000 in 2004. An
employee,  pursuant to his  employment  contract,  has been  granted an economic
interest in one percent of all outstanding  shares of the Company's common stock
as of the  date of his  employment  agreement.  This  economic  interest  vested
immediately  upon  execution  of the  employment  agreement,  but the  right  is
contingent  upon the occurrence of certain  future  events.  Because such events
have not occurred as of December 31, 2001,  and  management  believes  that such
events are unlikely to occur,  no  compensation  expense has been  calculated or
recorded.

Medical Insurance

Effective April 1, 1998, the Company established a self-funded medical insurance
plan for its employees with stop-loss  coverage for amounts in excess of $40,000
per  individual  and  approximately  $3,678,000 in the aggregate for the current
plan period ended December 30, 2001 and $2,792,000 in the aggregate for the plan
period ended December 31, 2000.  The Company has  contracted  with a third-party
administrator to assist in the payment and  administration of claims.  Insurance
claims are recognized as expenses when incurred,  including an estimate of costs
incurred  but not  reported  at the balance  sheet  dates.  In the  accompanying
consolidated  balance  sheets,  $238,000  and  $508,000  has been  accrued as of
December 31, 2001and 2000, respectively, related to this liability.

                                      F-25
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

8.  Reportable Segments

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

The Company evaluates performance based on profit or loss from operations before
depreciation,  amortization,  income taxes and interest  expense  (EBITDA).  The
Company  derives  a  majority  of its  revenues  from CCP  sales  and the  chief
operating  decision  makers  rely on  EBITDA to assess  the  performance  of the
segments and make  decisions  about  resources to be allocated to the  segments.
Accordingly,  EBITDA is  included in the  information  reported  below.  Certain
expenses are  maintained at the  Company's  corporate  headquarters  and are not
allocated to the segments.  Such expenses  primarily  include interest  expense,
corporate overhead costs, certain non-recurring gains and losses.  Inter-segment
sales, which historically have not been material, are generally accounted for at
cost and are eliminated in consolidation.  The  manufacturing  products division
includes  financial data for the six legal entities from their  respective dates
of  acquisition  through  December 31, 2001.  Thus, the  manufacturing  products
division  segment  information is not  comparable  for the 1999,  2000, and 2001
periods.  Best  financial  data is included  from  January 1, 1999,  Osborne and
Terrazzo  from October 26, 1999,  Magna Wall from  December 1, 1999,  Don's from
March 1, 2000 and Palestine from June 1, 2000.

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

In  anticipation  of the  Company's  adoption of SFAS No.  142,  the Company has
reevaluated  the  allocation  of  certain  intangible  assets  to the  segments.
Information  as of and for the years ended  December 31, 2000 and 1999 have been
restated to conform to this revised breakout.

                                      F-26
<page>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

8.  Reportable Segments (continued)

Information about reportable segments, and reconciliation of such information to
the consolidated totals as of and for the year indicated, is as follows:
<TABLE>
<CAPTION>

For the Year Ended                               Manufactured                     Consolidated
December 31, 2001                    CCP           Products          Other           Total
                              --------------- --------------- ---------------- ---------------
<S>                             <C>                <C>            <C>            <C>
Revenue                         $167,228,203       $48,662,571       $339,985    $216,230,759
EBITDA                            36,626,349         4,862,850    (10,337,177)     31,152,022
Depreciation and amortization     13,099,713         2,440,193        269,663      15,809,569
Total assets                     182,068,540        46,796,876     24,953,473     253,818,889
Expenditures for PP&E              4,699,635         1,525,085        196,882       6,421,602

For the Year Ended
December 31, 2000
Revenue                         $139,470,096       $41,009,405       $422,360    $180,901,861
EBITDA                            27,674,818         4,026,257    (13,690,958)     18,010,117
Depreciation and amortization     12,734,938         1,964,370        255,123      14,954,431
Total assets                     188,957,876        46,481,590     16,894,909     252,334,375
Expenditures for PP&E              5,123,317         2,133,579        928,693       8,185,589

For the Year Ended
December 31, 1999
Revenue                         $134,631,711       $20,821,159       $752,402    $156,205,272
EBITDA                            32,096,154         2,811,482     (8,139,384)     26,768,252
Depreciation and amortization     11,862,017         1,005,779        223,335      13,091,131
Total assets                     189,672,793         6,683,098     24,106,620     220,462,511
Expenditures for PP&E              7,520,689           350,610        919,571       8,790,870

</TABLE>

The accounting  policies of the segments are the same as those  described in the
summary  of  significant  accounting  policies.  Segment  assets  reflect  those
specifically  attributable  to the  individual  segments  and  include  accounts
receivable,  inventory and property,  plant and equipment and intangible assets.
All other assets are included in the "Other" column.

