SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       or

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______


                                     0-21946
                        ---------------------------------
                              (Commission File No.)

                         HI-RISE RECYCLING SYSTEMS, INC.
          -------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                      FLORIDA                           65-0222933
          ------------------------------           -------------------
         (State or other jurisdiction of            (I.R.S. Employer
          incorporation or organization)           Identification No.)


 8505 N.W. 74TH AVENUE, MIAMI, FLORIDA                     33166
------------------------------------------- ------------------------------------
(Address of principal executive offices)                 (Zip Code)

                                 (305) 597-0243
             ------------------------------------------------------
               Registrant's Telephone Number, including area code

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

                          COMMON STOCK, $0.01 PAR VALUE
--------------------------------------------------------------------------------
                                (Title of Class)

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

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

The aggregate market value of the voting Common Stock held by non-affiliates of
the registrant as of April 11, 2001 was $1,194,549, computed by reference to the
closing price of the Common Stock on such date.

As of April 11, 2001, there were 16,947,355 shares of the registrant's Common
Stock outstanding.

Documents Incorporated By Reference

                                      None.

<PAGE>

         This Form 10-K contains various "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's (as defined below) expectations and beliefs concerning future events
and involve known and unknown risks and uncertainties. When used in this report,
the terms "anticipate," "believe," "estimate," "expect" and "intend" and words
or phrases of similar import, as they relate to the Company or its subsidiaries
or Company management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions related to
certain factors including, without limitation, decline in demand for the
Company's products, increases in costs of sales, inability to amend, restructure
or replace the Credit Facility under which the Company is currently in default,
failure to successfully implement certain restructuring initiatives, customer
relations, relationships with vendors, steel costs, the interest rate
environment, the inability to integrate successfully acquired operations,
one-time events, the effect of general economic conditions generally, factors
affecting the waste hauling and construction industries and other factors
described herein and in other filings made by the Company with the Securities
and Exchange Commission. These statements by their nature involve substantial
risks and uncertainties and actual events or results may vary materially from
those described herein as anticipated, believed, estimated or intended. The
Company undertakes no obligation to update, and the Company does not have a
policy of updating or revising, these forward-looking statements.

PART I.

ITEM 1.  DESCRIPTION OF BUSINESS

General

         Hi-Rise Recycling Systems, Inc. (the "Company" or "Hi-Rise") is
primarily engaged in manufacturing, distributing, marketing and selling
recycling and other solid waste handling equipment. Until February 1997, the
Company was primarily engaged in distributing, marketing and selling a
proprietary automated system known as the hi-rise system(TM) (the "Hi-Rise
System") designed to collect source-separated recyclables and other solid waste
in multi-story residential buildings. Beginning in February 1997 and continuing
through December 1999, the Company consummated a succession of acquisitions to
expand its product lines to include sheet metal fabrication products, consisting
primarily of rubbish and laundry chutes, and solid waste handling equipment
products, consisting primarily of waste containers and trash compaction systems.
In particular, during this period of time the Company consummated the following
significant acquisitions:

     o   In February 1998, the Company acquired Hesco Sales, Inc. ("Hesco"), a
         Florida corporation engaged in the business of manufacturing, marketing
         and selling solid waste handling equipment products. Hesco's product
         lines include waste containers and trash compaction systems.

     o   In October 1998, the Company acquired Bes-Pac, Inc. ("Bes-Pac"), a
         South Carolina corporation engaged in the business of manufacturing,
         marketing and selling solid waste handling equipment products.
         Bes-Pac's product lines include waste containers and trash compaction
         systems.

     o   In November 1998, the Company acquired Acme Chute Company ("Acme"), a
         Florida corporation engaged in the business of manufacturing,
         installing and servicing trash and linen chutes primarily in the South
         Florida high-rise market.

     o   In February 1999, the Company acquired DeVivo Industries, Inc.
         ("DeVivo"), a Connecticut corporation engaged in the business of
         manufacturing, marketing and selling solid waste handling equipment
         products. DeVivo's product lines include waste containers and trash
         compaction systems.

     o   In September 1999, the Company acquired certain of the assets of
         Kohlman Engineering Corp. ("Kohlman"), an Illinois corporation that
         manufactures, markets, sells and services waste compactors and trash
         chutes.

     o   In December 1999, the Company acquired American Gooseneck, Inc.
         ("American Gooseneck"), an Arizona corporation engaged in the business
         of manufacturing and distributing solid waste handling equipment.
         American Gooseneck's product lines include large industrial compacting
         systems; small and roll-off waste containers, hoists and tarps for
         truck hauling vehicles and a full line of recycling equipment.

                                      -1-
<PAGE>

         Hi-Rise has two primary Divisions, the Solid Waste Equipment Division
(the "Solid Waste Division") and the Architecturally Specified Division
("Architectural Division"). The Solid Waste Division designs, manufactures and
markets a wide variety of waste containers, compactors, balers, container
hoists, waste container tarps and other related products. The Architectural
Division designs, manufactures and sells proprietary recycling systems and
architecturally specified products such as trash and laundry chutes, as well as
products such as corner guards, kick and push plates, hold rails and bumper rail
systems, which are commonly used in waste handling environments.

         The Company anticipates that in the future the Solid Waste Division
consisting of Hesco's, Bes-Pac's, DeVivo's and American Gooseneck's product
lines will be the Company's single largest source of revenue. In addition, the
Company expects that its other principal sources of revenue will be sales of
rubbish and linen chutes, trash compaction systems and the sales of the Hi-Rise
System. Currently, approximately 82% of the Company's revenues are derived from
its Solid Waste Division and the other 18% of its revenues are derived from its
Architectural Division. For selected financial data pertaining to the Solid
Waste Division and the Architectural Division, see Note 14 to the Company's
Consolidated Financial Statements.

         Through recent acquisitions, Hi-Rise has assembled a group of companies
with established customer relationships and experience within the industry. In
the waste handling equipment sector, the Company's customer lists include top
waste hauling companies and retail names. In the architecturally specified
industry, the Company has established relationships with developers, general
contractors and architects throughout all of the major cities in which the
Company conducts business. By continuously working with its customers to develop
customized systems and equipment, Hi-Rise is able to increase the depth of its
relationships and display its expertise in the industry. To expand the
full-service aspect of its Company's business, Hi-Rise has built out its
distribution and sales force to ensure that both local and national coverage are
available.

         Hi-Rise offers a comprehensive range of products and services to the
waste handling and recycling communities. Hi-Rise is able to provide its Solid
Waste Division customers a complete range of waste and specialty containers, as
well as other products such as compactors and roll-off hoists. Hi-Rise is also
able to offer its entire customer base after-market services, such as repair and
maintenance. Hi-Rise expects the service aspect of the business to become
increasingly important. Accordingly, Hi-Rise has focused on recruiting
experienced, capable sales people who can recognize customer needs and identify
which Hi-Rise capabilities would benefit their customers most. In both the Solid
Waste and Architectural Divisions, Hi-Rise is also positioned as a "one-stop"
shop, which can provide design, installation, equipment and after-market service
capabilities.

         Through IDC Systems, Inc., a New York corporation wholly owned by the
Company ("IDC Systems"), the Company is engaged in the business of assembling,
selling, installing and servicing trash compaction systems in New York, New
Jersey and Connecticut. As of December 31, 2000, through IDC Systems, the
Company serviced on an annual basis approximately 800 compaction customers, many
of which are multi-story residential buildings that are potential customers for
the Hi-Rise System.

         The Company was incorporated in Florida in May 1990 as Recycling
Systems, Inc. and in March 1992, changed its name to Hi-Rise Recycling Systems,
Inc. The Company's executive offices are located at 8505 N.W. 74th Avenue,
Miami, Florida 33166, and its telephone number is (305) 597-0243. Unless the
context requires otherwise, all references herein to the Company include its
wholly owned subsidiaries, IDC Acquisition Sub, Inc., Wilkinson Company, Inc.,
Recycltech Limited, Acme Chute Company, Inc., Bes-Pac, Inc., Hesco Sales, Inc.,
United Truck and Body Corporation, Hesco Export Corporation, DeVivo Industries,
Inc., DII Acquisition Corp., Ecological Technologies, Inc., KE Corporation and
American Gooseneck, Inc.

Recent Developments

         Commencing in late 1999 and continuing through the current year, the
Company's business has suffered from softened demand for its products due in
large part to competition and to decreased equipment expenditures from its
largest customers. The Company has also experienced increased steel costs, which
comprise the largest material component in all of its products and more
recently, aggressive competitive pricing introduced in certain of its key Solid
Waste Division markets. These factors coupled with the recent opening of new
production facilities, expansion of existing facilities, the introduction of new
product lines and the re-designing and shifting of production among its
manufacturing facilities have all contributed to plant and labor manufacturing
inefficiencies and a significant deterioration in operating margins. This has
resulted in substantial losses, the continued use of cash in


                                      -2-
<PAGE>

operations and defaults under the Company's Credit Facility with GECC
(referenced below) under both its borrowings base eligibility and other
financial covenants. This situation, coupled with the task of integrating all of
the Company's acquisitions, has led to a number of recent management initiatives
including review of the manufacturing process and staffing levels at all
locations and an extensive review of the Company's balance sheet with a focus on
inventory and receivables.

         In response to this situation, the Board of Directors engaged Grisanti,
Galef, and Goldress, Inc. ("GGG") on October 16, 2000. GGG is a corporate
performance consulting firm with experience in providing interim leadership to
under-performing companies. The initial engagement involved an assessment of the
Company's operations and of the recent operating and manufacturing initiatives
in order to make preliminary recommendations for future operating strategies.
Based upon these recommendations, the Board of Directors determined to further
retain GGG in November 2000.

         Dr. James Ashton, a GGG partner, assumed responsibility for the
operational management of the Company. Donald Engel, Chairman of the Board and
Chief Executive Officer ("CEO") requested that the Board of Directors delegate
his CEO responsibilities to Dr. Ashton. Dr. Ashton appointed Mel Johnson as
Chief Operating Officer of the Solid Waste Division, Michael Bracken, an
employee of the Company, as acting Chief Operating Officer of the Architectural
Division and Ron Miller as financial management consultant to Kevin Bartczak,
Chief Financial Officer of the Company.

         The GGG team commenced significant restructuring initiatives, including
the reorganization of the Company's Architectural Division and Solid Waste
Division into two completely separate operating units. Major changes within the
two business units are also being implemented, including changes in operating
and reporting responsibilities, manufacturing and distribution processes,
inventory production strategies and credit and collection policies. In addition,
these initiatives have included personnel terminations, responsibility changes,
the closure of manufacturing locations, and the discontinuance of certain
products and service offerings. The GGG team has recently completed an operating
and financial plan which contemplates future improvements in financial and
operating results as the operating and manufacturing philosophies broadly
described above are implemented.

         The Company has a credit facility (the "Credit Facility") under the
terms of a credit agreement (the "Credit Agreement") with General Electric
Capital Corporation ("GECC") as administrative agent, and other lenders from
time to time, as they become party thereto. The Company is currently in default
under both its borrowing eligibility and other financial covenants set forth in
the Credit Agreement. GECC and the other lenders have declared all amounts
outstanding, together with accrued interest, to be immediately due and payable.
Throughout 2000, the Company entered into four amendments with respect to the
Credit Agreement. These amendments had the effect of increasing the Credit
Facility first to $63 million and later, notwithstanding the above defaults, to
increase amounts available under the Credit Facility by an aggregate of $5.5
million by obtaining from GECC an additional subordinated term loan which
matured on February 15, 2001. The amendments to the Credit Agreement also
allowed for overline advances in the aggregate amount of $500,000
notwithstanding the fact that the Company had already drawn more funds than it
was permitted based upon its current collateral levels. Furthermore, as part of
the $5.5 million term loan provided by GECC, the Company issued warrants to GECC
to purchase an aggregate of 17,382,053 shares of the Company's common stock, par
value $.01 (the "Common Stock"), at a price of $.01 per share. The Company is
continuing its discussions with GECC and the other lenders to restructure its
existing Credit Facility and secure additional working capital.

         Although management believes that the recently introduced changes will
continue to reduce inventory levels, production and overall operating costs,
previously described manufacturing inefficiencies, continued softness in product
demand, coupled with severe cash flow constraints experienced prior to the
December amendment, continue to negatively impact the Company's operations.

         In addition, Donald Engel, the Company's Chairman of the Board and
Chief Executive Officer, indicated to the Company his intention to resign from
all offices and positions he currently holds with the Company and each of its
subsidiaries. Also, on April 17, 2001, Gary McAlpin, the Company's former
President and Chief Operating Officer, resigned from all offices and positions
he held with the Company and each of its subsidiaries.


                                      -3-
<PAGE>

         For a more detailed discussion regarding the Recent Developments
described above, see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Solid Waste Division

         The Solid Waste Division offers a diversified line of products and
systems including: 1) a variety of metal containers used for the collection of
waste material and recyclables; 2) balers and compactors used for the processing
of waste materials; and 3) intermodal and roll-off containers, transfer
trailers, roll-off hoists, tarps, vacuum units and other specialized equipment
used for the collection and transportation of solid, liquid and low risk
hazardous waste materials. Waste containers are available in a number of sizes
and are primarily constructed from heavy duty steel.

         In addition to waste containers, the Solid Waste Division also sells
trash compaction systems, balers and hoppers, and specialized equipment for use
with waste handling trucks. The Solid Waste Division also manufactures trash
compaction systems that are available in a number of models designed primarily
for use in multi-story buildings and commercial establishments. During the years
ended December 31, 2000, 1999 and 1998, sales of products by the Solid Waste
Division accounted for approximately 82%, 76% and 59%, respectively, of the
Company's revenues. At December 31, 2000, 1999 and 1998, the Solid Waste
Division had a backlog of approximately $1.2 million, $2.7 million and $1.2
million, respectively.

Architectural Products

         Wilkinson sells, manufactures, markets and installs sheet metal
fabrication products, consisting primarily of laundry and rubbish chutes, as
well as construction products such as corner guards, kick and push plates,
handrails and bumper rail systems. Wilkinson also offers a line of recycling
bins. Wilkinson's laundry and rubbish chutes are available with various types of
doors, including a door integrated with the Hi-Rise System control panel, and
are custom designed to meet a building's specifications. Construction products
and recycling bins are generally available either custom designed or from stock.
In addition, Wilkinson provides other sheet metal fabrication products
consisting of components custom designed to its customers' specifications, which
are utilized by its customers in the manufacture of their products. Wilkinson
also sells replacement parts for its principal products.

         During the years ended December 31, 2000, 1999 and 1998, sales of
Wilkinson's products accounted for approximately 7%, 9% and 16%, respectively,
of the Company's revenues.

         IDC Systems offers a line of trash compaction systems designed
primarily for use in multi-story buildings. IDC Systems' product line includes
six principal models. During the years ended December 31, 2000, 1999 and 1998,
sales of trash compaction systems accounted for approximately 4%, 5% and 7%,
respectively, of the Company's revenues.

         Acme manufactures, markets, sells and installs sheet metal fabrication
products in Florida consisting primarily of trash and laundry chutes and storage
lockers. During the years, ended December 31, 2000, 1999 and 1998, sales of
Acme's products accounted for approximately 4%, 4% and less than 1%,
respectively, of the Company's revenues.

The Hi-Rise Recycling System(TM)

         The Company's Hi-Rise System, which is marketed under the Hi-Rise
Recycling System(TM) name, is easily adapted to and takes advantage of the
efficiency and convenience of a multi-story building's existing waste disposal
chute or is designed into newly constructed buildings, permitting residents to
conveniently dispose of, without commingling, a variety of recyclable waste
including glass, metal, newspaper and plastic, plus garbage. The Hi-Rise System
consists of six waste collection and storage bins, one for each recyclable and
one for garbage, which rest on a carousel located at the bottom of the
building's waste disposal chute, and electronic panels installed near the
disposal chute's door on each floor. When activated by a resident, the control
panel electronically rotates the carousel to position the selected collection
bin under the disposal chute, in turn, to receive up to five categories of
recyclables and garbage for storage and collection. Presently, there are two
models of the carousel system, the "rollaway bin" model and the bagger model.
The rollaway bin model collects the garbage and recyclables in rollaway bin
containers that rest on the carousel and can be rolled off the carousel when
full and replaced by an


                                      -4-
<PAGE>

empty one. For those buildings where rollaway containers are not practical, the
Company has designed the bagger model. The bagger model collects the garbage and
recyclables in disposable bags that are located in round collection bins that
rest on the carousel. The bags can be removed from the bins to be placed at
curbside for collection. Both models are equipped with an automatic garbage
compactor.

         The Company also manufactures the hi-rise trisorter system (the
"Hi-Rise Trisorter System"), an alternate version of the Hi-Rise System. The
Hi-Rise Trisorter System combines the Hi-Rise System floor panels with a chute
extension that directs waste into one of three separate bins for garbage, paper
or commingled recyclables, instead of the six section carousel. The Company
developed the Hi-Rise Trisorter System, which requires less space than the
original version of the Hi-Rise System, for the existing building market.

         By providing for source separation and collection from each floor, the
Hi-Rise System eliminates the cost, inconvenience and potential health and fire
hazards associated with manually transporting solid waste in elevators and
stairwells to a central storage area on the ground floor or basement. The
Hi-Rise System is intended to promote recycling and enable multi-story building
owners and residents to efficiently source-separate and divert recyclable waste
from landfills, while reducing the time, labor and hauling expenses normally
associated with solid waste disposal. The Company designed the Hi-Rise System in
response to perceived market opportunities arising out of increasing state and
local environmental regulation mandating or encouraging recycling.

         The price of the Hi-Rise System currently ranges from $50,000 to
$120,000 depending upon the number of floors in a multi-story building. The
number of systems installed in a building depends on the number of garbage
chutes in the building. During the years ended December 31, 2000, 1999 and 1998,
sales and sales-type leases of Hi-Rise Systems accounted for approximately 4%,
9% and 23%, respectively, of the Company's revenues. The Company anticipates
that, in the future, sales and sales-type leases of the Hi-Rise System will
continue to constitute a decreasing percentage of its revenues.

         To date, the Company has installed 310 Hi-Rise Systems, of which 45
were sold and 265 were leased or rented. In connection with sales-type leases of
the Hi-Rise System, the Company previously entered into shared savings
agreements with building owners, pursuant to which the Company managed a
building's solid waste disposal and received a percentage of the building
owner's shared savings realized as a result of reduced waste disposal costs.
These agreements were sold on a non-recourse basis in February 1998 and the
Company has ceased offering shared savings arrangements.

Marketing and Sales

         The Solid Waste Division currently has 13 regional sales people located
throughout the east coast, southeast and southwest. In addition, 2 national
sales people focus on training, the end user market and sales management. The
Division also currently employs 7 sales support staff who process phone orders
and repair and maintenance requests. Sales people are paid a base salary and
also earn a commission based on sales margins of the products they sell. The
Solid Waste Division's goal is to utilize its marketing and sales force to
market on both a national and local basis, while retaining flexibility to meet
local delivery needs.

         Hesco, Bes-Pac, DeVivo and American Gooseneck market their products to
waste haulers, municipalities and residential customers throughout the east and
west coasts of the United States. Hesco solicits a significant portion of its
sales through participation in municipal bids and is listed on the Florida
Statewide Vendor List. Hesco's, Bes-Pac's and DeVivo's marketing efforts include
monitoring trade journals and other industry sources for bid solicitations by
various entities including government authorities and related instrumentalities,
and responding to such bid solicitations. Typically, a bidder submits a proposal
detailing its qualifications, the products to be provided and the cost of the
products to the soliciting entity which then, based upon its evaluation of the
proposals submitted, awards the order to the successful bidder.

         While many of the Solid Waste Division's customers have a national
presence, the requisition of waste handling equipment is often handled on a
regional basis. The Company believes that retaining both national and local
sales personnel provides a competitive advantage in marketing and meeting the
needs of national customers who have large waste handling equipment
requirements.


                                      -5-
<PAGE>

         Through a series of acquisitions, the Architectural Division has
assembled a core group of companies that offers a complete array of products and
services for recycling systems. The Architectural Division's goal is to design,
manufacture and install waste management systems and provide after-market
services, such as maintenance and repair. The Architectural Division has the
capability to design waste management systems and equipment for specific needs
and custom applications for a wide variety of industries. This is illustrated by
the Architectural Division's range of projects, which include residential
buildings, sports arenas/forums and hotels. The Architectural Division works
with each of its customers to design waste management systems which meet
specific requirements, tailoring standard products to produce a customized
result. Once the system is designed, Hi-Rise provides installation, education
and after-market service.

         Products such as the Recycling Ready Compactor (built to easily
accommodate recycling capabilities at a later date) and the American Disability
Act ("ADA") Doors (a chute door which opens automatically) were developed by the
Company to target certain markets and requirements. Using a fairly standard
model, engineers can change specifications to meet customer needs, yielding a
cost-efficient, customized product. Installation and education are also provided
to the customer, as well as follow-on repair and maintenance as needed. The
Architectural Division's service staff is cross-trained for a number of tasks
such as installation, service and general product knowledge. Using this
experience, these representatives can recommend waste management solutions to
customers on a quick, responsive basis.

         The Architectural Division has focused on increasing the sale of higher
margin products such as apartment style compactors and parts, ADA Doors, as well
as after-market services. Many of these higher margin products were designed by
the Company in response to the requirements of a specific customer. Once
developed, the Architectural Division is able to offer these enhanced products
to the Company's entire customer base. By providing customers with after-market
services such as maintenance and repair, the Company is able to secure revenues
from both the sale of these services, as well as the sale of replacement parts
and equipment.

         The Company also emphasizes the sale of other complementary
architecturally specified products, such as metal fabrications commonly used in
waste handling and other building environments.

         The Architectural Division will continue to focus on markets with high
population densities and a high concentration of multi-story buildings that have
strong new construction and renovation activity. The Architectural Division will
continue to build on established relationships with developers, general
contractors and architects. The Architectural Division has aggressively sought
out the retrofit market in select markets such as the New York City metropolitan
area, and in other markets such as Miami, Toronto and Chicago for the sale of
recycling systems. The return on investment for retrofit multi-story dwelling
with a Hi-Rise Recycling System can be as little as one year, making it a
profitable investment for Hi-Rise's customers. Additionally, many cities offer
tax credits for retrofits, which increases the attractiveness of retrofitting to
building owners.

         To further penetrate existing markets, the Architectural Division plans
to increase recycling awareness through an education program disseminated
through current relationships with contractors and developers, participation in
trade shows and architectural seminars. The Company's extensive product line and
expanding service capabilities has increased the Division's ability to increase
revenues for its current markets.

         The Company's marketing efforts with respect to the Hi-Rise System are
focused in geographic markets in which the Hi-Rise System is believed to have
potential for significant market penetration. The Company believes that certain
geographic markets are likely to achieve greater system penetration based on a
number of factors, principal among which is the existence of mandatory recycling
legislation with penalties for non-compliance. The Company has identified
potential geographic markets by evaluating, among other things, the existence of
proposed legislation mandating recycling; high or increasing landfill and
incinerator disposal fees which result in high monthly hauling fees to building
owners; and high concentrations of mid-rise and high-rise buildings in
serviceable geographic areas. Based on this evaluation, the Company is currently
focusing its efforts primarily in South Florida and West Florida and
metropolitan areas such as New York City and Toronto, Canada. In addition, the
Company has expanded its operations into new geographic markets beginning in
markets in which the Hi-Rise System is likely to achieve market penetration,
such as Boston, Massachusetts and Washington, D.C., as well as Chicago,
Illinois. Of the 310 systems installed to date, 294 have been installed in
multi-story residential buildings (including 291 in new residential construction
and 3 in a mixed-use historic rehabilitation) and 16 have been sold to private
waste hauling companies, which have remarketed the system to residential
building owners.


