U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20519

                                   FORM 10-KSB

(MARK ONE)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934 For the year ended December 31, 1999

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

                         Commission File Number 0-17594

                             USA BIOMASS CORPORATION
                 (Name of small business issuer in its charter)

              DELAWARE                                      33-032959
   (State or other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                     Identification No.)

         7314 Scout Avenue
         Bell Gardens, California                            90201
(Address of principal executive offices)                   (Zip Code)

          Issuer's telephone number (including area code): 562-928-9900

Securities registered under Section 12(g) of the Exchange Act:

                                      None

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

                    Common Stock, $0.002 par value per share
                                 Title of Class

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statement to this Form 10-KSB. [_]

The registrant's  revenues from continuing operations for its most recent fiscal
year were $7,644,907.

     Based on the  average  of bid and  asked  prices  on March  31,  2000,  the
aggregate market value of common stock held by  non-affiliates of the registrant
on March 31, 2000 was approximately $36,223,252.

     The number of shares  outstanding of the registrant's  only class of Common
Stock, $0.002 par value per share, was 9,347,936 on March 31, 2000.


<PAGE>



                                     Part I

ITEM 1. DESCRIPTION OF BUSINESS.

HISTORICAL SUMMARY

     USA  Biomass   Corporation,   formerly  AMCOR  Capital   Corporation   (the
"Company"),  was  incorporated  in Delaware  on March 10,  1988.  The  Company's
consolidated  operations,  as of December  31,  1999,  include its wholly  owned
subsidiaries,   USA  Waste   Transport  Inc.,  USA   Biomass-Greenwaste,   Inc.,
TransPacific  Environmental,  Inc.  ("TPE") and AMCOR  Biomass  Farms,  LLC (99%
owned), all of which are continuing operations.  Discontinued Operations include
Sun Goddess Farms,  Inc., AMCOR  Properties,  Inc., and Las Palomas Country Club
Estates LLC, (99% owned).

DESCRIPTION OF BUSINESS

     The Company's  operations at December 31, 1999 included:  (i) "clean green"
waste  processing and recycling  ("biomass")  and (ii) contract waste  transport
services.  During 1997, the Company's focus shifted from  agribusiness  and land
planning/development  to  biomass.  Subsequently,  in  June  1998,  the  Company
broadened  its new focus to include solid waste  transportation  and developed a
strategic  alliance with Waste  Management,  Inc.,  formerly USA Waste  Services
("Waste Management").

     During  the  second  half of  1998,  in light  of the  Company's  strategic
alliance with Waste  Management and related  existing and potential  biomass and
solid waste  transportation  opportunities,  the  Company's  Board of  Directors
determined  that  the  Company's  shift  in  focus  from  agribusiness  and land
planning/development  to  solid  waste  transportation  and  biomass  should  be
complete  and  permanent.  Consequently,  the Board of  Directors  approved  the
Company's name change  effective August 31, 1998 and  subsequently,  on December
22, 1998,  adopted a Plan of Discontinued  Operations  (the "Plan")  pursuant to
which   the   Company   will    discontinue    its    agribusiness    and   land
planning/development operations and will focus on its solid waste transportation
and biomass operations. In addition, on January 12, 1999, the Board of Directors
approved a change in the Company's fiscal year end to December 31.

     Implementation of the Plan has had a material impact on the presentation of
the Company's financial  statements.  All business activity,  cash flows and net
assets of these  operations  for the year ended August 31, 1998,  the four month
period ended  December 31, 1998,  and the year ended December 31, 1999 have been
classified as discontinued  operations,  and the assets of these operations have
been reduced to the lower of cost or net realizable value.



                                                                               2
<PAGE>



SOLID WASTE TRANSPORTATION

     The Company entered into two  transportation  service  contracts with Waste
Management  in June 1998.  Under the  contracts,  the Company has the  exclusive
right to provide  transportation  services  from two of Waste  Management's  Los
Angeles-area transfer stations to certain landfills. The Company began providing
transportation  services in October 1998.  The  contracts  have initial terms of
five years,  with two automatic  five-year  extensions unless either party gives
180 days' prior  written  notice of its desire to terminate the contracts at the
end of the  then  current  term.  A third  contract  was  agreed  to with  Waste
Management in December 1999, with terms similar to the other two contracts.

BIOMASS/RECYCLING

     "Clean  green"  waste is organic  material  in the form of plants,  leaves,
clippings, cuttings, trimmings of grass, weeds, shrubbery, bushes, trees, garden
wastes and wood products from both commercial and residential sources, including
sawdust,  tree trunks,  scrap lumber and untreated wooden pallets.  The material
received as clean green waste cannot contain more than 0.5%  non-organic  matter
by total weight.

     The Company's  clean green waste  operations have been and most likely will
continue to be influenced  significantly by the implementation of the California
Integrated  Waste  Management  Act of 1989  (Assembly  Bill 939 ("AB 939").  The
provisions of AB 939 mandate,  among other  things,  the diversion of recyclable
materials from over-crowded  landfills. A key element of AB 939 relates to green
waste that could be processed and incorporated back into the soil or recycled in
other ways. AB 939 currently mandates that California's municipalities must have
a plan in place to divert 50% of all waste from landfills by the end of the year
2000.

     The Company is engaged in private green waste recycling and holds leasehold
interests in a transfer station facility located in Santa Fe Springs, California
and a 3-acre site in Fontana, California that is fully permitted for green waste
processing.  The Company  receives  green waste at its  transfer  stations  from
various sources  including Waste  Management.  The Company processes and markets
the green waste to various users,  thereby assisting Waste Management and others
in fulfilling their recycling obligations under AB 939.

     In November 1998, the Company  commenced hauling green waste for the County
of Los Angeles Sanitation  District in connection with the County's diversion of
processed material from its Puente Hills landfill. The initial contract is for a
term of three years plus an option for three additional years and specifies that
the Company will divert the first 100 tons per day (500 tons per week) of excess
ground or processed  green



                                                                               3
<PAGE>



waste  from the  landfill.  Pursuant  to this  contract,  the  Company  has been
informally presented with the opportunity to divert more than the minimum of 100
tons per day,  which  opportunity  the Company  intends to pursue as  sufficient
outlet markets are identified.

     The Company  receives  and  processes  green waste from  numerous  Southern
California  municipalities  and  commercial  parties.  It also is a party  to an
operating agreement with Apollo Wood Recovery,  Inc., to process wood for boiler
fuel  (electricity  generation) and fiberboard at the Company's site in Fontana,
California. The Company is exploring the acquisition of a company engaged in the
composting of organic fertilizer.

     In March 2000,  the Company  acquired  American Waste  Transport,  (AWT), a
private San Diego  County-based  waste transport and green waste recycling firm.
AWT has  operations  that mirror the  Company's in San Diego  County,  with some
overlap in Los Angeles and Orange  counties.  AWT's  revenues for the year ended
December 31, 1999, approximate $14 million.

     Presently,  there appears to be an abundant supply of green waste available
due  primarily  to the large  volume  produced  in Southern  California  and the
implementation  of AB  939.  The  Company  believes  there  is a  good  economic
incentive  to take all of the  green  waste  that is  offered,  particularly  as
landfill  "tipping  fees" ranging from $16 to over $27 per ton tend to establish
the market. The challenge is to identify and secure end-markets for the incoming
green waste, which historically have included fertilizer production  facilities,
boiler fuel (for electricity generation) and fiberboard production facilities.

     The Company owns  710-acres of  undeveloped  land located in the  Coachella
Valley,  which we plan to use as a  land-application/biomass  depository for our
continuing green waste operations.

DISCONTINUED OPERATIONS - AGRIBUSINESS

     Historically,  we engaged primarily in agribusiness,  principally  growing,
processing and marketing fresh table grapes in Southern  California's  Coachella
Valley.  We also received  management  and/or  development  fees and income from
packing and cold storage  services  that we provided for some of our  affiliated
partnerships and third parties. We leased an 80,000-square foot packing and cold
storage plant,  which we previously  used as our  headquarters  in the Coachella
Valley.

     Although  we were one of the  largest  producers  and  shippers  of  "early
market"  table  grapes  that are  harvested  from  early  May  through  June and
typically command premium prices, increased competition from Mexico, which has a
microclimate   similar  to  the



                                                                               4
<PAGE>



Coachella Valley, had created supply/price  uncertainty in the early table grape
market.  Consequently,  the Plan  provided for the complete  divestiture  of the
Company's  agribusiness  operations,  which was  completed  by December 31, 1999
except for the Company's investment in an Oregon farmland joint venture.

     The  Company's  investment  in the Columbia  River Basin of eastern  Oregon
includes a 50%  ownership  interest in a joint  venture  that owns a  6,000-acre
irrigated  potato and grain farming  operation,  together with certain  Columbia
River water rights. We are currently negotiating to sell our 50% interest in the
potato and grain farm to our joint venture  partner,  who operates that property
under a lease that would have terminated  September 30, 1999, but which has been
extended for an additional five years.

DISCONTINUED OPERATIONS - LAND PLANNING/DEVELOPMENT

     The Company  traditionally  was engaged  primarily  in  agribusiness,  with
additional revenues derived from partnership  management,  including real estate
development  partnerships.  Some of these  partnerships owned land that was once
used  for  farming  and  ultimately  became  suitable  for  development.   Other
partnerships were formed solely to acquire, plan and develop land.

     During  fiscal  1996,  the Company  began a major  subdivision/golf  course
project located  southeast of San Antonio,  Texas.  The Company,  under contract
with a partnership  managed by the Company in 1997,  completed  development of a
golf course at the project. On behalf of the Partnership,  the Company developed
and manages the 1,300-lot  subdivision  and golf course.  In February  2000, the
golf course was sold through foreclosure.

     Due to disappointing sales activity,  the Plan contemplated the sale of the
entire project in a "bulk sale" transaction and, in that regard, the Company, in
early 1999, wrote down its cost of the project to estimated net realizable value
plus any costs incurred to carry the project through liquidation.  This resulted
in a charge of  $5,306,244  to its fiscal 1998  financial  statements to reflect
this  write-down.  In March 1999, the Company  entered into an agreement to sell
the project for $11.5 million. However, the buyer did not close the transaction.
In the fourth  quarter  of 1999,  the  Company  transferred  (including  related
liabilities) its interest in the project to AMCOR Financial Corporation ("AFC"),
a then wholly owned subsidiary of the Company.

     In  January  2000,  the  Company  distributed  to its  common  and Series A
Preferred  shareholder,  all of its shares in AFC. The Company has disputes with
AFC regarding  the nature and amount of assets and  liabilities  transferred  to
AFC. Further, all of the regulatory  requirements related to the distribution of
the AFC shares to the Company's shareholders may not have been satisfied.



                                                                               5
<PAGE>



     During the four months ended December 31, 1998, the year ended December 31,
1999, and the first quarter of 2000,  the Company  disposed of certain assets of
the discontinued operations at amounts less than initially anticipated. Further,
the current appraised value of certain of the remaining assets has declined from
the values used in estimating the disposal loss at August 31, 1998.

     In 1999, the Company managed  approximately 15 limited  partnerships,  down
from over 120 in 1991.  The  partnerships  own two Southern  California  parcels
owned by one partnership, as well as a 173-acre property located outside Houston
owned jointly by two other  partnerships.  These partnerships are in the process
of terminating.

COMPETITION

     The  foundation  of the  Company's  continuing  solid waste  transportation
activities is exclusive transport  contracts with Waste Management,  the largest
waste hauler in the country.  The contracts include two transfer  stations.  The
first is located in Carson, California,  with a permitted capacity of over 5,000
tons per day, and is reported to be one of the largest in the country. The other
transfer  station is in South Gate. In December 1999 an additional  contract was
negotiated  for  the  transport  of  biomass  from  Waste  Management's   Sunset
Environmental  transfer station in Orange County. Due to the exclusive nature of
these contracts and the five-year term and two five-year options to extend,  the
Company does not expect to be confronted  with any  significant  competition for
these three transfer stations for as long as 15 years, provided that the Company
satisfactorily discharges its contractual responsibilities.  The Company intends
to bid on future solid waste  transportation  contracts for Waste Management and
other waste companies as they become available,  which could provide the Company
with significant growth opportunities in the future.

     In  the  large  Southern  California  market,  there  are  three  principal
providers of contract waste transport services -- STS  Transportation,  American
Waste  Transport,  and USA Biomass  Corporation.  In March 2000,  American Waste
Transport  ("AWT"),  with annual  revenues of $14  million,  was acquired by USA
Biomass.  AWT has major contracts with Waste  Management,  Republic Services and
Allied Waste, as well as extensive  green waste  operations.  Combined,  the two
companies have a contractual  backlog exceeding $350 million.  Revenues for 2000
are expected to be $25  million,  and will provide the Company with the dominant
share of this market.

     The Company's clean green waste operations provide alternatives to landfill
disposal and are part of the non-hazardous waste recycling industry. The Company
believes that successful entry into the green waste industry, on a volume basis,
requires that the Company  identifies and contracts with multiple  end-users for
the recycled



                                                                               6
<PAGE>



product.  The industry is dominated by several large national  waste  management
companies and numerous regional and local companies,  all of which contribute to
the  significant,  somewhat  fragmented,   competition  that  characterizes  the
industry, many having much greater financial and operational resources, and more
established  market positions,  than the Company.  The Company believes that its
recent strategic  alliance with Waste Management,  and its expanded market share
gained with the AWT  acquisition,  will help  insulate the Company from external
competition  and provide a reliable  supply of biomass to support the  Company's
green waste operations.

     There has been an increasing trend at the state and local levels to mandate
solid  waste  reduction  at the source and to prohibit  the  disposal of certain
types of wastes at landfills,  as evidenced by  legislation  such as AB 939. The
Company  believes  that as this trend  continues,  the  Company  will  encounter
additional  competition  from new and existing waste industry  participants.  In
addition,  the Company may compete with  municipalities  that maintain their own
waste  collection and landfill  operations and that have  significant  financial
advantages over the Company due to, among other things,  the availability of tax
revenues and tax-exempt financing.

BUSINESS STRATEGY

     The Company  continues to manage and expand its solid waste  transportation
and biomass  businesses.  The Company's present business strategy includes:  (i)
expansion of its contractual relationships with Waste Management and other waste
haulers, and (ii) growth of its green waste processing and recycling business as
additional markets are generated, both internally and through acquisitions.

EMPLOYEES

     As of December 31, 1999, the Company,  together with its subsidiaries,  had
108  full-time  employees,  including  10 in  administration  and 98 in  biomass
operations. None of the Company's employees are represented by a labor union and
the Company has experienced no work stoppages. However, the Company is presently
in  negotiations  with a local of the Teamsters Union pursuant to an election to
organize  held in April 1999.  The Teamsters  have a one-year  contract with the
truck  drivers of AWT,  which was acquired in March 2000.  The Company  believes
that in spite of the historically low unemployment rate in Southern  California,
there is an adequate  supply of the type of labor needed to staff the  Company's
expanding solid waste transportation and biomass operations.



                                                                               7
<PAGE>



ITEM 2. DESCRIPTION OF PROPERTY

     On December  31,  1998,  the Company  acquired a 4-acre  industrial  parcel
located  in Bell  Gardens,  California,  which  includes  a  40,000  square-foot
equipment  maintenance facility and a separate 2,400 square-foot office building
used as the base for the Company's transportation  operations.  During 1999, the
Company officially relocated its headquarters to the Bell Gardens facility.  Its
address is 7314 Scout Avenue, Bell Gardens, CA 90201.

     The Company's  biomass  operations  are based in two  locations,  the first
being a  1.75-acre  site in Santa Fe  Springs,  California,  which we lease  for
$54,000  annually.  This site  also  serves as a green  waste  transfer  station
pursuant to a  Conditional  Use Permit  from the City of Santa Fe  Springs.  The
second  location  is a fully  permitted  green  waste  transfer  and  processing
facility  on a 3-acre site in  Fontana,  California,  which we lease for $42,000
annually.

ITEM 3. LEGAL PROCEEDINGS

     In December 1997, a judgment was entered against the Company and two of its
officers,  who are also  shareholders.  The  Company has filed an appeal of this
judgment.

     On April 5, 2000, a bank filed a lawsuit  against the Company  related to a
deficiency  pertaining  to real property the bank  foreclosed  on in Texas.  The
Company  intends to vigorously  defend against this lawsuit and believes that it
has recorded its  liability  related  thereto on its financial  statements.  The
Company does not expect that this matter will have a material  adverse effect on
the Company's financial condition or results of operations.

     The Company is not involved in any other  pending legal  proceedings  other
than legal proceedings occurring in the ordinary course of business.  Such other
legal proceedings in the aggregate are believed by management to be immaterial.

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

     No matters  were  submitted to a vote of security  holders  during the last
quarter of the fiscal year ended December 31, 1999.



                                                                               8
<PAGE>



PART II

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

     The Company's Common Stock has traded in the over-the-counter  market since
1989 and is currently trading on the NASDAQ SmallCap Market. Set forth below are
the high and low bid prices of the Common  Stock during each quarter of calendar
1998 and 1999,  as  reported  by a member firm of the  National  Association  of
Securities  Dealers,  Inc. that affects  transactions  in NASDAQ SmallCap Market
stocks and acts as one of the market makers for the Company's  Common Stock. The
quotations  listed below reflect  inter-dealer  prices,  without retail mark-up,
mark-down or commissions, and may not represent actual transactions.

                                                Stock Prices
                                       -------------------------------
                                        High                      Low
                                       ------                    -----
FISCAL 1998
         First Quarter               $  5.375                  $ 4.1875
         Second Quarter                 5.313                    4.125
         Third Quarter                  5.187                    4.125
         Fourth Quarter                 4.938                    2.378

FISCAL 1999
         First Quarter               $  2.875                  $ 1.438
         Second Quarter                 2.375                    1.375
         Third Quarter                  2.00                     1.189
         Fourth Quarter                 4.50                     1.125

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


     At March 31, 2000, there were approximately 3,280 stockholders of record of
the  Company's  Common  Stock.  The Company has paid no  dividends on its Common
Stock and does not expect to pay dividends in the foreseeable future.