                                      F-27
<PAGE>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

9.  Related Party Transactions

The Company's parent,  ISG, files a consolidated income tax return including the
Company  and all of its  subsidiaries  as  discussed  in Note 2. As the  Company
records all tax  payments  and  receipts,  a payable to ISG for  $4,796,444  and
$2,244,422 has been recorded as of December 31, 2001 and 2000, respectively,  to
reflect  amounts owed to ISG relating to ISG's interest  deductions  included in
the 1997, 1998, 1999, and 2000 consolidated tax returns, and an estimate of what
will  be  included  in  the  2001  consolidated  income  tax  returns.  The  tax
information included in Note 6 above has been prepared as if the Company filed a
separate tax return.

10.  Unsuccessful Acquisition Costs

Costs of $1.5 million  incurred  related to unsuccessful  business  acquisitions
were  charged  to  expense  in  2000  when  the  Company  determined  that  such
acquisitions would not occur. No such costs were expensed in 2001.

On February 24, 1999,  the Company  entered into an option  agreement to acquire
the stock of Tatum  Industries,  Inc.  (Tatum).  As part of that agreement,  the
Company  agreed to loan  Tatum  approximately  $50,000  per month for  operating
expenses and loan servicing.  Tatum's note to the Company accrued interest at 8%
and was payable on demand.  Additionally,  the Company leased Tatum's  building,
transferred  certain  equipment  and  incurred  approximately  $0.1  million  of
leasehold improvements to the property. On October 27, 2000, the Company advised
Tatum that the  Company was  terminating  the option  agreement  and the Company
advised Tatum that the note to the Company, totaling approximately $1.1 million,
would be due and payable on March 1, 2001. In December  2000,  Tatum advised the
Company that they would not be able to repay the note and the Company's  attempt
to purchase the outstanding  stock of Tatum was  unsuccessful.  As a result,  in
2000,  the  Company   expensed   approximately   $1.1  million  in  unsuccessful
acquisition  costs,  which is  included  in the $1.5  million  discussed  above.
However,  the Company  continued  to lease the  building  from Tatum and use the
equipment in its operations.

In 2001, in  conjunction  with the Company's  decision to abandon its production
operations at Tatum's facility, the Company recognized $291,000 as an impairment
loss on the owned assets,  based upon an offer the Company  received to purchase
the assets.  This loss is recognized in operating  income and is included in the
aggregate total of selling,  general and  administrative  expense.  These assets
were sold in December 2001.

                                      F-28

<PAGE>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

11.  Condensed Consolidating Financial Information

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

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

<TABLE>
<CAPTION>

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

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

Intangible assets, net       160,865,174               -    131,849,626       29,015,548                 -
Investment in subsidiaries             -   $(45,476,666)     45,476,666                -                 -
Other assets                      93,706               -         93,706                -                 -
                          ---------------------------------------------------------------------------------
Total assets                $253,818,889   $(45,476,666)   $251,157,906      $46,796,876        $1,340,773
                          =================================================================================

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

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

Shareholder's equity:
   Common stock               34,745,050         (28,496)    34,745,050           28,496                 -
   Cumulative translation
    adjustment                   (55,636)        (38,829)             -                -           (16,807)

   Additional paid in capital          -     (40,960,169)             -       40,533,259           426,910
   Retained (deficit)
     earnings                (10,134,391)     (4,472,373)   (10,134,391)       4,641,189          (168,816)
                          ---------------------------------------------------------------------------------
Total shareholder's equity    24,555,023    (45,499,867)     24,610,659       45,202,944           241,287
                          ---------------------------------------------------------------------------------
Total liabilities and
  shareholder's equity      $253,818,889   $(45,476,666)   $251,157,906      $46,796,876        $1,340,773
                          =================================================================================
</TABLE>

                                      F-29
<PAGE>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

11.  Condensed Consolidating Financial Information (continued)

The condensed consolidating balance sheet as of December 31, 2000 is as follows:
<TABLE>
<CAPTION>