                                      -6-
<PAGE>

         The Company engages an independent sales force and independent
distributors in various regions throughout the United States, for marketing the
Hi-Rise System, Wilkinson's sheet metal fabrication products and IDC System's
trash compaction systems to multi-story building owners, architects, building
contractors and waste hauling companies. Although the Company continues to sell
Hi-Rise Systems through independent distributors, the Company has increased its
emphasis on sales of Hi-Rise Systems through its direct sales force. Direct
salespeople have a close relationship with customers and have a genuine interest
in ensuring customers are satisfied. Currently, the Company maintains direct
sales representatives in South Florida, New York, Toronto, Chicago, Cleveland
and Southern California. In the future, the Company will focus on expanding the
direct sales force in Southern California and Washington D.C. Direct sales allow
the Division to concentrate on increasing service revenues, such as the
after-market repair, maintenance and parts business. Service and replacement
part sales generate higher margins and provide an important competitive
advantage in the industry. The Architectural Division currently has
approximately 7 sales people located throughout North America. The Company has a
network of approximately 32 domestic and 3 international distributors. The
Company generally has contractual arrangements with its distributors pursuant to
which the distributor is granted the exclusive right to market the Company's
products in the specified territory. The distributor typically is not required
to meet sales quotas to maintain its relationship with the Company. Most of the
Company's distributors purchase the Company's products for resale to their
customers. Since the consummation of the Wilkinson Acquisition, the Company has
commenced marketing the Company's IDC Systems' trash compaction systems under
the "Wilkinson" name. In addition, as a result of the Wilkinson and Acme
Acquisitions, the Company is able to offer a fully integrated wasted disposal
system for multi-story buildings consisting of the Hi-Rise System, waste
disposal chute and trash compaction system. The Company believes that by
utilizing its distributor network to offer a fully integrated waste disposal
system, it will be able to penetrate further the new construction market.

Lease Programs

         In addition to sales of Hi-Rise Systems, the Company seeks to enter
into favorable long-term sales-type lease agreements with building owners
providing for a fixed monthly rental, renewal options and a fair market value
purchase option at the end of the lease term. The Company also seeks to enter
into capital leases, for a term of seven years, with building owners providing
for monthly principal and interest payments to be applied towards the cost of
the Hi-Rise System. At the end of the lease, the building owner may purchase the
system for nominal consideration. Of the 310 Hi-Rise Systems installed to date,
265 have been installed pursuant to lease agreements.

Manufacturing and Supply

         Containers are manufactured in the Easley, South Carolina; Conover,
North Carolina; Miami, Florida; Phoenix, Arizona; Newtown, Connecticut; and New
Albany, Mississippi facilities. Due to the large size and heavy weight of
containers, transportation costs are significant. The Company considers the
maximum economical shipping radius for containers to be approximately 300 to 500
miles. Accordingly, containers are manufactured regionally. All of the Company's
container manufacturing facilities are located near heavily populated areas.

         From the Company's Miami, Florida facility, Hi-Rise can effectively
market containers in Florida and the Southeast region of the United States. The
Newtown, Connecticut facility allows the Company to effectively reach the
Northeast region. The Easley, South Carolina and Conover, North Carolina
locations allow the Company to effectively reach the South and Mid Atlantic
regions. The Phoenix, Arizona facility allows the Company to market containers
throughout the Southwest region of the United States from El Paso, Texas to San
Diego, California. The New Albany, Mississippi facility allows the Company to
market to the Mideast Region.

         The manufacturing process for containers consists primarily of
purchasing, cutting the metal to length, forming, welding, assembly and
painting. The majority of paint used is water based, which minimizes
environmental issues.

         The Company has centralized the manufacture and assembly of waste
handling equipment components, such as power packs and hydraulic assemblies used
in compactors, at the Miami and South Carolina facilities. These higher value
assemblies are then shipped to the Company's other regional manufacturing
facilities for final installation into waste handling equipment. The housings
for compactors and balers are typically manufactured regionally due to
transportation costs. Aside from the assembly of power and hydraulic components,
the manufacture of compactors and balers is similar to that of containers.


                                      -7-
<PAGE>

         The Company manufactures hoists and tarp systems at its facilities in
Miami. These systems require more engineering and are produced in lower volumes
so as to necessitate a more centralized approach to manufacturing.

         The principal materials used in the manufacture of the Solid Waste
Division's products are steel, paint and plastic. Steel represents approximately
45% of the Solid Waste Division's direct costs, paint 7% and plastic lids 6%.
Hi-Rise currently has several sources for its raw material requirements and
believes that other sources are available. In addition, the Company obtains
mechanical and electrical components, such as sprockets, hydraulic cylinders,
motors, gear boxes, and electrical relays and contacts from third party
manufacturers.

         Purchase orders for Hesco's, Bes-Pac's, DeVivo's and American
Gooseneck's waste containers, lids, roll-off hoists and tarps are generally
manufactured and delivered promptly. Trash compaction systems are manufactured
to the customer's order. The period of time required to fill an order for a
trash compaction system ranges from one to four weeks. As a result, the sales
cycle for the Solid Waste Division products may range from one day to two months
depending on the type of product and available inventory.

         The Company manufactures the Hi-Rise Trisorter System, its sheet metal
fabrication products, including trash and linen chutes, and trash compaction
systems at its facility in Stow, Ohio. The Company engages in limited assembly
operations of the Hi-Rise System at its Miami, Florida facilities. The Company
obtains certain of its component parts, including carousels, rollaway waste
collection bins and most of the components of the electronic control panel and
"controller" incorporated into the Hi-Rise System, and to a lesser extent
certain components of its trash compaction systems, from third-party
manufacturers. For the years ended December 31, 2000, 1999 and 1998,
substantially all of the Company's carousel requirements were purchased from
Best Designs, Inc.

         The Company's manufacturing process for chutes consists primarily of
purchasing, cutting the steel to length, forming, welding, assembly and then
packaging for shipment. Quality control is performed during the welding process.
The principal materials used in manufacturing are stainless steel and aluminized
steel rolls. The Company has begun configuring the facility to allocate space
for new manufacturing. Certain of the Company's existing equipment may be used
for manufacturing of the Company's other products and the Company intends to
purchase additional equipment for this purpose.

         The Company's Hi-Rise System assembly operations involve the
certification of each system component, assembly of the system's electronic
control panels, a series of quality specification measurements, and various
other physical and visual tests to certify final performance specifications. The
Company's sales cycle, which in the case of leases commences at the time a
prospective customer demonstrates to the Company an interest in leasing a
Hi-Rise System and ends upon completion of installation of such system, at which
time the Company recognizes revenue, typically ranges from six to eighteen
months. The Company also sells certain units under contracts providing for
progress payments made throughout the production of the system. In these limited
cases, revenue is recognized on the percentage of completion method. The period
from the execution of a purchase order or lease or rental agreement until
delivery of system components to the Company, assembly, shipment and completion
of installation of such system typically ranges from one to two months in the
case of existing buildings and from six to eighteen months in the case of new
building construction. In the case of sales to distributors, the Company's sales
cycle typically ranges from two to four months, commences at the time a
prospective customer expresses an interest in purchasing a Hi-Rise System and
ends upon shipment of the system to the distributor, at which time the Company
recognizes revenue. By contrast, the Company may fill purchase orders within
seven days of receipt when delivered out of inventory. These orders are
primarily orders for spare parts. The Company generally fills orders shortly
after receipt, except in the case of new building construction where delays in
installation may occur at the building owner's request as a result of its
construction schedule. At December 31, 2000, 1999 and 1998, the Architectural
Division had a backlog of approximately $6.6 million, $9.2 million and $10.1
million, respectively, relating primarily to installations of Hi-Rise Systems in
new buildings and contracted compactor orders. The Company believes that its
present inventory level, together with readily available components and
supplies, is sufficient to satisfy the current backlog.

         The minimum period of time required by the Company to fill an order for
its custom-designed Wilkinson products generally ranges from two to four weeks
from its receipt of approved drawings. However, its sales cycle typically
depends on the building's construction schedule. As a result, the sales cycle
for the Company's Wilkinson products may range from six months to 18 months.


                                      -8-
<PAGE>

         The Company currently has alternative sources for materials and
components used by each of its divisions and believes that additional
alternative sources are available. The Company is substantially dependent on the
ability of its suppliers and manufacturers, among other things, to satisfy
performance and quality specifications and dedicate sufficient production
capacity for components within scheduled delivery times. Through Wilkinson, the
Company generally purchases its steel requirements pursuant to blanket-type
purchase arrangements pursuant to which prices are established for a specified
period. With the exception of Wilkinson, the Company does not maintain supply
contracts with any of its suppliers or manufacturers and purchases materials and
components pursuant to purchase orders placed from time to time in the ordinary
course of business. Failure or delay by the Company's suppliers or manufacturers
in supplying necessary materials or components to the Company would adversely
affect the Company's ability to obtain and deliver products on a timely and
competitive basis.

Customers

         The customers for the Solid Waste Divisions' waste containers consist
principally of waste haulers and municipalities throughout the east and west
coasts of the United States. The Company markets the Solid Waste Divisions'
trash compaction systems primarily to multi-story buildings and commercial
establishments. The Solid Waste Division typically enters into blanket sales
orders with its municipal customers and certain waste haulers pursuant to which
it agrees to sell its products to the customer at prices, which are fixed for a
specified period of time. For fiscal year 2000, no one customer accounted for
more than 14% of the Solid Waste Division's revenues.

         The Company has historically marketed the Hi-Rise System for use in
existing and newly-constructed residential buildings. Hi-Rise believes that
other potential customers include waste recycling companies, municipal waste
haulers, hospitals, universities, hotels and government buildings. Specific
markets such as the retrofit sector have been a recent focus for the
Architectural Division, as most cities offer tax credits for retrofit recycling
projects. In addition, the cost savings associated with the installation of a
recycling system can result in a pay back period of one year.

         A substantial portion of customers for the Architectural Division's
products consists of developers, architects and general contractors who require
the Company's products in building construction. These customers generally
utilize these products in construction of residential buildings, hotels,
hospitals and other commercial buildings. Recent projects in which the Company
has been involved in the design, installation and supply of waste handling
systems include the American Airlines Stadium in Miami, Florida; the Banc One
Ballpark in Phoenix, Arizona; and the refurbishment of the 42nd street area in
New York City in co-operation with the Millennium Development Company. The
Architectural Division has increasingly focused on providing additional service
and maintenance to its customers, from specific design capabilities to
after-market support, such as repair and maintenance. For fiscal years 2000 and
1999, no one customer accounted for more than 3% and 2%, respectively, of the
Architectural Division's revenues.

         A substantial portion of customers for Wilkinson's products consists of
architects and building contractors who specify its products in building
construction. These customers generally utilize these products in construction
of residential buildings, hotels and hospitals. The Company believes that the
Wilkinson acquisition has enhanced its ability to penetrate the new construction
market.

         To date, the Company has marketed the Hi-Rise System primarily to
existing and newly constructed residential buildings. Since 1995, the Company
has focused on the new construction residential building market. The new
construction market in South Florida was a large source of orders for the
Hi-Rise System during the years ended December 31, 2000 and 1999. The Company
plans to market the Hi-Rise System beyond the residential building market to
owners of existing commercial buildings with waste disposal chutes and newly
constructed or renovated commercial multi-story buildings. The Company believes
that other potential customers include waste recycling companies, municipal
waste haulers, hospitals, universities, hotels and government buildings.

         In fiscal years 2000 and 1999 no one customer accounted for more than
12% and 13%, respectively, of the Company's total revenues, and the top ten
customers represented less than 33% and 35%, respectively, of total revenues.
However, approximately 27% and 37%, respectively, of the total revenues were
from the Company's Florida-based subsidiaries.


                                      -9-
<PAGE>

Installation, Service and Monitoring of the Hi-Rise System

         The Hi-Rise System can be easily installed with virtually no structural
changes to buildings or to disposal chutes in existing buildings, and can be
easily designed into new buildings. Installation generally takes one to four
days and consists of installing the carousel, collection bins and "controller"
in the basement and installing and wiring electronic control panels near
disposal chute doors on each floor. The Company performs diagnostic tests and
procedures to determine whether the installed system meets system
specifications. The Company currently has 17 employees providing installation
services, not including the 9 service and installation personnel available in
New York.

         The Company's personnel provide on-site training to building staff in
the use of the Hi-Rise System. The Company provides training for both the
operation and use of the hardware components of the system and execution of all
applications of the software. Purchase of the system includes provision by the
Company of a complete installation, operation, service and safety manual in
addition to technical training, which is tailored to the needs of the building
management and other personnel. Education is made available to the building
manager, maintenance staff and waste hauler, typically during a two to four week
curriculum. In addition, prior to the installation of the Hi-Rise System in a
building, the Company institutes an educational program for residents and
provides educational materials, including instructional videos, to building
residents in order to encourage source-separation and proper use of the system.
Building management and residents are encouraged to maintain a high level of
recycling and conduct on-going source-separation surveys. When the Hi-Rise
System is activated by a resident, the control panel automatically "locks-out"
all other chute doors to prevent other residents from disposing of a different
recyclable or garbage. Nevertheless, there are no safeguards to prevent improper
disposal by the resident utilizing the system. Accordingly, the success of the
Hi-Rise System is dependent upon the cooperation of the building's residents.
However, based on its experience, the Company believes that it is unlikely that
a resident will misuse the system, inasmuch as the control panel must be
activated for disposal. Moreover, a resident not inclined to participate in the
building's recycling program may simply push the garbage button for disposal of
all his trash. The Company currently has one employee providing training and
educational services.

         In connection with Hi-Rise System sales, the Company offers a limited
warranty period of six months in the case of retrofit buildings, or one year in
the case of new buildings, covering workmanship and materials, during which
period the Company or its authorized service representative will make repairs
and replace parts which become defective due to normal use. Pursuant to
maintenance and service contracts, the Company will make repairs during business
hours according to a specified period commencing upon the expiration of the
warranty for a monthly fee. The Company employs 17 persons who are engaged in
system maintenance and service (including installation), excluding 9 service
representatives employed by IDC Systems. These 26 are trained to install and
service both compactors and the Hi-Rise System. Other than buildings which have
entered into lease agreements with the Company, to date, 24 buildings
(containing 47 systems) have entered into service contracts with the Company.
Revenues from these service contracts are not material. The Company also
provides basic warranty services over the life of the equipment under certain of
its long term lease arrangements.

         As with the Hi-Rise System, IDC Systems' trash compaction systems can
be easily installed into existing buildings or new buildings. Installation
normally takes one to two days and consists of installing the compaction unit in
the basement or first floor of the building. IDC Systems currently has 9
employees providing service and installation services.

         In connection with sales of the Solid Waste Divisions' products, each
of Hesco, Bes-Pac, DeVivo and American Gooseneck typically offers a one-year
limited warranty covering workmanship and materials, during which time it will
repair or replace products or parts which become defective due to normal use.

         In connection with sales of trash compaction units, IDC Systems offers
a one-year limited warranty covering workmanship and materials, during which
time IDC Systems will make repairs and replace parts, which become defective due
to normal use. In addition, IDC Systems attempts to enter into a maintenance and
service contract with the building regarding the compaction system. Pursuant to
such service contracts, for a monthly fee, IDC Systems will make repairs and
generally maintain the compaction system for a one-year period, commencing upon
the expiration of the warranty period. In the event a building determines not to
enter into a maintenance and service agreement with IDC Systems regarding a
compaction system, IDC Systems will service the system as requested by the
building for a maintenance fee related to time and material costs of IDC
Systems.


                                      -10-
<PAGE>

         Wilkinson performs installation services if requested by the customer.
In connection with sales of sheet metal fabrication products, Wilkinson
typically offers a one-year limited warranty covering workmanship and materials,
during which time Wilkinson will make repairs and replace parts, which become
defective due to normal use.

Product Development

         Hi-Rise's product development efforts are focused on enhancing and
refining its products to satisfy individual and industry requirements. Product
development expenditures are expensed as incurred. The Company's product
development efforts are focused on enhancing and refining the Hi-Rise System and
on adapting the system to satisfy individual and industry requirements. For the
years ended December 31, 2000 and 1999, product development expenditures by the
Company were less than $75,000 in each year and were expensed as incurred. The
Company intends to continue to engage in ongoing system refinement and
enhancement efforts, including development of a diverter model that enables the
system to accommodate larger buildings with the Hi-Rise System and a separate
compactor. The system also has modem capabilities to interface via telephone
communication lines with waste hauling companies and other industry
participants. The Company believes that the potential ability of the system to
alert waste hauling and recycling companies when collection bins reach capacity
will facilitate community recycling programs and improve the efficiency of
recyclable solid waste collection and disposal.

Competition

         The Company faces intense competition in the solid waste handling
equipment industry. Certain of the Company's competitors offer as wide a range
of products, have greater market share and financial, marketing, manufacturing
and other resources than the Company. Hesco, Bes-Pac, DeVivo and American
Gooseneck compete with a number of national and regional manufacturers and
distributors of solid waste handling equipment, including Marathon, McClain/EZ
Pack and Waste Quip. The Company believes that several of its competitors have
added or are in the process of adding additional manufacturing capacity, which
could reduce order backlogs and price levels, and consequently adversely affect
the Company. Moreover, the absence of highly sophisticated technology results in
a number of small regional companies entering the container product business
periodically and competing with the Company.

         Although the Company believes that its products are superior to those
of most of its competitors because of the quality of these products, consumers
generally find the products relatively interchangeable. Consequently, price,
product availability and delivery, design and manufacturing quality and service
are the principal means of competition. The Company believes that it can
continue to compete and further strengthen its competitive position through
proper pricing, marketing and cost-effective distribution of the Company's
products.

         The Company is aware of a number of companies that offer trash
compaction systems substantially similar to those sold by the Company. Through
Wilkinson and Acme, the Company competes with certain regional manufacturers of
chutes and other sheet metal fabrication products. In addition, there are
numerous companies involved in the waste management industry, including waste
hauling companies and other companies engaged in waste separation, recovery and
recycling, which may have the expertise and resources that would encourage them
to attempt to develop and market products which would compete with the Hi-Rise
System or render the system obsolete or less marketable. The Company's Hi-Rise
System currently competes with other methods for separating and collecting
recyclables and waste disposal. The Company believes that the alternatives
offered by its competitors are less desirable than the Hi-Rise System because
they are more expensive and may result in risks such as fire and vermin from the
storage of recyclables on each floor of the building until collection and in
health hazards to the building's maintenance personnel associated with
floor-to-floor collection and transportation of recyclables.

Patents and Proprietary Information

         Through Hesco, the Company holds a United States patent covering its
hydraulic tarp mechanism, which expires in 2008. Additionally, the Company has a
United States patent pending covering a compactor assembly for


                                      -11-
<PAGE>

use with recycling bins, which if issued, would expire in 2017. Through DeVivo,
the Company holds two patents relating to the locking mechanisms on DeVivo's
front and side loading waste containers. Both of these patents expire in 2014.
Additionally, DeVivo has a patent pending relating to a specialized waste
container for certain liquid wastes. Through Wilkinson, the Company holds United
States patents covering certain recycling bins, which expire at various dates
from 2009 through 2010, and has applications pending for additional patents. The
Company holds United States, Canadian and European Community patents, which
cover a system of separating waste in multi-story buildings with a chute system.
The Company's United States, Canadian and European Community patents expire in
2008, 2013 and 2016, respectively. Functionally equivalent waste collection and
source-separation systems, which may not be covered by the Company's patents,
may be currently in commercial distribution by the Company's competitors. The
Company has applied for patents in Japan and Korea, similar or identical to its
United States and Canadian patents.

         The Company believes that patent protection is important to its
business. There can be no assurance, however, as to the breadth or degree of
protection which existing or future patents, if any, may afford the Company,
that any unissued patent applications will result in issued patents or that
patents will not be circumvented or invalidated. Although the Company believes
that its patents and products do not and will not infringe patents or violate
proprietary rights of others, it is possible that its existing patent rights may
not be valid or that infringement of existing or future patents or proprietary
rights may occur. In the event the Company's products infringe patents or
proprietary rights of others, the Company may be required to modify the design
of its products or obtain a license. Moreover, if one or more of the Company's
products infringes patents or proprietary rights of others, the Company could,
under certain circumstances, become liable for damages, which could have a
material adverse effect on the Company.

         The Company also relies on trade secrets and proprietary know-how and
employs various methods to protect the concepts, ideas and documentation of its
proprietary information. However, such methods may not afford complete
protection and there can be no assurance that others will not independently
develop such know-how or obtain access to the Company's know-how, concepts,
ideas and documentation. Although the Company has and expects to have
confidentiality agreements with its employees and appropriate vendors, there can
be no assurance that such arrangements will adequately protect the Company's
trade secrets. As the Company believes that its proprietary information is
important to its business, failure to protect such information could have a
material adverse effect on the Company.

Employees

         At December 31, 2000, Hi-Rise employed approximately 561 persons, of
which 12 were in executive positions, 35 were in sales and marketing, 471 were
in production, 20 were in service and installation and 23 were in
administration.

         IDC Systems is a party to a collective bargaining agreement with the
Building Service Employees International Union, Local 32-E, Service Trade
Division, AFL-CIO (the "IDC Union") with respect to 9 of its service employees.
The current collective bargaining agreement expired in March 2000. The Company
and the IDC Union had negotiations for a new contract. However, these
negotiations have not yet resulted in a contract with the IDC Union and
currently the Company and the IDC Union are in arbitration. Wilkinson is a party
to a collective bargaining agreement with the Building Sheet Metal Workers
International Union, Local 33, (the "Wilkinson Union") with respect to 37 of its
manufacturing employees. The current collective bargaining agreement with
Wilkinson Union expired on March 29, 2000. Hi-Rise and the Wilkinson Union are
currently negotiating terms of a new contract. It is anticipated that the new
contract will expire in March 2004. Acme is a party to a collective bargaining
agreement with the Building Sheet Metal Workers International Union, Local 32,
(the "Acme Union") with respect to 17 of its manufacturing and service
employees. The current collective bargaining agreement with the Acme Union will
expire in September 2002.

ITEM 2.  DESCRIPTION OF PROPERTY FACILITIES

         The Company's principal executive offices are located at Hesco's office
and manufacturing facilities in an approximately 110,000 square foot building
situated on approximately eight acres of land in Miami, Florida. Rent for these
facilities is approximately $34,000 per month for the Miami facility pursuant
to a lease (the "Acosta Lease") expiring February 26, 2005 with an option to
renew for an additional three-year term. The lease for the


                                      -12-
<PAGE>

Hesco facility was entered into between Hesco and an affiliate of Evelio Acosta,
the former owner of Hesco, in connection with the acquisitions of Hesco and
related subsidiaries and is subject to an unconditional guaranty between the
Company and the landlord. For pending litigation pertaining to this property,
see "Item 3. Legal Proceedings." The Company also leases office space in New
York City on a month-to-month basis at a monthly rental of $3,000.