     In January 1998, the Company issued an aggregate of 31,250 shares of Common
Stock in exchange  for $62,000  upon the  exercise of options  issued  under the
Company's 1994 Non-Qualified Stock Option Plan.



                                                                               9
<PAGE>



     In  January  1998,  the  Company  issued  3,938  shares of Common  Stock in
exchange for the  cancellation  of a 5% note payable to a  non-affiliate  in the
principal amount of $15,816.88.

     In December  1998,  the Company  issued an  aggregate  of 11,507  shares of
Common Stock to two  non-affiliated  holders of 12% notes in lieu of an interest
payment of $55,376.71.

     In January  1999,  the  Company  issued  22,151  shares of Common  Stock in
payment of interest to two holders of 12% notes.

     In November  1999,  the Company  issued  149,407  shares of Common Stock in
exchange for the cancellation of a $410,869, 8% note payable to an employee.

     In November  1999,  the Company  issued  290,799  shares of Common Stock in
exchange  for the  cancellation  of 12% notes  aggregating  $954,234  to various
private parties.

     In November  1999,  the Company  issued  89,170  shares of Common  Stock in
exchange  for the  cancellation  of two 5%  notes  aggregating  $267,461  to two
private parties.

     In November 1999,  the Company  issued  422,883 shares  pursuant to Options
outstanding to two officers in exchange for the offset of $676,613 of notes owed
to the Officers by the Company.

     In  December  1999,  the  Company  issued  12,000  shares to a creditor  in
exchange for the cancellation of $41,297 owed by the Company.

     In December 1999,  the Company  issued  100,000 shares  pursuant to Options
held by an employee in the amount of $200,000.

     In December 1999, the Company issued 50,000 shares pursuant to Options held
by a  former  employee  in  consideration  for  $65,000,  in the  form of a note
receivable.

     In December  1999,  the Company  issued  12,500  shares to two  consultants
pursuant to Options for a total  consideration  of $37,500 in the form of a note
receivable.

     In December 1999, the Company  exchanged 591,625 shares of Common Stock for
394,414 shares of its Series B Preferred Stock valued at $3,944,140.

The issuances of the Company's Common Stock in the above referenced transactions
were  affected in reliance upon the exemption  from  registration  under Section
4(2) of the  Securities  Act of 1933,  as amended  (the  "Securities  Act"),  as
transactions  not involving



                                                                              10
<PAGE>



a public offering.  Exemption from the registration provisions of the Securities
Act is claimed on the basis that such  transactions  did not  involve any public
offering  and the  purchasers  were  sophisticated  with  access  to the kind of
information registration would provide.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

     In 1997, the Company entered the biomass business, and in 1998 entered into
a strategic alliance with Waste Management resulting in a long-term  contractual
relationship  for the  transport  of solid  waste.  Prior to 1999,  as described
above, the Company was engaged in agribusiness and real estate/land planning and
development.  In December  1998, the Company's  Board of Directors  approved the
Plan authorizing the liquidation of all agribusiness and real estate operations.
Implementation  of the Plan,  particularly  for years  1998 and 1999,  has had a
material impact on the presentation of the Company's financial statements.

FISCAL YEAR CHANGE

     Prior  to  the  year-ended  December  31,  1999,  the  Company's  financial
statements  were  prepared on the basis of an August 31 fiscal year.  In January
1998 the Company elected to convert to a December 31 calendar year for reporting
purposes and, in accordance  therewith,  filed a 10-QSB "Transition  Report" for
the four months ended December 31, 1998.  Accordingly,  the amounts reflected in
the Company's  current  Consolidated  Statements of Operations are for the years
ended  December  31,  1999 and August  31,  1998 and for the four  months  ended
December 31, 1998. Therefore,  for purposes of comparing the respective 12-month
periods for December 31 1998 and 1999, the 1998 numbers have been presented on a
pro-forma   basis.   As  the  Company's   biomass   operations  were  relatively
insignificant prior to December 31, 1998, the following  pro-forma analysis,  in
the opinion of  management,  presents a realistic  comparison  of the two twelve
month periods.

CONTINUING OPERATIONS

     In October 1998, the Company officially  commenced waste transport services
for Waste  Management.  Pro forma revenues for 1998,  which included green waste
recycling and tree maintenance  revenues for the entire year, were $3.6 million.
Revenues for 1999,  which included just one calendar quarter of tree maintenance
revenues as this business was sold in March,  1999, were $7.6 million--up  112%,
but still below the  Company's  estimated  $10  million  break-even  level.  The
Company did have a positive  1999 gross margin of 12.3%,  although a loss in the
amount of $1,735,000  was incurred  (compared to a loss of



                                                                              11
<PAGE>



$7,114,000  the prior year) due primarily to a $637,000  loss from  TransPacific
Environmental's  tree  maintenance  operations  (which  were  sold in the  first
quarter),   and  carry-over   administrative  and  interest  costs  (aggregating
$2,319,000),  partially to support of the phase-out of discontinued  operations.
In  addition,  continuing  operations  incurred  significant  start-up  costs to
develop the infrastructure  for a fast growth biomass business.  This included a
substantial  investment in plant,  personnel and equipment to support the future
anticipated revenue stream.

     With  additional  contracts  in  place,  the  Company  forecasts  year 2000
revenues to increase  substantially.  This will be  augmented by the March 2000,
acquisition  of San Diego  County-based  American Waste  Transport,  with annual
revenues  approximating $14 million.  This acquisition,  which also has contract
waste transport services, as well as extensive green waste recycling operations,
should result in combined revenues of $25 million for 2000.  Management believes
that a minimum 12% gross margin level can be  maintained,  which would  generate
adequate  proceeds  to carry  administrative  and  interest  costs.  The present
contractual backlog, which includes  contracts/renewals  with terms in excess of
10 years, exceeds $350 million.



                                                                              12
<PAGE>



                        Pro Forma Statement of Operations
                      For the Year Ended December 31, 1998

                              Amounts in Thousands
                          -----------------------------

                                    Add       Less   For Year Ended December 31
                      Year Ended 4 Mos.End 4 Mos.End --------------------------
                       08/31/98  12/31/98   12/31/97       1998        1999
                       Audited  (Unaudited)(Unaudited)  (ProForma)   Audited
                       -------    -------    -------    ---------    -------
Revenues               $ 2,005    $ 2,025    $   406     $ 3,624     $ 7,645
Cost of Revenues         2,665      1,694        634       3,725       6,705
                       -------    -------    -------     -------     -------
  Gross Profit (Loss)     (660)       331       (228)       (101)        940
                       -------    -------    -------     -------     -------
Gen'l & Admin. Exp.      3,228      1,156        678       3,706       1,496
Loss from Asset
   Impairment            1,971         --         --       1,971         141
Loss on Sale of
   Assets                  366          4         --         370         215
Interest Exp.
  (Income), net            662        390         86         966         823
                       -------    -------    -------     -------     -------
   Loss, Continuing
     Operations        ($6,887)   $(1,219)   $  (992)    $(7,114)    $(1,735)
                       =======    =======    =======     =======     =======

     For both 1998 and 1999,  the  Company's  continuing  operations  consist of
solid  waste  transport  and  biomass  operations,  which  include  green  waste
recycling.   The  Company  sold  its  unprofitable  municipal  tree  maintenance
operations  in March 1999.  The  Company's  discontinued  operations  consist of
agribusiness and land planning/development. A discussion of the material factors
that  affected  the  Company's  results  of  continuing  operations  and,  where
applicable, the results of its discontinued operations, are presented separately
below.

RESULTS OF CONTINUING OPERATIONS

REVENUES

     The Company's  revenues from  continuing  operations  for 1999 include both
biomass recycling and waste transport revenues whereas revenues for 1998 reflect
mostly biomass recycling activities, as the initial waste transport contract did
not commence  until October 1998. The Company  generated  revenues of $7,645,000
for 1999 compared to $3,624,000 for 1998, an increase of $4,021,000 or 111%. The
increase is principally due to a full year of waste transport  revenues in 1999,
which totaled  $5,561,000,  compared to



                                                                              13
<PAGE>



only three  months in 1998,  which  totaled  $894,000.  Other  revenues for 1999
totaled  $2,084,000 of which $363,000  pertained to municipal  tree  maintenance
operations, which were sold during the first quarter of 1999.

COST OF REVENUES

     Costs of Revenues for 1999 were $6,705,000 compared to $3,725,000 for 1998,
an increase of  $2,980,000  or 80%. The increase is  principally  related to the
111%  increase in revenues in 1999.  This is partially  offset by a 1998 cost of
$797,000 related to green waste soil enhancement activities that were terminated
that year and by operating costs  associated with a full year's tree maintenance
operations in 1998. Overall,  this resulted in a gross profit from operations in
1999 of  $940,000,  for an  operating  margin  of  12.3%.  This  compares  to an
operating loss of $101,000 for the prior year. The improved margin is the result
of  significantly  higher  waste  transport  volume,  reduced  losses  from tree
maintenance  operations (which were sold in early,  1999) and the elimination of
soil enhancement activities.

     Gross margin on waste  transport  activities  was $853,000  (15.4% of waste
transport  revenues) in 1999,  and $236,000 (14% of gross  greenwaste  revenues,
exclusive  of  municipal  tree  trimming  activities)  in  1999.  Tree  trimming
contracts  resulted in a negative gross margin of $146,000 (40% of tree trimming
revenue) in 1999.

GENERAL AND ADMINISTRATIVE EXPENSES

     General and  administrative  expenses were  $1,496,000 for 1999 compared to
$3,706,000 for the prior year, a decrease of $2,210,000 or 60%. The  significant
decrease is primarily  due to the expected cost and related  overhead  reduction
pertaining to the phasing out of the  Company's  discontinued  agricultural  and
real  estate  operations.  In  addition,  the prior year  included  $672,000  of
administrative  costs related to TPE, which was sold early in 1999,  $360,000 of
corporate  restructuring  consulting  fees,  and  $188,000  related  to the cost
associated with options granted to members of the Company's Board of Directors.

INTEREST EXPENSE, NET OF INTEREST INCOME

     For 1999, interest expense, net of interest income, was $823,000,  compared
to $966,000 for 1998, a decrease of $143,000 or 15%, due largely to the pay down
of debt from asset sales.



                                                                              14
<PAGE>



LOSS FROM ASSET IMPAIRMENT

     In 1998 the  Company  incurred  a  $1,971,000  loss from  asset  impairment
related to a green waste contract that did not materialize and soil  enhancement
operations that were  suspended.  Such losses for 1999 were only $141,000 as the
substantial portion of the loss was incurred the prior year.

GAIN OR LOSS ON SALE OF ASSETS:

     For 1999, the Company realized a net loss of $215,000 on the sale of assets
compared to a net loss of $370,000 in 1998. The higher prior year's loss related
primarily to the liquidation of assets,  related to the Company's  initial green
waste pilot program.

LOSS FROM CONTINUING OPERATIONS:

     For 1999,  the Company  incurred a net loss of $1,735,000  from  continuing
operations  compared to a loss of  $7,114,000  for the prior year.  The material
disparity between the two years is principally that 1998 was a start-up year for
biomass  operations  and  included  a  full  year  loss  from  tree  maintenance
activities,  which were  disposed  of in early 1999.  Concerning  the 1999 loss,
$637,000 was attributable to TPE's tree maintenance operations,  which were sold
early in 1999.  Additional  administrative costs were incurred in relocating the
Company's  headquarters.  Interest  costs will also  decrease as the Company has
reduced its debt by 42%. As volume increases for 2000 and future years, based on
the Company's expanding  contractual backlog, the Company is expected to operate
profitably.

RESULTS OF DISCONTINUED OPERATIONS

     The Plan adopted by the Board of Directors  specified a one-year time frame
for management to dispose of all non-biomass operations, which were reclassified
for financial statement purposes, as discontinued operations. As of December 31,
1999,  over $12 million of assets were sold,  with a $2.5  million  agricultural
property  scheduled for sale by mid-year 2000. Any remaining  assets not sold by
December 31, 1999 (principally a San Antonio subdivision that was under contract
to sell in 1999 for $11.5  million,  but the sale  aborted)  were  revalued  and
written down to fair market  value,  resulting in an  additional  1999 loss from
discontinued  operations.  These  assets  (and  related  liabilities)  were then
transferred  to  AMCOR  Financial   Corporation  ("AFC")  a  then  wholly  owned
subsidiary. AFC has separate management from the Company, and the Company has no
management or control over AFC. In January 2000, the Company  distributed to its
common and preferred  shareholders all of its AFC common shares. The Company has
disputes  with AFC  regarding  the nature  and amount of assets and  liabilities
transferred to AFC. Further,  all of the regulatory  requirements related to the
distribution of the AFC shares to the Company's  shareholders  may not have been
satisfied.



                                                                              15
<PAGE>



     For years  1998 and  1999,  implementation  of the Plan has had a  material
impact  on the  presentation  of the  Company's  financial  statements.  This is
because operations, cash flows and net assets of these operations for both years
have been reclassified as discontinued  operations,  and consequently the assets
for these operations were reduced to the lower of cost or net realizable  value,
resulting  in  significant  charges  to  earnings.  Accordingly,  the  Company's
agribusiness and real estate  operations have been accounted for as discontinued
operations and the results thereof have been excluded from continuing operations
in the Company's consolidated  financial statements.  For fiscal 1998, which had
limited  biomass  start-up  revenues,  this resulted in a loss of $15,786,000 of
which $9,947,000  pertained to discontinued  operations,  principally due to the
write-down of real estate and related assets. For 1999, which was the first full
year of biomass  operations,  the net loss was  $9,186,746  of which  $7,452,029
pertained to discontinued operations,  principally related the write-down of the
San Antonio project.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company's  overall  financial  condition as of December  31, 1999,  as
compared to the prior year has not changed significantly, principally due to the
Company's  inability to liquidate all of its discontinued  operations.  However,
some assets were sold,  which served to reduce total debt from $19.7  million at
December  31, 1998 to $11.4  million at the end of 1999.  This $8.3 million debt
reduction (42%) is expected to yield significant annual interest savings for the
year  2000 and  beyond.  In  addition,  1999  revenues  from  expanding  biomass
operations  increased  111% over the prior year but, at $7.6 million,  are below
the projected $10 million threshold required to break even. Although the Company
reported  a loss of  $1,735,000  for the year from  continuing  operations,  due
largely to the development of the new biomass business, it had a gross operating
margin of 12.3%,  which  included  losses from TPE, which diluted the target 15%
margin  from  biomass   operations.   Revenue  growth  for  the  year  2000  was
significantly  enhanced in March,  when the Company completed the acquisition of
American Waste  Transport  which,  when  consolidated  with the Company,  should
generate $25 million of revenues for  2000--an  increase of 227% over 1999,  and
with a gross margin expected to exceed 12%,  should generate  adequate funds for
operations. Moreover, the Company now has a contractual backlog in place of more
than $350 million with terms  generally  exceeding 10 years or longer,  ensuring
consistent  revenue  for  future  periods.  Also,  in  March  2000  the  Company
successfully  completed  a  $3  million  private  placement  of  6%  convertible
preferred  stock.  This capital will be largely  used for  acquisitions  and for
capital equipment needs to service the Company's expanding contractual base.

     The  Company's  current ratio was .66 at December 31, 1999 compared to 1.11
the prior  year,  primarily  due to the  write  off of  assets  of  discontinued
operations,  which were



                                                                              16
<PAGE>



classified  as  current,  pending  the  anticipated  sale  thereof.  This  ratio
significantly  improved  in the first  quarter  2000 as a result of the  private
placement  of preferred  stock,  which  provided $3 million of working  capital.
Moreover,  liquidity is expected to continue to improve  during 2000 as a result
of (i) the intense  management of cash flow; (ii) the Company has adequate lines
of  credit  in  place  and has  plans  to  moderately  expand  both  senior  and
subordinated  debt  to fund  working  capital  related  to the  Company's  large
contract  backlog;  (iii) during 2000 the Company  expects to liquidate its $2.5
million  agricultural  property  investment,   (iv)  the  Company  has  tax-loss
carry-forwards  exceeding  $22  million  which can be applied to shelter  future
earnings  thereby  enhancing  cash flow,  and (v) the Company  intends to, where
appropriate,  make  acquisitions  using its common stock for the  generation  of
earnings  and cash  flow.  It is for the  foregoing  reasons  that  the  Company
believes  that its  liquidity  needs  for the  year  2000  will be  sufficiently
satisfied.  Moreover, with its discontinued operations now partially liquidated,
the Company has strategically  positioned itself to profitably capitalize on the
numerous opportunities now available in the biomass industry.

YEAR 2000 COMPLIANCE

     To date  management  of the Company  believes  that its  software  packages
currently in use are Year 2000  compliant.  Management  does not expect that the
financial  impact of required  modifications  to such software,  if any, will be
material  to  the  Company's  financial  position,  cash  flows  or  results  of
operations in any given year.

FORWARD-LOOKING STATEMENTS

     Certain of the statements  contained in this report,  including those under
"Description of Business" and "Management's Discussion and Analysis of Financial
Condition and Results of  Operations,"  and  especially  those  contained  under
"Liquidity  and Capital  Resources"  and "Looking  Ahead," are  "forward-looking
statements" that involve risks and  uncertainties.  The actual future results of
the Company could differ  materially from those  statements.  Factors that could
cause or contribute to such differences  include,  but are not limited to, those
discussed in this Annual Report on Form 10-KSB,  risks  associated with managing
the Company's  growth and those factors  discussed in "Risk  Factors"  described
below in this Item 6 of this Annual  Report on Forma  10-KSB.  While the Company
believes that these statements are accurate, the Company's business is dependent
upon general economic  conditions and various  conditions  specific to the clean
green waste and solid waste transportation industries. Future trends and results
cannot be predicted with certainty. In particular:

     -    In 1998 the Company has  elected to embark on a major  departure  from
          its historic business into the biomass and solid waste  transportation
          businesses



                                                                              17
<PAGE>



          in  which  the  Company  has  relatively  little  experience.  Such  a
          transformation  has  many  risks  and  uncertainties  that  could  far
          outweigh the benefits of its strategic alliance with Waste Management.
          And,  notwithstanding  the  attractiveness of its long-term  transport
          contracts with Waste Management, the Company's success will ultimately
          depend  heavily on the ability of  management  to guide the Company in
          executing and  performing  the  contracts  with Waste  Management  and
          others.  Despite the  Company's  apparent  initial  success  under its
          contracts, the future remains uncertain.