                                                              ISG        Manufactured        ISG
                           Consolidated   Eliminations     Resources       Products        Canada
                          -----------------------------------------------------------------------------
<S>                         <C>            <C>             <C>             <C>             <C>
Assets
Current assets:
  Cash and cash
    equivalents             $  6,986,725     $         -    $ 5,954,992    $ 1,054,079     $  (22,346)
  Accounts receivable         25,153,986               -     19,742,002      5,152,357         259,627
  Income tax receivable        2,196,988               -      2,208,061       (11,073)               -
  Inventories                  6,663,633               -      1,815,138      4,584,187         264,308
  Other current assets         1,909,215               -      1,811,949         97,266               -
                          -----------------------------------------------------------------------------
Total current assets          42,910,547               -     31,532,142     10,876,816         501,589

Property, plant and
equipment                     37,760,556               -     31,859,149      4,914,902         986,505

Intangible assets, net       171,600,956               -    140,921,426     30,679,530               -
Investment in subsidiaries             -    (43,078,999)     43,078,999              -               -
Other assets                      62,316               -         51,974         10,342               -
                          -----------------------------------------------------------------------------
Total assets                $252,334,375   $(43,078,999)   $247,443,690    $46,481,590      $1,488,094
                          =============================================================================

Liabilities and shareholder's
Current liabilities:
   Accounts payable          $10,704,637        $      -     $8,561,809     $2,082,000         $60,828
   Accrued expenses            7,082,306               -      6,743,155        287,260          51,891
   Other current liabilities     996,153               -        678,564        317,589               -
                          -----------------------------------------------------------------------------
Total current liabilities     18,783,096               -     15,983,528      2,686,849         112,719

Long-term debt               165,000,000               -    165,000,000              -               -
Deferred tax liabilities      37,702,524               -     37,702,524              -               -
Payable to Parent              2,244,022               -      2,244,022              -               -
Intercompany account
   payable                             -          22,774    (1,904,021)        738,496       1,142,751
Other liabilities              1,482,848               -      1,265,848        217,000               -

Shareholder's equity:
   Common Stock               34,745,050        (28,496)     34,745,050         28,496               -
   Cumulative translation
   adjustment                   (29,904)        (15,959)              -              -        (13,945)
   Additional paid in capital          -    (40,825,606)              -     40,552,265         273,341
   Retained (deficit)
     earnings                (7,593,261)     (2,231,712)    (7,593,261)      2,258,484        (26,772)
                          -----------------------------------------------------------------------------
Total shareholder's equity    27,121,885    (43,101,773)     27,151,789     42,839,245         232,624
                          -----------------------------------------------------------------------------
Total liabilities and
shareholder's equity        $252,334,375   $(43,078,999)   $247,443,690    $46,481,590      $1,488,094
                          =============================================================================
</TABLE>

                                      F-30
<PAGE>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

11.  Condensed Consolidating Financial Information (continued)

The condensed  consolidating statement of operations for the year ended December
31, 2001 is as follows:
<TABLE>
<CAPTION>

                                                                          ISG       Manufactured        ISG
                                    Consolidated     Eliminations      Resources      Products        Canada
                                    -------------- ----------------- -------------- ------------------------------
<S>                                  <C>               <C>           <C>             <C>              <C>
Revenues                             $216,230,759      $          -  $ 165,930,603   $ 48,662,571     $ 1,637,585
Costs and expenses:
Cost of products and services,
  excluding depreciation              158,227,608                 -    118,169,420     38,477,953       1,580,235
Depreciation and amortization          15,809,569                 -     13,268,749      2,440,193         100,627
Selling, general and administrative
  expenses                             25,019,279                 -     19,379,292      5,546,746          93,241
New product development                 2,308,010                 -      2,308,010              -               -
                                    -------------- ----------------- -------------- ------------------------------
                                      201,364,466                 -    153,125,471     46,464,892       1,774,103
                                    -------------- ----------------- -------------- ------------------------------
Operating income (loss)                14,866,293                 -     12,805,132      2,197,679       (136,518)
Equity interest in subsidiary income            -       (2,240,661)      2,240,661              -               -
Interest expense                     (16,968,174)                 -   (16,928,222)       (39,952)               -
Other income (expense), net               476,160                 -        256,708        224,978         (5,526)
                                    -------------- ----------------- -------------- ------------------------------
Income (loss) before income tax       (1,625,721)       (2,240,661)    (1,625,721)      2,382,705       (142,044)
Income tax expense                        915,409                 -        915,409              -               -
                                    -------------- ----------------- -------------- ------------------------------
Net income (loss)                    $(2,541,130)      $(2,240,661)   $(2,541,130)     $2,382,705      $(142,044)
                                    ============== ================= ============== ==============================
</TABLE>

The condensed  consolidating statement of operations for the year ended December
31, 2000 is as follows:
<TABLE>
<CAPTION>