         Bes-Pac maintains an office and manufacturing facilities in an
approximately 50,000 square foot building situated on approximately four acres
of land in Easley, South Carolina. Bes-Pac also maintains a manufacturing
facility in an approximately 100,000 square foot building in Easley, South
Carolina and a 70,000 square foot facility in Conover, North Carolina. All these
facilities are leased from Ronald McCracken, an officer of the Company and the
former owner of Bes-Pac, for an aggregate rental of approximately $25,250 per
month pursuant to leases expiring on December 31, 2012. In addition, Bes-Pac
leases approximately 7,000 square feet comprising the first floor of an office
building in Easley, South Carolina. The lease provides for initial rent of
approximately $3,300 per month with increases in years three through seven. The
lease expires May 31, 2007 and is leased from a partnership of which Ronald
McCracken is a partner.

         DeVivo maintains its office and manufacturing facilities in an
approximately 90,000 square foot building situated on approximately seven acres
of land in Newtown, Connecticut. This facility is leased from Mario DeVivo, the
former owner of DeVivo, for a rental of approximately $30,000 per month pursuant
to a lease expiring February 28, 2011.

         American Gooseneck maintains its office and manufacturing facilities in
an approximately 44,000 square foot building situated on approximately five
acres of land in Phoenix, Arizona. This facility is leased from Hambicki
Investment Partnership, an affiliate of the former owners of American Gooseneck,
for a rental of approximately $12,000 per month pursuant to a lease expiring
December 17, 2004. American Gooseneck has an option to renew the lease for an
additional 60 months.

         IDC Systems' executive offices, warehouse and assembly operations are
located in approximately 10,600 square feet of leased space in Mount Vernon, New
York. The lease provides for a rental of approximately $8,100 per month, with
increases in the second and third year of 4% each, and a three-year term
expiring October 1, 2003.

         Wilkinson's executive offices, warehouse, manufacturing and assembly
operations are located in approximately 50,000 square feet of leased space in
Stow, Ohio. The lease provides for a three-year term expiring February 2, 2002
at an initial rental of approximately $14,300 per month, with increases in the
second and third year based on increases in the consumer price index.

         Recycltech's offices are located in approximately 20,000 square feet of
leased space in the City of North York, Ontario, Canada. The lease provides for
a rental of approximately $7,800 per month and expires on October 31, 2003.

         Acme maintains its corporate headquarters and manufacturing facilities
in an approximately 10,000 square foot building situated on approximately two
acres of land in Fort Lauderdale, Florida. These facilities are leased for a
rental of approximately $3,400 per month pursuant to a lease expiring April 30,
2001. The Company believes that Acme's facilities are adequate for its present
needs.

         The business of United Truck and Body is now maintained at its new
offices, warehouse and manufacturing facilities in an approximately 41,000
square foot building situated on approximately seven acres of land in New
Albany, Mississippi (the "New Albany Facility" or "New Albany"). The lease
provides for a rental of $5,700 per month and expires on June 30, 2005.

ITEM 3.  LEGAL PROCEEDINGS

         As a result of operations conducted in the ordinary course of business,
from time to time the Company may be, and currently is, subject to product
liability and/or warranty claims and litigation. The Company believes, though no
absolute assurance can be given to that effect, that the current levels of
coverage provided by the Company's product liability insurance policy are
adequate and that any such claims will not have a material adverse effect on the
Company's financial condition or results of operations.


                                      -13-
<PAGE>

         On March 28, 2001, Acosta Family Limited Partnership, lessor of Hesco's
office and manufacturing facilities and the Company's principal executive
office, filed a lawsuit in the Circuit Court of the Eleventh Judicial Circuit in
and for Miami-Dade County, Florida against Hesco. The complaint filed in this
action seeks unspecified damages alleging breach of the Acosta Lease through the
alleged failure on the part of Hesco to maintain the property, alleged
noncompliance with environmental laws and alleged failure of Hesco to provide
insurance to lessor insuring against loss of rent. The Company has not yet filed
a response but intends to vigorously defend against all allegations made in the
complaint. The Company believes the suit is without merit; however, the Company
is unable to predict the outcome of the litigation.

         On March 30, 2001, Edelsy Marcano, a former employee of Hesco, filed a
lawsuit in the Circuit Court of the Eleventh Judicial Circuit in and for
Miami-Dade County, Florida against Hesco. The complaint filed in this action
seeks unspecified damages alleging breach of the Employment Agreement, dated
February 20, 1998, between Marcano and Hesco, resulting from Hesco's decision to
terminate Marcano's employment for cause. The Company has not yet filed a
response but intends to vigorously defend against all allegations made in the
complaint. The Company believes the suit is without merit; however, the Company
is unable to predict the outcome of the litigation.

         On or about July 31, 2000, the Commissioner of Environmental Protection
for the State of Connecticut (the "Plaintiff") brought an action in Superior
Court, Judicial District of Hartford, State of Connecticut, against DeVivo
Industries, Inc. ("DeVivo"), a wholly-owned subsidiary of the Company, alleging
that DeVivo violated several provisions of Connecticut law by its failure to
obtain permits relating to its construction, installation and operation in 1986
and 1994 of paint spray booths used in its manufacturing processes. The
Plaintiff is seeking civil penalties not to exceed $25,000 per day for each day
of violation on or after October 1, 1990 and civil penalties not to exceed
$1,000 per day for each day of violation prior to October 1, 1990. The Company
believes that it is entitled to be indemnified for substantially all liability
for this action by the former shareholders of DeVivo pursuant to the terms and
conditions of the Stock Purchase Agreement dated as of February 23, 1999, by and
among the Company, DII Acquisition Corp., DeVivo, Ecological Technologies and
the shareholders of DeVivo. However there can be no assurance that those
shareholders will satisfy their indemnification obligations.

         The parties to the action have reached a settlement in principle under
which, pending final approval by the Attorney General's Office, Mario DeVivo
will pay a civil penalty in the amount of $200,000 and all counts of the
complaint filed by the Plaintiff will be dismissed. DeVivo has submitted
applications for the necessary permits.

         On September 29, 2000, Reliance Metalcenter, a California corporation
and a vendor of a subsidiary of the Company ("Metalcenter"), filed a lawsuit in
United States District Court for the Southern District of Florida against the
Company, as the alleged successor-in-interest of AG Products. The complaint
filed in this action sought damages in the amount of $364,536 for breach of
contract, plus interest and related items, for metal products previously
delivered to American Gooseneck, Inc. d/b/a AG Products, and alleged that the
Company was also liable as AG's "alter ego." The suit was withdrawn by the
plaintiff without prejudice on March 9, 2001.

         On October 19, 2000, Lawson Steel Co., Inc., an Ohio corporation and a
vendor of a subsidiary of the Company ("Lawson Steel"), filed a lawsuit in the
United Sates District Court for the Southern District of Florida against the
Company and DeVivo. The complaint filed in this action sought damages in the
amount of $100,765 for breach of contract alleging that the Company and DeVivo
owe to Lawson Steel an amount of money equal to the damages sought for steel
material purchased by DeVivo. The suit was withdrawn by the plaintiff without
prejudice.

         On November 14, 2000, Lawson Steel filed a lawsuit in the Circuit Court
of the Eleventh Judicial Circuit, in and for Miami-Dade County, Florida against
the Company and DeVivo. The complaint filed in this action sought damages in the
amount of $58,396 for breach of contract alleging that the Company and DeVivo
owed to Lawson Steel an amount of money equal to the damages sought for steel
material purchased by DeVivo. The suit was withdrawn by the plaintiff with
prejudice on February 6, 2001.

         On November 30, 2000, Mailhot Industries Ontario, Ltd. filed a lawsuit
against Hesco in the Circuit Court of the Eleventh Judicial Circuit, in and for
Miami-Dade County, Florida alleging non-payment of $54,134 for cylinders
previously delivered to Hesco Sales, Inc. The suit was withdrawn by the
plaintiff with prejudice on February 14, 2001.

         In December 2000, Permite Corp. ("Permite"), filed a lawsuit in the
Circuit Court of the Eleventh Judicial Circuit, in and for Miami-Dade County,
Florida alleging that Hesco owed it $48,844 for merchandise delivered to Hesco.
The suit was withdrawn by the plaintiff without prejudice on March 6, 2001.


                                      -14-
<PAGE>

         Certain other vendors of the Company have threatened to commence legal
action for non-payment of trade payables.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of 2000.

PART II.

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

         The Company's Common Stock had traded in the over-the-counter market on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") Small-Cap Market under the symbol "HIRI" from July 22, 1993, the date
of the Company's initial public offering (the "IPO") until December 4, 2000. On
December 5, 2000, the Company announced that it had received notification that
the Nasdaq Stock Market, Inc. had decided to delist its Common Stock from
trading on the NASDAQ Small-Cap Market, effective December 4, 2000. NASDAQ based
its decision on concerns relating to the Company's failure to meet the minimum
bid price requirements. The Company had requested a hearing regarding a proposed
plan of compliance with the listing requirements to be held on January 4, 2001,
but the Company subsequently requested that the hearing with Nasdaq be canceled.
The Company is currently trading its Common Stock in the over-the-counter market
("OTC") via the Electronic Bulletin Board ("OTC Bulletin Board").

         The following table sets forth, for the periods indicated, the high and
low closing bid quotations for the Common Stock, as reported on NASDAQ for the
years ended December 31, 2000 and December 31, 1999 and on the OTC Bulletin
Board for the 1st Quarter of 2001. The OTC quotations represent quotations
between dealers without adjustment for retail markups, markdowns or commissions
and may not necessarily represent actual transactions.

                        Period                    High          Low
         -------------------------------------- ----------- -----------
         2001
         1st Quarter                              $1/8         $1/16

         Year ended December 31, 2000
         1st Quarter                              $2 5/16      $1 15/16
         2nd Quarter                               1 7/16         31/32
         3rd Quarter                                 7/8          11/32
         4th Quarter                                 1/4          1/32

         Year ended December 31, 1999
         1st Quarter                              $3 11/16     $1 5/16
         2nd Quarter                               4 3/4        3
         3rd Quarter                               3 1/8        2 1/8
         4th Quarter                               2 3/8        1 3/4

         As of April 11, 2001, there were 123 holders of record of the Company's
Common Stock. The Company believes that there are in excess of approximately
2,436 beneficial owners of the Company's Common Stock. On April 11, 2001, the
closing bid price of the Common Stock was $0.10 per share.

         In late June and early July 1997, the Company sold an aggregate of 200
shares of its Series B Convertible Preferred Stock, $.01 par value (the "Series
B Preferred Stock"), and warrants (the "1997 Warrants") to purchase an aggregate
of 888,887 shares of the Common Stock, in a private placement to accredited
investors for an aggregate purchase price of $2,000,000 pursuant to Rule 506 of
Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"). The Series B Preferred Stock is convertible, at the option of the holder
thereof, into Common Stock at a conversion price of $2.25. During 2000, 100
shares of the Series B Preferred Stock were converted to 444,444 shares of the
Company's Common Stock. The remaining Series B Preferred Stock accrues Common
Stock dividends at a rate of approximately 36,000 shares per annum, which
dividends are payable upon conversion of the


                                      -15-
<PAGE>

Series B Preferred Stock in additional shares of Common Stock. The Series B
Preferred Stock has no voting rights. The 1997 Warrants entitle the holders
thereof to purchase shares of Common Stock at an exercise price of $2.25 per
share.

         In connection with the Bes-Pac Merger, on October 30, 1998, the Company
issued an aggregate of 1,890,500 shares of Common Stock to Ronald J. McCracken,
the former owner of Bes-Pac, which shares had a market value of approximately
$3,781,000 on such date. In January 2000, the Company issued an aggregate of
1,310,705 shares of Common Stock to Ronald J. McCracken. Of such shares, 644,038
shares were issued in connection with the conversion of a subordinated
convertible promissory note issued to Mr. McCracken in connection with the
Company's acquisition of Bes-Pac and 666,667 shares were issued as earn-out
consideration pursuant to the terms of the merger agreement related to the
Bes-Pac acquisition.

         In connection with the Company's acquisition of American Gooseneck, on
December 16, 1999, the Company issued an aggregate of 689,393 shares of Common
Stock, valued at approximately $1,250,000 on such date, to the former
shareholders of American Gooseneck. Furthermore, in accordance with certain
earn-out provisions set forth in that certain Stock Purchase Agreement (the "AG
Agreement"), dated as of December 13, 1999 by and among, the Company, American
Gooseneck, Inc. and the shareholders of American Gooseneck, on January 1, 2001,
the Company issued an aggregate of 463,025 additional shares of Common Stock,
valued at $900,000 on the date on which the AG Agreement was executed, to the
former shareholders of American Gooseneck.

         On July 5, 2000, the Company sold 50 shares of newly created 13% Series
C Preferred Stock, $0.01 par value per share (the "Series C Preferred Stock"),
to Donald Engel, the Company's Chairman of the Board and Chief Executive
Officer, for an aggregate purchase price of $500,000. The Series C Preferred
Stock ranks: (i) prior to all of the Company's Common Stock; (ii) prior to any
class or series of capital stock of the Company hereafter created specifically
ranking by its terms junior to any Series C Preferred Stock of whatever
subdivision, and (iii) junior to the Company's Series B Preferred Stock, in each
case as to distributions of assets upon liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary. The holders of the Series C
Preferred Stock are entitled to receive cumulative cash dividends, payable
quarterly in arrears, at the rate per share of 13% per annum. Dividends on the
Series C Preferred Stock accrue from the date of issuance or thereafter, from
the most recent date on which dividends were payable, and are payable quarterly
each year. The Series C Preferred Stock may be redeemed, in whole or in part, at
the option of the Company at any time prior to October 31, 2001 at $10,000 per
share, plus accrued and unpaid dividends, if any, to the date of redemption. Any
and all outstanding shares of Series C Preferred Stock are required to be
redeemed by the Company on October 31, 2001. Also, pursuant to the terms of the
Credit Facility, the Company is permitted to return or repay amounts invested by
Mr. Engel only to the extent that (i) no Default or Event of Default (as defined
in the Credit Agreement) shall have occurred, and (ii) after giving effect to
the return or repayment of the amounts invested by Mr. Engel, the Company and
its subsidiaries shall have Borrowing Availability (as defined in the Credit
Agreement) of at least $2,500,000.00. Also, payment of the dividends is subject
to the same conditions set forth with respect to the return or repayment of the
amounts invested by Mr. Engel.

         On December 4, 2000, in connection with consummation of the
transactions contemplated by the Fourth Amendment (the "Fourth Amendment") to
the Credit Agreement between GECC and certain other lenders and the Company and
certain other Borrowers (collectively, the "Borrowers") all as named therein,
the Company issued a warrant (the "Warrant") to GECC as consideration for GECC
making an additional $5,500,000 loan to the Borrowers. The Warrant is
exercisable at any time or from time to time through and including December 4,
2010, to purchase 17,382,053 shares of the Common Stock of the Company at an
exercise price of $.01 per share. As additional consideration for the Warrant,
GECC surrendered to the Company for cancellation a warrant dated as of October
28, 1998 issued to GECC by the Company. The Company has entered into a
Registration Rights Agreement with GECC, dated December 4, 2000 (the
"Registration Rights Agreement"), providing GECC with certain registration
rights with respect to the shares of Common Stock issuable upon exercise of the
Warrant.

         Pursuant to a Letter of Intent with Valiant Products, Inc., a Florida
corporation ("Valiant"), and Robert English, sole shareholder of Valiant, on
July 7, 2000, the Company issued an aggregate of 50,000 shares of Common Stock,
valued at approximately $51,560 on such date, to Robert English. The transaction
contemplated was never consummated.


                                      -16-
<PAGE>

         To date, the Company has not declared or paid any dividends on its
Common Stock. The payment of dividends, if any, is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition and other relevant factors. The Board does
not intend to declare any dividends in the foreseeable future, but instead
intends to retain future earnings for use in the Company's business operations.
In addition, certain covenants set forth in the Company's Credit Facility with
GECC restrict the Company's ability to declare or pay dividends.

ITEM 6.  SELECTED FINANCIAL DATA

         The following selected financial data should be read in conjunction
with the consolidated financial statements and the notes thereto included
elsewhere in this Annual Report on Form 10-K. The results of operations for the
year ended December 31, 1999 include the results of certain companies acquired
in 1999 as follows: DeVivo, effective February 1999, Kohlman effective September
1999 and American Gooseneck effective December 1999. The results of operations
for the year ended December 31, 1998 include the results of certain companies
acquired in 1998 as follows: Hesco, effective February 1998, Bes-Pac, effective
October 1998, and Acme effective November 1998. The statement of operations data
for the years ended December 31, 2000, 1999 and 1998 and the balance sheet data
at December 31, 2000 and 1999 are derived from, and are qualified by reference
to, audited consolidated financial statements included elsewhere herein and
should be read in conjunction with those consolidated financial statements and
the notes thereto. The statement of operations data set forth below for the
periods ended December 31, 1997 and 1996 and the balance sheet data as of
December 31, 1998, 1997 and 1996 are derived from the audited financial
statements of the Company not included herein (thousands, except earnings (loss)
per share and weighted average common shares).

<TABLE>
<CAPTION>
                                                    2000          1999           1998          1997          1996

Statement of Operations Data
<S>                                             <C>            <C>                <C>          <C>           <C>
Operating revenue.........................      $    63,299    $    59,734     $   31,180     $   10,484     $    3,207
Operating income (loss)...................          (16,923)         6,389          3,303            (44)        (2,825)
Income (loss) from continuing operations..          (22,884)         2,482          3,003             20         (2,639)
Basic  earnings  (loss) per  common  share
   from continuing operations.............      $     (1.49)   $      0.18     $     0.30     $     0.00     $    (0.47)
Diluted  earnings  (loss) per common share
   from continuing operations.............      $     (1.49)   $      0.17     $     0.27     $     0.00     $    (0.47)
Weighted average common shares - basic....       15,394,746     12,564,909      9,095,563      6,361,254      5,578,333
Weighted average common shares - diluted..       15,394,746     15,026,858     10,560,775      8,966,930      5,578,333

Balance Sheet Data
Total assets..............................      $    85,058    $    94,714     $   53,814     $   19,185     $    9,981
Long-term debt, including current                    58,088         51,376         23,667          7,592          1,885
   maturities.............................
Redeemable preferred stock................              532            --             --             --             --
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

General

         The Company was incorporated in May 1990 and was engaged principally in
product development until January 1991, when it installed the first Hi-Rise
System on a shared savings basis. The Company only began to generate significant
revenues in 1998.

         The Company is primarily engaged in manufacturing, distributing,
marketing and selling solid waste handling equipment. Until February 1997, the
Company was primarily engaged in distributing, marketing and selling the Hi-Rise
System, a proprietary automated system designed to collect source-separated
recyclables and other solid waste in multi-story residential and commercial
buildings. In 1998, the Company acquired Hesco and Bes-Pac, companies engaged in
the business of manufacturing, marketing and selling solid waste handling
equipment products consisting primarily of waste containers and trash compaction
systems. In 1999, the Company acquired DeVivo, Kohlman and American Gooseneck.


                                      -17-
<PAGE>

         The Company's results of operations for the year ended December 31,
1998 include the results of Hesco from February 20, 1998, Bes-Pac from October
30, 1998 and Acme from November 20, 1998. Additionally, the Company's results of
operations for the year ended December 31, 1999 include the results of DeVivo
from February 1999, Kohlman from September 1999 and American Gooseneck from
December 1999. The results of operations for the year ended December 31, 2000
include the recently opened New Albany Facility. Accordingly, the Company's
results of operations for the years ended December 31, 2000, 1999 and 1998 are
not comparable in certain material respects.

Business Segments

         The Company operates in two business segments comprised of the
Architectural Division, which manufactures the Hi-Rise System and rubbish, linen
and laundry chutes designed primarily for multi-story residential and commercial
buildings, and the Solid Waste Division, which, through its four operations and
seven manufacturing facilities, manufactures a wide line of solid waste handling
equipment. Currently, approximately 82% of the Company's revenues are derived
from its Solid Waste Division and the other 18% of its revenues are derived from
its Architectural Division.

Current Business Environment

         Commencing in late 1999 and continuing through the current year, the
Company's business has suffered from softened demand for its products due in
large part to competition and to decreased equipment expenditures from its
largest customers. Although overall revenues of the Company have increased over
the prior year, this has primarily been accomplished through acquisitions,
expansion activity and new product introductions, as generally individual
subsidiaries have not performed at projected or prior year levels. The Company
has also experienced increased steel costs, which comprise the largest material
component in all of its products and more recently, aggressive competitive
pricing introduced in certain of its key Solid Waste Division markets. These
factors coupled with, the recent opening of new production facilities, expansion
of existing facilities, the introduction of new product lines and the
re-designing and shifting of production among its manufacturing facilities have
all contributed to plant and labor manufacturing inefficiencies and a
significant deterioration in operating margins. This has resulted in substantial
losses, the continued use of cash in operations and defaults under the Company's
Credit Facility with GECC under both its borrowing base eligibility and other
financial covenants. This situation, coupled with the task of integrating all of
the Company's acquisitions, has led to a number of management initiatives.

         These initiatives included the review of the manufacturing process and
staffing levels at all locations and changes in production management in certain
of its Solid Waste Division operations. Management also examined the products
being manufactured by its various facilities and reviewed its products to
determine if standardization and/or product rationalization was warranted in
light of the current business environment described above.

         The initiatives also included an extensive review of the Company's
balance sheet. This included a review of the allowance for doubtful accounts,
exposures related to slow paying or non-paying sales type lease customers, the
carrying value of its inventories in view of the manufacturing conditions
discussed above and exposure to loss related to certain distributor accounts.

         In response to concerns over the Company's deteriorating operating
results and cash flows, the Board of Directors engaged GGG on October 16, 2000.
GGG is a corporate performance consulting firm with experience in providing
interim leadership to under-performing companies. The initial engagement
involved an assessment of the Company's operations and to assess the recent
operating and manufacturing initiatives in order to make preliminary
recommendations for future operating strategies. Based upon these
recommendations, the Board of Directors determined to further retain GGG in
November 2000.

         Dr. James Ashton a GGG partner, assumed responsibility for the
operational management of the Company. Donald Engel, Chairman of the Board and
Chief Executive Officer requested that the Board of Directors delegate his CEO
responsibilities to Dr. Ashton. Dr. Ashton appointed Mel Johnson as Chief
Operating Officer of the Solid Waste Division, Michael Bracken, an employee of
the Company, as acting Chief Operating Officer of the Architectural Division and
Ron Miller as financial management consultant to Kevin Bartczak, Chief Financial
Officer of the Company.


                                      -18-
<PAGE>

         In order to address the near term liquidity needs of the Company, the
GGG management team worked throughout the fourth quarter to obtain short term
financing in order to stabilize the Company's operations while a financial and
operating plan was developed. During December 2000, the Company was able to
reach agreement with GECC whereby amounts available under its existing credit
facilities were increased by an aggregate of $5.5 million by obtaining an
additional subordinated term loan which matured on February 15, 2001. The
Company is currently in default under both its borrowing base eligibility and
other financial covenants. For more information regarding the Credit Facility,
see "Liquidity and Capital Resources."