     -    The Company has also  committed part of its future to expansion of its
          green waste operations.  The future of this industry will be partially
          dictated by AB 939, which mandates the diversion from landfills of 50%
          of the waste  stream.  At the present time,  municipalities  and waste
          haulers  seem  eager  to  comply  and  willing  to pay  fees to  those
          processors  willing  to take the  material.  However,  if the  Company
          expands its green waste operations without locating reliable, adequate
          end-market users, major green waste disposal problems could result.

     -    The  Company's  future  liquidity  and  viability  is  still  somewhat
          dependent upon a relatively  rapid and orderly  execution of the Plan.
          This may include  funding the periodic  cash  requirements  of certain
          liabilities related to discontinued operations.  Therefore, should the
          Company  fail  to  discharge  its  liquidation  plan  in an  expedient
          fashion, this could severely impair the Company's liquidity.

     The Company has not experienced a material adverse impact of such risks and
uncertainties and does not anticipate such an impact.  However, no assurance can
be given that such risks and uncertainties  will not affect the Company's future
results of operations or its financial position.

RISK FACTORS

OPERATING LOSS; ACCUMULATED DEFICIT

     In  connection  with  the   implementation   of  the  Plan,  the  Company's
agribusiness and land planning/development operations have been accounted for as
discontinued  operations and the results  thereof,  for 1998 and 1999, have been
excluded from continuing operations.  This resulted in classifying most revenues
for 1998 as  discontinued  operations,  as most of the Company's  revenues prior
then were derived from now discontinued operations. In 1999 the Company incurred
an after-tax loss of $9,186,746  from all operations as compared to an after-tax
loss of $15,786,00 for fiscal 1998. As



                                                                              18
<PAGE>



of December 31, 1999,  the Company had an  accumulated  deficit of  $24,781,849.
Although the Company  expects to generate  working  capital from its  continuing
biomass and transportation operations and divestiture of the Company's remaining
agricultural investment, the Company has shifted its focus to biomass activities
with which it has relatively  little  experience,  and there can be no assurance
the Company will have profitable operations in the future.







                                                                              19
<PAGE>



POTENTIAL FLUCTUATIONS IN FUTURE OPERATING RESULTS; COMPETITION

     The  Company's  quarterly  results have varied  significantly  in the past,
although  and it is likely  that this  variability  will not be as severe in the
future due to the existence if long-term  solid waste transport  contracts,  and
the state of California law ("AB 939") mandating recycling.  Many factors remain
beyond the  Company's  control,  including:  the impact of  potential  increased
competition with respect to the Company's  biomass  activities by municipalities
that  maintain  their own waste  collection  and  landfill  operations  and have
significant  financial  advantages  over the Company due to, among other things,
the availability of tax revenues and tax-exempt  financing;  the  implementation
and enforcement of and compliance with legislation such as AB 939; the price and
availability  of fuel and other  resources  needed for the Company's solid waste
transportation  and biomass  activities;  the financial  health of the Company's
customers;  and  economic  conditions  generally.  The ability of the Company to
successfully  obtain new biomass and transportation  contracts and the volume of
the stream of biomass  available to the Company for transport or recycling under
existing contracts during a quarter are difficult to forecast. Such fluctuations
may also  contribute  to  volatility in the market price for the Common Stock of
the Company.

CUSTOMER CONCENTRATION

     The Company derives a significant portion of its revenues from a relatively
limited number of customers. The foundation of the Company's initial solid waste
transportation  activities  was  an  exclusive  transport  contract  with  Waste
Management. Initially, this one customer accounted for over 80% of revenues from
continuing operations. With the acquisition of American Waste Transport in March
2000,  this  customer  concentration  is expected to fall to less than 60%,  and
decline  further  during  the year as  additional  new  accounts  are  obtained.
However,  there can be no  assurance  that the  Company  will be  successful  in
obtaining additional transportation and biomass contracts.  Further, the Company
anticipates  that its contracts with Waste  Management  will continue to account
for a majority of its  transportation  revenues for the foreseeable  future. The
loss of this  customer or failure of Waste  Management  to continue to provide a
reliable  stream of biomass for transport  would likely have a material  adverse
effect on the Company's business, operating results and financial condition.

NEED FOR SUBSTANTIAL ADDITIONAL CAPITAL

     The Company's  future capital  requirements  will depend upon many factors,
including  the  Company's  ability  to obtain  new  biomass  and  transportation
contracts and customers



                                                                              20
<PAGE>



and rapid,  orderly execution of the Plan. Capital will be necessary to fund the
periodic  cash  requirements.  During  the past  year  the sale of  discontinued
operations  have  funded  much  of  these  cash  requirements.  There  can be no
assurance  that such future  transactions  will be sufficient or that  financing
will be available on a timely  basis,  if at all, or on terms  acceptable to the
Company.  If adequate funds are not available,  the Company's  business strategy
could be  impeded  and the  Company  may be  required  to delay,  scale  back or
eliminate  its  efforts to expand its  biomass  and  transportation  activities.
Accordingly,   the  Company's  business,  financial  condition  and  results  of
operations could be materially and adversely  affected.  If additional funds are
raised by issuing equity or convertible  debt  securities,  options or warrants,
dilution to the existing stockholders of the Company may result.

CHANGES IN WORK FORCE AND ACTIVITIES; DEPENDENCE UPON KEY PERSONEL

     Late in 1998 the Company  elected to embark on a major  departure  from its
historic business into the biomass and solid waste transportation  businesses in
which the Company had relatively little experience. The Company's future success
depends to a large extent upon the continued  service of certain key  managerial
employees and the Company's  ability to restructure  its existing work force and
attract and retain highly  qualified  personnel in connection  with the shift in
the Company's activities.

     The  Company  believes  that  it  has  hired   individuals  with  extensive
management   and   operational   experience  in  the  biomass  and  solid  waste
transportation  industries.  The Company's  ability to succeed in its continuing
operations  will require it to continue to restructure  its existing  workforce,
hire and  integrate new talent  experienced  in solid waste  transportation  and
biomass  activities,  and motivate and effectively  manage all of its employees.
There can be no assurance  that the Company will be able to attract,  assimilate
or retain such personnel.  If the Company is unable to successfully  restructure
its  existing  work force and  attract,  manage and retain  qualified  personnel
experienced  in the Company's  continuing  operations,  the Company's  business,
operating results and financial condition could be adversely affected.

ENVIRONMENTAL REGULATION

     It may be necessary to expend  considerable  time, effort and money to keep
the Company's  existing or acquired  facilities and vehicles in compliance  with
applicable  federal,  state and local requirements  regulating  health,  safety,
environment,  zoning  and land use,  and as to which  there may not be  adequate
insurance  coverages or reserves.  If environmental  laws become more stringent,
the Company's  environmental  capital  expenditures and costs for  environmental
compliance may increase in the future.  In addition,  due to the  possibility of
unanticipated factual or regulatory development, the



                                                                              21
<PAGE>



amounts and timing of future environmental expenditures could vary substantially
from those currently anticipated.

ITEM 7. FINANCIAL STATEMENTS

     The consolidated  financial  statements of the Company and its subsidiaries
are  submitted  as a separate  section of this  Annual  Report on Form 10-KSB on
pages F-1 through F-38.

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

         None



                                                                              22
<PAGE>



                                    PART III

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

DIRECTORS AND EXECUTIVE OFFICERS

     The directors and executive officers of the Company are as follows:

     Name                  Age               Position
     ----                  ---               --------
     Fred H. Behrens       58         Chairman of the Board, Chief Executive
                                      Officer and Director
     Robert A. Wright      63         President, Chief Operating Officer and
                                      Director
     Eugene W. Tidgewell   50         Chief Financial Officer, Treasurer, Vice
                                      President and Director
     Michael J. Silva      37         Chief Development Officer and Director
     Hilly G. Jones        50         Secretary
     Marlene Tapie         44         Director
     H. Glen Leason        75         Director

     FRED H. BEHRENS has served as the Chairman,  Chief Executive Officer, and a
director of the Company since 1988 and previously  served as Treasurer and Chief
Financial  Officer of the Company from 1990 to January  1998.  Mr.  Behrens also
served as the Chairman and director of Sun Goddess  Farms,  Inc., a wholly owned
subsidiary of the Company ("SGF").  Mr. Behrens has been actively  involved with
the Company and its affiliates since August 1979. From 1966 to 1971, Mr. Behrens
was on the audit staff of Arthur  Andersen & Company;  between 1971 and 1973, he
was a principal in a real estate  development  company;  and from 1973 to August
1979, he was employed as a Vice President of an agricultural management company.
Mr.  Behrens holds a Bachelor of Science degree from the University of Minnesota
School of Business  Administration.  Mr. Behrens is a general  partner of Rancho
California  Partners II, a California limited  partnership (the  "Partnership"),
which filed a voluntary  Chapter 11  Reorganization  Petition  under the federal
Bankruptcy  Act  to  resolve  certain  issues  with  the  Riverside  County  Tax
Assessor's  Office  on or  about  March  20,  1996.  The  decision  to file  for
reorganization   was  made  to  protect  certain  real  property  owned  by  the
Partnership  from  foreclosure  while the  property was being  reappraised.  The
issues raised in the Petition have been favorably  resolved and the  Partnership
has dismissed the Petition.



                                                                              23
<PAGE>



     ROBERT A. WRIGHT has served as the President,  Chief Operating Officer, and
a director of the Company  since 1988.  Mr.  Wright also serves as the President
and director of SGF. In April 2000,  Mr.  Wright  agreed to vacate the office of
President  to assist  with the  management/liquidation  of certain  discontinued
operations.  He remains a Company director.  During the past 25 years Mr. Wright
has been,  and  continues  to be, a  principal  in and the  President  of a farm
equipment  manufacturing  company located in central  Illinois.  Mr. Wright also
served as general partner or co-general  partner for several  agricultural  real
estate partnerships,  which were not organized by the Company or its affiliates.
Mr.  Wright  holds a Bachelor  of Science  degree in  Business  (Management  and
Finance) from the University of Colorado. Mr. Wright is a general partner of the
Partnership,  which filed a voluntary Chapter 11  Reorganization  Petition under
the federal  Bankruptcy Act to resolve certain issues with the Riverside  County
Tax  Assessor's  Office on or about  March 20,  1996.  The  decision to file for
reorganization   was  made  to  protect  certain  real  property  owned  by  the
Partnership  from  foreclosure  while the  property was being  reappraised.  The
issues raised in the Petition have been favorably  resolved and the  Partnership
has dismissed the Petition.

     EUGENE W. TIDGEWELL has served as the Chief Financial Officer and Treasurer
and as a Vice  President of the Company  since  January 1998 and has served as a
Director of the Company since February 1999. Mr.  Tidgewell was an audit manager
at Kelly & Company, the Company's independent  auditors,  from 1989 to 1998. Mr.
Tidgewell  holds  a  Bachelor  of  Science  Degree  in  Business  Administration
Accounting)  from  the  University  of  Notre  Dame  and is a  Certified  Public
Accountant in the State of California.

     MICHAEL J. SILVA has served as Chief Development Officer since January 2000
and a Director since  February  2000. Mr. Silva is an engineering  graduate from
the  University  of the Pacific and has MS in civil  engineering  from  Stanford
University.  Since  graduation,  he has been  exclusively  employed in the waste
service industry, serving as Division President/Chief Operating Officer for CR&R
from 1986 to 1997.  From 1997 to 1999 he served as Chief  Executive  Officer  of
Athens  Services.  Both  companies  are ranked in the top 10  nationally.

     MARLENE  A.  TAPIE has  served as a director  of the  Company  since  1988.
Between  1979  and  1994,  she  served  in  various  capacities  including  Vice
President,  Executive Secretary to the Chairman and Office  Administrator.  From
1992 through 1995,  Ms. Tapie owned and operated a clothing  company,  Marlene &
Company.  In  October  1994  she  and  her  husband,  Alan  Tapie,  a  PGA  golf
professional, purchased a controlling interest in Buena Park Golf Center, a golf
course and  driving  range  located in Buena  Park,  California.  She  currently
manages her husband,  who is a touring  professional  in the European PGA Senior
Tour.



                                                                              24
<PAGE>



     H. GLEN LEASON has served as a director of the Company since February 1999.
From 1984 to the present,  Mr. Leason has served as a Senior Vice President with
Torrey Pines  Securities.  Prior to that, Mr. Leason served in the United States
Navy Submarine Service From 1943 to 1946. He was a securities broker with Leason
& Company in Chicago,  Illinois from 1946 through 1960, eventually becoming Vice
President  for  its  initial  public  offering   department  in  Newport  Beach,
California,  was a Vice President in the initial public  offering  department at
R.J.  Henderson & Co., in Newport  Beach,  California  from 1960 to 1966, was an
Emerging  Growth Stock Vice  President  with  Jefferies & Co. in Newport  Beach,
California  from 1966 until Jefferies & Co., was purchased in 1969, and rejoined
Leason & Company as President  until 1973.  From 1973 to 1984, Mr. Leason worked
with  Wedbush  Securities  and then with  McDonald,  Krieger & Bowyer in Beverly
Hills,  California.   Mr.  Leason  completed  various  courses  at  Northwestern
University and Loyola Marymount University,  is a registered representative with
the NASD and holds a principal's license.

     HILLY G. JONES has served as Corporate Secretary since January 2000 and has
been the Company's  Office  Administrator  since May 1999. She has been employed
part time by the Company in various administrative capacities since 1989, except
for the period from June 1995 to December 1998, when she left the Company to own
and  operate  a small  business.  Prior to 1989,  she was  employed  in  various
administrative   capacities  in  the   securities,   environmental,   and  other
industries.

     All directors  hold office until the next annual  stockholders'  meeting or
until their  respective  successors  are elected or until their  earlier  death,
resignation  or removal.  Officers are appointed by, and serve at the discretion
of, the Board of Directors.

COMPLIANCE WITH BENEFICIAL OWNERSHIP REPORTING RULES

     Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"),  requires the Company's  executive officers and directors and persons who
beneficially own more than 10% of a registered class of a Company's Common Stock
("reporting  persons")  to file  initial  reports of  ownership  and  reports of
changes in ownership  with the SEC. Such  reporting  persons are required by SEC
regulations  to furnish the Company  with copies of all such  reports  that they
file.

     Based  solely  upon a review  of copies of such  reports  furnished  to the
Company during the year ended December 31, 1999 and  thereafter,  or any written
representations  received by the Company  from  reporting  persons that no other
reports were  required,  the Company  believes  that,  during the Company's 1999
year,  all  section  16(a)  filing  requirements  applicable  to  the  Company's
reporting persons were complied with.



                                                                              25
<PAGE>



ITEM 10. EXECUTIVE COMPENSATION

     There is shown  below  information  concerning  the  annual  and  long-term
compensation  for  services in all  capacities  to the Company of the  Company's
Chief  Executive  Officer  and the only other  executive  officer of the Company
whose aggregate cash compensation  exceeded $100,000  (collectively,  the "Named
Executives") during the fiscal years ended August 31, 1997 and 1998 and December
31, 1999.

                    SUMMARY COMPENSATION TABLE

                                            Annual Compensation
                               ------------------------------------------------
                                                      Other Annual
     Name and                                Salary   Compensation
  Principal Position           Year            ($)         ($)
  ------------------           ----          -------   ----------
  Fred H. Behrens              1999          136,200     15,650
    Chairman and Chief         1998          152,000     15,864
    Executive Officer          1997          120,000      5,724

  Robert A. Wright             1999          109,375     15,180
    President(1) and Chief     1998          133,081     15,080
    Operating Officer          1997          120,000     11,519

  Eugene W. Tidgewell          1999          112,000      --
    Vice President and         1998          102,666      --
    Chief Financial Officer
---------------------------

(1)  In April 2000,  Mr. Wright agreed to vacate the office of as President,  to
     assume responsibility for the management and liquidation of assets included
     in discontinued operations. He will remain as a Company director.

STOCK OPTION GRANTS IN 1999

     The following table sets forth information  concerning individual grants of
stock options made pursuant to the Company's  1997 Stock Option Plan during 1999
to each of the  named  executives.  The  Company  has  never  granted  any stock
appreciation rights.



                                                                              26
<PAGE>



OPTIONS GRANTS IN LAST FISCAL YEAR

                                            Individual Grants
                         -----------------------------------------------------
                               Number of   Percent of
                               Securities     Total
                               Underlying    Options     Exercise
                                Options     Granted to    or Base
                                Granted    Employees in    Price    Expiration
       Name                      (#)       Fiscal Year     ($/Sh)       Date
    ----------                ---------    -----------    -------   ----------
Eugene W. Tidgewell             19,500        66.43%       $1.50     10/15/10

OPTION EXERCISES AND VALUE FOR 1999

     The table below sets forth the following information with respect to option
exercises during 1999 by each of the named executive  officers and the status of
their  options at  December  31,  1999:

     o    The number of shares of common stock acquired upon exercise of options
          in fiscal 1999;

     o    The aggregate dollar value realized upon the exercise of such options,

     o    The total number of exercisable and non-exercisable stock options held
          at December 31, 1999, and

     o    The  aggregate  dollar value of  in-the-money  exercisable  options at
          December 31, 1999.