                                                                          ISG       Manufactured        ISG
                                    Consolidated     Eliminations      Resources      Products        Canada
                                    -------------- ----------------- -------------- ------------------------------
<S>                                 <C>               <C>            <C>             <C>              <C>
Revenues                            $ 180,901,861     $           -  $ 139,218,939   $ 41,009,405     $   673,517
Costs and expenses:
  Cost of products and services sold,
   excluding depreciation             133,092,574                 -    100,334,508     32,215,869         542,197
  Depreciation and amortization        14,954,431                 -     12,984,578      1,964,370           5,483
  Unsuccessful acquisition costs        1,525,386                 -      1,525,386              -               -
  Selling, general, and
   administrative expenses             26,326,402                 -     21,219,591      4,954,151         152,660
  New product development               2,331,510                 -      2,331,510              -               -
                                    -------------- ----------------- -------------- ------------------------------
                                      178,230,303                 -    138,395,573     39,134,390         700,340
                                    -------------- ----------------- -------------- ------------------------------
Operating income (loss)                 2,671,558                 -        823,366      1,875,015        (26,823)
Equity interest in subsidiary income            -       (2,014,930)      2,014,930              -               -
Interest expense                     (15,804,378)                 -   (15,784,193)       (20,185)               -
Miscellaneous income, net                 384,128                 -        197,205        186,872              51
                                    -------------- ----------------- -------------- ------------------------------
Income (loss) before income tax      (12,748,692)       (2,014,930)   (12,748,692)      2,041,702        (26,772)
Income tax expense (benefit)          (2,993,677)                 -    (2,993,677)              -               -
                                    -------------- ----------------- -------------- ------------------------------
Net income (loss)                   $ (9,755,015)     $ (2,014,930)  $ (9,755,015)    $ 2,041,702      $ (26,772)
                                    ============== ================= ============== ==============================
</TABLE>
                                      F-31

<PAGE>
                      ISG Resources, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

11.  Condensed Consolidating Financial Information (continued)

The  condensed  consolidating  statement of cash flow  information  for the year
ended December 31, 2001 is as follows:
<TABLE>
<CAPTION>

                                                                                 ISG       Manufactured        ISG
                                              Consolidated   Eliminations     Resources      Products        Canada
                                              -------------  -------------- -------------- --------------  ------------
<S>                                           <C>              <C>           <C>             <C>             <C>
Net cash provided by operating activities     $ 14,711,194     $ (777,045)   $ 12,900,807    $ 2,444,315     $ 143,117

Net cash provided by (used in) investing
activities                                     (5,743,900)         799,915    (3,649,175)    (3,021,319)       126,679

Net cash provided by financing activities        1,795,869               -      1,795,869              -             -

Effect of exchange rate changes on cash
  and cash equivalents                            (25,732)        (22,870)              -              -       (2,862)
                                              -------------------------------------------------------------------------

Net increase (decrease) in cash and cash
  equivalents                                   10,737,431               -     11,047,501      (577,004)       266,934

Cash and cash equivalents at beginning
of period                                        6,986,725               -      5,954,992      1,054,079      (22,346)
                                              -------------------------------------------------------------------------
Cash and cash equivalents at end of period    $ 17,724,156             $ -   $ 17,002,493      $ 477,075     $ 244,588
                                              =========================================================================
</TABLE>

The  condensed  consolidating  statement of cash flow  information  for the year
ended December 31, 2000 is as follows:
<TABLE>
<CAPTION>

                                                                                ISG       Manufactured        ISG
                                             Consolidated   Eliminations     Resources      Products         Canada
                                             -------------  -------------- -------------- --------------  -------------
<S>                                          <C>              <C>           <C>            <C>             <C>
Net cash provided by (used in) operating
activities                                   $    683,795     $ (770,097)   $  (515,406)   $  2,401,804    $ (432,506)

Net cash provided by (used in) investing
activities                                   (35,982,596)         786,056   (35,845,032)    (1,347,725)        424,105

Net cash provided by financing activities      42,315,430               -     42,315,430              -              -

Effect of exchange rate changes on cash
  and cash equivalents                           (29,904)        (15,959)              -                      (13,945)
                                             --------------------------------------------------------------------------

Net increase (decrease) in cash and cash
  equivalents                                   6,986,725               -      5,954,992      1,054,079       (22,346)

Cash and cash equivalents at beginning
of period                                               -               -              -              -              -
                                             --------------------------------------------------------------------------
Cash and cash equivalents at end of period    $ 6,986,725             $ -    $ 5,954,992    $ 1,054,079     $ (22,346)
                                             ==========================================================================
</TABLE>


                                      F-32