         The GGG team has commenced significant restructuring initiatives,
including the reorganization of the Company's Architectural Division and Solid
Waste Division into two completely separate operating units. Major changes
within the business units are also being implemented, including changes in
operating and reporting responsibilities, manufacturing and distribution
processes, inventory production strategies and credit and collection policies.
In addition, these initiatives have included personnel terminations,
responsibility changes, the closure of manufacturing locations and the
discontinuance of certain products and service offerings. The GGG team has
recently completed an operating and financial plan which contemplates future
improvements in financial and operating results as the operating and
manufacturing philosophies broadly described above are implemented.

         Although management believes that the recently introduced changes will
continue to reduce inventory levels, production and overall operating costs,
previously described manufacturing inefficiencies, continued softness in product
demand, coupled with severe cash flow constraints experienced prior to the
December amendment, continue to negatively impact the Company's operations. The
effect of these conditions has continued to cause purchasing inefficiencies,
necessitated excessive costs of moving raw materials among production locations
and required the manufacturing and shipping of products from less than optimal
locations.

         Management believes that the changes forming the basis for the recently
completed financial and operating plan will improve the Company's operating
performance throughout fiscal 2001 as the changes are fully implemented and
absorbed in the operating and manufacturing processes.

Results of Operations

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

         Total revenue during the year ended December 31, 2000 was $63,299,000,
an increase of $3,565,000, or approximately 6%, compared to total revenue of
$59,734,000 during the year ended December 31, 1999. The primary sources of the
increase in revenue are the inclusion of American Gooseneck and Kohlman for the
entire year, and the expansion and ramp-up of Recycltech and the New Albany
Facility in the aggregate amount of $9,997,000. This increase was offset, in
part, by a decline in revenue throughout the remaining Solid Waste Division
units of $2,248,000 and a decrease in the remaining Architectural Division units
of $4,184,000.

         During the year ended December 31, 2000, the Company recognized
interest income of approximately $500,000, a decrease of $446,000, or
approximately 47%, compared to $946,000 during 1999. The decrease is primarily
attributable to the substantial reduction in the Company's investment in sales
type leases of Hi-Rise Systems and waste equipment and lower cash availability
in 2000 as compared to 1999.

         Costs of equipment and parts sold increased by $15,025,000, or
approximately 36%, from $41,996,000 during the year ended December 31, 1999 to
$57,021,000 during the year ended December 31, 2000. A substantial amount of
this increase is attributable to the inclusion of costs of American Gooseneck
and Kohlman for the entire year and costs associated with the expansion and
ramp-up of Recycltech and the New Albany Facility aggregating $9,645,000, which
amount includes, along with the rest of the facilities, additional reserves for
slow-moving and potentially obsolete inventories. As a percentage of revenue,
cost of equipment sold increased to 90% during the year ended December 31, 2000
from 70% during the prior year. As noted above, the Company has made a number of
acquisitions in the last several years and as such, the number of productions
facilities has increased along with attendant manufacturing labor and overhead.
In addition, in anticipation of substantial increased revenues in fiscal 2000,
additional manufacturing and administrative personnel were retained.

         As indicated above, although overall revenues of the Company have
increased over the prior year, this has primarily been accomplished through
acquisitions, expansion activity and new product introductions. Generally


                                      -19-
<PAGE>

individual subsidiaries have not performed at projected or prior year levels,
particularly in the second half of the year, during which sustained economic
slow-downs became evident. Accordingly, increased labor and fixed overhead costs
in relation to units produced and sold, negatively impacted the Company's gross
margins by an estimated 5%. In addition, increased steel prices, fuel costs,
pricing competition, product mix and general plant inefficiencies have
negatively impacted gross margins. Steel prices increased from an average of
13-14 cents per pound in 1999 to approximately 17 cents per pound in 2000, which
price increases management estimates have increased the cost of equipment sold
by approximately $3,500,000 or 6% as a percentage of revenues. Although steel
prices began to stabilize and were lowered in the latter part of the year, the
Company was not able to capitalize on these reductions in prices due to its cash
flow constraints while its Credit Facility was being amended. In addition, due
to the aggressive competitive pricing in certain of the key Solid Waste Division
markets noted earlier, the Company reduced its selling prices during the year in
certain markets, which management estimates has increased the cost of equipment
sold as a percentage of revenues by approximately 3%. During the third and
fourth quarters of 2000, the Company incurred certain charges that management
believes are non-recurring in nature. These charges consisted of start-up and
expansion inefficiencies of certain new and existing facilities, severance and
relocation activities related to these facilities and charges to reduce current
inventory values and to record increased reserves for slow-moving and
potentially obsolete inventory. Additional initiatives taken in the fourth
quarter included the discontinuance of certain manufacturing operations and
departments, which has necessitated the disposal of certain manufacturing
equipment and related products. Management estimates that charges related to
these activities aggregated approximately $1,900,000 or 2% of revenues. In
addition, fuel costs increased approximately $400,000.

         Selling and marketing expenses during the year ended December 31, 2000
were $4,383,000, an increase of $1,923,000, or approximately 78%, compared to
selling and marketing expenses of $2,460,000 during the prior year. Selling and
marketing expenses included $350,000 for the comparable period in 2000 that the
American Gooseneck, Kohlman and New Albany operations were not in the results in
1999. In addition, selling and marketing expenses increased $700,000 due to
salaries and other marketing expenses related to marketing of the Company's
national accounts and $900,000 attributable to expanded efforts at the local
level.

         General and administrative expenses during the year ended December 31,
2000 were $18,818,000, an increase of $9,929,000, or approximately 112%,
compared to general and administrative expenses of $8,889,000 incurred in 1999.
General and administrative expenses included additional costs of approximately
$950,000 for DeVivo, American Gooseneck and Kohlman for the comparable portion
of 2000 that those operations were not in the Company's results in 1999 and
approximately $625,000 due to the ramp-up and expansion of operations at the
Recycltech and New Albany facilities. Incremental charges include $600,000
related to three Architectural Division distributor accounts which have been
terminated. Management has determined to sell direct in certain territories
rather than to work with distributors. Incremental expenses also include the
re-negotiation of certain lease receivable accounts, lease buy-outs and losses
and fees incurred in connection with sale of lease receivables to Western
Finance aggregating approximately $975,000 and additional reserves associated
with lease receivables of $525,000 due to the business conditions described
above. The Company also increased provisions for bad debts over historical
levels by approximately $500,000 due to increased delinquencies during the
latter part of the year and to general concerns related to the current business
environment. A reserve was also established in the amount of $300,000 in the
fourth quarter of 2000 resulting from a large sale made in 2000 that will
possibly be litigated for non-payment and may not be collected. Other increases
include new hires and general salary increases of approximately $500,000,
insurance costs of $250,000, increased goodwill amortization of $275,000,
increased travel costs of $300,000, GGG management team expenses of $400,000,
legal and professional fees of $575,000, additional costs of leased facilities
of $300,000, termination and contract payments of $525,000 and plant closure
provisions of $175,000. The Company also wrote-off costs of $800,000 resulting
from potential acquisitions which are no longer being pursued, and incurred
$225,000 in connection with a special incentive program for receivable
collection efforts.

         Interest expense increased $3,282,000 or approximately 88%, to
$7,011,000, for the year ended December 31, 2000 from $3,729,000 for the prior
year. This increase is a result of increased borrowings under the Company's
credit facilities and increased interest rates in 2000 as compared to 1999. This
increase included an increase in the incurrence of $575,000 in bank and finance
fees along with amortization of prepaid costs associated with the warrants
issued to GECC. These credit facilities have financed substantially all of the
Company's acquisitions and are used to finance its working capital needs.


                                      -20-
<PAGE>

         As a result of the foregoing, the Company realized a net loss of
$22,884,000 for the year December 31, 2000, compared to net income of $2,482,000
for the year ended December 31, 1999.

     Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

         Total revenue during the year ended December 31, 1999 was $59,734,000,
an increase of $28,554,000, or approximately 92%, compared to total revenue of
$31,180,000 during the year ended December 31, 1998. One of the primary sources
of the increase is the inclusion of ten months of sales for DeVivo and a full
year of sales for Bes-Pac, Hesco and Acme in 1999 compared to only two months,
ten months and one month, respectively in 1998. DeVivo realized additional sales
of $9,950,000. BesPac had sales of $16,153,000 and Hesco had sales of
$2,943,000. The remaining increase is a result of revenues from Acme for the
year of $1,896,000. The increases were partially offset by a reduction in
Hi-Rise sales in 1999 of approximately $2,000,000 related to products purchased
and subsequently resold in 1998 from Acme prior to acquisition as well as other
vendors.

         During the year ended December 31, 1999, the Company recognized
interest income of approximately $946,000, an increase of $170,000, or
approximately 22%, compared to $776,000 during 1998. The increase in interest
income was primarily attributable to the higher average lease receivables
balance during 1999 as compared to 1998.

         Costs of equipment and parts sold increased by $20,851,000, or
approximately 99%, from $21,145,000 during the year ended December 31, 1998 to
$41,996,000 during the year ended December 31, 1999. This increase in
attributable to the inclusion of ten months of costs for DeVivo and a full year
of costs for Bes-Pac and Hesco in 1999 compared to only two months and ten
months, respectively, in 1998. The increase was offset by a reduction in costs
at Hi-Rise due to the acquisition of Acme which previously sold to Hi-Rise.

         As a percentage of revenue, cost of equipment sold increased to 70%
during the year ended December 31, 1999 from 68% during the prior year . The
primary reason for this increase was a corresponding increase in sales of waste
equipment which have a higher cost of sales on a percentage basis. Waste
equipment products cost of sales was approximately 75%.

         Selling and marketing expenses during the year ended December 31, 1999
were $2,460,000, an increase of $1,159,000, or approximately 89%, compared to
selling and marketing expenses of $1,301,000 during 1998. Selling and marketing
expenses for the year ended December 31, 1999 included approximately $35,000 for
DeVivo and an aggregate of an additional $1,120,000 of expenses for Hesco and
Bes-Pac for additional months of 1999.

         General and administrative expenses during the year ended December 31,
1999 were $8,889,000, an increase of approximately $3,458,000, or approximately
64%, compared to general and administrative expenses of $5,431,000 during 1998.
General and administrative expenses for the year ended December 31, 1999
included approximately $1,408,000 for DeVivo. The remaining increase is related
to increased personnel and professional fees. In addition, there was
approximately $500,000 of one-time expenses related to closing of a facility and
costs associated with acquisitions not consummated.

         Interest expense increased to $3,729,000 for the year ended December
31, 1999, an increase of approximately 273%, compared to $1,001,000 for the
prior year, as a result of increased borrowings under the Company's credit
facilities. Advances under such credit facilities were used to finance the
Company's acquisitions.

         The Company's loss carryforwards were fully used in 1999 and the
Company realized a net tax rate of 31%. This resulted in an increase of taxes to
$1,124,000 for the year ended December 31, 1999 compared to $75,000 for the
prior year.

         As a result of the foregoing, the Company realized net income of
$2,482,000 during the year ended December 31, 1999, compared to net income of
$3,003,000 during the year ended December 31, 1998.

Liquidity and Capital Resources

         Until February 1997, the Company was primarily engaged in distributing,
marketing and selling the Hi-Rise System, a proprietary automated system
designed to collect source-separated recyclables and other solid waste


                                      -21-
<PAGE>

in multi-story residential and commercial buildings. In 1998, the Company
acquired Hesco, Acme and Bes-Pac and, in 1999 the Company acquired DeVivo,
Kohlman and American Gooseneck. These acquisitions were financed through
borrowings made under the Credit Facility.

         The Company's operations and acquisitions have been financed through
both equity and debt arrangements. The primary source of financing has been
through the Credit Facility. On October 28, 1998, the Company entered into the
Credit Facility. On June 30, 2000, the Company and all of the Company's
subsidiaries entered into a second amendment to the Credit Agreement with GECC
as administrative agent, and the other lenders from time to time as they become
party thereto, to increase the Credit Facility to $63 million. The Company is
currently in default under both its borrowing eligibility and other financial
covenants. On October 19, 2000, the Company entered into a third amendment to
the Credit Facility to allow for overline advances in the aggregate amount of
$500,000. On December 4, 2000, the Company entered into a fourth amendment to
the Credit Facility with GECC to increase amounts available under the Credit
Facility by an aggregate of $5.5 million by obtaining an additional subordinated
term loan from GECC which matured on February 15, 2001. The overline advances
and the increase in the Credit Facility in December 2000 were made
notwithstanding the existence of the pending defaults. The increase in the
available lines of credit under the Credit Facility has been used for working
capital requirements.

         On July 5, 2000, the Company sold 50 shares of its Series C Preferred
Stock, to Donald Engel, the Company's Chairman of the Board and Chief Executive
Officer, for an aggregate purchase price of $500,000. The holders of the Series
C Preferred Stock are entitled to receive cumulative cash dividends, payable
quarterly in arrears, at the rate of 13% per annum. Dividends on the Series C
Preferred Stock accrue from the date of issuance or thereafter, from the most
recent date on which dividends were payable, and are payable quarterly each
year. Any and all outstanding shares of Series C Preferred Stock are required to
be redeemed by the Company on October 31, 2001. Also, pursuant to the terms of
the Credit Facility, the Company is permitted to return or repay amounts
invested by Mr. Engel only to the extent that (i) no Default or Event of Default
(as defined in the Credit Agreement) shall have occurred, and (ii) after giving
effect to the return or repayment of the amounts invested by Mr. Engel, the
Company and its subsidiaries shall have Borrowing Availability (as defined in
the Credit Agreement) of at least $2,500,000. Also, payment of the dividends is
subject to the same conditions set forth with respect to the return or repayment
of the amounts invested by Mr. Engel.

         The Company's Credit Facility with GECC and the other lenders requires
the maintenance of certain financial covenants, borrowing base eligibility and
other restrictions. The Company is currently in default under its Credit
Facility under both its borrowing base eligibility and other financial
covenants. Specifically, among other defaults, the Company has overdrawn
$15,400,000 more funds than it was permitted based upon its eligible collateral
levels. The Company is currently in discussions with GECC and the other lenders
to restructure its existing Credit Facility. There are no assurances that the
Credit Facility will be restructured successfully or that additional working
capital will be provided. GECC and the other lenders have declared all amounts
outstanding, together with accrued interest, to be immediately due and payable.
As the Company does not currently have existing liquidity to repay these
amounts, GECC and the other lenders could proceed against the collateral, which
would have a material adverse effect on the Company's business and financial
condition. Since the Company is in default, all amounts due under the Credit
Facility are presented as current liabilities in the accompanying consolidated
balance sheet as of December 31, 2000.

         Under the terms of the Credit Facility, as amended, receivables and
inventory of the Company and its subsidiaries collateralize one revolving line
of credit in the amount of up to $8,600,000. The borrowing base is calculated by
taking 80% of the value of eligible receivables and 50% of the value of eligible
inventory. Approximately $18,469,000 was outstanding under this line of credit
as of December 31, 2000. The other revolving line of credit in the amount of up
to $9,000,000 is collateralized by leases entered into by the Company for
Hi-Rise systems and other products manufactured by the Company and its
subsidiaries. The borrowing base is calculated by taking 84% of the value of
eligible leases issued by the Company for its equipment. Approximately
$7,517,000 was outstanding under this line of credit as of December 31, 2000.
Both lines of credit bear interest at a rate per annum equal to the prime rate
as announced by The Wall Street Journal plus .5% and are due in October 2003.
One term loan is for $9,000,000 and bears interest at a fixed rate of 11% for
five years. Interest only on this term loan is payable quarterly for four and
one-half years with principal payable for two quarters in the amount of
$1,500,000 and a $6,000,000 payment due at October 30, 2003. The $6,000,000 term
loan has a twelve-month period of interest only and principal payments to be
paid on a quarterly basis until October 30, 2003. This term loan bears interest
at a


                                      -22-
<PAGE>

rate of prime, as announced by The Wall Street Journal, plus 1%. The $5,500,000
term loan was due on February 15, 2001 and bears interest at 15%. This term loan
is fully subordinated, both in time of payment and right of payment, to the
repayment in full of all other obligations under the Credit Facility. The
acquisition facility also has a twelve-month interest only period and quarterly
principal payments are due five years from the funding of the loan. The
acquisition facility also bears interest at a rate of prime, as announced by The
Wall Street Journal, plus 1%. So long as an Event of Default (as defined in the
Credit Facility) shall have occurred and be continuing and at the election of
GECC as Administrative Agent (or upon the written request of the lenders), the
interest rates applicable to all outstanding obligations under the Credit
Facility shall be increased by two percent (2%) per annum above the rates of
interest or the rate of fees otherwise applicable (the "Default Rate"). Interest
and letter of credit fees shall accrue at the Default Rate from the initial date
of such Event of Default until that Event of Default is cured or waived and
shall be payable upon demand. The lenders under the Credit Facility have not
elected to have the Company accrue interest and fees at the default rate. The
Company has not made principal or interest payments since November 2000.

         In December 1999 and June 2000, the Company entered into lease
financing arrangements with Western Finance and Lease, Inc., formerly known as
First Sierra, Inc. ("Western Finance"), pursuant to which Western Finance has
agreed to purchase, from time to time, eligible leases of Hi-Rise Systems from
the Company for a purchase price equal to the discounted present value of the
leases purchased. During 2000 and 1999, the Company sold the anticipated cash
flow relating to Hi-Rise System leases to Western Finance for $1,600,000 and
$1,800,000, respectively.

         At December 31, 2000, the Company had a working capital deficit of
$45,175,000 due to amounts borrowed from its primary lenders being presented as
current obligations, and had cash and cash equivalents aggregating $375,000,
compared to working capital of $2,801,000 and cash and cash equivalents of
$194,000 at December 31, 1999.

         The Company's existing financial condition will limit its ability to
obtain additional sources of financing. If the Company is unable to obtain
additional sources of financing, or to renew, replace or modify the existing
Credit Facility with facilities of like amount, or if the Company is unable to
implement other alternative strategies, then the Company will have insufficient
cash to continue to operate the business as it is now conducted, and may be
unable, in whole or in part, to fund the purchase of equipment or fund other
working capital requirements, or continue to operate as a going concern.

         As part of the $5,500,000 term loan provided by GECC on December 4,
2000, the Company canceled warrants to purchase an aggregate of 1,476,259 shares
of Common Stock previously issued to GECC and issued warrants to GECC to
purchase an aggregate of 17,382,053 shares of the Company's Common Stock at an
exercise price of $.01 per share.

         During the year ended December 31, 2000, net cash used in operating
activities was $6,788,000, compared to net cash used in operating activities of
$3,720,000 during the year ended December 31, 1999. The net cash used in
operating activities was primarily the result of the net loss of $22,884,000.
Accounts receivable decreased by $773,000 as a result of decreased fourth
quarter sales coupled with increased collection efforts. In addition, inventory
decreased by $2,410,000 primarily as a result of "just-in-time" management
initiatives. Additionally, net cash received on sales type leases was $2,886,000
as a result of the sales of various leases to Western Finance noted above in the
amount of $1,600,000, collections on receivable balances offset by new leases
and the re-negotiation of lease receivables described above.

         Net cash used in investing activities was $2,150,000 during the year
ended December 31, 2000. This was primarily the result of cash used for the
purchase of capital equipment and financing costs. Net cash provided by
financing activities was $9,119,000 during 2000. This increase was primarily the
result of net borrowings, net of repayments under the Company's Credit Facility
of $8,300,000 and $500,000 obtained for the issuance of mandatorily redeemable
preferred stock.

         The Company's independent public accountants have included a "going
concern" paragraph in their audit report accompanying the 2000 consolidated
financial statements. The paragraph states that the Company's net loss, default
under the credit agreements and negative working capital raise substantial doubt
about the Company's ability


                                      -23-
<PAGE>

to continue as a going concern and cautions that the consolidated financial
statements do not include adjustments that might result from the outcome of this
uncertainty.

         The Company currently has no outstanding material commitments for
capital expenditures.

Recent Accounting Pronouncements

         In June 2000, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 138 ("SFAS 138"), Accounting for Certain Derivative
Instruments -- an Amendment of FAS 133. SFAS 138 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives). SFAS 138 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. Management believes the adoption of SFAS 138 will
not have a material impact on the Company's consolidated financial statements as
the Company currently does not use derivative instruments.

         In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation -- an Interpretation of APB 25 ("FIN 44"). This interpretation
clarifies certain issues relating to stock compensation. FIN 44 is effective
July 1, 2000; however, certain conclusions in this interpretation cover specific
events that occurred prior to July 1, 2000. FIN 44 did not have an impact on the
Company's consolidated financial statements.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 summarizes certain of the SEC's views in applying general
accepted accounting principles to revenue recognition in financial statements.
SAB 101 did not have an impact on the Company's consolidated financial
statements.

Cautionary Statements Relating to Forward-Looking Statements

         The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operations contains various "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which represent the Company's expectations and beliefs concerning future events
and involve known and unknown risks and uncertainties. When used herein the
terms, "anticipate," "believe," "estimate," "expect" and "intend" and words or
phrases of similar import, as they relate to the Company or its subsidiaries or
Company management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions related to
certain factors including, without limitation, decline in demand for the
Company's products, increases in costs of sales, inability to amend, restructure
or replace the Credit Facility under which the Company is currently in default,
failure to successfully implement certain restructuring initiatives, customer
relations, relationships with vendors, steel costs, the interest rate
environment, the inability to integrate successfully acquired operations,
one-time events, the effect of general economic conditions generally and factors
affecting the waste hauling and construction industries, and other factors
described herein and in other filings made by the Company with the Securities
and Exchange Commission. These statements by their nature involve substantial
risks and uncertainties and actual events or results may vary materially from
those described herein as anticipated, believed, estimated or intended. The
Company undertakes no obligation to update, and the Company does not have a
policy of updating or revising, these forward-looking statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Interest Rates: The Company's interest rate risk results from holding
variable rate debt obligations, as an increase in interest rates results in
lower earnings and increased cash outflows. The interest rate on the Company's
Credit Facility is payable at variable rates. The effect of a 1% increase in
interest on the Company's borrowings would result in an increase in interest
expense of $436,000 for the year ended December 31, 2000.

         Steel Prices: The Company is exposed to fluctuations in steel costs,
which comprise the largest material component in all of its products.
Accordingly, an increase in steel costs would result in lower earnings and
increased cash outflows.


                                      -24-
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS

         The Consolidated Financial Statements of the Company required by Form
10-K are attached following Part III of this report commencing on page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.


                                      -25-
<PAGE>

PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

           Name              Age                              Position
------------------------ --------- -------------------------------------------
James E. Ashton, Ph.D.       58     Acting Chief Executive Officer

Melvin D. Johnson            54     Acting Chief Operating Officer - Solid
                                    Waste Division

Donald Engel                 67     Chairman of the Board and Chief
                                    Executive Officer

J. Gary McAlpin              48     Former President and Chief
                                    Operating Officer

Kevin J. Bartczak            47     Vice President, Chief Financial Officer,
                                    Corporate Secretary and Treasurer

Michael F. Bracken           42     Executive Vice President - New Construction
                                    Sales and Acting Chief Operating Officer -
                                    Architectural Division

Ronald J. McCracken          50     Executive Vice President - Business
                                    Development and Sales and President of
                                    Bes-Pac, Inc.