                     AGGREGATED OPTION EXERCISES DURING 1999
                                       AND
                       OPTION VALUES ON DECEMBER 31, 1999

<TABLE>
<CAPTION>

                   Number of
                    Shares
                 Acquired Upon                    Number of Unexercised     Value of Unexercised In-the-
                  Exercise of   Value Realized      Options 12/31/99          Money Options 12/31/99(1)
                                                --------------------------  ----------------------------
   Name              Option     Upon Exercise   Exercisable  Unexercisable  Exerciserable  Unexercisable
   ----              ------     -------------   -----------  -------------  -------------  -------------

<S>                 <C>           <C>                <C>          <C>            <C>            <C>
Fred H. Behrens     246,955       $343,514           --           --             --             --
Robert A. Wright    175,928        244,715           --           --             --             --
</TABLE>



                                                                              27
<PAGE>



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

(1)  In accordance  with SEC rules,  values are  calculated by  subtracting  the
     exercised price from the fair market value of the underlying  common stock.
     For purposes of this table, fair market value is deemed to be closing price
     on the date the options were executed for the Company's common reported for
     Nasdaq SmallCap transactions on December 31, 1999.

DIRECTORS' COMPENSATION

     The  Company's  directors do not receive cash  compensation  for  attending
Board of Director meetings.  In 1998, each director received options to purchase
up to 15,000 shares of the Company's  Common Stock at $3.00 per share,  the then
closing price of the Company's Common Stock.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth as of March 1, 2000,  certain  information
with respect to (i) each director of the Company,  (ii) the named executives and
(iii) all directors and executive officers of the Company as a group. Other than
as described below, no other person is known to the Company to be the beneficial
owner of more  than 5% of the  Company's  Common  Stock.  The  information  with
respect to each person  specified  as a supplier or  confirmed by such person or
based upon statements filed with the Commission.  Each person set forth below is
a director of the Company.

                                       AMOUNT AND NATURE
NAME AND ADDRESS                    OF BENEFICIAL OWNERSHIP    PERCENT OF CLASS
OF BENEFICIAL OWNER                     OF COMMON STOCK(1)     OF COMMON STOCK
--------------------                ------------------------   ----------------

Fred H. Behrens(2)                          1,003,153                 9.98%
7314 Scout Avenue
Bell Gardens, CA 90201

Robert A. Wright(3)                           815,018                 8.11 %
86025 Avenue 52
Coachella, CA 92236

H. Glen Leason(4)                              16,370                    *
77-955 Calle Arroba
La Quinta, CA 92253

Eugene W. Tidgewell (5)                        39,500                    *


                                                                              28
<PAGE>



7314 Scout Avenue
Bell Gardens, CA 90201

Marlene Tapie (6)                              89,167                    *
76 Los Cabos
Dana Point, CA 92629

All Directors and Executives
Officers as a group (5 persons)(7)          1,963,208                19.54%

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

*    Represents less than 1%

(1)  Beneficial  ownership is determined in accordance with the rules of the SEC
     and  generally   included  voting  or  investment  power  with  respect  to
     securities.  Except as  indicated  by  footnote,  and subject to  community
     property laws where  applicable,  the persons named in the table above have
     sole voting and investment power with respect to all shares of Common Stock
     shown as  beneficially  owned by them.  Shares of Common  Stock  subject to
     options currently exercisable, or exercisable within 60 days after March 1,
     2000 are deemed to be outstanding in calculating  the percentage  ownership
     of a person or group but are not deemed to be  outstanding  as to any other
     person or group.

(2)  Includes 782,498 shares of Common Stock held by Behrens  Partners,  Ltd., a
     family limited  partnership  controlled by Mr.  Behrens.  Also includes (i)
     207,355  shares  held in escrow on behalf  of Mr.  Behrens  and ii)  13,300
     shares held in an IRA account.

(3)  Includes (i) 237,093 shares of Common Stock held by Wright Family Partners,
     Ltd., a family limited  partnership  controlled by Mr. Wright, (ii) 447,533
     shares of Common  Stock  held in  escrow on behalf of Mr.  Wright  and iii)
     130,392 shares held in an IRA account.

(4)  Includes 16,200 shares of Common Stock  underlying 9,000 shares of Series A
     9%  Convertible  Preferred  Stock  that are  convertible  and 170 shares of
     Common Stock held in an IRA account.

(5)  Represent 39,500 shares of Common Stock underlying options.

(6)  Includes 31,250 shares of Common Stock underlying options.

(7)  Includes  476,633  shares of Common  Stock  underlying  options  and 33,120
     shares of Common Stock underlying  18,400 shared of Series A 9% Convertible
     Preferred Stock that are convertible.



                                                                              29
<PAGE>



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Between  1981 and 1986,  the Company,  in its  capacity as general  partner
and/or placement agent,  raised  approximately $200 million in private placement
syndications.   This   syndication   activity   resulted  in  the  formation  of
approximately  137  limited   partnerships,   which  acquired  real  estate  for
agribusiness or development and resale  purposes.  Partnership  liquidation have
reduced this total to 14 limited  partnerships  as of December  31, 1999.  It is
planned  that all  partnerships  will file final tax returns  during the next 12
months and virtually all on-going business activities have ceased.


     On November 30, 1995, the Company  acquired a 50% interest in PS III Farms,
LLC, which leases 6,490 acres to one of the limited  liability  company members,
which is not affiliated with the Company.  The lease expired  September 30, 1999
and has been renewed for an additional  five years pending  negotiations to sell
the Company's 50% interest to its partner during 2000. The primary crop grown on
the farm is potatoes.

     The Company  holds a 99%  ownership  interest in Las Palomas  Country  Club
Estates LLC, a California limited liability  company,  which previously acted as
the development  entity for the golf course owned by an affiliated  partnership,
all operations has been transferred to AFC in December 1999.

Fred H. Behrens,  Chairman,  Chief Executive  Officer,  director,  and principal
shareholder of the Company holds a 1% ownership  interest in Las Palomas Country
Club  Estates  LLC.  The Company  also holds a 99%  ownership  interest in AMCOR
Builders  LLC,  which  previously  managed the  construction  operations  of the
Company in Texas prior to being transferred to AFC. Robert A. Wright, President,
Chief Operating Officer, director and principal shareholder of the Company holds
a 1% ownership interest in AMCOR Builders LLC. The Company holds a 99% ownership
interest in AMCOR Biomass Farms LLC. Enterprise packing Company ("EPC") owns 442
limited partnership  interests issued by Lake Valley. Mr. Behrens and Mr. Wright
are the only general  partners of Lake Valley and EPC.  There are 2,600  limited
partnership   interests  of  Lake  Valley   presently  issued  and  outstanding.
Therefore,  by attribution of their ownership interests in EPC, Messrs.  Behrens
and Wright  jointly own 17% of the issued and  outstanding  limited  partnership
interests of Lake Valley.

     In December  1997,  Messrs.  Behrens  and Wright  agreed,  at the  lenders'
request,  to personally  guarantee  $4,250,000 of debt financing obtained by the
Company from GMAC Credit Corporation and TexStar Bank in connection with the Las
Palomas golf course/subdivision project. In consideration for the guarantee, the
Company  agreed to pay to Messrs.  Behrens  and Wright  assigned  to the Company
their rights to this guarantee fee effective  August 31, 1998 as described below
in this Item 12.



                                                                              30
<PAGE>



     On December 20, 1999, the Company agreed to reduce the conversion  price of
its Series B Convertible  Preferred  Stock to $6.67 per share from $10 per share
(on December 20, the market price for the  Company's  Common Stock were $4.188).
At that time, all of the Series B Convertible Preferred Stock that was issued to
three affiliated  limited  partnerships was converted into 591,621 shares of the
Company's common stock.









                                                                              31
<PAGE>

                             USA Biomass Corporation

                        Consolidated Financial Statements

                  As of December 31, 1999 and 1998 and for the
           Year Ended December 31, 1999, the Four Month Period Ended
                           December 31, 1998 and for
                         The Year Ended August 31, 1998



<PAGE>


                             USA Biomass Corporation

                 Index to the Consolidated Financial Statements
                  As of December 31, 1999 and 1998 and for the
               Year Ended December 31, 1999, the Four Month Period
                        Ended December 31, 1998 and for
                         The Year Ended August 31, 1998
--------------------------------------------------------------------------------

Independent Auditors' Report ..............................................    1

Consolidated Financial Statements for USA Biomass Corporation:

     Consolidated Balance Sheets as of December 31, 1999 and 1998 .........    2

     Consolidated Statements of Operations for the Year Ended
        December 31, 1999, the Four Month Period Ended December
        31, 1998 and the Year Ended August 31, 1998 .......................    5

     Consolidated Statements of Shareholders' Equity for the Year
        Ended December 31, 1999, the Four Month Period  Ended
        December 31, 1998 and the Year Ended August 31, 1998 ..............    6

     Consolidated Statements of Cash Flows for the Year Ended
        December 31, 1999,  the Four Month Period Ended  December 31,
        1998 and the Year Ended August 31, 1998 ...........................    8

Notes to the Consolidated Financial  Statements ...........................   13


<PAGE>

                         Report of Independent Auditors



To the Board of Directors and Shareholders of
USA Biomass Corporation

We have  audited the  accompanying  consolidated  balance  sheets of USA Biomass
Corporation  and its  subsidiaries  as of December  31,  1999 and 1998,  and the
related consolidated  statements of operations,  shareholders'  equity, and cash
flows for the year ended December 31, 1999, the four month period ended December
31, 1998, and the year ended August 31, 1998. 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  generally   accepted  auditing
standards.  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of USA
Biomass  Corporation and  subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 1999,  the four month period ended  December 31, 1998, and the year
ended  August  31,  1998,  in  conformity  with  generally  accepted  accounting
principles.

Kelly & Company
Newport Beach, California
April 12, 2000


<PAGE>


                             USA Biomass Corporation

                           Consolidated Balance Sheets
                           December 31, 1999 and 1998

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



                                     ASSETS
<TABLE>
<CAPTION>
                                                                                 1999          1998
                                                                             -----------   -----------
<S>                                                                          <C>           <C>
Current assets:

  Cash and equivalents                                                       $   540,651   $   767,293
  Cash held in escrow                                                            617,176          --
  Cash held in trust                                                             203,891          --
  Accounts  receivable,  net of allowance for doubtful  receivables  of
     $90,580 and $54,985 as of December 31, 1999 and December 31, 1998,
     respectively                                                                862,619       526,170
  Receivable from affiliates                                                      25,869          --
  Income taxes recoverable                                                          --         292,639
  Other current assets                                                           129,589       423,295
  Net current assets of discontinued operations                                1,248,670     8,337,976
                                                                             -----------   -----------
     Total current assets                                                      3,628,465    10,347,373
Property and equipment, net of accumulated depreciation                        7,584,040     9,104,446
Note receivable, noncurrent                                                         --       6,462,347
Other assets                                                                      31,963       127,645
Intangible assets, net of accumulated amortization                               391,667       441,666
                                                                             -----------   -----------
Total assets                                                                 $11,636,135   $26,483,477
                                                                             ===========   ===========
</TABLE>


   The accompanying notes are an integral part of the consolidated financial
                                  statements.


                                      F-2
<PAGE>


                             USA Biomass Corporation

                           Consolidated Balance Sheets
                           December 31, 1999 and 1998

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

                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                   1999          1998
                                                              -----------   -----------

<S>                                                           <C>           <C>
      Current liabilities:

           Accounts payable                                   $ 1,747,537   $ 1,944,450
           Payroll and payroll taxes payable                      632,013       890,698
           Accrued remediation costs                              180,808       507,000
           Lines of credit                                        640,000       874,610
           Payable to affiliates                                     --         520,618
           Notes payable:
              Affiliates                                          190,714     2,268,053
              Other                                               727,717       979,954
           Capitalized lease obligations                          809,690       681,922
           Income taxes payable                                   347,942       334,832
           Accrued interest                                       194,620       284,272
                                                              -----------   -----------
                Total current liabilities                       5,471,041     9,286,409
      Notes payable, net of current portion:
           Affiliates                                           1,020,967       597,420
           Other                                                2,333,288     6,261,799
      Capitalized lease obligations, net of current portion     2,551,898     3,515,768
                                                              -----------   -----------

Total liabilities                                              11,377,194    19,661,396
                                                              ===========   ===========
</TABLE>

Commitments and contingencies


   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-3
<PAGE>


                             USA Biomass Corporation

                           Consolidated Balance Sheets
                           December 31, 1999 and 1998

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


                 LIABILITIES AND SHAREHOLDERS' EQUITY, CONTINUED


<TABLE>
<CAPTION>
                                                                                       1999            1998
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
Shareholders' equity:

      Preferred Stock (2,000,000 shares authorized):
           Series A, 9% Convertible Preferred Stock, $0.01 par value;
              cumulative nonvoting; $7,422,000 and $7,475,000 aggregate
              liquidation preference at December 31, 1999 and 1998,
              respectively; 812,500 shares authorized, 742,200 and 747,500
              shares issued and outstanding at December 31, 1999 and 1998,
              respectively                                                         $      7,422    $      7,475
           Series B, 6% Convertible Preferred Stock, $0.01 par value; cumulative
              nonvoting; 750,000 shares authorized, 394,414 shares issued and
              outstanding at December 31, 1998                                             --             3,944
      Common stock, $0.002 par value; 25,000,000 shares authorized, 9,509,856
        and 7,761,385 issued, 9,485,606 and 7,737,135 shares
        outstanding at December 31, 1999 and 1998, respectively.                         19,018          15,522
      Additional paid-in capital                                                     25,235,189      21,970,123
      Accumulated deficit                                                           (24,781,849)    (15,056,644)
      Receivable on common stock                                                       (102,500)           --
      Treasury stock, at cost (24,250 common shares at
        December 31, 1999 and 1998)                                                    (118,339)       (118,339)
                                                                                   ------------    ------------

Total shareholders' equity                                                              258,941       6,822,081
                                                                                   ------------    ------------

Total liabilities and shareholders' equity                                         $ 11,636,135    $ 26,483,477
                                                                                   ============    ============
</TABLE>


   The accompanying notes are an integral part of the consolidated financial
                                  statements.


                                      F-4
<PAGE>


                             USA Biomass Corporation

                      Consolidated Statements of Operations
        For the Year Ended December 31, 1999, the Four Month Period Ended
                             December 31, 1998 and
                       For The Year Ended August 31, 1998

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

<TABLE>
<CAPTION>
                                                                                         For the Period From
                                                                   For the Year Ended    September 1, 1998 to  For the Year Ended
                                                                    December 31, 1999    December 31, 1998       August 31, 1998
                                                                   ------------------    --------------------  -------------------
<S>                                                                    <C>                  <C>                  <C>
Revenues                                                               $  7,644,907         $  2,024,830         $  2,005,611
Cost of revenues                                                          6,704,505            1,694,250            2,665,206
                                                                       ------------         ------------         ------------

      Gross margin                                                          940,402              330,580             (659,595)
General and administrative expenses                                       1,492,820            1,152,697            3,228,682
Loss from asset impairment                                                  141,050                 --              1,971,123
Loss on sale of assets                                                      215,258                3,768              365,990
                                                                       ------------         ------------         ------------
      Operating loss from continuing operations                             908,726              825,885            6,225,390
Interest expense,net                                                        822,791              389,429              661,889
                                                                       ------------         ------------         ------------
      Loss from continuing operations before income
        taxes                                                             1,731,517            1,215,314            6,887,279
Benefit from income taxes                                                     3,200                3,200           (1,048,475)
                                                                       ------------         ------------         ------------

Loss from continuing operations                                           1,734,717            1,218,514            5,838,804
                                                                       ------------         ------------         ------------
Discontinued operations (Note 4):
      Estimated loss on disposal                                          5,346,328              814,550            7,068,069
      Loss from  discontinued operations (Note 12)                        2,105,701                 --              2,878,813
                                                                       ------------         ------------         ------------
      Total                                                               7,452,029              814,550            9,946,882
                                                                       ------------         ------------         ------------

Net loss                                                               $  9,186,746         $  2,033,064         $ 15,785,686
                                                                       ============         ============         ============

Loss from continuing operations per common share,
   basic and diluted                                                   $       0.41         $       0.20         $       0.88
                                                                       ============         ============         ============

Net loss per common share, basic and diluted                           $       1.35         $       0.31         $       2.19
                                                                       ============         ============         ============
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.