Ira S. Merritt               63     Director

Joel M. Pashcow              56     Director

Leonard Toboroff             68     Director

         James E. Ashton, Ph.D. has been the Company's Acting Chief Executive
Officer since November 2000. Dr. Ashton has been a partner with GGG since July
2000 and was retained by the Board of Directors of the Company to assume
operational management and implement certain restructuring initiatives at the
Company. Prior to joining the Company, from 1998-2000, Dr. Ashton was Chairman
and Chief Executive Officer of Precision Partners, Inc. ("Precision Partners"),
a rollup of medium sized machine shops. From 1995 to 1997, Dr. Ashton was
Chairman and Chief Executive Officer of Fiberite, Inc. ("Fiberite"), a specialty
materials company specializing in composite materials such as materials for use
in space shuttles. Dr. Ashton holds a Bachelor of Science degree in Engineering
from the University of Iowa, a Master of Science degree and a Ph.D. in
Engineering from the Massachusetts Institute of Technology and a Master of
Business Administration degree from Harvard Business School.

         Melvin D. Johnson has been the Company's Acting Chief Operating Officer
- Solid Waste Division since November 2000 when he was appointed by Dr. Ashton
and the Board of Directors of the Company. Mr. Johnson has been affiliated with
GGG since July 2000 and is also currently a member of the Executive Management
Committee of Poco Graphite, a materials company that specializes in specialty
graphite material. Prior to joining the Company, from 1998 to 2000, Mr. Johnson
was the Vice President of Precision Partners. From 1996 to 1997, Mr. Johnson was
the General Manager of the Winona Division at Fiberite; and, from 1995 to 1996,
Mr. Johnson was the Vice President - Operations at Trailmobile, a producer of
18-wheeler trailers.

         Donald Engel has been the Company's Chief Executive Officer since March
1996 and Chairman of the Board since May 1997. From March 1996 to May 1997, Mr.
Engel served as Co-Chairman of the Board. Prior to joining the Company, Mr.
Engel was a private investor. From June 1991 to June 1993, Mr. Engel served as a
consultant to Bear Stearns & Co., Inc. From March 1985 to June 1991, Mr. Engel
served as a consultant to Drexel Burnham Lambert where he had been managing
director since 1978. Mr. Engel has served as a director of multi-national
companies such as Revlon Group, Inc., Triangle Industries, Inc., and Uniroyal
Chemical, Inc. Mr. Engel indicated to the Company his intention to resign from
all offices and positions he currently holds with the Company and each of its
subsidiaries.

         J. Gary McAlpin had been the Company's President from January 12, 1998
to April 17, 2001 and its Chief Operating Officer from March 1997 to April 17,
2001. Mr. McAlpin joined the Company in October 1996 initially serving as Vice
President. From January 1996 to October 1996, Mr. McAlpin served as a
construction/project


                                      -26-
<PAGE>

manager of Birwelco-Montenay, a power generator. For the eight years prior to
joining Birwelco-Montenay, Mr. McAlpin served as the Vice President and General
Manager of IDAB Incorporated, a materials handling company. On April 17, 2001,
Mr. McAlpin resigned from all offices and positions he held with the Company and
each of its subsidiaries.

         Kevin J. Bartczak has been the Company's Chief Financial Officer and
Vice President since May 31, 2000 and also the Company's Corporate Secretary and
Treasurer since August 20, 2000. Prior to joining the Company, Mr. Bartczak was
Vice President, Chief Financial Officer, Treasurer and Assistant Secretary of
Pravant, Inc. ("Pravant"), a manufacturer of electronic products designed for
applications within aircraft support, fire control and signal intelligence.
Prior to his tenure at Pravant, from 1993 to 1995, he served as Chief Financial
Officer, Secretary and Director of Opto Mechanik, Inc. ("OMI"), a manufacturer
of electro-optical fire control and assemblies for weapons systems. Mr. Bartczak
was employed from 1987 to 1993 as a division controller of Harsco Corporation, a
manufacturer of heavy equipment and land combat systems. From 1984 to 1987, he
was employed as a division controller of General Defense Corporation, a
manufacturer and developer of ammunition, radar guidance and weapon systems. Mr.
Bartczak served from 1981 to 1984 as a division controller and manager of
corporate accounting of Elkem Metal Company, a producer of metal alloys. From
1979 to 1981, he functioned as senior accountant for the Cyclops Corporation, a
producer of specialty steel, industrial and residential building products and
consumer electronics. As a certified public accountant, he worked as an audit
supervisor for Arthur Young & Co. from 1975 to 1979. Mr. Bartczak holds a
Bachelor of Science degree in Business Management from Indiana University of
Pennsylvania.

         Michael F. Bracken has been the Company's Executive Vice President -
New Construction Sales since July 1996 and has been serving as the Company's
Acting Chief Operating Officer - Architectural Division since October 2000. Mr.
Bracken joined the Company in September 1993 as a salesman of the hi-rise
system. From August 1992 to August 1993, Mr. Bracken was the General Manager and
Construction Project Manager of Brickell Biscayne Condominium in Miami, Florida.
Prior to 1992, Mr. Bracken served as a field manager of Schlumberger Overseas
Ltd., a petroleum engineering company in South East Asia.

         Ronald J. McCracken has been the Company's Executive Vice President -
Business Development and Sales and the President of Bes-Pac since October 1998.
Prior to joining the Company, from February 1986 to October 1998, Mr. McCracken
served as the President and Chief Executive Officer of Bes-Pac, Inc., a
corporation wholly owned by Mr. McCracken ,and engaged in the business of
manufacturing and distributing solid waste handling equipment. The Company
acquired Bes-Pac in October 1998.

         Ira S. Merritt has been a director of the Company since March 1996.
Since his semi-retirement in 1990, Mr. Merritt, a licensed certified public
accountant, has been engaged in selling residential real estate in Boca Raton,
Florida. From 1988 to 1990, Mr. Merritt was employed by the Sidney Kohl Company,
a Florida real estate company, where he established the firm's property
management division. From 1982 to 1988, Mr. Merritt was the Executive Vice
President and Chief Financial Officer of Hanover Companies, Inc. From 1975 to
1982, Mr. Merritt was the senior partner of Merritt, Levy and Cohen, an
accounting firm specializing in the real estate industry.

         Joel M. Pashcow has been a director of the Company since March 1996.
Mr. Pashcow is now the Chairman of the Executive Committee of the Board of
Trustees of Ramco-Gershenson Property Trust (NYSE) and Chairman and President of
Atlantic Realty Trust. Mr. Pashcow served as the Chairman of the Board of
Directors of RPS Realty Trust, a New York Stock Exchange commercial property
REIT, from February 1988 to April 1996. Mr. Pashcow has served as a member of
the Board of Governors of the Real Estate Securities and Syndication Institute
and as a director and member of the executive committee of the National Realty
Committee.

         Leonard Toboroff has been a director of the Company since January 1999.
Mr. Toboroff has served as a Vice President of Riddell Sports, Inc. since April
1998. Since May 1989, Mr. Toboroff has been a Vice Chairman of the Board of
Allis-Chalmers Corp. Additionally, Mr. Toboroff has served as a director of
Ameriscribe Corp. since August 1987 and served as its Chairman and Chief
Executive Officer from December 1987 to May 1988. From May through July 1982,
Mr. Toboroff served as Chairman and Chief Executive Officer of American Bakeries
Company. Mr. Toboroff has served as a director of Banner Aerospace, Inc., a
supplier of aircraft parts since September 1992 and as a director of Mego
Financial Corp., a developer of time share projects and land, since March 2000.
He has also been a director of Engex, Inc. and Saratoga Springs Beverage Corp.
since 1993. Mr. Toboroff has been a practicing attorney since 1961.


                                      -27-
<PAGE>

Committees and Meetings of the Board of Directors

         During 2000, the Board of Directors held 3 meetings and took action 8
additional times by unanimous written consent. No Director attended fewer than
75% of the meetings of the Board of Directors held during 2000 during the period
of such Director's service.

         The only committees of the Board of Directors are the Audit Committee
and the Compensation Committee. The Board does not have a nominating or similar
committee. The Company's Board of Directors performs the functions of a
nominating or similar committee.

         Messrs. Merritt, Pashcow and Toboroff are the current members of the
Company's Audit Committee. The Audit Committee held 3 meetings during 2000. The
duties and responsibilities of the Audit Committee include (a) recommending to
the Board the appointment of the Company's auditors and any termination of
engagement, (b) reviewing the plan and scope of audits, (c) reviewing the
Company's significant accounting policies and internal controls and (d) having
general responsibility for all related auditing matters.

         Messrs. Pashcow and Merritt are the current members of the Company's
Compensation Committee, which committee held 3 meetings during 2000. The
Compensation Committee reviews and approves the compensation of the Company's
executive officers and administers the Company's stock option plans.

Additional Information Concerning Directors

         Compensation. Each non-employee director of the Company receives an
annual fee of $15,000 and is reimbursed for expenses incurred in connection with
activities as a director of the Company. Directors who are also employees do not
receive additional compensation for their services as directors. Non-employee
directors serving on the Company's Compensation Committee and/or Audit Committee
also receive $1,000 per meeting.

         Options. Directors are eligible to receive grants of options and other
awards under the 1998 Executive Incentive Compensation Plan (the "1998 Plan").
Formerly, each non-employee director received an automatic grant of options to
purchase 20,000 shares of common stock, par value $.01 per share (the "Common
Stock"), under the Company's 1996 Directors' Stock Option Plan (the "Directors
Plan") on his or her initial election to the Board of Directors. Thereafter,
each director received an automatic grant of options to purchase 1,000 shares of
Common Stock upon such director's re-election as a member of the Board. For
1998, each of Messrs. Merritt and Pashcow received grants under the Directors
Plan and for 1999, each of Messrs. Merritt, Pashcow and Toboroff received grants
under the Directors Plan. Each option grant, vesting in equal installments over
five years and having a ten-year term, permits the holder to purchase shares at
their fair market value on the date of grant, which was $2.50 in the case of
options granted in 1999. The Directors Plan has been superceded by the 1998
Plan.

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

         Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent of the Company's outstanding Common Stock,
to file with the Securities and Exchange Commission (the "SEC") initial reports
of ownership and reports of changes in ownership of Common Stock. Such persons
are required by SEC regulation to furnish the Company with copies of all such
reports they file.

         To the Company's knowledge, based solely on a review of the copies of
filings furnished to the Company and written or oral representations that no
other reports were required, the Company believes that all of its directors and
executive officers complied during 2000 with the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, with the exception of the
failure by Michael Bracken, the Company's Vice President - New Construction
Sales and Acting Chief Operating Officer - Architectural Division, to timely
file a Form 5 reporting the grant to him of options to purchase 60,000 shares of
Common Stock at an exercise price of $2.50 on August 3, 1993 and the grant to
him of options to purchase 9,000 shares of common stock at an exercise price of
$2.50 on December 31, 1996. The late filing resulted from administrative
oversight.


                                      -28-
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

         The following table sets forth, for the fiscal years ended December 31,
2000, 1999 and 1998, the aggregate compensation awarded to, earned by or paid to
Donald Engel, the Company's Chairman and Chief Executive Officer, J. Gary
McAlpin, the Company's former President and Chief Operating Officer, Bradley
Hacker, the Company's former Chief Financial Officer and Secretary, Kevin J.
Bartczak, the Company's current Chief Financial Officer and Secretary, Ronald J.
McCracken, the Company's Executive Vice President - Business Development and
Sales and President of Bes-Pac and Michael F. Bracken, the Company's Executive
Vice President - New Construction Sales and Acting Chief Operating Officer -
Architectural Division (collectively, the "Named Executive Officers"). No other
executive officers of the Company earned compensation in excess of $100,000
during 2000. The Company did not grant any restricted stock awards or stock
appreciation rights or makes any long-term incentive plan payouts during such
fiscal years.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                         Long-Term
                                                                         Annual Compensation           Compensation
                                                                 ----------------------------------  ----------------
         Name and Principal Position                  Year            Salary           Bonus(1)           Options
------------------------------------------------  -------------  ----------------  ----------------  ----------------
<S>                                                   <C>              <C>              <C>                <C>
Donald Engel                                          2000             $200,000           --               250,000(4)
  Chairman of the Board and                           1999             $180,000         $100,000           200,000(4)
  Chief Executive Officer (2)                         1998             $180,000           --               200,000(3)

J. Gary McAlpin                                       2000             $151,250           --               125,000(4)
  Former President and Chief                          1999             $120,635         $100,000            50,000(4)
  Operating Officer (5)                               1998             $118,008         $100,000           200,000(3)

Bradley Hacker                                        2000             $ 87,488         $ 25,000            --
  Former Chief Financial Officer and                  1999             $ 85,768         $ 40,000            20,000(4)
  Secretary (6)                                       1998             $ 82,840         $ 50,000            10,000(3)

Kevin J. Bartczak                                     2000             $ 72,804         $125,000           150,000(4)
  Vice President, Chief Financial Officer,            1999               --               --                --
  Corporate Secretary and Treasurer (7)               1998               --               --                --

Ronald J. McCracken                                   2000             $112,071           --                --
  Executive Vice President                            1999             $118,024           --                --
  Business Development and Sales and                  1998             $ 20,000           --                --
  President-- Bes-Pac

Michael F. Bracken                                    2000             $122,178           --                15,000(4)
  Executive Vice President - New                      1999             $125,874           --                --
  Construction Sales and Acting Chief                 1998             $117,580           --                15,000(3)
  Operating Officer
------------------
<FN>
(1)  Consists of bonuses paid in 2000 but earned in 1999.
(2)  Mr. Engel has served as the Chief Executive Officer since March 1996,
     served as Co-Chairman of the Board from March 1996 to May 1997 and has
     served Chairman of the Board since May 1997. Mr. Engel indicated to the
     Company his intention to resign from all positions he currently holds with
     the Company and its subsidiaries.
(3)  Represents options granted under the Company's 1996 Stock Option Plan.
(4)  Represents options granted under the Company's 1998 Executive Incentive
     Compensation Plan.
(5)  On April 17, 2001, Mr. McAlpin resigned from all positions he held with
     the Company and its subsidiaries.
(6)  Mr. Hacker voluntarily terminated his employment with the Company in August
     2000.
(7)  Mr. Bartczak has served as the Chief Financial Officer and Vice President
     since May 31, 2000.
</FN>
</TABLE>

                                      -29-
<PAGE>

Employment Agreements

         The Company has entered into an employment agreement with Donald Engel,
effective as of March 25, 1996, which provides for the employment of Mr. Engel
as the Company's Chairman of the Board and Chief Executive Officer. This
employment agreement provides for an annual base salary of $180,000, subject to
annual increases in accordance with the Consumer Price Index. Mr. Engel has
agreed that during the term of his employment agreement and for a period of five
years thereafter, he will not compete or engage in a business competitive with
any recycling or solid-waste disposal business in which the Company or any of
its affiliates then engages and which operates within any state in which the
Company conducts business. On August 3, 2000, the Company entered into an
amendment of Mr. Engel's employment agreement (the "Amendment") to provide for
certain severance provisions. Mr. Engel indicated to the Company his intention
to resign from all positions he currently holds with the Company and its
subsidiaries.

         The Company had also entered into a five-year employment agreement with
J. Gary McAlpin, effective as of March 10, 1998, which provided for the
employment of Mr. McAlpin as the Company's President and Chief Operating
Officer. Mr. McAlpin's employment agreement provided for an annual base salary
of $120,000 subject to annual increases in accordance with the Consumer Price
Index and an annual incentive bonus of not less than $50,000. Pursuant to the
employment agreement, Mr. McAlpin has agreed that during the term of his
employment agreement and for a period of one year thereafter, he will not
consult with or engage in or own in excess of 5% of any entity which engages in
the business of providing mechanical multi-story recycling and which operates
within any state in which we conduct business. Mr. McAlpin's employment
agreement also contained certain provisions related to severance payments which
are no longer applicable due to his resignation. On April 17, 2001, Mr.
McAlpin's employment agreement was terminated in connection with his resignation
from the Company and all provisions of the employment agreement were rendered
void with the exception of those provisions pertaining to Mr. McAplin's
covenants not to compete with the Company set forth above as well as the
providing of certain welfare benefits.

         In connection with the Company's acquisition of Bes-Pac, the Company
entered into a five-year employment agreement with Ronald J. McCracken,
effective as of October 29, 1998, which provides for the employment of Mr.
McCracken as the Company's Executive Vice President - Business Development and
Sales. The initial term of this agreement will be automatically extended for
successive one-year terms unless either party gives notice of its intent not to
extend the term. Mr. McCracken's employment agreement provides for an annual
base salary of $120,000 subject to annual increases in accordance with the
Consumer Price Index. Pursuant to this employment agreement, Mr. McCracken has
agreed that during the term of his employment agreement and for a period of two
years thereafter, he will not, directly or indirectly, engage in or have any
interest in any business (whether as an employee, officer, director, partner,
agent, creditor, consultant or otherwise) which engages in the business of
providing manufacturing, marketing, distributing and selling non-mobile solid
waste handling equipment; provided, however, that such restriction shall not
apply to the ownership or acquisition by Mr. McCracken of securities of any
issuer that is registered under the Securities Exchange Act of 1934, as amended,
and that are listed for trading on any national securities exchange or are
quoted on NASDAQ, so long as Mr. McCracken does not own, control or acquire a
controlling interest in or become a member of a group which exercises direct or
indirect control of, more than two percent of any class of capital stock of such
corporation. Upon the termination of Mr. McCracken's employment with the Company
for cause or by the executive without cause, Mr. McCracken will be entitled to
receive any unpaid salary through the date of termination. Upon the termination
of Mr. McCracken's employment by the Company without cause, Mr. McCracken will
be entitled to receive (i) any unpaid salary accrued through the date of
termination, (ii) base salary through the expiration date of the agreement and
(iii) benefits that would have been paid by the Company through the expiration
date of the employment agreement.

The GGG Agreement

         The Company has entered into an understanding in principle to retain
GGG, such agreement to be subject to definitive agreements to be entered into in
the future (the "GGG Agreement"). Pursuant to the terms of the GGG Agreement,
the Company has retained the services of James Ashton who serves as the
Company's Acting Chief Executive Officer, assuming responsibilities for
operating the Company, Melvin Johnson who serves as the Company's Acting Chief
Operating Officer--Solid Waste Division and Ronald Miller who serves as a
consultant


                                      -30-
<PAGE>

providing financial management assistance to Kevin Bartczak, the Company's Chief
Financial Officer, and James Ashton. Under the terms of the GGG Agreement, Dr.
Ashton's services are provided on a one-half time basis for a fee of $30,000 per
month plus reimbursement of all reasonable expenses incurred by Dr. Ashton in
connection with the fulfillment of his duties to the Company. Melvin Johnson's
services are provided on a full time basis for a fee of $30,000 per month plus
reimbursement of all reasonable expenses incurred by Mr. Johnson in connection
with the fulfillment of his duties to the Company. From November 2000 to January
2000 (the "Initial Period"), Ronald Miller's services were provided on a
half-time basis for a fee of $20,000 per month plus reimbursement of all
reasonable expenses incurred by Mr. Miller in connection with the fulfillment of
his duties to the Company. Mr. Miller's services are now provided approximately
four days per month or as required from time to time for a fee of $2,400 per day
plus reimbursement of all reasonable expenses incurred by Mr. Miller in
connection with the fulfillment of his duties to the Company.

         In addition to the fee for service payments, under the terms of the GGG
Agreement, GGG will receive certain performance payments based upon a percentage
of the Company's Net Equity (as defined in the GGG Agreement) or based upon a
percentage of multiples of the Company's earnings, such performance payments to
be paid to GGG at the end of the period for which its consultants were retained
by the Company.

Stock Incentive Plans

         In July 1993, the Company adopted the 1993 Stock Option Plan pursuant
to which 350,000 shares of Common Stock were reserved for issuance to officers
and other key employees and to certain other persons who are employed or engaged
by the Company. In 1995, the number of shares of Common Stock reserved for
issuance under this plan was increased by 150,000 shares to 500,000 shares.
Under the 1993 Stock Option Plan, options have been designated as "incentive
stock options" or "non-qualified options" within the meaning of the Internal
Revenue Code of 1986, as amended. As of December 31, 2000, options to purchase
an aggregate of 342,440 shares of Common Stock had been granted and were
outstanding under the 1993 Stock Option Plan at an average exercise price of
$2.85 per share. No additional options are being granted under this option plan.

         In March 1996, the Company adopted the 1996 Stock Option Plan pursuant
to which 1,000,000 shares of Common Stock have been reserved for issuance to
officers and other key employees and to certain other persons who are employed
or engaged by the Company. In connection with the adoption of the 1996 Stock
Option Plan, the Company's Compensation Committee granted Donald Engel, the
Company's Chairman of the Board and Chief Executive Officer, options to purchase
an aggregate of 500,000 shares of Common Stock. Such options were to vest over a
five-year period with vesting to accelerate in the event that the price of the
common stock increased to $6.00 per share, which acceleration occurred in July
1996. As of December 31, 2000, options to purchase an aggregate of 914,000
shares of Common Stock had been granted and were outstanding under the 1996
Stock Option Plan at an average exercise price of $2.53 per share. No additional
options are being granted by the Company under the 1996 Stock Option Plan.

         In March 1996, the Company adopted a new directors stock option plan
pursuant to which 150,000 shares of Common Stock were reserved for issuance.
Only non-employee directors of the Company are eligible to receive options under
this plan. The plan provided for an automatic grant of an option to purchase
20,000 shares of Common Stock upon a person's election as a director and an
automatic grant of an option to purchase 1,000 shares of Common Stock upon such
person's re-election as a director. As of December 31, 2000, options to purchase
an aggregate of 94,000 shares of Common Stock had been granted under the new
directors stock option plan at an average exercise price of $2.48 per share. The
1996 directors stock option plan has been superceded by the 1998 Executive
Incentive Compensation Plan.

         In March 1998, the Company adopted the 1998 Executive Incentive
Compensation Plan (the "1998 Plan"). The 1998 Plan provides for grants of stock
options, stock appreciation rights ("SARs"), restricted stock, deferred stock,
other stock-related awards and performance or annual incentive awards that may
be settled in cash, stock or other property. The 1998 Plan was approved by the
Company's shareholders in June 1998 at the Company's 1998 Annual Meeting of
Shareholders. The 1998 Plan is intended to supplement the Company's existing
stock option plans. Pursuant to the 1998 Plan, an aggregate of 2,000,000 shares
have been reserved for issuance to the Company's officers, directors, employees
and independent contractors. As of December 31, 2000, options to purchase an
aggregate of approximately 1,601,100 shares of Common Stock were issued and
outstanding under the 1998 Plan at an average exercise price of $1.72 per share.


                                      -31-
<PAGE>

Compensation Committee Interlocks and Insider Participation

         The membership of Compensation Committee of the Board of Directors in
2000 consisted of Joel Pashcow and Ira Merritt. No member of the Compensation
Committee is now or ever was an officer or an employee of the Company. No
executive officer of the Company serves as a member of the Compensation
Committee of the Board of Directors of any entity one or more of whose executive
officers serves as a member of the Company's Board of Directors or Compensation
Committee. There were no compensation committee interlocks during fiscal 2000.