                                      F-5
<PAGE>


                             USA Biomass Corporation

                 Consolidated Statements of Shareholders' Equity
              For the Year Ended December 31, 1999, the Four Month
                       Period Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                       Series A      Series B                       Common        Series A
                                                      Preferred     Preferred       Common         Treasury       Preferred
                                                       Shares        Shares         Shares          Shares          Stock
                                                     ----------   ------------   ------------    ------------    ------------
<S>                                                     <C>            <C>           <C>               <C>        <C>

Balance, August 31, 1997                                    --         404,414      7,172,974            --              --
   Issuance of Series A 9% Convertible Preferred
   Stock                                                747,500            --            --              --      $      7,475
   Shares issued upon exercise of options                   --             --          31,250            --              --
   Shares issued in payment of debt                         --             --          14,927            --              --
   Shares issued for the acquisition of TransPacific
    Environmental, Inc.                                     --             --         406,109            --              --
   Shares issued in settlement of litigation                --             --         144,000            --              --
   Options on common stock granted to
    nonemployees for consulting and other  services         --             --            --              --              --
   Treasury shares  acquired                                --             --            --          (24,250)            --
   Shares reacquired and retired                            --             --          (7,875)           --              --
   Series A Preferred Stock dividends                       --             --            --              --              --
   Net loss                                                 --             --            --              --              --
                                                     ----------   ------------   ------------    ------------    ------------

Balance, August 31, 1998                                747,500        404,414      7,761,385         (24,250)   $      7,475
                                                     ==========   ============   ============    ============    ============

<CAPTION>
                                                        Series B                      Treasury         Additional
                                                       Preferred        Common         Common           Paid-in       Accumulated
                                                         Stock          Stock           Stock           Capital   Earnings (Deficit)
                                                      ------------   ------------    ------------    ------------ ------------------
<S>                                                   <C>            <C>             <C>             <C>             <C>
Balance, August 31, 1997                              $      4,044   $     14,345            --      $ 14,242,065    $  3,259,382
  Issuance of Series A 9% Convertible Preferred
     Stock                                                    --             --              --         6,161,869            --
  Shares issued upon exercise of options                      --               63            --            62,437            --
  Shares issued in payment of debt                            --               30            --            70,869            --
  Shares issued for the acquisition of TransPacific
     Environmental, Inc.                                      --              812            --         1,195,030            --
  Shares issued in settlement of litigation                   --              288            --            83,093            --
  Options on common stock granted to
   nonemployees for consulting and other  services            --             --              --           187,500            --
  Treasury shares  acquired                                   --             --      $   (118,339)           --              --
  Shares reacquired and retired                               --              (16)           --           (32,840)           --
  Series A Preferred Stock dividends                          --             --              --              --          (497,276)
  Net loss                                                    --             --              --              --       (15,785,686)
                                                      ------------   ------------    ------------    ------------    ------------

Balance, August 31, 1998                              $      4,044   $     15,522    $   (118,339)   $ 21,970,023    $(13,023,580)
                                                      ============   ============    ============    ============    ============

<CAPTION>
                                                         Notes
                                                      Receivable
                                                        Common
                                                         Stock           Total
                                                     ------------    ------------
<S>                                                                  <C>
Balance, August 31, 1997                                    --       $ 17,519,836
  Issuance of Series A 9% Convertible Preferred
     Stock                                                  --          6,169,344
  Shares issued upon exercise of options                    --             62,500
  Shares issued in payment of debt                          --             70,899
  Shares issued for the acquisition of TransPacific
     Environmental, Inc.                                    --          1,195,842
  Shares issued in settlement of litigation                 --             83,381
  Options on common stock granted to
   nonemployees for consulting and other  services          --            187,500
  Treasury shares  acquired                                 --           (118,339)
  Shares reacquired and retired                             --            (32,856)
  Series A Preferred Stock dividends                        --           (497,276)
  Net loss                                                  --        (15,785,686)
                                                        -------      ------------

Balance, August 31, 1998                                    --       $  8,855,145
                                                        =======      ============
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-6
<PAGE>

                             USA Biomass Corporation

                 Consolidated Statements of Shareholders' Equity
              For the Year Ended December 31, 1999, the Four Month
                       Period Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         Series A        Series B                      Common         Series A
                                                        Preferred       Preferred        Common       Treasury        Preferred
                                                         Shares          Shares          Shares         Shares          Stock
                                                      ------------    ------------    ------------   ------------    ------------
<S>                                                        <C>           <C>             <C>              <C>        <C>
Balance, August 31, 1998                                   747,500         404,414       7,761,385        (24,250)   $      7,475
   Share cancellation                                         --           (10,000)           --             --              --
   Net loss                                                   --              --              --             --              --
                                                      ------------    ------------    ------------   ------------    ------------

Balance, December 31, 1998                                 747,500         394,414       7,761,385        (24,250)          7,475
   Common stock issued in settlement of debt                  --              --           563,527           --              --
   Series B convertible preferred stock issued
      for cumulative dividends in arrears                     --            53,846            --             --              --
   Conversion of Series B Convertible Preferred
      Stock to common stock                                   --          (448,260)        591,621           --              --
   Common stock issued on exercise of stock options           --              --           585,383           --              --
   Conversion of Series A Convertible Preferred
      Stock to common stock                                 (5,300)           --             7,940           --               (53)
   Common stock options issued for services                   --              --              --             --              --
   Notes receivable arising from exercise of
      common stock options                                    --              --              --             --              --
   Net loss                                                   --              --              --             --              --
                                                      ------------    ------------    ------------   ------------    ------------
Balance, December 31, 1999                                 742,200            --         9,509,856        (24,250)   $      7,422
                                                      ============    ============    ============   ============    ============

<CAPTION>
                                                        Series B                        Treasury      Additional
                                                       Preferred         Common          Common        Paid-in       Accumulated
                                                         Stock           Stock           Stock         Capital    Earnings (Deficit)
                                                      ------------    ------------   ------------    ------------ ------------------
<S>                                                   <C>             <C>            <C>             <C>            <C>
Balance, August 31, 1998                              $      4,044    $     15,522   $   (118,339)   $ 21,970,023   $(13,023,580)
   Share cancellation                                         (100)           --             --               100           --
   Net loss                                                   --              --             --              --       (2,033,064)
                                                      ------------    ------------   ------------    ------------   ------------

Balance, December 31, 1998                                   3,944          15,522       (118,339)     21,970,123    (15,056,644)
   Common stock issued in settlement of debt                  --             1,127           --         1,728,693           --
   Series B convertible preferred stock issued
      for cumulative dividends in arrears                      538            --             --           537,921       (538,459)
   Conversion of Series B Convertible Preferred
      Stock to common stock                                 (4,482)          1,183           --             3,299           --
   Common stock issued on exercise of stock options           --             1,170           --           977,941           --
   Conversion of Series A Convertible Preferred
      Stock to common stock                                   --                16           --                37           --
   Common stock options issued for services                   --              --             --            17,175           --
   Notes receivable arising from exercise of
      common stock options                                    --              --             --              --             --
   Net loss                                                   --              --             --              --       (9,186,746)
                                                      ------------    ------------   ------------    ------------   ------------
Balance, December 31, 1999                                    --      $     19,018   $   (118,339)   $ 25,235,189   $(24,781,849)
                                                      ============    ============   ============    ============   ============

<CAPTION>
                                                          Notes
                                                       Receivable
                                                         Common
                                                          Stock         Total
                                                       ----------    ------------
<S>                                                     <C>          <C>
Balance, August 31, 1998                                $    --      $  8,855,145
   Share cancellation                                        --              --
   Net loss                                                  --        (2,033,064)
                                                        ---------    ------------

Balance, December 31, 1998                                   --         6,822,081
   Common stock issued in settlement of debt                 --         1,729,820
   Series B convertible preferred stock issued
      for cumulative dividends in arrears                    --              --
   Conversion of Series B Convertible Preferred
      Stock to common stock                                  --              --
   Common stock issued on exercise of stock options          --           979,111
   Conversion of Series A Convertible Preferred
      Stock to common stock                                  --              --
   Common stock options issued for services                  --            17,175
   Notes receivable arising from exercise of
      common stock options                               (102,500)       (102,500)
   Net loss                                                  --        (9,186,746)
                                                        ---------    ------------
Balance, December 31, 1999                              $(102,500)   $    258,941
                                                        =========    ============
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.



                                      F-7
<PAGE>


                             USA Biomass Corporation

                      Consolidated Statements of Cash Flows
              For the Year Ended December 31, 1999, the Four Month
                       Period Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                                          For the Period From
                                                                     For the Year Ended   September 1, 1998 to   For the Year Ended
                                                                       December 31, 1999    December 31, 1998      August 31, 1998
                                                                          ------------        ------------          ------------
<S>                                                                       <C>                 <C>                   <C>
Cash flows from operating activities:
      Net loss                                                            $  9,186,746        $  2,033,064          $ 15,785,686
      Add loss (deduct income) from discontinued
       operations                                                            7,452,029                --               9,946,882
                                                                          ------------        ------------          ------------
        Net loss from continuing operations                                  1,734,717           2,033,064             5,838,804
      Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation                                                        958,929             268,658               316,229
           Amortization                                                         49,999              16,666                41,668
           Uncollectible receivables                                            50,580              14,985                  --
           Loss on impairment of assets                                        141,050                --               1,971,123
           Loss on sale of assets                                              177,322                --                 365,990
           Gain on sale of assets                                               13,914                --                    --
           Provision for settlement expense                                       --                  --                 112,129
           Stock options granted to nonemployees
              for consulting and other services                                   --                  --                 187,500
           Stock Compensation                                                   17,175                --                    --
           Issuance of common stock for interest                                55,376                --                    --
           Issuance of common stock for services                                41,297                --                    --
      Decrease (increase) in assets, net of effect of
         acquisition of TransPacific Environmental,
         Inc.:
           Accounts receivable                                                (387,029)           (205,621)              (97,855)
           Income taxes recoverable                                            292,639                --                (292,639)
           Other current assets                                                293,706            (178,827)              710,093
           Due from related parties                                               --                  --                 239,887
           Other assets                                                         95,682             (97,464)                2,782
      Increase (decrease) in liabilities, net of effect of
        acquisition of TransPacific Environmental,
         Inc.:
           Accounts payable                                                   (186,056)            678,193              (400,579)
           Remediation                                                        (326,192)               --                    --
           Payroll taxes payable                                              (258,685)           (174,307)               87,557
           Income taxes payable                                                 13,110             331,632            (1,033,200)
           Accrued interest payable                                            243,921             121,427              (181,583)
           Deferred taxes                                                         --                  --                 (55,894)
                                                                          ------------        ------------          ------------
           Payable to affiliates                                              (412,694)            (11,093)                 --
                                                                          ------------        ------------          ------------
Net cash used in operating activities of
   continuing operations                                                    (1,092,492)           (454,265)           (3,865,596)


Net cash used in operating activities of
   discontinued operations                                                  (1,609,977)         (1,220,231)           (6,105,493)
                                                                          ------------        ------------          ------------

Cash used in operating activities                                         $ (2,702,469)       $ (1,674,496)         $ (9,971,089)
                                                                          ------------        ------------          ------------
</TABLE>



   The accompanying notes are an integral part of the consolidated financial
                                  statements.


                                      F-9
<PAGE>


                             USA Biomass Corporation

                      Consolidated Statements of Cash Flows
              For the Year Ended December 31, 1999, the Four Month
                       Period Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                          For the Period From
                                                                      For the Year Ended  September 1, 1998 to  For the Year Ended
                                                                       December 31, 1999    December 31, 1998     August 31, 1998
                                                                      ------------------  --------------------- -------------------
<S>                                                                        <C>                <C>                <C>
Cash flows provided by (used in) investing activities:
      Purchases of property and equipment                                  $  (158,163)       $  (166,801)       $  (142,777)
      Proceeds on sale of note receivable                                    2,462,347               --                 --
      Sales of property and equipment                                           81,500               --              101,393
      Acquisition of TransPacific Environmental, Inc., net of
        cash acquired                                                             --                 --             (398,154)
                                                                           -----------        -----------        -----------
Net cash used in investing activities of
   continuing operations                                                     2,385,684           (166,801)          (439,538)

Net cash provided by investing activities
   of discontinued operations                                                  963,676               --            4,199,029
                                                                           -----------        -----------        -----------

Cash provided by investing operations                                        8,349,360           (166,801)         3,759,491
                                                                           -----------        -----------        -----------

Cash flows provided by (used in) financing activities:

      Proceeds from line of credit                                              15,000            625,000            249,610
      Proceeds from notes and loans                                               --            1,530,646          2,229,065
      Repayment of notes and loans                                            (652,035)          (374,827)        (3,541,141)
      Proceeds from exercise of options                                        200,000               --                 --
      Repayment of notes and notes - affiliates                               (102,900)              --                 --
      Dividends paid on Series A Preferred Stock                                  --                 --             (497,276)
      Acquisition of treasury shares                                              --                 --             (118,339)
      Net proceeds from issuance of Series A
        Preferred Stock                                                           --                 --            6,169,344
      Purchase and retirement of common stock                                     --                 --              (32,856)
      Exercise of stock options                                                   --                 --               62,500
                                                                           -----------        -----------        -----------

Net cash provided by financing activities of
   continuing operations                                                      (539,935)         1,780,819          4,520,907

Net cash provided by financing activities of
   discontinued operations                                                    (333,598)              --            2,338,596
                                                                           -----------        -----------        -----------

Cash provided by financing activities                                         (873,583)         1,780,819          6,859,503
                                                                           -----------        -----------        -----------

Net increase (decrease) in cash                                               (226,642)           (60,478)           647,905

Cash and equivalents at beginning of year                                      767,293            827,771            179,866
                                                                           -----------        -----------        -----------

Cash and equivalents at end of year                                        $   540,651        $   767,293        $   827,771
                                                                           ===========        ===========        ===========
</TABLE>


   The accompanying notes are an integral part of the consolidated financial
                                  statements.


                                      F-10
<PAGE>


                             USA Biomass Corporation

                      Consolidated Statements of Cash Flows
              For the Year Ended December 31, 1999, the Four Month
                       Period Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

                Supplemental Disclosures of Cash Flow Information

<TABLE>
<CAPTION>
                                                                            For the Period From
                                                     For the Year Ended     September 1, 1998 to    For the Year Ended
                                                      December 31, 1999       December 31, 1998        August 31, 1998
                                                     ------------------     --------------------    -------------------
<S>                                                      <C>                     <C>                     <C>
Cash paid during the year for:
      Interest:
      Continuing operations                              $1,196,703              $  189,382              $  838,066
      Discontinued operations                               582,927                 383,999                 521,191
                                                         ----------              ----------              ----------
                                                         $1,779,630              $  573,381              $1,359,257
                                                         ==========              ==========              ==========
      Income taxes                                       $     --                $     --                $  332,589
                                                         ==========              ==========              ==========
</TABLE>

<TABLE>
<CAPTION>
                            Supplemental Schedule of
      Non-Cash Investing and Financing Activities of Continuing Operations

<S>                                                            <C>                <C>                   <C>
Assets acquired (disposed of) in non-cash transactions:
      Assets acquired                                                 --           5,486,636             $ 1,141,225
      Receivables from related parties                                --                --                   815,184
      Capital lease obligations incurred                              --          (2,905,733)               (727,610)
      Liabilities incurred                                            --          (2,580,903)               (413,615)
      Liability to officer incurred                                   --                --                  (815,184)
Satisfaction of debt through issuance of stock:
      Liabilities satisfied                                    $ 1,633,145              --               $    70,899
      Common stock issued                                       (1,633,145)             --                   (70,899)
Dividends on Preferred Stock:
      Additional paid in capital                                   538,459              --                       --
      Reduction in retained earnings                              (538,459)             --                       --
Satisfaction of debt through offset of options exercise:
      Liabilities satisfied                                        676,586              --                       --
      Common shares issued                                        (676,586)             --                       --
Conversaion of preferred stock to common stock:
      Preferred shares converted                                     3,997              --                       --
      Common shares issued                                          (3,997)             --                       --
Issuance of note receivable on common stock:
      Receivable on common stock                                   102,500              --                       --
      Common shares issued                                        (102,500)             --                       --
Satisfaction of debt through offset of related receivables:
      Receivables satisfied                                     (1,401,723)             --                       --
      Liabilities satisfied                                        283,388              --                       --
      Liabilities to officers satisfied                          1,118,335              --                       --
</TABLE>


   The accompanying notes are an integral part of the consolidated financial
                                  statements.



                                      F-11
<PAGE>



                             USA Biomass Corporation

                      Consolidated Statements of Cash Flows
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


                            Supplemental Schedule of
 Non-Cash Investing and Financing Activities of Continuing Operations, Continued

<TABLE>
<CAPTION>
                                                                                            For the Period From
                                                                         For the Year Ended September 1, 1998 to  For the Year Ended
                                                                         December 31, 1999  December 31, 1998      August 31, 1998
                                                                         -----------------  --------------------  ------------------
<S>                                                                         <C>                 <C>               <C>
Settlement liability and related party receivable:
      Liability to estate of former officer                                       --                  --          $  (283,388)
      Receivable from related party                                               --                  --              283,388

Purchase of all the capital stock of TransPacific Environmental, Inc.:
      Fair value of assets acquired                                               --                  --          $ 2,260,933
      Less:
           Cash paid                                                              --                  --             (411,207)
           Common stock issued                                                    --                  --           (1,195,842)
                                                                                                                  -----------
           Liabilities assumed                                                    --                  --          $  (653,884)
                                                                                                                  ===========

Included in the net liabilities  assumed were the following operating
   assets and liabilities:
      Cash                                                                        --                  --          $    13,053
      Accounts receivable                                                         --                  --              116,235
      Other current assets                                                        --                  --               48,531
      Other assets                                                                --                  --                2,230
      Accounts payable                                                            --                  --             (679,283)
      Notes payable                                                               --                  --             (154,650)

Assets disposed of in non-cash transaction:
      Assets disposed                                                       $ (200,295)               --                 --
      Liabilities satisfied                                                    377,517                --                 --
      Loss on disposal                                                        (177,222)               --                 --
</TABLE>


   The accompanying notes are an integral part of the consolidated financial
                                  statements.


                                      F-12
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

1.   Description of the Company's Business

     The  operations  of USA Biomass  Corporation  (the  "Company"),  a Delaware
     corporation, consist of clean green waste processing ("biomass"), and waste
     transportation,  which  commenced in October 1998.  These  activities  take
     place  exclusively  in Southern  California.  In January 1999,  the Company
     changed its year end to December 31.

     During the year ended August 31, 1998,  the Company  commenced  its biomass
     operations,  and in December 1998, the Company's Board of Directors adopted
     a plan to discontinue its agribusiness and real estate activities (Note 4).
     In a two year  period,  the Company has  completed it  transition  from its
     historical  activities to its current segments.  Although this has resulted
     in the  recognition  of  significant  losses in the  periods,  the  Company
     believes  that  the  combination  of its  long  term  waste  transportation
     contracts, its growing biomass operations, and the preferred stock offering
     and  acquistion  of American  Waste  Transport in the first quarter of 2000
     will enable it to successfully compete in its current lines of business.