Option/SAR Grant Table

         The following table sets forth information concerning grants of stock
options made during the year ended December 31, 2000 to the Named Executive
Officers. No stock appreciation rights were granted in 2000.

                          OPTION GRANTS FOR FISCAL 2000
                               (Individual Grants)

<TABLE>
<CAPTION>
                                                                     Percent of
                                                                   Total Options
                                                  Number of          Granted To
                                               Options Granted      Employees In      Exercise       Expiration
                     Name                                           Fiscal Year       ($/Share)         Date
-------------------------------------------  -------------------  ---------------  --------------  ---------------
<S>                                                 <C>                 <C>             <C>             <C>
Donald Engel............................            250,000             35.6%           $1.02           5/5/10
J. Gary McAlpin.........................            125,000             17.8%           $1.02           5/5/10
Bradley Hacker..........................              --               --                --              --
Kevin Bartczak..........................            150,000             21.4%           $1.08           5/31/10
Michael F. Bracken......................             15,000              2.1%           $1.02           5/5/10
Ronald J. McCracken.....................              --               --                --              --
</TABLE>

AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE

         The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers at December 31,
2000. No stock options were exercised by the Named Executive Officers during the
year ended December 31, 2000. No stock appreciation rights were granted or are
outstanding.

<TABLE>
<CAPTION>
                                                                   Number of Securities
                                       Shares                     Underlying Unexercised    Value of Unexercised In-The-
                                      Acquired                     Options at 12/31/00        Money Options at 12/31/00
                                        Upon         Value     --------------------------- --------------------------------
               Name                   Exercise     Realized    Exercisable   Unexercisable   Exercisable   Unexercisable
---------------------------------- ------------- ----------- -------------- -------------- -------------- -----------------
<S>                                      <C>          <C>      <C>             <C>               <C>            <C>
Donald Engel...................          --           --       1,045,000       305,000           (2)            --
J. Gary McAlpin................          --           --         338,417       136,583           (2)            --
Bradley Hacker.................          --           --             --            --            --             --
Kevin Bartczak.................          --           --          17,500       132,500           (2)            --
Michael F. Bracken.............          --           --         104,317        25,683           (2)            --
Ronald J. McCracken............          --           --             --            --            --             --
--------------------
<FN>
(1)  Values are calculated by subtracting the exercise price from the fair market value of the underlying common stock. For
     purposes of this table, fair market value is deemed to be $.09375, the average of the high and low common stock price
     reported for OTC Bulletin Board transactions on December 31, 2000.

(2)  The option exercise price exceeded the fair market value of the Common Stock on such date, and accordingly, such
     options were "underwater."
</FN>
</TABLE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of April 11, 2001, the number of
shares of Common Stock that were owned beneficially by (i) each person who is
known by the Company to beneficially own more than 5% of the


                                      -32-
<PAGE>

Common Stock, (ii) each director, (iii) the Named Executive Officers (as defined
in "Executive Compensation") and (iv) all directors and executive officers of
the Company as a group:

<TABLE>
<CAPTION>
                                                                                      Total number of
                                                                                           Shares
                                                       Aggregate       Acquirable       Beneficially
                                                       Number of     Within 60 Days    Owned (Columns      Percentage
                     Name                              Shares(A)         (1)(B)           (A)+(B)          Ownership
--------------------------------------------------- -------------- ----------------- ------------------ ---------------
<S>                                                    <C>             <C>               <C>                  <C>
Donald Engel.............................                 10,000        1,350,000         1,360,000            8.0%
J. Gary McAlpin..........................                     --          475,000           475,000            2.7%
Bradley Hacker...........................                     --               --                --            *
Kevin Bartczak...........................                     --          150,000           150,000            *
Ronald J. McCracken......................              2,517,883               --         2,517,883           14.9%
Michael F. Bracken.......................                     --          130,000           130,000            *
Mario DeVivo.............................              1,278,882               --         1,278,882            7.5%
Evelio Acosta............................              1,194,094               --         1,194,094            7.0%
Ira S. Merritt...........................                  1,000           24,000            25,000            *
Joel M. Pashcow..........................                     --           24,000            24,000            *
Leonard Toboroff.........................                     --           46,000            46,000            *
General Electric Capital Corporation and
   Group(2)..............................                     --       17,745,689        17,745,689           51.2%
Northern Trust Corporation and Group(3).....           1,192,794               --         1,192,794            7.0%
All directors and executive officers as
   a group (9 persons)...................              2,528,883        1,919,280         4,727,883           25.1%
------------------
<FN>
* Represents less than 1% of the outstanding common stock.
(1)  Reflects the number of shares that could be purchased by the holder by exercise of options granted under our stock
     option plans or warrants at April 10, 2001 or within 60 days thereafter.

(2)  Based on Amendment No. 1, dated December 6, 2000, to Schedule 13D. Each of General Electric Capital Services, Inc.
     and General Electric Company may be deemed to own the shares of Common Stock beneficially owned by General
     Electric Capital Corporation because of certain affiliations. General Electric Capital Services and General
     Electric Company disclaim beneficial ownership.

(3)  Based on Schedule 13G, filed February 7, 2000 by Northern Trust Corporation as a Parent Holding Company (as such
     term is used in Rule 13d-1 of the Exchange Act) on behalf of the Northern Trust Company, Northern Trust Bank of
     Florida, N.A. and Northern Trust Quantitative Advisors, Inc., all of which are banks as defined in Section 3(a)(b)
     of the Exchange Act and subsidiaries of Northern Trust Corporation.
</FN>
</TABLE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Common Stock Ownership

         In February 1997, the Company acquired all of the issued and
outstanding capital stock of Hesco from Evelio Acosta. In connection with these
transactions, Hesco entered into a lease with Acosta Family Limited Partnership,
an affiliate of Evelio Acosta, for Hesco's corporate headquarters and
manufacturing facilities in an approximately 110,000 square foot building
situated in Miami, Florida at a monthly rental of approximately $34,000 per
month, plus applicable sales tax. The Company entered into an agreement with the
partnership unconditionally guaranteeing Hesco's obligations under this lease.
Also, in connection with the acquisition of Hesco, Hesco entered into a lease
with Evelio Acosta and his spouse, Gladys Acosta, for an approximately 3,000
square foot shop in Hialeah, Florida at a monthly rent of approximately $1,100.
The Company also guaranteed the obligations of Hesco under this lease. During
2000, an aggregate of approximately $450,000 was paid to Evelio Acosta under
these leases.

         In connection with the Company's acquisition of Hesco and Atlantic
Maintenance of Miami, Donald Engel, the Company's Chairman of the Board and
Chief Executive Officer, loaned the Company $500,000, which loan accrued
interest at an annual rate of 10% per annum. The Company repaid the principal
amount of the loan, together with $33,333 of accrued interest, in October 1998
with amounts available under the Company's financing arrangements with General
Electric Capital Corporation and participating lenders. In connection with this
loan, the


                                      -33-
<PAGE>

Company granted Mr. Engel warrants to purchase an aggregate of 250,000 shares of
Common Stock at a price of $2.75 per share, which purchase price was slightly
greater than the market price of the Common Stock on the date of grant of such
warrants.

         In connection with the Company's acquisition of Bes-Pac, the Company
entered into a five-year employment agreement with Ronald McCracken, the former
sole shareholder of Bes-Pac, pursuant to which Mr. McCracken is serving as the
Company's Executive Vice President of Business Development and Sales.
Additionally, in connection with this acquisition, amendments to certain real
property leases respecting three facilities owned by Mr. McCracken at which
Bes-Pac conducts business operations were executed, which, among other things,
shortened the term of two of such leases to a period of seven years. In
addition, Bes-Pac leases approximately 7,000 square feet comprising the first
floor of an office building in Easley, South Carolina. The lease provides for an
initial rent of approximately $3,300 per month with increases in years three
through seven. The lease expires in May 31, 2007 and is leased from a
partnership in which one of the partners is Mr. McCracken. The Company agreed to
guaranty Bes-Pac's obligations under all of these leases. During 2000, an
aggregate of approximately $367,000 was paid to Mr. McCracken under these
leases.

         On February 22, 1999, the Company consummated the acquisition of the
DeVivo Companies. The purchase was consummated pursuant to a Stock Purchase
Agreement by and among the Company, the DeVivo Companies, Mario DeVivo and two
other selling stockholders owning 10% each of Ecological Technologies, Inc. with
Mario DeVivo owning the remaining 80%. In connection with these transactions,
the Company entered into five-year employment agreements with each of the
sellers, and DeVivo entered into a long-term lease with Mario DeVivo expiring
February 28, 2011 for DeVivo's plant and office facility, an approximately
90,000 square foot building situated on approximately seven acres of land in
Newtown, Connecticut, for a rental of approximately $30,000 per month. The
Company guaranteed the obligations of DeVivo under this lease. During 2000, an
aggregate of approximately $360,000 was paid to Mario DeVivo under this lease.

         On December 16, 1999, the Company consummated the acquisition of
American Gooseneck, Inc. The purchase was consummated pursuant to the terms of a
Stock Purchase Agreement by and among the Company, American Gooseneck and all of
the shareholders of American Gooseneck (collectively, the "AG Shareholders"). In
connection with the acquisition, American Gooseneck entered into a long-term
lease with Hambicki Investment Partnership, an affiliate of the AG Shareholders,
expiring December 17, 2004, with respect to American Gooseneck's principal
manufacturing plant and office facility, an approximately 44,000 square foot
building situated on approximately five acres of land located in Phoenix,
Arizona, for a rental of approximately $12,000 per month. The Company agreed to
guaranty American Gooseneck's obligations under the lease. American Gooseneck
has an option to renew the lease for an additional 60 months. During 2000, an
aggregate of approximately $152,000 was paid to Hambicki Investment Partnership
under this lease.

         On July 5, 2000, the Company sold 50 shares of newly created 13% Series
C Preferred Stock, $0.01 par value per share (the "Series C Preferred Stock"),
to Donald Engel, the Company's Chairman of the Board and Chief Executive
Officer, for an aggregate purchase price of $500,000. The Series C Preferred
Stock ranks: (i) prior to all of the Company's Common Stock; (ii) prior to any
class or series of capital stock of the Company hereafter created specifically
ranking by its terms junior to any Series C Preferred Stock of whatever
subdivision, and (iii) junior to the Company's Series B Preferred Stock, in each
case as to distributions of assets upon liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary. The holders of the Series C
Preferred Stock are entitled to receive cumulative cash dividends, payable
quarterly in arrears, at the rate of 13% per annum. Dividends on the Series C
Preferred Stock accrue from the date of issuance or thereafter, from the most
recent date on which dividends were payable, and are payable quarterly each
year. The Series C Preferred Stock may be redeemed, in whole or in part, at the
option of the Company at any time prior to October 31, 2001 at $10,000 per
share, plus accrued and unpaid dividends, if any, to the date of redemption. Any
and all outstanding shares of Series C Preferred Stock are required to be
redeemed by the Company on October 31, 2001. Also, pursuant to the terms of the
Credit Facility, the Company is permitted to return or repay amounts invested by
Mr. Engel only to the extent that (i) no Default or Event of Default (as defined
in the Credit Agreement) shall have occurred, and (ii) after giving effect to
the return or repayment of the amounts invested by Mr. Engel, the Company and
its subsidiaries shall have Borrowing Availability (as defined in the Credit
Agreement) of at least $2,500,000.00. Also, payment of the dividends is subject
to the same conditions set forth with respect to the return or repayment of the
amounts invested by Mr. Engel.


                                      -34-
<PAGE>

         In connection with consummation of the transactions contemplated by the
Fourth Amendment, the Company i ssued the Warrant to GECC as consideration for
GECC making an additional $5,500,000 loan to the Borrowers. The Warrant is
exercisable at any time or from time to time to and including December 4, 2010,
to purchase 17,382,053 shares of the Common Stock of the Company at an exercise
price of $.01 per share. As additional consideration for the Warrant, GECC
surrendered to the Company for cancellation the warrant dated as of October 28,
1998. The Company has entered into a Registration Rights Agreement with GECC,
dated December 4, 2000 (the "Registration Rights Agreement"), providing GECC
with certain registration rights with respect to the shares of Common Stock
issuable upon exercise of the Warrant.

ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K

         (a)      Exhibits

  Exhibits                             Description
------------ -------------------------------------------------------------------
    3.1       Company's Amended and Restated Articles of Incorporation.
    3.2       Form of Subscription Agreement between the Registrant and the
              purchasers of the Series B Convertible Preferred Stock, including
              forms of accompanying Warrant, Registration Rights Agreement and
              Certificate of Designation of the Series B Convertible Preferred
              Stock (1)
    3.3       Certificate of Designation of 13% Series C Preferred Stock of
              Hi-Rise Recycling Systems, Inc. (2)
    3.4       Company's Bylaws. (3)
    4.1       Form of Common Stock Certificate. (4)
    4.2       Form of Underwriter's Warrant. (5)
    4.3       Stock Purchase Warrant, dated as of October 28, 1998, issued by
              Hi-Rise to Key Corporate and NationsBank, N.A. (6)
    4.4       Stock Purchase Warrant, dated December 4, 2000.
    10.1      1993 Stock Option Plan. (7)(8)
    10.2      Form of Indemnification Agreement between the Company and each of
              its executive officers and directors. (8)(9)
    10.3      Forms of Monitoring and Service Agreements. (10)
    10.4      United States Patent No. 5,031,829 dated July 16, 1991. (11)
    10.5      Assignment of Patent dated June 15, 1993, by Mark Shantzis in
              favor of the Company. (12)
    10.6      International Application under the Patent Cooperation Treaty.
              (13)
    10.7      Request for Entry into National Phase under Article 22 or 39 of
              the Patent Cooperation Treaty dated January 24, 1992 filed in
              Canada. (14)
    10.8      Request for Entry into Regional Phase under the Patent Cooperation
              Treaty dated January 20, 1993 filed in the European Community.
              (15)
    10.9      Application under the Patent Cooperation Treaty filed in Japan.
              (16)
    10.10     Application under the Patent Cooperation Treaty filed in Korea.
              (17)
    10.11     Merger Agreement between the Company, IDC Acquisition Sub, Inc.,
              IDC Systems and the stockholders of IDC Systems. (18)
    10.12     Employment Agreement between the Company and Seymour Oestreicher.
              (8)(18)
    10.13     Registration Rights Agreement dated June 27, 1995, between the
              Company and Norton Herrick. (19)
    10.14     Asset Purchase Agreement dated February 3, 1997 among the Company,
              WC Acquisition Corp. and Wilkinson Company, Inc., including Form
              of Lease. (20)
    10.15     Lease dated October 9, 1996 between Recycltech, Ltd. and Pianosi
              Bros. Construction Ltd. (21)
    10.16     Compromise Agreement dated July 1996 between the Company and
              Jeffrey Daniels. (22)
    10.17     Compromise Agreement dated July 1996 between the Company and
              Thomas Witter. (23)
    10.18     1996 Stock Option Plan (8) (24)
    10.19     1996 Directors Stock Option Plan. (8) (25)
    10.20     Employment Agreement dated March 25, 1996 between the Company and
              Donald Engel. (8) (26)
    10.21     Employment and Consulting Agreement dated March 25, 1996 between
              the Company and Mark D. Shantzis. (8) (27)


                                      -35-
<PAGE>

  Exhibits                             Description
------------ -------------------------------------------------------------------
    10.22     Agreement and Plan of Merger dated as of February 11, 1998 by and
              among the Company, HS Acquisition Corp., Hesco Sales, Inc. and
              Evelio Acosta. (28)
    10.23     Business Lease dated February 20, 1998 between Evelio and Gladys
              Acosta and Hesco Sales, Inc. (29)
    10.24     Business Lease dated February 20, 1998 between Acosta Family
              Limited Partnership and Hesco Sales, Inc. (30)
    10.25     Unconditional Continuing Guaranty of Leases dated February 20,
              1998 by and between the Company and Evelio and Gladys Acosta. (31)
    10.26     Unconditional Continuing Guaranty of Leases dated February 20,
              1998 by and between the Company and Acosta Family Limited
              Partnership. (33)
    10.27     Indemnification Agreement dated February 20, 1998 by and among the
              Company, HS Acquisition Corp., AM Acquisition Corp., Hesco Sales,
              Inc., Atlantic Maintenance of Miami, Inc. and Evelio Acosta. (33)
    10.28     Employment Agreement dated February 20, 1998 between Hesco Sales,
              Inc. and Evelio Acosta. (8) (34)
    10.29     Employment Agreement dated March 10, 1998 between the Company and
              J. Gary McAlpin. (8) (35)
    10.30     Employment Agreement dated March 10, 1998 between the Company and
              Bradley Hacker. (8) (36)
    10.31     Settlement Agreement and Mutual General Release between Milton
              Payton and the Company dated March 2, 1998. (37)
    10.32     Credit Agreement (the "Credit Agreement"), dated as of October 28,
              1998, by and among Hi-Rise Recycling Systems, Inc., IDC
              Acquisition Sub, Inc., Wilkinson Company, Inc., Recycltech
              Enterprises Inc., Hesco Sales, Inc., United Truck and Body
              Corporation, Hesco Export Corporation, BPI Acquisition Corp., and
              DII Corporation, as Borrowers, General Electric Capital
              Corporation, NationsBank, N.A., Key Corporate Capital, Inc. and
              the other lenders signatory thereto, as Lenders, General Electric
              Capital Corporation, as Administrative Agent for the Lenders, and
              NationsBank, N.A., as Revolver Agent for the Lenders. (38)
    10.33     Revolving Note (Revolver A), dated as of October 28, 1998, in the
              aggregate principal amount of $2,250,000 issued by the Borrowers
              to General Electric Capital Corporation ("GECC"). (39)
    10.34     Revolving Note (Revolver A), dated as of October 28, 1998, in the
              aggregate principal amount of $3,350,000 issued by the Borrowers
              to NationsBank, N.A. ("NationsBank"). (40)
    10.35     Revolving Note (Revolver B), dated as of October 28, 1998, in the
              aggregate principal amount of $3,150,000 issued by the Borrowers
              to GECC. (41)
    10.36     Revolving Note (Revolver B), dated as of October 28, 1998, in the
              aggregate principal amount of $3,150,000 issued by the Borrowers
              to NationsBank. (42)
    10.37     Revolving Note (Revolver A), dated as of October 28, 1998, in the
              aggregate principal amount of $2,400,000 issued by the Borrowers
              to Key Corporate Capital, Inc., ("Key Corporate"). (43)
    10.38     Revolving Note (Revolver B), dated as of October 28, 1998, in the
              aggregate principal amount of $2,700,000 issued by the Borrowers
              to Key Corporate. (44)
    10.39     Term Note (Term Loan A), dated as of October 28, 1998, in the
              aggregate principal amount of $1,050,000 issued by the Borrowers
              to GECC. (45)
    10.40     Term Note (Term Loan A), dated as of October 28, 1998, in the
              aggregate principal amount of $3,150,000 issued by the Borrowers
              to NationsBank. (46)
    10.41     Term Note (Term Loan A), dated as of October 28, 1998, in the
              aggregate principal amount of $1,800,000 issued by the Borrowers
              to Key Corporate. (47)
    10.42     Term Note (Term Loan B), dated as of October 28, 1998, in the
              aggregate principal amount of $6,300,000 issued by the Borrowers
              to GECC. (48)
    10.43     Term Note (Term Loan B), dated as of October 28, 1998, in the
              aggregate principal amount of $2,700,000 issued by the Borrowers
              to NationsBank. (49)
    10.44     Acquisition Loan Note, dated as of October 28, 1998, in the
              aggregate principal amount of $2,250,000 issued by the Borrowers
              to GECC. (50)
    10.45     Acquisition Loan Note, dated as of October 28, 1998, in the
              aggregate principal amount of $3,350,000 issued by the Borrowers
              to NationsBank. (51)
    10.46     Acquisition Loan Note, dated as of October 28, 1998, in the
              aggregate principal amount of $2,400,000 issued by the Borrowers
              to Key Corporate. (52)


                                      -36-
<PAGE>

  Exhibits                             Description
------------ -------------------------------------------------------------------
    10.47     Swing Line Loan (Revolver A), dated as of October 28, 1998, in the
              aggregate principal amount of $1,000,000 issued by the Borrowers
              to NationsBank. (53)
    10.48     Swing Line Loan (Revolver B), dated as of October 28, 1998, in the
              aggregate principal amount of $1,000,000 issued by the Borrowers
              to NationsBank. (54)
    10.49     Security Agreement, dated as of October 28, 1998, between the
              Borrowers and GECC, in its capacity as Administrative Agent for
              the Borrowers under the Credit Agreement. (55)
    19.50     Pledge Agreement, dated as of October 28, 1998, between Hi-Rise
              Recycling Systems, Inc. and GECC, in its capacity as
              Administrative Agent for the Borrowers under the Credit Agreement.
              (56)
    10.51     Pledge Agreement, dated as of October 28, 1998, between Hesco
              Sales, Inc. and GECC, in its capacity as Administrative Agent for
              the Lenders under the Credit Agreement. (57)
    10.52     Registration Rights Agreement, dated as of October 28, 1998,
              between Hi-Rise and GECC, NationsBank and Key Corporate. (58)
    10.53     Securities Purchase Agreement, dated as of October 28, 1998, by
              and among Hi-Rise, GECC, NationsBank and Key Corporate. (59)
    10.54     Agreement and Plan of Merger, dated as of October 9, 1998, between
              the Company, BPI Acquisition Corp. Bes-Pac, Inc. and Ronald J.
              McCracken (60)
    10.55     Stock Purchase Agreement, dated as of February 23, 1999 among the
              Company, DII Acquisition Corp., DeVivo Industries, Inc.,
              Ecological Technologies, Inc., Mario DeVivo, Mariano Tucciarone
              and Anthony Rosati (61)
    10.56     Stock Purchase Agreement, dated as of December 13, 1999, by and
              among the Company, American Gooseneck, Inc. and the shareholders
              of American Gooseneck, Inc. (62)
    10.57     Hi-Rise Recycling Systems, Inc. 1998 Executive Incentive
              Compensation Plan (8) (63)
    10.58     Second Amendment to Credit Agreement and Composite Amendment,
              dated as of June 30, 2000 (64)
    10.59     Third Amendment to Credit Agreement and Composite Amendment
              Agreement, dated October 19, 2000.
    10.60     Fourth Amendment to Credit Agreement and Composite Amendment
              Agreement, dated December 4, 2000.
    10.61     Securities Purchase Agreement, dated as of December 4, 2000,
              between GECC and the Company.
    10.62     Registration Rights Agreement, dated as of December 4, 2000,
              between GECC and the Company.
    10.63     Fifth Amendment to Credit Agreement and Composite Amendment
              Agreement, dated December 9, 2000.
    10.64     First Amendment, dated August 3, 2000, to the Employment Agreement
              between the Company and Donald Engel.
    21.1      Subsidiaries of the Company.
    23.1      Consent of Independent Certified Public
              Accountants-PricewaterhouseCoopers LLP, dated April 17, 2001.

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

(1)  Incorporated by reference to Exhibit 10.1 filed with the Company's Current
     Report on Form 8-K dated June 24, 1997.

(2)  Incorporated by reference to Exhibit 2 to the Company's Current Report on
     Form 8-K, dated June 30, 2000.

(3)  Incorporated by reference to Exhibit 3.2 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(4)  Incorporated by reference to Exhibit 4.1 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(5)  Incorporated by reference to Exhibit 4.2 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(6)  Incorporated by reference to Exhibits 10.24 and 10.25 of the Company's
     Quarterly Report on Form 10-QSB for the quarter ended September 30, 1998.

(7)  Incorporated by reference to Exhibit 10.1 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(8)  Management contract or compensation plan.


                                      -37-
<PAGE>

(9)  Incorporated by reference to Exhibit 10.6 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(10) Incorporated by reference to Exhibit 10.7 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(11) Incorporated by reference to Exhibit 10.8 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(12) Incorporated by reference to Exhibit 10.9 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(13) Incorporated by reference to Exhibit 10.10 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(14) Incorporated by reference to Exhibit 10.11 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(15) Incorporated by reference to Exhibit 10.12 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(16) Incorporated by reference to Exhibit 10.13 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(17) Incorporated by reference to Exhibit 10.14 filed with the Company's
     Registration Statement on Form SB-2 (No. 33-63778-A).

(18) Incorporated by reference to Exhibit 10.18 and 10.19 filed with the
     Company's Form 10-KSB for the year ended December 31, 1994.

(19) Incorporated by reference to Exhibit 10.2 filed with the Company's Current
     Report on Form 8-K dated June 27, 1995.

(20) Incorporated by reference to Exhibit 2 filed with the Company's Current
     Report on Form 8-K dated February 3, 1997.

(21) Incorporated by reference to Exhibit 10.25 filed with the Company's Form
     10-KSB for the year ended December 31, 1996.

(22) Incorporated by reference to Exhibit 10.1 filed with the Company's
     Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996.

(23) Incorporated by reference to Exhibit 10.2 filed with the Company's
     Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996.

(24) Incorporated by reference to Exhibit A filed with the Company's Definitive
     Proxy Statement with respect to its 1996 Annual Meeting of Shareholders
     held on July 16, 1996 (the "1996 Proxy Statement").

(25) Incorporated by reference to Exhibit B filed with the 1996 Proxy Statement.

(26) Incorporated by reference to Exhibit 10.30 filed with the Company's Form
     10-KSB for the year ended December 31, 1996.

(27) Incorporated by reference to Exhibit 10.31 filed with the Company's Form
     10-KSB for the year ended December 31, 1996.

(28) Incorporated by reference to Exhibit 2.1 filed with the Company's Current
     Report on Form 8-K dated March 9, 1998.

(29) Incorporated by reference to Exhibit 10.37 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.

(30) Incorporated by reference to Exhibit 10.38 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.


                                      -38-
<PAGE>

(31) Incorporated by reference to Exhibit 10.39 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.

(32) Incorporated by reference to Exhibit 10.40 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.

(33) Incorporated by reference to Exhibit 10.41 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.

(34) Incorporated by reference to Exhibit 10.42 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.

(35) Incorporated by reference to Exhibit 10.43 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.

(36) Incorporated by reference to Exhibit 10.44 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.

(37) Incorporated by reference to Exhibit 10.45 filed with the Company's Form
     10-KSB for the year ended December 31, 1997.

(38) Incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(39) Incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(40) Incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(41) Incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(42) Incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(43) Incorporated by reference to Exhibit 10.6 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(44) Incorporated by reference to Exhibit 10.7 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(45) Incorporated by reference to Exhibit 10.8 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(46) Incorporated by reference to Exhibit 10.9 of the Company's Quarterly Report
     on Form 10-QSB for the quarter ended September 30, 1998.

(47) Incorporated by reference to Exhibit 10.10 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(48) Incorporated by reference to Exhibit 10.11 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(49) Incorporated by reference to Exhibit 10.12 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(50) Incorporated by reference to Exhibit 10.13 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(51) Incorporated by reference to Exhibit 10.14 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(52) Incorporated by reference to Exhibit 10.15 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.


                                      -39-
<PAGE>

(53) Incorporated by reference to Exhibit 10.16 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(54) Incorporated by reference to Exhibit 10.17 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(55) Incorporated by reference to Exhibit 10.18 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(56) Incorporated by reference to Exhibit 10.19 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(57) Incorporated by reference to Exhibit 10.20 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(58) Incorporated by reference to Exhibit 10.21 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(59) Incorporated by reference to Exhibit 10.22 of the Company's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1998.

(60) Incorporated by reference to Exhibit 10.1 to the Company's Current Report
     on Form 8-K, dated October 9, 1998.

(61) Incorporated by reference to Exhibit 2.1 to the Company's Current Report on
     Form 8-K, dated February 23, 1999.

(62) Incorporated by reference to Exhibit 2.1 to the Company's Current Report on
     Form 8-K, dated December 16, 1999.

(63) Incorporated by reference to Exhibit 4.1 filed with the Company's
     Registration Statement on Form S-8 (No. 333-36072).

(64) Incorporated by reference to Exhibit 1 to the Company's Current Report on
     Form 8-K, dated June 30, 2000.

         (b)      Reports on Form 8-K:

                  None.



                                      -40-
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                            HI-RISE RECYCLING SYSTEMS, INC.

Date:  April 17, 2001
                                            By: /s/ JAMES ASHTON
                                               ---------------------------------
                                               James Ashton, Acting Chief
                                                 Executive Officer

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
            Signature                               Position                                  Date
-----------------------------------------------------------------------------------------------------------
<S>                                  <C>                                                <C>
By: /s/ JAMES ASHTON                 Acting Chief Executive Officer (Principal          April 17, 2001
    ----------------------------       Executive Officer)
    James Ashton

By: /s/ KEVIN BARTCZAK               Vice President, Chief Financial Officer,           April 17, 2001
    ----------------------------       Corporate Secretary and Treasurer
    Kevin Bartczak                     (Principal Financial and Accounting
                                       Officer)

By: /S/ IRA S. MERRITT               Director                                           April 17, 2001
    ----------------------------
    Ira S. Merritt

By: /s/ JOEL M. PASHCOW              Director                                           April 17, 2001
    ----------------------------
    Joel M. Pashcow

By: /s/ LEONARD TOBOROFF             Director                                           April 17, 2001
    ----------------------------
    Leonard Toboroff
</TABLE>


                                      -41-
<PAGE>


                                TABLE OF CONTENTS


                                                                           Pages

Report of Independent Certified Public Accountants...........................F-2
Consolidated Financial Statements:
     Balance Sheets..........................................................F-3
     Statements of Operations................................................F-4
     Statements of Changes in Shareholders' Equity...........................F-5
     Statements of Cash Flows................................................F-6
     Notes to Consolidated Financial Statements.......................F-7 - F-21


                                       F-1
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders of Hi-Rise Recycling Systems, Inc.

         In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows present fairly, in all material respects, the financial position
of Hi-Rise Recycling Systems, Inc. and its subsidiaries (the "Company") at
December 31, 2000 and December 31, 1999, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States of America. 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 of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

         The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and satisfaction of liabilities in the normal course
of business. As discussed in Note 1 to the consolidated financial statements,
the Company suffered a net loss for the year ended December 31, 2000, is in
default under its credit agreements and has negative working capital. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

PricewaterhouseCoopers LLP


March 27, 2001


                                       F-2
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999
                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                     2000          1999
                                                                                   --------      --------
<S>                                                                                <C>           <C>
                                     ASSETS
Current assets:
   Cash and cash equivalents .................................................     $    375      $    194
   Accounts receivable, net of allowance for doubtful accounts of $1,376 and
       $293 in 2000 and 1999, respectively ...................................       12,125        14,620
   Inventories ...............................................................        8,109        10,519
   Other assets ..............................................................        1,175         2,314
                                                                                   --------      --------
       Total current assets ..................................................       21,784        27,647

Property and equipment, net ..................................................        5,316         5,779
Net investment in sales type leases ..........................................        7,047        10,108
Prepaid financing costs ......................................................        2,619         2,340
Deferred acquisition costs ...................................................           --           380
Other assets .................................................................          451           777
Goodwill .....................................................................       47,841        47,683
                                                                                   --------      --------
       Total assets ..........................................................     $ 85,058      $ 94,714
                                                                                   ========      ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable ..........................................................     $  5,132      $  4,261
   Accrued liabilities .......................................................        3,837         1,410
   Cash overdrafts ...........................................................        1,096           739
   Income taxes payable ......................................................           --           461
   Current portion of long-term debt .........................................       56,894        17,975
                                                                                   --------      --------
       Total current liabilities .............................................       66,959        24,846
Long-term debt ...............................................................        1,194        33,401
                                                                                   --------      --------
       Total liabilities .....................................................       68,153        58,247
Commitments and contingencies

Mandatorily redeemable preferred stock, $.01 par value per share; 50 shares
   authorized, 50 and 0 shares issued and outstanding at December 31, 2000
   and 1999, respectively, liquidation preference of $532 ....................          532            --
Shareholders' equity:
   Preferred stock, $.01 par value per share; 1,000,000 shares authorized; 100
       and 200 shares issued and outstanding at December 31, 2000 and 1999,
       respectively, liquidation preference of $1,000 and $2,000 at
       December 31, 2000 and 1999 ............................................           --            --
   Common stock, $.01 par value per share; 50,000,000 shares authorized;
       16,403,926 and 13,757,472 shares issued and outstanding at
       December 31, 2000 and 1999, respectively ..............................          164           137
   Additional paid-in capital ................................................       40,348        37,482
   Accumulated deficit .......................................................      (24,139)       (1,152)
                                                                                   --------      --------
       Total shareholders' equity ............................................       16,373        36,467
                                                                                   --------      --------
       Total liabilities and shareholders' equity ............................     $ 85,058      $ 94,714
                                                                                   ========      ========
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-3
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
             (Amounts in Thousands, Except Share and Per Share Data)

<TABLE>
<CAPTION>
                                                                      2000             1999             1998
                                                                  ------------     ------------     ------------
<S>                                                               <C>              <C>              <C>
Revenues:
   Equipment sales ...........................................    $     59,592     $     57,052     $     29,673
   Service and parts revenue .................................           3,707            2,682            1,507
                                                                  ------------     ------------     ------------

         Total revenues ......................................          63,299           59,734           31,180

Costs and expenses:
   Cost of equipment and parts sold ..........................          57,021           41,996           21,145
   Selling and marketing .....................................           4,383            2,460            1,301
   General and administrative ................................          18,818            8,889            5,431
                                                                  ------------     ------------     ------------

         Total costs and expenses ............................          80,222           53,345           27,877
                                                                  ------------     ------------     ------------

         Operating income (loss) .............................         (16,923)           6,389            3,303
                                                                  ------------     ------------     ------------

Other income (expense):
   Interest income ...........................................             500              946              776
   Interest expense ..........................................          (7,011)          (3,729)          (1,001)
                                                                  ------------     ------------     ------------
                                                                        (6,511)          (2,783)            (225)
                                                                  ------------     ------------     ------------
   Income (loss) before income taxes .........................         (23,434)           3,606            3,078

   Benefit (provision) for income taxes ......................             550           (1,124)             (75)
                                                                  ------------     ------------     ------------

   Net income (loss) .........................................    $    (22,884)    $      2,482     $      3,003
                                                                  ============     ============     ============

Net income (loss) per common share:
   Basic .....................................................    $      (1.49)    $       0.18     $       0.30
                                                                  ============     ============     ============
   Diluted ...................................................    $      (1.49)    $       0.17     $       0.27
                                                                  ============     ============     ============

Weighted average common shares outstanding:
   Basic .....................................................      15,394,746       12,564,909        9,095,563
                                                                  ============     ============     ============
   Diluted ...................................................      15,394,746       15,026,858       10,560,775
                                                                  ============     ============     ============
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-4
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                    (Amounts in Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                              Additional                     Total
                                        Shares of    Preferred                 Paid-in      Accumulated   Shareholders'
                                      Common Stock     Stock    Common Stock   Capital        Deficit        Equity
                                      -----------   ----------   ----------   ----------    ----------    -------------
<S>                                     <C>         <C>          <C>          <C>           <C>           <C>
Balance at December
  31, 1997 .........................    6,468,532   $       --   $       65   $   16,728    $   (6,157)   $   10,636
Issuance of warrants in
   connection with
   financing .......................           --           --           --          943            --           943
Issuance of common stock ...........    4,944,820           --           49       10,891            --        10,940
Dividend requirement on
   preferred stock .................           --           --           --          291          (291)           --
Vesting of stock options
   issued to non-employees .........           --           --           --           17            --            17
Net income .........................           --           --           --           --         3,003         3,003
                                      -----------   ----------   ----------   ----------    ----------    ----------
Balance at December
   31, 1998 ........................   11,413,352           --          114       28,870        (3,445)       25,539
Issuance of common stock ...........    2,344,120           --           23        8,406            --         8,429
Dividend requirement on
   preferred stock .................           --           --           --          189          (189)           --
Vesting of stock options
   issued to non-employees .........           --           --           --           17            --            17
Net income .........................           --           --           --           --         2,482         2,482
                                      -----------   ----------   ----------   ----------    ----------    ----------
Balance at December
   31, 1999 ........................   13,757,472           --          137       37,482        (1,152)       36,467
Issuance of warrants in
   connection with
   financing .......................           --           --           --          522            --           522
Issuance of common stock ...........    2,096,804           --           22        2,246            --         2,268
Conversion of preferred
   stock into common stock .........      549,650           --            5           (5)           --            --
Dividend requirement on
   preferred stock .................           --           --           --          103          (103)           --
Net loss ...........................           --           --           --           --       (22,884)      (22,884)
                                      -----------   ----------   ----------   ----------    ----------    ----------
Balance at
   December 31, 2000 ...............   16,403,926   $       --   $      164   $   40,348    $  (24,139)   $   16,373
                                      ===========   ==========   ==========   ==========    ==========    ==========
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-5
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   2000        1999        1998
                                                                 --------    --------    --------
<S>                                                              <C>         <C>         <C>
Cash flows from operating activities:
   Net income (loss) .........................................   $(22,884)   $  2,482    $  3,003
   Adjustments  to  reconcile  net  income to net cash used in
     operating activities:
     Depreciation and amortization ...........................      4,182       1,942         973
     Bad debt expense ........................................      1,667         164         205
     Compensation expense for stock options and bonuses ......        232          17          17
     Acquisitions not consummated ............................        432          --          --
     Changes in assets and liabilities, net of acquisitions:
       Accounts receivable ...................................        773      (2,736)       (965)
       Inventories ...........................................      2,410      (2,245)     (1,476)
       Other assets ..........................................      1,094      (1,552)        140
       Net investment in sales type leases ...................      2,886      (2,040)     (3,180)
       Accounts payable and accrued liabilities ..............      2,881        (213)        (46)
       Income taxes payable ..................................       (461)        461         (11)
                                                                 --------    --------    --------
       Net cash used in operating activities .................     (6,788)     (3,720)     (1,340)
Cash flows from investing activities:
   Decrease in restricted cash ...............................         --          --       3,022
   (Increase) decrease in deferred acquisition costs .........         --        (229)         90
   Purchase of businesses, net of cash acquired ..............         --     (22,116)    (13,587)
   Purchase of property and equipment ........................     (1,102)     (1,381)       (449)
   Prepaid financing costs ...................................     (1,048)       (188)     (1,209)
                                                                 --------    --------    --------
       Net cash used in investing activities .................     (2,150)    (23,914)    (12,133)
Cash flows from financing activities:
   Payments on long-term debt ................................     (4,238)     (3,486)    (17,822)
   Proceeds from long-term debt ..............................     12,500      30,994      29,742
   Issuance of Mandatorily Redeemable Preferred Stock ........        500          --          --
   Cash overdrafts ...........................................        357          (4)        743
                                                                 --------    --------    --------
       Net cash provided by financing activities .............      9,119      27,504      12,663
Net increase (decrease) in cash and cash equivalents .........        181        (130)       (810)
Cash and cash equivalents, beginning of year .................        194         324       1,134
                                                                 --------    --------    --------
Cash and cash equivalents, end of year .......................   $    375    $    194    $    324
                                                                 ========    ========    ========
Supplemental disclosure of cash flow information:
   Cash paid during the year for interest ....................   $  5,075    $  3,431    $  1,001
                                                                 ========    ========    ========
   Cash paid during the year for taxes .......................   $     40    $    673    $     --
                                                                 ========    ========    ========
Purchase of businesses, net of cash acquired:
   Working capital, other than cash ..........................               $ (2,229)   $ (6,730)
   Property and equipment ....................................   $     --      (1,935)     (1,219)
   Cost in excess of net assets acquired, net ................         --     (26,582)    (20,647)
   Revolving line of credit ..................................         --          --         750
   Debt ......................................................         --         201       3,319
   Issuance of common stock ..................................         --       8,429      10,940
                                                                 --------    --------    --------
     Net cash used to acquire businesses .....................   $     --    $(22,116)   $(13,587)
                                                                 ========    ========    ========
</TABLE>

         Non-cash activities: During 1999 and 1998, the Company acquired
businesses as described in Note 2. The Company issued stock and notes payable in
conjunction with these acquisitions.

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.

                                       F-6
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    BUSINESS ORGANIZATION AND BASIS OF PRESENTATION

         Hi-Rise Recycling Systems, Inc. (the "Company") is primarily engaged in
manufacturing, distributing, marketing and selling recycling and solid waste
handling equipment. Until February 1997, the Company was primarily engaged in
distributing, marketing and selling of a proprietary automated system designed
to collect and source-separate recyclable and other solid waste in multi-story
residential buildings. The Company has expanded the business through a variety
of acquisitions as discussed in Note 2.

         The Company's business has suffered from softened demand for its
products due in large part to competition and to decreased equipment
expenditures from its largest customers. The Company has also experienced
increased steel costs, which comprise the largest material component in all of
its products and more recently, aggressive competitive pricing introduced in
certain of its key Solid Waste Division markets. These factors coupled with the
recent opening of new production facilities, expansion of existing facilities,
the introduction of new product lines and the re-designing and shifting of
production among its manufacturing facilities have all contributed to plant and
labor manufacturing inefficiencies and a significant deterioration in operating
margins. This resulted in substantial losses, the continued use of cash in
operations and defaults under its credit facility (the "Credit Facility") with
General Electric Capital Corporation and certain other lenders under both its
borrowing base eligibility and other financial covenants as of December 31,
2000.

         In response to this situation, the Board of Directors engaged Grisanti,
Galef and Goldress, Inc. ("GGG") on October 16, 2000. GGG is a corporate
performance consulting firm with experience in providing interim leadership to
under-performing companies. The initial engagement involved an assessment of the
Company's operations and of recent operating and manufacturing initiatives in
order to make preliminary recommendations for future operating strategies. Based
upon these recommendations, the Board of Directors determined to further retain
GGG in November 2000.

         The GGG management team worked throughout the fourth quarter of 2000 to
obtain short term financing in order to stabilize the Company's operations while
a financial and operating plan was being developed. During December 2000, the
Company was able to reach an agreement with GECC whereby amounts available under
its existing credit facilities were increased by an aggregate of $5.5 million by
obtaining an additional term loan which matured on February 15, 2001.

         The GGG management team also instituted significant restructuring
initiatives, which have included the reorganization of the Company's
Architectural Division and Solid Waste Division into two completely separate
operating units. Major changes within the business units are also being
implemented, including changes in operating and reporting responsibilities,
manufacturing and distribution process, inventory production strategies and
credit and collection policies. These initiatives have also included personnel
terminations, responsibility changes, the closure of manufacturing locations and
the discontinuance of certain products and service offerings. The GGG team has
recently completed an operating and financial plan which contemplates future
improvements in financial and operating results as the operating and
manufacturing philosophies broadly described above are implemented.

         The Company has entered into an understanding in principle to retain
GGG, such agreement to be subject to definitive agreements to be entered into in
the future (the "GGG Agreement"). Pursuant to the terms of the GGG Agreement, in
addition to the fee for service payments, GGG will receive certain performance
payments based upon a percentage of the Company's consolidated shareholders'
equity (as defined in the GGG Agreement) or based upon a percentage of multiples
of the Company's earnings, such performance payments to be paid to GGG at the
end of the period for which its consultants were retained by the Company.

         Although management believes that the recently introduced changes will
further reduce inventory levels, production and overall operating costs,
previously described manufacturing inefficiencies, continued softness in product
demand, coupled with severe cash flow constraints experienced prior to the
December increase in amounts available under the existing Credit Facility of
$5,500,000, continue to negatively impact the Company's operations. The effect
of these conditions has continued to cause purchasing inefficiencies,
necessitated excessive costs of moving raw materials among production locations
and required the manufacturing and shipping of products from less than optimal
locations.

         The Company incurred a net loss of $22.9 million for the year ended
December 31, 2000 and is currently in default under its Credit Facility under
both its borrowing base eligibility and other financial covenants. Since the
Company is in default, all amounts due under the Credit Facility are presented
as current liabilities, which has created a substantial working capital
deficiency in the accompanying balance sheet as of December 31, 2000.

         The Company is currently in discussions with GECC and the other lenders
to restructure its existing Credit Facility. GECC and the other lenders have
declared all amounts outstanding, together with accrued interest, to be
immediately due and payable. As the Company does not currently have existing
liquidity to repay these amounts,

                                       F-7
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

GECC and the other lenders could proceed against the collateral, which would
have a material adverse effect on the Company's business and financial
condition. If the Company is unable to renew, replace or modify the existing
Credit Facility with facilities of like amount, or if the Company is unable to
implement other alternative strategies, then the Company will have insufficient
cash to continue to operate the business as it is now conducted, and may be
unable, in whole or in part, to fund the purchase of equipment, fund other
working capital requirements or continue to operate as a going concern.

         The accompanying consolidated financial statements have been prepared
on a basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. Accordingly, the consolidated
financial statements do not include any adjustments that might be required if
the Company would have to liquidate its assets or satisfy its liabilities other
than through its normal business operations.

         The Company's independent certified public accountants have included a
"going concern" paragraph in their audit report accompanying the 2000
consolidated financial statements. The paragraph states that the Company's net
loss, default under the credit agreements and negative working capital raise
substantial doubt about the Company's ability to continue as a going concern and
cautions that the consolidated financial statements do not include adjustments
that might result from the outcome of this uncertainty. If the Company is not
able to continue in business as a going concern substantial impairment losses
would probably be required if assets were to be liquidated in other than the
normal course of business.

         Management believes that, despite the financial hurdles and funding
uncertainties going forward, if the Company's existing debt can be restructured,
changes forming the basis for the recently completed financial and operating
plan will improve the Company's operating performance throughout fiscal 2001 as
the changes are fully implemented and absorbed in the operating and
manufacturing processes.