2.   Summary of Significant Accounting Policies

     Principles of Consolidation

     The consolidated  financial  statements include the accounts of USA Biomass
     Corporation   and   its    subsidiaries.    USA   Waste   Transport,    USA
     Biomass-Greenwaste,   Inc.,  TransPacific  Environmental  Inc.,  and  AMCOR
     Biomass  Farms,  LLC (99% owned),  are the Company's  continuing  operating
     subsidiaries.  Sun Goddess Farms, Inc., AMCOR Properties, Inc., Las Palomas
     Country Club Estates,  LLC (99% owned) and AMCOR Builders,  LLC (99% owned)
     are discontinued operations. All significant intercompany transactions have
     been eliminated.

     Assets of  discontinued  operations  are  recorded at their  estimated  net
     realizable value (Note 4).

     Revenue Recognition

     Revenues  are  recognized  on the  accrual  method at the time the  related
     services are performed.

     Use of Estimates

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

     Cash and Equivalents

     Cash and equivalents  include  short-term,  highly liquid  instruments with
     original maturities of three months or less.

     Accounts Receivable

     The Company grants credit to customers substantially all of whom are in the
     waste industry.  The Company  performs credit  evaluations of its customers
     and, generally,  requires no collateral.  The Company's ability to generate
     revenues  and collect  amounts due from  customers  is affected by economic
     fluctuations in the waste industry.


                                      F-13
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

2.   Summary of Significant Accounting Policies, Continued

     Accounts Receivable, Continued

     The Company uses the allowance method to account for uncollectible accounts
     receivable.  The  Company's  estimate  is  based on  historical  collection
     experience and a review of the current status of trade accounts receivable.
     It is reasonably  possible that the Company's estimate of the allowance for
     doubtful accounts will change.

     Property and Equipment

     Property and equipment are recorded at cost and are  depreciated  using the
     straight-line method over the expected useful lives noted below.

                                                         Estimated Useful
                                                             Life
                                                         ----------------
           Vehicles and equipment                          3-10 years
           Office furniture and equipment                  3-10 years
           Buildings                                         30 years

     Leasehold  improvements  are amortized  over the shorter of the life of the
     assets or the life of the related lease.

     Intangible Assets

     Intangible assets include licenses and agreements and contracts. Intangible
     assets are  amortized  using the  straight-line  method over a period of 10
     years. Regularly, the Company assesses the intangible assets for impairment
     based on recoverability of the balances from expected future operating cash
     flows on an undiscounted basis (Note 8).

     Long Lived Assets

     Long-lived  assets held and used by the Company are reviewed for impairment
     whenever  events or changes in  circumstances  indicate  that the  carrying
     amount of an asset may not be recoverable.  The estimated undiscounted cash
     flows  associated  with the assets are compared to the carrying  amounts to
     determine if a writedown to fair value is required.

     As a result of the Company's review and assessment, and based upon the best
     information   available  in  the   circumstances,   including   independent
     appraisals, at December 31, 1999 and August 31, 1998 the Company determined
     that the carrying amounts of certain assets exceeded the fair value of such
     assets.


                                      F-14
<PAGE>



                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


2.   Summary of Significant Accounting Policies, Continued

     Stock Based Compensation

     Statement of Financial  Accounting  Standards ("SFAS") No. 123,  Accounting
     for  Stock-Based  Compensation  ("SFAS 123"),  established  accounting  and
     disclosure  requirements using a fair-value-based  method of accounting for
     stock-based employee and nonemployee compensation plans.

     The Company  continues  to account for  stock-based  employee  compensation
     using the intrinsic value method prescribed in Accounting  Principles Board
     Opinion No. 25,  Accounting  for Stock  Issued to Employees as permitted by
     SFAS 123.  Compensation cost for stock options,  if any, is measured as the
     excess of the quoted  market  price of the  Company's  stock at the date of
     grant  over  the  amount  an  employee  must  pay  to  acquire  the  stock.
     Compensation  cost is recorded over the requisite  vesting periods based on
     the market value on the date of grant.

     New Accounting Pronouncement

     In June 1998, the FASB issued Statement of Financial  Accounting  Standards
     ("SFAS")  No.  133,  Accounting  for  Derivative  Instruments  and  Hedging
     Activities,  which  establishes  accounting  and  reporting  standards  for
     derivative  instruments.  This Statement  requires that an entity recognize
     all  derivatives  as  either  assets or  liabilities  in the  statement  of
     financial  position and measure those  instruments  at fair value.  In June
     1999, the FASB issued SFAS No. 137,  Accounting for Derivative  Instruments
     and Hedging Activities-Deferral of the Effective Date of FASB Statement No.
     133, which postponed the adoption date of SFAS 133. As such, the Company is
     not required to adopt the new Statement until the year 2001. The Company is
     currently  evaluating  the effect that  implementation  of the new standard
     will have on its results of operations and financial position.

3.   Cash Held in Escrow and in Trust

     At December  31,  1999,  the  Company  had funds held in an escrow  account
     resulting  from the sale of  farmland  from its  discontinued  agribusiness
     operations.  The funds were held pending the Company's  ability to secure a
     certain loan release.  In February  2000, the loan release was obtained and
     the cash was released from escrow.

     At December 31,  1999,  the Company had cash held in trust with an attorney
     to be used in the resolution of certain liabilities.



                                      F-15
<PAGE>



                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

4.   Discontinued Operations

     On  December  22,  1998 , the  Company  adopted  a plan to  dispose  of its
     agribusiness  and real  estate  operations.  In October  1999,  the Company
     transferred  substantially  all of its  remaining  real  estate  assets and
     related  liabilities to AMCOR Financial Corp.  ("AFC"), a then wholly owned
     subsidiary.  In January  2000,  the Company  distributed  to its common and
     preferred  shareholders  all of its AFC  common  shares.  The  Company  has
     disputes with AFC regarding the nature and amount of assets and liabilities
     transferred to AFC. Further, all the regulatory requirements related to the
     distribution of the AFC shares to the Company's  shareholders  may not have
     been satisfied. As a result, the Company continues to record its investment
     related  to  these  real  estate  assets  as  net  assets  of  discontinued
     operations in the consolidated balance sheets.

     At August 31, 1998 estimated losses of approximately $1,543,000 anticipated
     on sales of  discontinued  operations  and  estimated  operating  losses of
     approximately  $1,336,000  for the period from August 31, 1998  through the
     estimated  dates  of  disposition  of  discontinued  operations,  currently
     expected to be December 31, 2000,  were included in the  estimated  loss on
     disposal of discontinued operations.  Additional losses on the dispositions
     of  discontinued  operations  of $ - and $814,550 were recorded in the year
     ended  December 31, 1999 and the four months ended December 31, 1998 due to
     asset sales at less than expected  amounts and diminished  appraised values
     resulting from slower than expected sales.

     Selected  information  for the  discontinued  agribusiness  and real estate
     operations is presented below.

                                      For the Year Ended December 31, 1999
                             ---------------------------------------------------
                              Agribusiness        Real Estate        Total
                             ---------------   ---------------   ---------------
Revenues                     $          --     $          --     $          --
Operating income (loss)                 --                --                --
                             ---------------   ---------------   ---------------

Loss on disposal             $          --     $          --     $          --
                             ===============   ===============   ===============



                                      F-16
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


4.    Discontinued Operations, Continued

                                For the Four Months Ended December 31, 1998
                             ---------------------------------------------------
                              Agribusiness        Real Estate        Total
                             ---------------   ---------------   ---------------
Revenues                     $          --     $          --     $          --
                             ===============   ===============   ===============
Operating income (loss)                 --                --                --
                             ===============   ===============   ===============

Loss on disposal             $          --     $       814,550   $       814,550
                             ===============   ===============   ===============

                                       For the Year Ended August 31, 1998
                             ---------------------------------------------------
                              Agribusiness        Real Estate        Total
                             ---------------   ---------------   ---------------
Revenues                     $  6,057,166      $ 12,304,686      $ 18,361,852
                             ============      ============      ============
Operating loss               $ (1,989,554)     $ (1,554,930)     $ (2,878,882)
                             ============      ============      ============
Loss on disposal             $ (1,323,883)     $ (1,554,930)     $ (2,878,813)
                             ============      ============      ============

     At December 31, 1999, the remaining assets of the  discontinued  operations
     are the Company's receivable from a partnership that owned in a golf course
     sold in foreclosure in February 2000,  certain housing  development land in
     Texas, and a 50% interest in PS III Farms, LLC, which owns 6,490 acres that
     it leases to a limited  liability  company  owned by the other 50%  venture
     partner.  The lease has a remaining  term of twelve  months and  contains a
     renewal  option on terms  subject to mutual  agreement  at that  time.  The
     primary crop grown on the Oregon farm is potatoes.  The real estate  assets
     have been pledged as  collateral  on notes  payable on which the Company is
     primarily  liable  totaling  $4,887,402  at  December  31,  1999,  which is
     included  in the net assets of  discontinued  operations.  Of this  amount,
     $3,048,070  was  collateralized  by a golf  course  upon  which the  lender
     foreclosed  in February  2000.  The lender has  notified the Company that a
     deficiency of $1.6 million exists after the foreclosure.

5.   Receivables Due to/Due from Affiliates

     Receivables  due  to/due  from  affiliates  relate to the  activities  of a
     partnership,  Enterprise Packing Company ("EPC"), the partners of which are
     two officers who are also  shareholders  and directors of the Company.  The
     amount due from the partnership represents the net of advances to and other
     transactions with the partnership and bears interest at 8% per annum.

     Offset of Guarantee Fees

     The  partners  of EPC  have  from  time to  time  provided  their  personal
     guarantees to lenders who required the  guarantees as necessary  conditions
     to lending the  Company  various  amounts,  which  aggregate  approximately
     $11,750,000. During the year ended August 31, 1998, as partial satisfaction
     of amounts  that EPC owes the  Company,  the  partners of EPC  assigned and
     offset their rights to receive loan guarantee fees totaling $548,500, which
     is included in discontinued operations.



                                      F-17
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

5.   Due from Officers and Directors, Continued

     Assignment of Priority Receivable

     During  the year ended  August  31,  1998,  EPC  assigned  its right to its
     priority  receivable  from a  partnership  to the  Company in the amount of
     $428,841 as partial  satisfaction  of its amount owed to the Company.  This
     receivable is included in discontinued operations.

     Exercise of Options

     During the year ended December 31, 1999, the two officers exercised options
     to  purchase  422,883  shares of the  Company's  common  stock  through the
     cancellation of $676,612.80 of amounts due by the Company.

6.   Note Receivable

     The note receivable at December 31, 1998 resulted from sale of a portion of
     the assets of the Company's  discontinued  operations.  In August 1999, the
     Company  sold this note.  The terms of this sale provide for the Company to
     receive up to an  additional  $500,000 if the note is paid by August  2000.
     This amount  decreases  monthly  until July 2002. If the note is paid after
     July 2002,  the  Company  will not  realize  any  additional  amounts.  Any
     additional amounts received will be recorded as income when received.

7.   Property and Equipment

     Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                       December 31,
                                                                --------------------------
                                                                    1999           1998
                                                                -----------    -----------
<S>                                                             <C>            <C>
     Vehicles and equipment                                     $ 6,548,131    $ 7,139,065
     Office furniture and equipment                                  32,971         21,859
     Leasehold improvements                                          13,686         68,244
     Buildings                                                      433,043        654,288
     Land                                                         1,804,082      1,814,082
                                                                -----------    -----------

                                                                  8,831,913      9,697,538
             Less: accumulated amortization and  depreciation    (1,247,873)      (593,092)
                                                                -----------    -----------

     Total property and equipment, net                          $ 7,584,040    $ 9,104,446
                                                                ===========    ===========
</TABLE>


                                      F-18
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


7.   Property and Equipment, Continued

     The  following  is an  analysis  of  property  held  under  capital  leases
     (included   in  the   preceding   summaries)   with   related   accumulated
     depreciation,  depreciation  expense,  and total  depreciation  expense  of
     continuing operations:

                                                      December 31,
                                             -----------------------------
                                                1999              1998
                                             -----------       -----------

     Vehicles and equipment                  $ 3,096,035       $ 3,142,256
     Accumulated depreciation                   (518,685)         (133,836)
                                             -----------       -----------

     Total                                   $ 2,577,350       $ 3,008,420
                                             ===========       ===========


<TABLE>
<CAPTION>
                                                                            For the Period From
                                                     For the Year Ended     September 1, 1998 to    For the Year Ended
                                                      December 31, 1999       December 31, 1998        August 31, 1998
                                                     ------------------     --------------------    -------------------
<S>                                                      <C>                     <C>                     <C>

     Capitalized lease depreciation  expense             $436,913                $ 78,240                $119,934
                                                         ========                ========                ========

     Total property, equipment and capital lease
        depreciation expense                             $958,929                $268,658                $319,229
                                                         ========                ========                ========
</TABLE>

     During the year ended December 31, 1999, the Company sold biomass equipment
     with a net book amount of $1,055,126  and  recognized a loss of $215,258 on
     the sale of these assets.

     Asset Impairment

     At December 31, 1999, certain equipment  previously utilized by the Company
     was  determined  to no longer be  necessary,  or the Company  significantly
     changed  the  manner  and  extent  to  which  it was  used  in its  biomass
     operations.  When the Company determined that the assets would no longer be
     utilized,  it  decided  to hold these  assets  for  disposition  and ceased
     recording depreciation expense. In this connection, the Company obtained an
     appraisal of the value less  estimated  costs of disposal of the  equipment
     and, accordingly, recognized an impairment loss of $96,557.



                                      F-19
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

8.   Intangible Assets

     Intangible  assets  associated  with the Company are all involved  with the
     green waste segment of the business. The intangible assets are noted below:

                                                         December 31,
                                                   -----------------------
                                                      1999          1998
                                                   ---------     ---------
     Recycling license                             $ 250,000     $ 250,000
     Customer lists                                   50,000        50,000
     Facilities lease                                200,000       200,000
                                                   ---------     ---------

                                                     500,000       500,000
          Less: accumulated amortization            (108,333)      (58,334)
                                                   ---------     ---------

     Intangible assets, net of amortization        $ 391,667     $ 441,666
                                                   =========     =========

     Amortization  expense for the year ended  December 31, 1999, the four month
     period  ended  December  31,  1998,  and the year ended August 31, 1998 was
     $49,999, $16,666, and $41,668, respectively.

9.   Lines of Credit

     Lines of credit consist of the following:

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                             ----------------------
                                                                                1999         1998
                                                                             ---------    ---------
<S>                                                                          <C>          <C>
     Borrowing  under a $650,000  line of credit with a bank,  interest at
     prime  plus 1.50%  (the bank  prime  rate was 8.50% at  December 31,
     1999), secured by all assets of the Company, and due June 30, 2000      $ 640,000    $ 625,000


     Borrowing  under a $250,000  line of credit with a bank,  interest at
     prime plus 2% (the bank prime was 8.5% at December 31, 1999), paid in
     full during 1999                                                             --        249,610
                                                                             ---------    ---------


     Total                                                                     640,000      874,610

          Less: current portion                                               (640,000)    (874,610)
                                                                             ---------    ---------

     Total noncurrent                                                             --           --
                                                                             =========    =========
</TABLE>


                                      F-20
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


10.  Notes Payable

     Notes payable consist of the following:

     Uncollateralized

          Notes Payable to Affiliates:

<TABLE>
<S>                                                                                  <C>                     <C>

          Notes payable,  with  effective  interest rates ranging from 6% to 12%
          per annum.  Notes with  aggregate  principal  amounts of $175,000  are
          payable to  individuals  who are  investors  in  limited  partnerships
          managed by the Company and are in default and classified as current. A
          note  of  $210,815  is  due to  the  spouse  of a  director,  a  major
          shareholder,  and is due  January  2, 2001.  Notes of $15,713  and the
          $810,152  are  payable  to  affiliated  partnerships  managed  by  the
          Company.                                                                   $  1,211,681            $ 2,495,284


           Note payable to an employee, with interest at 8% per annum, converted
           into common stock in November 1999.                                              --                   370,189
                                                                                     ------------            -----------

           Total due to affiliates                                                      1,211,681              2,865,473

                Less: current portion                                                    (190,714)            (2,268,053)
                                                                                     ------------            -----------

           Total noncurrent due to affiliates                                        $  1,020,967            $   597,420
                                                                                     ============            ===========
</TABLE>


                                      F-21
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


10.  Notes Payable, Continued

     Uncollateralized, Continued

          Notes Payable to Third Parties:

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                          ------------
                                                                                      1999           1998
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>
          Note payable,  with interest at 8% per annum with monthly payments of
          $11,182, paid in 1999                                                           --           46,011
                                                                                   -----------    -----------

          Total due to third parties                                               $      --      $    46,011
                                                                                   ===========    ===========

     Collateralized

          Notes payable to individuals, paid in April 2000                         $    31,723    $   296,164

          Notes  payable,  collateralized  by a vehicle,  with interest at 9.50%
          per annum.  The note is due in February 2004,  with monthly  payments
          of $714                                                                       29,396           --

          Note payable,  collateralized by a note receivable,  with interest at
          12.25%. This note was paid in September 1999                                    --        4,000,000

          Note payable,  collateralized by Company  facility,  with interest at
          Wall Street  Journal  Prime plus 1% per annum,  (8.5% at December 31,
          1999). Due in December 2003 with monthly principal payments of
          $8,098                                                                       780,372        800,000

          Notes payable, collateralized by equipment with interest ranging from
          8% to 18.7% per annum. Maturity dates range from December 1999
          to June 2004                                                               2,219,514      2,099,578
                                                                                   -----------    -----------

          Total due to third parties                                                 3,061,005      7,195,742
               Less: current portion                                                  (727,717)      (979,954)
                                                                                   -----------    -----------

          Total noncurrent  due to third parties                                   $ 2,333,288    $ 6,215,788
                                                                                   ===========    ===========
</TABLE>



                                      F-22
<PAGE>



                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

10.  Notes Payable, Continued

     Maturities of notes payable for the  years ending December 31:

                2000                                             $  918,426
                2001                                              1,597,388
                2002                                                682,609
                2003                                                349,915
                2004 and thereafter                                 724,348

11.  Obligations Under Capital Leases

     The Company leases vehicles and equipment  under  long-term  noncancellable
     capital leases. Obligations under capital leases consist of the following:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                                    ------------
                                                                                  1999         1998
                                                                              ----------   ----------

<S>                                                                           <C>              <C>
     Capital  leases with  effective  interest rates of 9.5% and 9.75% per
     annum,  with  aggregate  monthly  principal and interest  payments of
     $3,545 through December 1998                                                   --     $    7,924

     Capital lease with an effective interest rate of 8.5% per annum, with
     monthly  principal and interest  payments of $1,525 through September
     2002                                                                     $   36,737       49,960

     Capital  leases with interest  ranging from 9.1% to 12.62% per annum,
     with monthly  principal  and interest  payments  ranging from $924 to
     $5,564, which aggregate $21,515. Maturity dates range from August
     2000 to June 2001                                                           302,021      518,464

     Capital  leases with an  effective  interest  rate of 8.75% per annum,
     with monthly  principal and interest  payments  ranging from $4,125 to
     $15,044,  which aggregate  $54,779 . Maturity dates range from October
     to December 2003                                                          2,636,259    2,998,728

     Capital  leases with  interest  ranging from 7.60% to 8.50% per annum,
     with  monthly  principal  and interest  payments  ranging from $394 to
     $488, which aggregate $1,329.   Maturity dates range from September to
     November 2004                                                                64,638         --
</TABLE>


                                      F-23
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


11.  Obligations Under Capital Leases, Continued

<TABLE>
<S>                                                                           <C>          <C>
     Capital leases with interest ranging from 7.8% to 17% per annum, with
     monthly  principal  and  interest  payments  ranging  from  $1,040 to
     $6,691,  which aggregate $16,426.  Maturity dates range from February
     2001 to March 2003                                                       $  321,933   $  622,614
                                                                              ----------   ----------

     Total obligations under capital leases                                   $3,361,588   $4,197,690
                                                                              ==========   ==========
</TABLE>

     Future minimum lease payments under capital leases at December 31, 1999 are
     as follows:

<TABLE>
<S>                                                                         <C>
      2000                                                                  $ 1,063,752

      2001                                                                      992,565

      2002                                                                      683,799

      2003                                                                    1,256,787

      2004                                                                       14,920
                                                                            -----------

     Total minimum lease payments                                             4,011,823

          Less: amount representing interest at the incremental borrowing
             rate                                                              (650,235)
                                                                            -----------

     Present value of minimum lease payments                                  3,361,588

          Less: current maturities                                             (809,690)
                                                                            -----------

     Obligations under capital leases, long-term                            $ 2,551,898
                                                                            ===========
</TABLE>



                                      F-24
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

12.  Income Taxes

     The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                                       For the Period From
                                                                 For the Year Ended    September 1, 1998 to    For the Year Ended
                                                                  December 31, 1999      December 31, 1998      August 31, 1998
                                                                  -----------------      -----------------      ---------------
<S>                                                                   <C>                   <C>                          <C>
     Current tax expense (benefit):

        Federal                                                              --                    --              $  (995,904)
        State                                                         $     3,200           $     3,200                  3,323
                                                                      -----------           -----------            -----------
                                                                            3,200                 3,200               (992,581)
                                                                      -----------           -----------            -----------
     Deferred tax expense (benefit):
        Federal                                                              --                    --                 (240,381)
        State                                                                --                    --                  184,487
                                                                      -----------           -----------            -----------
                                                                             --                    --                  (55,894)
                                                                      -----------           -----------            -----------

      Total provision (benefit)                                       $     3,200           $     3,200            $(1,048,475)
                                                                      ===========           ===========            ===========

     Provision (benefit) allocated to:

     Discontinued operations                                                 --                    --                     --
     Loss on disposal of discontinued
        operations                                                           --                    --                     --
     Continuing operations                                            $     3,200           $     3,200            $(1,048,475)
                                                                      -----------           -----------            -----------

     Total provision (benefit)                                        $     3,200           $     3,200            $(1,048,475)
                                                                      ===========           ===========            ===========
</TABLE>

     The deferred tax benefit for federal  income tax purposes is primarily  due
     to the  utilization of the net operating loss to offset prior years' income
     taxes and the expected  future tax liability.  The deferred tax expense for
     state  income tax  purposes  is  primarily  due to the  establishment  of a
     valuation  allowance  in fiscal year 1998 for the state  deferred tax asset
     recognized in fiscal year 1997.

     The income tax benefit for the year ended August 31, 1998,  is allocated to
     loss from  continuing  operations as the tax benefit  arising from the loss
     from  continuing  operations  is the same as the benefit  arising  from the
     aggregate of all losses from operations.  Consequently,  no incremental tax
     benefit remains for allocation to the loss from discontinued  operations or
     loss on disposal of discontinued operations.



                                      F-25
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

12.  Income Taxes, Continued

     Significant  components  of the  Company's  deferred  income tax assets and
     liabilities are as follows:

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                             ------------
                                                                      1999                   1998
                                                                  -----------            -----------

<S>                                                               <C>                    <C>
     Deferred income tax assets:

          Depreciation                                            $    42,427                   --
          Net operating loss carryforward                           8,767,232            $ 2,822,273
          Nondeductible writedowns related to discontinued
             operations                                               282,954              3,331,355
          State tax credit carryforward                                  --                  250,462
          Other                                                         7,086                  7,086
                                                                  -----------            -----------

     Total deferred income tax assets                               9,099,699              6,411,176
          Valuation allowance                                      (8,689,700)            (5,722,651)
                                                                  -----------            -----------

     Net deferred income tax asset                                $   409,999            $   688,525
                                                                  ===========            ===========

     Deferred income tax liability:

          Depreciation                                                   --              $   350,917
          Partnership loss                                        $   409,999                337,608
                                                                  -----------            -----------
             Total deferred income tax liability                      409,999                688,525
                                                                  -----------            -----------

     Net deferred income tax liability                                   --                     --
                                                                  ===========            ===========
</TABLE>

     The  Company,  based  upon its recent  history  of losses and  management's
     assessment of when operations are  anticipated to generate  taxable income,
     has concluded that it is more likely than not that none of the net deferred
     income tax assets will be realized  through future taxable earnings and has
     established a valuation allowance for them.

     The valuation allowances  increased  $2,967,049,  $507,281,  and $5,215,370
     during the year ended December 31, 1999, the four months ended December 31,
     1998, and the year ended August 31, 1998, respectively.


                                      F-26
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

12.  Income Taxes, Continued

     Reconciliation  of the  effective  tax rate to the U.S.  federal  statutory
     income tax rate is as follows:

<TABLE>
<CAPTION>
                                                                      For the Period From
                                                  For the Year Ended  September 1, 1998 to  For the Year Ended
                                                   December 31, 1999   December 31, 1998    August 31, 1998
                                                   -----------------   -----------------    ---------------
<S>                                                      <C>                <C>                <C>
     U.S. federal statutory income tax rate              (34.0)%            (34.0)%            (34.0)%
     State tax provision                                   0.1                0.1                0.7
     Nondeductible writedowns related to
        discontinued operations                           --                 --                  2.7
     Nondeductible penalties                              --                  5.6               --
     Other                                                 0.3                0.5                1.0
     Change in valuation allowance                        33.7               28.0               23.4
                                                          ----               ----               ----

     Effective income tax rate                             0.1%               0.2%              (6.2)%
                                                          ====               ====               ====
</TABLE>

     The Company had a California  Enterprise Zone tax credit carryforward.  The
     Company generated the tax credits through its farming operations located in
     the  Coachella  Enterprise  Zone.  The tax  credits can only be utilized by
     generating  income in the Enterprise Zone. In the current year, the Company
     has  discontinued  all of its operations in the Coachella  Enterprise Zone;
     therefore,  the  deferred  tax  asset  related  to  the  state  tax  credit
     carryforwards has been written off.

     The  Company  has federal and state net  operating  loss  carryforwards  of
     $22,483,572  and  $12,701,550,  respectively.  The  federal  and  state net
     operating  loss  carryforwards  will  begin to  expire  in 2018  and  2003,
     respectively.

13.  Commitments

     The Company  leases certain of its biomass  facilities and equipment  under
     noncancellable  operating  leases.  Future  minimum  lease  payments  under
     noncancellable operating leases at December 31, 1999 are as follows:

     Continuing Operations

         2000                                                      $109,392
         2001                                                        38,628
         2002                                                          --
                                                                   --------

         Total future minimum lease payments                       $148,020
                                                                   ========

     Rent expense from operating  leases related to continuing  operations was $
     150,936 for the year ended  December 31,  1999,  $74,792 for the four month
     period ended  December 31, 1998, and $240,728 for the year ended August 31,
     1998.


                                      F-27
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------


13.  Commitments, Continued

     Discontinued Operations

     The costs associated with early termination of operating leases in the real
     estate  operations  have been included in loss on disposal of  discontinued
     operations.  Contractually  required  payments  relating to these operating
     leases are as follows:

         2000                                                      $110,590
         2001                                                         3,486
         2002                                                          --
                                                                   --------

         Total future minimum lease payments                       $114,076
                                                                   ========

     Rent expense from operating leases related to discontinued operations was $
     195,709 for the year ended  December 31,  1999,  $75,737 for the four month
     period ended  December 31, 1998, and $308,907 for the year ended August 31,
     1998.

14.  Contingencies

     Concentrations

     Cash Balances

     The  Company  maintains  cash  balances  in bank  accounts  which  exceeded
     federally  insured limits by $983,031 and $161,838 at December 31, 1999 and
     1998, respectively;  however, the Company has not experienced any losses in
     such accounts.

     Customers

     During the year ended  December 31, 1999 and the four months ended December
     31, 1998, a single  customer  accounted  for 97% and 99%,  respectively, of
     revenue for the transportation subsidiary and 77% and 48% of total revenue.
     This revenue is realized under contracts that have initial terms of 5 years
     with renewal options up to 10 years. There were no transportation  revenues
     during the year ended August 31, 1998. This customer  accounted for 59% and
     47% of the total  accounts  receivable  balances at  December  31, 1999 and
     1998,  respectively.  No other customers had accounts  receivable  balances
     that exceeded 10%.


                                      F-28
<PAGE>



                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

14.  Contingencies, Continued

     Concentrations, Continued

     Fuel

     During the year ended  December 31, 1999 and the four months ended December
     31, 1998, the Company purchased 97% and 94% of its fuel from one entity. In
     all of its transportation contracts, the Company has terms that provide for
     direct increases or decreases in the hauling rate based upon  extraordinary
     increases or decreases in their cost of fuel.

     Certain Significant Estimates

     Write-down of Equipment

     At  August  31,  1998  and at  December  31,  1999 the  Company  recognized
     impairment write-downs of certain specialized equipment previously utilized
     in its biomass  operations.  In determining the amount of each  impairment,
     the Company obtained  valuations from an independent  equipment  appraiser.
     The valuations  contemplate  the orderly sale of this equipment in, and the
     existence  of, a market  for used  specialty  equipment.  Given the  unique
     economic and operational nature of the equipment and the limited market, it
     is  reasonably  possible  that the  Company's  estimate of the amount to be
     realized  from the  disposition  of the  equipment  to recover its carrying
     amount will change in the near term.  The carrying  value of this equipment
     is $159,000 at December 31, 1999.

     Discontinued Operations

     Discontinued  operations include  management's best estimates of amounts it
     expects to realize on the disposition of its real estate operations.  These
     operations include significant estimates of amounts expected to be realized
     related  to  completed  houses  and  residential  lots held for  sale,  and
     receivables  due from affiliated  real estate limited  partnerships.  These
     estimates are based on several factors  including values of recent sales of
     similar  properties,  and  valuations  by  independent  appraisers  of real
     estate.  These valuations  contemplate  sale in an orderly  liquidation and
     assume the  existence  of a market  for all the assets of the  discontinued
     operations,  all or any of which may or may not materialize.  Consequently,
     the amounts the Company will ultimately  realize could differ materially in
     the near term from the amounts  assumed in arriving at the loss on disposal
     of the discontinued operations.

15.  Stock Based Compensation Plans

     Under terms of the  Company's  stock  option  plans,  directors,  officers,
     employees, and certain vendors may be granted options to purchase shares of
     the Company's  common stock at no less than 100% of the market price of the
     shares on the date the option is granted.  Options generally vest over four
     years and have a maximum term of ten years.  At December 31, 1999 and 1998,
     606,850 and 982,883 shares, respectively, were reserved for future issuance
     under the plans.


                                      F-29
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

15.  Stock Based Compensation Plans, Continued

     A summary of the activity  relating to the Company's  stock option plans as
     of December  31, 1999,  December 31, 1998 and August 31, 1998,  and changes
     during the periods then ended is presented below:

<TABLE>
<CAPTION>
                                                                                 For the Period From
                                                         For the Year Ended      September 1, 1998 to      For the Year Ended
                                                         December 31, 1999       December 31, 1998         August 31, 1998
                                                        -------------------     ----------------------    ---------------------
                                                                   Weighted                   Weighted                 Weighted
                                                                    Average                    Average                  Average
                                                                   Exercise                   Exercise                  Exercise
                                                         Shares      Price         Shares       Price       Shares       Price
                                                        --------   --------      ---------    --------     ----------  ---------
<S>                                                      <C>           <C>         <C>           <C>       <C>             <C>
     Outstanding at beginning of year                    982,883      $2.43      1,012,883      $2.45        656,633      $1.65
     Exercised                                          (585,383)      1.62           --         --          (31,250)      2.00
     Granted                                             364,350       1.18           --         --          555,000       3.97
     Cancelled/repriced                                     --         --          (30,000)      2.81       (150,000)      4.60
     Forfeited                                          (155,000)      1.26           --         --          (17,500)      3.14
                                                        --------                 ---------                ----------
     Outstanding at end of year                          606,850       2.24        982,883       2.43      1,012,883       2.43
                                                        ========                 =========                ==========
</TABLE>

     The following table summarizes  information about stock options outstanding
     at December 31, 1999:

<TABLE>
<CAPTION>
                                                                   Weighted Average
                                            Outstanding  at      Remaining Contractual     Exercisable at
                      Exercise Prices      December 31, 1999        Life (in Years)       December 31, 1999
                      ---------------      -----------------        ---------------       -----------------
<S>                                              <C>                                           <C>
                         $1.30                    98,100                 5                      88,250
                          2.00                   286,250                 5                     258,439
                          3.00                   212,500                 8                      43,750
                          4.00                    10,000                 7                       5,000
                                            ------------                                  ------------
                 $1.30 to 4.00                   606,850                                       395,439
                                            ============                                  ============
</TABLE>

     SFAS No.  123  requires  the use of  option  valuation  models  to  provide
     supplemental  information  regarding  options granted after 1994. Pro forma
     information  regarding  net income and  earnings  per share shown below was
     determined as if the Company had  accounted for its employee  stock options
     under the fair value method of that statement.

     The fair value of each option  granted was  estimated  at the date of grant
     using  the  Black-Scholes  option  pricing  model  (the  "BSOPM")  with the
     following  weighted average  assumptions used for grants in the years ended
     December 31, 1999 and August 31, 1998,  respectively:  dividend yield of 0%
     for  both  years),  expected  volatility  of 0.96 and  1.17,  respectively,
     risk-free  interest  rate of 5.57% and 4.90%,  respectively,  and  expected
     contractual  life of 10 years for both years.  The  weighted  average  fair
     value of options  granted  during the years  ended  December  31,  1999 and
     August  31,  1998 was $1.89 and $3.07,  respectively.  There were no grants
     during the four month period ended December 31, 1998.


                                      F-30
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

15.  Stock Based Compensation Plans, Continued

     The BSOPM was  developed  for use in  estimating  the fair  value of traded
     options.   The  Company's  employee  stock  options  have   characteristics
     significantly  different  from  those of  traded  options  such as  vesting
     restrictions  and  extremely  limited  transferability.  In  addition,  the
     assumptions  used  in  option  valuation  models  are  highly   subjective,
     particularly the expected stock price  volatility of the underlying  stock.
     Because changes in these subjective input assumptions can materially affect
     the fair value estimate,  in management's  opinion,  the existing models do
     not  provide a reliable  single  measure of the fair value of its  employee
     stock options.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
     options is  amortized  over the  options'  vesting  periods.  The pro forma
     effect on net loss for the periods  presented is not  representative of the
     pro forma effect on net loss in future years  because it does not take into
     consideration pro forma  compensation  expense related to grants made prior
     to 1994. The Company's pro forma information is as follows:

<TABLE>
<CAPTION>
                                                                                 For the Period From
                                                         For the Year Ended      September 1, 1998 to      For the Year Ended
                                                         December 31, 1999       December 31, 1998         August 31, 1998
                                                        -------------------     ----------------------    ---------------------
<S>                                                           <C>                     <C>                     <C>
     Net loss, as reported                                    $9,186,746              $2,033,064              $15,785,686
     Net loss, pro forma                                      $9,565,709              $2,069,014              $16,803,346
     Basic and diluted loss per share, as reported            $     1.35              $     0.31              $      2.19
     Basic and diluted loss per share, pro forma              $     1.40              $     0.31              $      2.21
</TABLE>

     Common stock warrants issued in the periods  presented to non-employees for
     services rendered  primarily under consulting  agreements are accounted for
     based on the fair value of the consideration  received or the fair value of
     the equity instrument issued,  whichever is more reliably  measurable.  The
     following is a  description  of warrants  granted and  outstanding  and the
     assumptions utilized involving the grants in the periods presented.


                                      F-31
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

15.  Stock Based Compensation Plans, Continued

     A summary of the activity  relating to warrants as of December 31, 1999 and
     1998,  and changes  during the year ended  December 31, 1999,  and the four
     month period ended  December 31, 1998 and the year ended August 31, 1998 is
     presented below:

<TABLE>
<CAPTION>
                                                                                 For the Period From
                                                         For the Year Ended      September 1, 1998 to    For the Year Ended
                                                         December 31, 1999       December 31, 1998        August 31, 1998
                                                        -------------------     ----------------------  ---------------------
                                                                   Weighted                  Weighted               Weighted
                                                                    Average                   Average                Average
                                                                   Exercise                  Exercise                Exercise
                                                        Warrants     Price      Warrants       Price    Warrants      Price
                                                        --------   --------     ---------    --------   ----------   --------
<S>                                                      <C>        <C>         <C>           <C>       <C>           <C>
     Outstanding at beginning of period                  479,500    $3.29       479,500       $3.29     362,500       $1.66
     Granted                                                --       --            --          --       117,000        1.63
     Expired                                            (340,000)    2.00          --          --          --          --
                                                         -------                -------                 -------
     Outstanding at end of period                        139,500     6.43       479,500        3.29     479,500        3.29
                                                         =======                =======                 =======
</TABLE>

     The range of exercise  prices of warrants  outstanding at December 31, 1999
     was $4.50 to $6.67.  The weighted  average  fair value of warrants  granted
     during the year ended August 31, 1998 was $3.25.


     The following table summarizes  information about warrants  outstanding at
     December 31, 1999:

<TABLE>
<CAPTION>
                                                                                                      Estimated
                                                 Volatility            Dividend       Risk-Free         Lives
                                                   Factor                Yield     Interest Rates     (In Years)
                                                   ------                -----     --------------    -----------
<S>                                            <C>                        <C>          <C>                <C>
                  1998 warrant grants               1.032                 0%           5.20%              4
                  1997 warrant grants          1.080 to 1.184             0%           5.34%              2
</TABLE>

16.  Disclosures about Fair Values of Financial Instruments

     The  estimated  fair value  amounts  of all  financial  instruments  on the
     Company's December 31, 1999 and 1998 balance sheets have been determined by
     using available market information and appropriate valuation methodologies.
     Fair  value is  described  as the amount at which the  instrument  could be
     exchanged in a current transaction between informed willing parties,  other
     than in a forced liquidation. However, considerable judgment is necessarily
     required  in  interpreting  market data to develop  the  estimates  of fair
     value.  Accordingly,  the estimates  presented  herein are not  necessarily
     indicative  of the  amounts  that the  Company  could  realize in a current
     market exchange.  The use of different market assumptions and/or estimation
     methodologies  may have a  material  effect  on the  estimated  fair  value
     amounts.  The  Company  does  not  have  any off  balance  sheet  financial
     instruments.


                                      F-32
<PAGE>



                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

16.  Disclosures about Fair Values of Financial Instruments, Continued

     The  following  methods  and  assumptions  were  used  by  the  Company  in
     estimating fair value disclosures for financial statements:

          Cash and equivalents,  accounts receivable, cash held in escrow, other
          current assets,  accounts  payable,  current portion of notes payable,
          and  certain  other  current  liability  amounts  are  reported in the
          balance  sheet  at  approximate  fair  value  due  to the  short  term
          maturities of these instruments.

          The fair value of noncurrent notes payable is estimated by determining
          the net present value of future  payments.  The carrying amount on the
          balance  sheet  approximates  the  fair  value as the  interest  rates
          approximate  current market rates with the exception of one noncurrent
          not with a carrying amount of $810,153 and a fair value of $686,354.

17.  Loss per Common Share

     Basic and diluted loss per common share have been  computed by dividing the
     loss available to common  stockholders  by the  weighted-average  number of
     common shares for the period.  Loss available to common stockholders is the
     loss after adding to the loss any preferred  stock  dividend  requirements.
     The  additional  common  shares  that would be  issuable  for  options  and
     warrants  outstanding are ignored, as to include them in the calculation of
     diluted loss per share would be antidilutive.

     The computations of basic and diluted loss per common share are as follows:

<TABLE>
<CAPTION>
                                                                                 For the Period From
                                                        For the Year Ended      September 1, 1998 to    For the Year Ended
                                                         December 31, 1999        December 31, 1998       August 31, 1998
                                                         -----------------        -----------------       ---------------
<S>                                                           <C>                       <C>                   <C>
     Loss from continuing operations                          $1,734,717                $1,218,514            $5,838,804
          Add: dividends on preferred
             shares-declared                                        --                        --                 497,276
          Add: dividends on preferred shares
             - paid upon conversion                              216,928                      --                    --
          Add: dividends on preferred shares
             - cumulative, not declared                          671,850                   297,133               362,059
          Add: excess fair market value given
             in preferred stock conversion to
             common stock                                        609,284                      --                    --
                                                              ----------                ----------            ----------

     Loss to common shareholders                               3,232,779                 1,515,647             6,698,139
</TABLE>


                                      F-33
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

17.   Loss per Common Share, Continued

<TABLE>
<CAPTION>
                                                                                 For the Period From
                                                        For the Year Ended      September 1, 1998 to    For the Year Ended
                                                         December 31, 1999        December 31, 1998       August 31, 1998
                                                         -----------------        -----------------       ---------------
<S>                                                        <C>                    <C>                       <C>
          Loss from discontinued operations,
             including loss on disposal                    $    7,452,029         $      814,550            $    9,946,882
                                                           --------------         --------------            --------------

          Net loss available to common shareholders
                                                           $   10,684,808         $    2,330,197            $   16,645,021
                                                           ==============         ==============            ==============

          Weighted average shares - basic and
             diluted                                            7,896,229              7,737,135                 7,595,556
                                                           ==============         ==============            ==============

     Loss per Common Share -  Basic and Diluted

          Loss per share from continuing operations        $         0.41         $         0.20            $         0.88
          Loss per share from discontinued
             operations, including loss on disposal                  0.94                   0.11                      1.31
                                                           --------------         --------------            --------------
          Net loss per share available to  common
             shareholders                                  $         1.35         $         0.31            $         2.19
                                                           ==============         ==============            ==============
</TABLE>

     The effect of the  potentially  dilutive  securities  listed below were not
     included in the computation of diluted  earnings per share because to do so
     would have been antidilutive for the periods presented.

<TABLE>
<CAPTION>
                                                                                 For the Period From
                                                           For the Year Ended    September 1, 1998 to      For the Year Ended
                                                            December 31, 1999    December 31, 1998         August 31, 1998
                                                            -----------------    -----------------         ------------------
<S>                                                                <C>                 <C>                    <C>
     Shares of common stock issuable under:
        Employee stock options                                       386,850             982,883                449,084
        Warrants                                                     379,500             479,500                182,227
        Series A Convertible Preferred Stock                       1,335,960           1,345,500              1,345,500
        Series B Convertible Preferred Stock                            --               591,621                404,414
</TABLE>

     Warrants to purchase an additional 12,500 and 10,000 shares of common stock
     with  exercise  prices of $4.50 and $6.00  per  share,  respectively,  were
     outstanding  during the  periods  presented  and were not  included  in the
     computation  of diluted  earnings per share because their  exercise  prices
     were greater than the average  market  prices of the common shares for each
     of the periods presented.


                                      F-34
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

18.  Stock Transactions

     Series A Convertible Preferred Stock and Related Transactions

     During the first  quarter of the year ended  August 31,  1998,  the Company
     sold 747,500 shares of its Series A 9% Convertible Preferred Stock ("Series
     A Preferred Stock") at $10 per share. In connection with the offering,  the
     Company  granted the  underwriters  warrants to purchase  65,000  shares of
     Series A  Preferred  Stock at $12 per  share,  which  were  exercisable  in
     September 1998 and expire four years thereafter.

     The Series A Preferred Stock is convertible into the Company's common stock
     at the  option of the  holder  at any time at a price  equal to 125% of the
     common  stock  closing  price on  September  24, 1997 of $4.4375 per share,
     which represents approximately 1.8 shares of common stock for each share of
     Series A  Preferred  Stock upon  conversion.  The  Company  may convert the
     Series A Preferred  Stock to common  stock at such time as the common stock
     has traded for 20  consecutive  days at 150% of the closing  stock price on
     September  24,  1997.  In the event the  number of shares of the  Company's
     common stock is increased or decreased as a result of a stock split,  stock
     dividend, reverse stock split, or otherwise, the number of shares of common
     stock into which each share of Series A  Preferred  Stock may be  converted
     shall  concurrently  be  proportionately  increased or decreased.  Further,
     after five years,  the  Company may redeem the Series A Preferred  Stock at
     $10.00 per share.  Upon  notice by the  Company to redeem,  the  holders of
     Series A Preferred Stock will have 30 days to elect to convert their Series
     A shares to common  stock at 125% of its  closing  price on  September  24,
     1997.

     The Series A Preferred  Stock provides for a 9% annual dividend of $.90 per
     share payable quarterly.  Dividends  accumulate whether or not declared and
     must be paid prior to any dividend  distribution to the holders of Series B
     Preferred  Stock or common stock.  In any liquidation or dissolution of the
     Company,  the  holders of Series A  Preferred  Stock will be  entitled to a
     liquidation  preference  of $10 per  share  plus all  related  accumulated,
     accrued,  and  unpaid  dividends.  Further,  if the  Company  does  not pay
     dividends on the Series A Preferred  Stock for eight  cumulative  quarters,
     the  holders  of  Series A  Preferred  Stock  have the  right to elect  the
     majority of the Company's Board of Directors.  As of December 31, 1999, the
     Company had not declared  dividends  for six  consecutive  quarters,  which
     totals $1,008,234 ($5.40 per share). No dividend in April 2000 was declared
     or paid. In March 2000,  the Company  declared and paid dividends for three
     quarters, totaling $416,340 ($2.70 per share).

     Series B Convertible Preferred Stock and Related Transactions

     In December 1999, the Company  exchanged 591,621 shares of its common stock
     for Series B preferred  shares in the ratio of one and  one-half  shares of
     common stock for each share of Series B preferred  stock.  Upon conversion,
     the  cumulative  dividends in arrears of $538,459 were paid by the issuance
     of 53,846 additional shares of Series B. The terms of the Series B provided
     for  conversion  of each share of Series B into one share of common  stock.
     The value of the  enhanced  conversion  has been  used to  reduce  earnings
     available to common shareholders in determining earnings per share.


                                      F-35
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

18.  Stock Transactions, Continued

     Shares Issued Under Stock Option Plans

     During the years ended December 31, 1999 and August 31, 1998, stock options
     were exercised resulting in the purchase of 585,383 shares for $979,111 and
     31,250 shares for $62,500, respectively.

     Common Stock Issued in Exchange for Debt

     During the year ended August 31, 1998,  the Company issued 14,927 shares of
     common stock at market value in payment of debt of $70,899.

     Shares Issued for the Acquisition of TransPacific Environmental, Inc.

     During the year ended August 31, 1998, the Company issued 406,109 shares of
     common stock for the acquisition of TransPacific Environmental, Inc.

     Shares Issued in Connection with Legal Settlement

     In the year ended August 31, 1998,  the Company  issued  144,000  shares of
     stock in  connection  with a  judgment  rendered  by a court in  litigation
     brought  by  an  individual   and  the  estate  of  a  former  officer  and
     shareholder.  As a result of the judgment,  the issuance of these shares is
     recorded as settlement expense.

     Treasury Stock Repurchase Program

     The Company's Board of Directors on November 10, 1997 authorized management
     to  purchase  up to  $1,000,000  worth of its common  stock over a 12 month
     period.  As of December 31, 1999 and 1998,  the Company had  repurchased at
     market value 24,250 shares for $118,339.

     Common Shares Reserved for Future Issuance

     At December 31, 1999,  the Company has  reserved  common  shares for future
     issuance as follows:

         Stock option plans                                         606,850
         Warrants                                                   139,500
         Convertible preferred stock                              1,335,960
                                                                  ---------

                                                                  2,082,310
                                                                  =========


                                      F-36
<PAGE>

                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

19.  Business Segments

     SFAS No.  131,  Disclosure  about  Segments  of an  Enterprise  and Related
     Information,   establishes   standards  for  reporting   information  about
     operating  segments in annual  financial  statements and requires  selected
     information about operating segments in interim financial reports issued to
     stockholders. Operating segments are defined as components of an enterprise
     about which separate  financial  information is available that is evaluated
     regularly by the chief operating decision maker in deciding how to allocate
     resources and in assessing performance.

     Each of these operating  segments is considered a reportable  segment,  and
     the  accounting  policies of the  operating  segments are the same as those
     described in Note 2. The Company  evaluates the performance of its segments
     and  allocates  resources to them based on revenue and EBITDA.  The Company
     defines EBITDA as earnings before interest,  income taxes, depreciation and
     amortization, and other nonoperating income and expense.

     Certain financial information is presented below:

<TABLE>
<CAPTION>
                                             Green Waste         Waste
                                              Recycling        Transport       Other            Total
                                              ---------        ---------       -----            -----
<S>                                         <C>             <C>                           <C>
     Year ended December 31, 1999:
          Revenue                           $  2,084,098    $  5,560,809           --     $  7,644,907
          EBITDA                                (627,099)        416,576       (579,283)      (729,806)
          Assets                               1,916,002       5,444,436   $  4,275,697     11,636,135
          Depreciation and amortization          363,601         604,417         32,577      1,000,595
          Interest expense                       243,263         477,022        231,772        952,057
     Four months ended December 31, 1998:
          Revenue                           $  1,122,595    $    902,235   $       --     $  2,024,830
          EBITDA                                (503,322)         79,442       (507,565)      (931,445)
          Assets                               3,430,480       5,382,814     17,670,183     26,483,477
          Depreciation and amortization          173,533          97,173         16,419        287,125
          Interest expense                       146,688          85,166        158,516        390,370
     Year ended August 31, 1998:
          Revenue                           $  2,005,611            --     $       --     $  2,005,611
          EBITDA                                (659,595)           --             --         (659,595)
          Assets                               3,258,418            --       18,212,661     21,471,079
          Depreciation and amortization          207,963            --          108,266        316,229
          Interest expense                       198,864            --          463,025        661,889
</TABLE>

                                      F-37
<PAGE>


                             USA Biomass Corporation

                 Notes to the Consolidated Financial Statements
           For the Year Ended December 31, 1999, the Four Month Period
                          Ended December 31, 1998 and
                       For The Year Ended August 31, 1998
--------------------------------------------------------------------------------

20.  Subsequent Events

     Sale of Series C Convertible Preferred Stock

     In March 2000,  the Company issued 3,000 shares of its Series C Convertible
     Preferred stock at $1,000 per share. In conjunction with the offering,  the
     Company issued warrants to purchase  100,000 shares of the Company's common
     stock at $4.65 per share.  The  warrants may be exercised at any time until
     they expire on March 31, 2005.

     The Series C Convertible  Preferred  shares may be converted at any time at
     $4.65 per share and provide for a 6% annual dividend rate.

     A portion of the  proceeds of this  offering  was used for the  acquisition
     described  below  and  for  the  payment  of  dividends  on  the  Series  A
     Convertible  Preferred Stock. The remaining  proceeds of this offering will
     be used for working capital.

     Acquisition of American Waste Transport

     In March 2000, the Company  acquired  substantially  all of the outstanding
     shares  of  American  Waste  Transport  ("AWT")  for cash in the  amount of
     $750,000  and up to one  million  shares  of the  Company's  common  stock,
     subject to resolution of certain contingencies.  This will be accounted for
     using the purchase method.

     The following  unaudited pro forma  consolidated  results of operations are
     presented as if the acquisition of AWT had taken place at January 1, 1999.

                                                                   Year Ended
                                                               December 31, 1999
                                                               -----------------
         Revenue                                                    22,588,000
                                                                  ------------
         Net loss from continuing operations                         1,570,024
                                                                  ------------
         Net loss                                                    9,022,053
                                                                  ------------
         Net loss per share, basic and diluted                    $      (1.16)
                                                                  ------------




                                      F-38

<PAGE>


21.  UNAUDITED QUARTERLY FINANCIAL DATA

     The  following is a  reconciliation  of 1999 interim  results of operations
     which were impacted by the effect of year-end adjustments:

<TABLE>
<CAPTION>
                                                                                                                        Quarter
                                                                                                                         Ended
                                     Quarter Ended                  Quarter Ended            Quarter Ended            December 31,
                                     March 31, 1999                 June 30, 1999           September 30, 1999            1999
                             -------------   -----------   -------------   -----------  -------------   -----------   ------------
                              As reported                   As reported                  As reported
                             in Form 10QSB   As adjusted   in Form 10QSB   As adjusted  in Form 10QSB   As adjusted      Actual
                             -------------   -----------   -------------   -----------  -------------   -----------    -----------
<S>                           <C>            <C>            <C>            <C>            <C>            <C>            <C>
Revenues                      $ 2,067,000    $ 2,067,000    $ 1,837,000    $ 1,837,000    $ 1,965,000    $ 1,965,000    $ 1,776,000

Costs and expenses (1)          2,487,000      2,840,000      1,998,000      1,976,000      1,747,000      2,264,000      2,300,000
                              -----------    -----------    -----------    -----------   -----------    -----------    -----------

Net income (loss)(2)          $  (420,000)   $  (773,000)   $  (161,000)   $  (139,000)   $    20,000    $  (497,000)   $(7,778,000)
                              ===========    ===========    ===========    ===========    ===========    ===========    ===========

Net loss per common
  share, basic and
  diluted                     $     (0.08)   $     (0.13)   $     (0.05)   $     (0.05)  $     (0.03)   $     (0.09)   $     (1.08)
                              ===========    ===========    ===========    ===========   ===========    ===========    ===========
</TABLE>

(1) Costs and  expenses  increased  primarily  due to  adjustments  relating to
depreciation,  liability  insurance,  medical insurance,  impairment losses, bad
debt expenses and losses on sale of assets.

(2) The reason for the  significant  loss of $7,778,000  in the fourth  quarter,
when  compared  to  prior  quarters,  is due  to  the  recording  of  loss  from
discontinued operations of approximately $7.4 million.


                                      F-39