2.    BUSINESS COMBINATIONS

         On December 16, 1999, the Company acquired all of the outstanding
common stock of American Gooseneck, Inc. ("AG"). The purchase was consummated
pursuant to the terms of a Stock Purchase Agreement, dated as of December 13,
1999 (the "Stock Purchase Agreement"), by and among the Company, AG and all of
the shareholders of AG. The aggregate purchase price paid by the Company was
approximately $10,210,000 and consisted of $8,960,000 in cash and 689,393 shares
of common stock with an aggregate fair market value at the time of closing of
$1,250,000. The cash portion of the purchase price was funded through borrowings
made under the Company's then existing $61.0 million credit facility with GECC
and the other lenders to that credit facility. Furthermore, pursuant to the
Stock Purchase Agreement, the Company withheld the delivery to the former owners
of AG of a number of shares of Common Stock having a fair market value of
$900,000 (the "Holdback Shares") as of the date of the Stock Purchase Agreement.
On January 1, 2001, all of the Holdback Shares were released to the former
owners of AG. The Stock Purchase Agreement further provides that the former
owners of AG shall receive additional shares of common stock if American
Gooseneck meets or exceeds certain agreed upon earnings targets during the
two-year period following the consummation of the acquisition. The amount of
shares to be issued cannot be fully determined until the period expires and the
attainment of the criteria is established. The Company will account for any
additional amounts when the specified financial criteria are achieved and it is
probable that such amounts will be paid, as additional purchase price for the
related acquisition.

         In September 1999, the Company acquired substantially all of the assets
of Kohlman Engineering Corp. ("Kohlman") for 200,000 shares of Common Stock
having a fair market value of $538,000 at the time of issuance and repaid
certain of the seller's expenses. Kohlman is engaged in the business of
manufacturing, selling and servicing waste compactors and trash chutes.

         On February 22, 1999, the Company purchased all the outstanding capital
stock of DeVivo Industries, Inc. ("DeVivo") and an affiliated company,
Ecological Technologies, Inc. (with DeVivo, the "DeVivo Companies") which owns
certain patent rights relating to DeVivo's business. The aggregate purchase
price paid by the Company for the DeVivo Companies was $16,920,000 which
consisted of approximately $11,707,000 in cash and 1,463,400 shares of the
Company's common stock valued at approximately $5,213,000 at the time of the
issuance. The cash portion of the purchase price was funded through borrowings
available under the Company's revolving and term credit facilities with GECC and
the other lenders.


                                      F-8
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

         In November 1998, the Company acquired all the outstanding stock of
Acme Chute Co. ("Acme"). The aggregate purchase price of approximately $600,000
consisted of approximately $550,000 in cash, and 27,778 shares of common stock
valued at approximately $50,000.

         In October 1998, the Company acquired all the outstanding capital stock
of Bes-Pac, Inc. ("Bes-Pac"). The aggregate purchase price of approximately
$8,000,000 consisted of $3,000,000 in cash, a convertible promissory note in the
principal amount of $1,219,000, 1,890,500 shares of the Company's common stock
valued at approximately $3,781,000 and the contingent right to receive between
$1,000,000 and $2,000,000 payable in cash and shares of the Company's common
stock as described below.

         The Company entered into contractual arrangements whereby shares of the
Company's common stock and cash could be issued to the former owner of Bes-Pac
upon attainment of specified financial criteria over the twelve month period
following the closing as set forth in the agreement. The amount of shares and
cash to be issued could not be fully determined until the period expired and the
attainment of the criteria was established. The Company was obligated to pay at
least $1,000,000 of this contingent consideration, which amount was presented in
the purchase price in 1998. The amount was settled through a cash payment of
$667,000 in October 1999 and the issuance of 166,500 shares common stock with a
fair market value of approximately $375,000 in February 2000. In October 1999,
all necessary financial criteria were achieved and the Company was obligated to
pay an additional $1,000,000 which was settled through the issuance of 500,000
shares of common stock in February 2000 and was recorded as additional purchase
price for the related acquisition.

         In February 1998, the Company acquired all of the outstanding capital
stock of Hesco Sales, Inc. and Subsidiaries and Atlantic Maintenance, Inc.
(collectively "Hesco"). The aggregate purchase price of approximately
$11,800,000 consisted of $8,300,000 in cash and 1,276,094 shares of the
Company's common stock valued at approximately $3,500,000.

         Additional financing was obtained by the Company to repay Hesco's
outstanding shareholder loans of approximately $1,800,000. Approximately
$500,000 of the purchase price was funded from the proceeds of a $500,000
five-year term loan from the Company's Chairman of the Board of Directors.

         All business combinations have been accounted for as purchases, and the
results of operations are included in the consolidated financial statements from
their respective dates of acquisition.

         The unaudited results of operations on a pro forma basis using an
effective tax rate of 38% and 0% in 1999 and 1998, respectively as if each of
the acquisitions had been made as of January 1, 1998 is as follows:


                                                       Years Ended December 31
                                                    ----------------------------
                                                        1999          1998
                                                    -------------  -------------
                                                     (Unaudited)    (Unaudited)

Revenues........................................       $72,117        $71,341
Income from operations..........................         8,573          5,418
Net income......................................         2,755          1,659
Earnings per share of common stock:
   Basic........................................          0.19           0.11
   Diluted......................................          0.17           0.10

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

         The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions have been eliminated.


                                      F-9
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

Use of Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Cash and Cash Equivalents

         For the purposes of the statements of cash flows, the Company considers
all highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.

         Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and cash equivalents.
The Company places its cash and cash equivalents with high credit quality
financial institutions and limits the amount of credit exposure to any one
financial institution.

Inventories

         Inventories consist primarily of systems and equipment held for sale
and spare parts, which are stated at the lower of cost (first-in, first-out
method) or market.

Property and Equipment

         Property and equipment are recorded at cost. Depreciation is provided
principally on the straight-line basis over the estimated useful lives of the
assets. When the assets are sold, replaced or otherwise retired, the costs and
related accumulated depreciation are removed from the accounts and any related
gains or losses are included in operations.

Goodwill

         Goodwill relating to business combinations is stated at acquisition
cost less accumulated amortization. Goodwill is amortized on a straight-line
basis over 20 to 40 years. The Company continually evaluates the existence of
goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected, undiscounted cash flows of the related business unit.
Accumulated amortization as of December 31, 2000 and 1999 totaled approximately
$3,308,000 and $1,847,000, respectively.

Income Taxes

         The Company uses the asset and liability method of accounting for
income taxes whereby deferred income taxes are recognized for the tax
consequences in future years for differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year-end based on
enacted tax laws and statutory tax rates applicable to the time periods in which
the differences are expected to affect taxable income.

Revenue Recognition

         Revenues from solid waste handling containers and parts are recognized
upon shipment of product to the customers. Revenues from waste handling systems
are generally recognized upon installation of the equipment into the buildings
and the related service revenues are recognized as the systems are serviced.

         The Company enters into sales-type leases primarily for hi-rise
systems, which expire in various years through 2008. Revenue from these
sales-type leases represents the present value of all minimum lease payments,
net of executory costs. The net investment in sales type leases are discounted
at the interest rates implicit in the leases. The related cost of the system is
charged to cost of equipment and parts sold. Associated interest, using the
interest method, is recorded over the terms of the lease agreements.

         Equipment sales for the hi-rise systems are recognized at the time the
systems are installed and the customers' acceptance of the systems. Service and
parts revenue relates to services provided subsequent to


                                      F-10
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

installation of the system for which the Company is paid either a fixed monthly
or quarterly fee. Such revenue is recognized over the terms of the respective
agreements. When the Company sells its hi-rise system to new buildings, the
period of time between the execution of a sales contract and installation of the
system typically ranges from six to eighteen months.

Per Share Data

         Basic net income (loss) per share is calculated by dividing net income
(loss) available to common shareholders by the weighted average common shares
outstanding during the years presented. Diluted net income (loss) per share is
calculated by dividing net income (loss) available to common shareholders by the
weighted average common shares outstanding, increased by the assumed conversion
of other potentially dilutive securities during the years.

         Shares used in the diluted calculation include the weighted average
effect of shares assumed to be issued under options and warrants under the
treasury stock method. In addition, the calculation includes the dilutive effect
of the assumed conversion into common shares of the Company's Series B Preferred
Stock and the resulting elimination of the stated dividend requirements, which
are payable in common stock upon conversion of the Series B Preferred Stock.

         Potentially dilutive shares were excluded from the diluted loss per
share calculation for the year ended December 31, 2000 because their effects
would have been anti-dilutive to the loss incurred by the Company, therefore,
the amounts reported for basic and diluted net loss per share were the same for
that year. As of December 31, 2000, stock options and warrants totaling
22,894,215 shares as well as 696,444 common shares issuable upon conversion of
the Series B Preferred Stock were excluded from the diluted loss per share
calculation because their effect was anti-dilutive. The effects of 628,440
common shares in 1999, representing primarily employee stock options whose
exercise prices were in excess of the average market price during 1999, and
1,282,500 common shares issuable under options, warrants and upon the conversion
of the Series B Preferred Stock in 1998 are excluded in the computation of
diluted earnings per share for the respective years as the effects of the
respective shares would have been anti-dilutive.

Recent Accounting Pronouncements

         In June 2000, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 138 ("SFAS 138"), Accounting for Certain Derivative
Instruments -- an Amendment of FAS 133. SFAS 138 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives). SFAS 138 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. Management believes the adoption of SFAS 138 will
not have a material impact on the Company's consolidated financial statements as
the Company currently does not use derivative instruments.

         In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation -- an Interpretation of APB 25 ("FIN 44"). This interpretation
clarifies certain issues relating to stock compensation. FIN 44 is effective
July 1, 2000; however, certain conclusions in this interpretation cover specific
events that occurred prior to July 1, 2000. FIN 44 did not have an impact on the
Company's consolidated financial statements.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 summarizes certain of the SEC's views in applying general
accepted accounting principles to revenue recognition in financial statements.
SAB 101 did not have an impact on the Company's consolidated financial
statements.

Reclassifications

         Certain reclassifications have been made to the December 31, 1999 and
1998 consolidated financial statements to conform to the December 31, 2000
presentation.


                                      F-11
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

4.    INVENTORY

         Inventories as of December 31 consisted of the following (amounts in
thousands):

<TABLE>
<CAPTION>
                                                                                   2000          1999
                                                                                  ------       -------
<S>                                                                               <C>          <C>
Raw materials...........................................................          $4,626       $ 6,126
Work in progress........................................................           1,040           583
Finished goods..........................................................           2,443         3,810
                                                                                  ------       -------
                                                                                  $8,109       $10,519
                                                                                  ======       =======
</TABLE>

5.    PROPERTY AND EQUIPMENT

         Property and equipment at December 31 consisted of the following
(amounts in thousands):

<TABLE>
<CAPTION>
                                                          Useful Lives             2000          1999
                                                          ------------            ------        ------
<S>                                                        <C>                    <C>           <C>
Equipment..........................................        7 years                $5,003        $5,249
Furniture and fixtures.............................        5 years                   615           571
Automobiles........................................        3-5 years                 910           947
Computers and software.............................        3 years                   869           819
Leasehold improvements.............................        10-17 years             2,173         1,897
                                                                                  ------        ------
                                                                                   9,570         9,483
Less accumulated depreciation......................                                4,254         3,704
                                                                                  ------        ------
                                                                                  $5,316        $5,779
                                                                                  ======        ======
</TABLE>

         Depreciation expense was $1,430,000, $967,000 and $290,000 for the
years ended December 31, 2000, 1999 and 1998, respectively.

6.    NET INVESTMENT IN SALES TYPE LEASES

         The net investment in sales type leases at December 31 consisted of the
following (amounts in thousands):

<TABLE>
<CAPTION>
                                                                                   2000          1999
                                                                                  ------       -------
<S>                                                                               <C>          <C>
Minimum lease payments..........................................................  $8,067       $11,206
Unearned income.................................................................  (1,437)       (2,142)
Estimated residual value of leased systems......................................     417         1,044
                                                                                  ------       -------
                                                                                  $7,047       $10,108
                                                                                  ======       =======
</TABLE>

         Future minimum lease payments due from customers under sales-type
leases as of December 31, 2000 are as follows (amounts in thousands):

                      2001................      $  782
                      2002................         977
                      2003................       1,004
                      2004................       1,163
                      2005................       1,251
                      Thereafter..........       2,890
                                                ------
                                                $8,067
                                                ======

         During 2000 and 1999, the Company sold receivables, with recourse, with
balances of approximately $2,350,000 and $2,060,000, respectively. The balance
of the receivables sold that remain uncollected at December 31, 2000 was
approximately $2,213,000. In connection with the receivables sold during 2000
and 1999, the Company recorded losses in the amounts of approximately $250,000
and $150,000 respectively, which are included in general and administrative
costs in the accompanying statements of operations.


                                      F-12
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

7.    LONG-TERM DEBT

         Long-term debt at December 31 consisted of the following (amounts in
thousands):

<TABLE>
<CAPTION>
                                                                                      2000        1999
                                                                                     -------     -------
<S>                                                                                  <C>         <C>
Primary lender financing:
Revolving working capital facility with a maximum borrowing of $19,000, bears
   interest payable at prime rate plus 1/2% (10.5% and 9.0% at December 31, 2000
   and 1999, respectively), maturing October 2003,
   collateralized by inventory and accounts receivable .........................     $18,469     $10,583
Revolving working capital facility with a maximum borrowing of $9,000,
   bears interest payable at prime rate plus 1/2% (10.5% and 9.0% at
   December 31, 2000 and 1999 respectively), maturing October 2003,
   collateralized by lease receivables and products manufactured ...............       7,517       8,100
Promissory note, collateralized by equipment ...................................       9,000       9,000
Promissory note, bears interest payable at 15%, maturing February 2001,
   collateralized by inventory and accounts receivable .........................       3,050          --
Promissory note, bears interest payable at the prime rate plus 1%,
   maturing October 2003, collateralized by equipment ..........................       4,333       5,333
Promissory note, bears interest payable at the prime rate plus 1%,
   maturing October 2003, collateralized by equipment ..........................      14,372      15,464
Other obligations:
Promissory notes to related party, interest payable monthly at the prime
   rate plus 1/4%, principal due October 2005 ..................................       1,100       1,100
Guaranteed payment under acquisition agreement, payable in stock and
   cash, $666 paid in October 1999 and $333 settled in February 2000 ...........          --         333
Promissory note to related party, bears interest payable at the prime
   rate plus 1/4%. Principal due in quarterly payments of $68 beginning
   April 1999, note converted to 609,500 shares of common stock upon
   shareholder approval during February 2000 ...................................          --       1,219
Notes payable in monthly installments through 2003 .............................         247         244
                                                                                     -------     -------
                                                                                      58,088      51,376
Less current portion ...........................................................      56,894      17,975
                                                                                     -------     -------
Long-term debt, net of current portion .........................................     $ 1,194     $33,401
                                                                                     =======     =======
</TABLE>

Primary lender financing:

         In October 1998, the Company obtained a $40,000,000 credit facility
(the "Credit Facility") which was increased to $61,000,000 during 1999 and
subsequently to $68,500,000 during 2000. The Credit Facility, which was provided
by General Electric Capital Corporation ("GECC") and other participating lenders
includes two revolving lines of credit totaling $28,000,000, three term loans
totaling $20,500,000 and a $20,000,000 acquisition line of credit. A portion of
the proceeds was used to pay off amounts outstanding under previous credit
facilities. The financing is collateralized by all of the Company's existing and
after acquired tangible and intangible assets and any future insurance proceeds.
In addition, the Company and all its subsidiaries cross-guaranteed the
financing. The financing also contains limitations on and/or prohibition of
mergers and acquisitions and various commercial and equity transactions.

         The $28,000,000 lines of credit include a $19,000,000 line of credit
that is collateralized by accounts receivable and inventory held by the Company
and all its subsidiaries and a $9,000,000 line of credit that is collateralized
by leases issued by the Company for systems and products manufactured by the
Company and its subsidiaries. The revolving lines of credit are due in October
2003 and bear interest at the prime rate plus 1/2% (10.5% and 9.0% at December
31, 2000 and 1999, respectively).

         The term loans consist of a $9,000,000 loan funded in connection with
the Bes-Pac acquisition in October 1998, a $6,000,000 loan made subsequent to
December 31, 1998 in connection with the acquisition and a $5,500,000 loan made
in December 2000 for additional working capital. The Bes-Pac term loan bears
interest at


                                      F-13
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

11%, is payable interest only for four and half years at which time two
consecutive quarterly payments of $1,500,000 are due with the balance of
$6,000,000 due in October 2003. The $6,000,000 term loan which was funded in
February 1999 is payable in quarterly installments, bears interest at prime plus
1% (11.0% and 9.5% at December 31, 2000 and 1999, respectively) with the balance
of the loan due in October 2003. The $5,500,000 term loan bears interest at 15%
per annum with the balance of the loan due in February 2001.

         The $20.0 million acquisition line of credit bears interest at prime
rate plus 1% and is collateralized by accounts receivable and inventory. The
acquisition line of credit has a twelve-month interest only period and quarterly
principal payments thereafter until its maturity date on October 2000.

         In connection with the GECC financing prior to 2000, the Company issued
to the financing agent and other lenders warrants to purchase an aggregate of
1,476,259 shares of its common stock, which warrants are exercisable at $1.50.
The estimated aggregate fair value of the warrants of $943,298 was recorded as
prepaid financing costs and is being amortized over the five year life of the
financing facility. In connection with the GECC financing in December 2000, the
Company cancelled those warrants that were previously issued to GECC and issued
to GECC warrants to purchase 17,382,053 shares of its common stock, which
warrants are exercisable at $0.01 per share. The estimated aggregate fair value
of the warrants of $521,500 was recorded as prepaid financing costs and is being
amortized over the life of the related borrowings.

         The Company's Credit Facility with GECC and the other lenders requires
the maintenance of certain financial covenants, borrowing base eligibility and
other restrictions. The Company is currently in default under its Credit
Facility under both its borrowing base eligibility and other financial
covenants. Specifically, among other defaults, the Company has overdrawn
$15,400,000 more funds than it was permitted based upon its eligible collateral
levels. The Company is currently in discussions with GECC and the other lenders
to restructure its existing Credit Facility. There are no assurances that the
Credit Facility will be restructured successfully or that additional working
capital will be provided. GECC and the other lenders have declared all amounts
outstanding, together with accrued interest, to be immediately due and payable.
As the Company does not currently have existing liquidity to repay these
amounts, GECC and the other lenders could proceed against the collateral, which
would have a material adverse effect on the Company's business and financial
condition. Since the Company is in default, all amounts due under the Credit
Facility are presented as current liabilities in the accompanying consolidated
balance sheet as of December 31, 2000.

         The minimum annual maturities of long-term debt after December 31, 2000
are as follows (amounts in thousands):

                      2001.................     $56,894
                      2002.................         162
                      2003.................         156
                      2004.................         136
                      2005.................         740
                                                -------
                                                $58,088
                                                =======

         The current portion of long-term debt presented above consists of all
amounts due under the Credit Facility.

8.    OPERATING LEASES

         The Company leases office facilities and equipment. Approximate future
minimum payments under noncancelable operating leases as of December 31, 2000,
are as follows (amounts in thousands):

                      2001.................     $ 1,960
                      2002.................       1,950
                      2003.................       1,413
                      2004.................         996
                      2005.................         790
                      Thereafter...........       4,392
                                                -------
                                                $11,501
                                                =======

                                      F-14
<PAGE>
                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

         Rental expense for the years ended December 31, 2000, 1999 and 1998 was
approximately $1,878,000, $1,488,000 and $625,000 respectively.

         Included in the above amounts are operating leases for property with
the former owners of Hesco, Bes-Pac, DeVivo and AG totaling approximately
$110,000 per month, subject to escalation clauses, payable through 2012.

9.    INCOME TAXES

         The provision for income taxes consists of the following (amounts in
thousands):

<TABLE>
<CAPTION>
                                                                           2000         1999         1998
                                                                          ------       ------       ------
<S>                                                                       <C>          <C>          <C>
Current provision...............................................          $(550)       $1,233       $  75
Deferred provision..............................................             --          (109)         --
                                                                          -----        ------       -----
Total provision.................................................          $(550)       $1,124       $  75
                                                                          =====        ======       =====
</TABLE>
         The Company and its U.S. subsidiaries join in the filing of a U.S.
consolidated income tax return. The Company's foreign subsidiaries file separate
returns in Canada. In 2000, the Company recorded a current tax benefit of
$550,000 as a result of a tax refund receivable.

         At December 31, 2000 and 1999, the components of the net deferred tax
asset were as follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                                                         2000         1999
                                                                                      ---------     -------
<S>                                                                                   <C>           <C>
Deferred Tax Assets
Fixed assets................................................................          $     334     $    48
Reserves and allowances.....................................................                628         189
Accrued compensation........................................................                 47          40
Net operating loss..........................................................              6,787         136
Other.......................................................................                221         102
Valuation allowance.........................................................             (8,017)         --
                                                                                      ---------     -------
Net deferred tax asset......................................................          $      --     $   515
                                                                                      =========     =======
</TABLE>
         The Company records a valuation allowance against deferred tax assets
if, based on the weight of available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized. In 2000, the
Company determined that a valuation allowance of $8,017,000 is required. In
1999, the Company reversed a valuation allowance of $356,000.

         As of December 31, 2000, the Company had federal and state net
operating loss carryforwards of approximately $17,000,000 and $19,800,000, which
expire in various years between 2007 and 2020.

         During 1999, the Company consummated certain acquisitions that included
changes in the ownership of the target company's stock. The Internal Revenue
Code restricts the amount of future income that may be offset by losses and
credits incurred prior to an ownership change.

         The reconciliation between the statutory income tax provision and the
actual tax provision for the years ended December 31 is shown as follows
(amounts in thousands):
<TABLE>
<CAPTION>
                                                                           2000         1999         1998
                                                                          ------       ------       ------
<S>                                                                       <C>          <C>          <C>

Income tax at federal statutory rate................................      $(8,202)     $1,262       $1,077
State taxes net of federal benefit..................................         (925)        133          108
Non-deductible expenses.............................................          532         281          287
Alternative minimum tax.............................................           --          --           65
Change in valuation allowance.......................................        8,017        (356)          --
Utilization  of net operating loss carryforward.....................           --          --       (1,402)
Other...............................................................           28        (196)         (60)
                                                                          ------       ------       ------
Income tax provision................................................      $ (550)      $1,124       $   75
                                                                          ======       ======       ======
</TABLE>

                                      F-15
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

10.   EQUITY TRANSACTIONS

Issuance of Preferred Stock

         In June and July 1997, the Company sold 200 shares of newly created
Series B non-voting convertible preferred stock, par value of $.01 per share
(the "Series B Preferred Stock"), and warrants to purchase an aggregate of
888,887 shares of common stock at $2.25 per share, in a private placement for an
aggregate purchase price of $2,000,000. The Series B Preferred Stock is
convertible, at the option of the holder thereof, into common stock at a
conversion price of $2.25 at any time subsequent to July 1, 1998. During June
2000, 100 of the Series B non-voting convertible preferred stock were converted,
pursuant to its original terms, into 549,650 shares of common stock at a per
share conversion price of $2.25. Common shares issued upon conversion included
105,206 shares issued as dividends. The Series B Preferred Stock entitles the
holder to common stock dividends of approximately 72,000 shares per annum,
accrued from the date of issuance through the date of conversion.

         The stated dividend requirement and the amount representing the
discount from fair value of the conversion feature of the preferred stock
amortized over the one year period ended July 1, 1998 has been presented as
dividends in the accompanying statement of changes in shareholders' equity.

         In July 2000, the Company sold 50 shares of newly created 13% Series C
Preferred Stock, $0.01 par value per share (the "Series C Preferred Stock") to
Don Engel, the Company's Chairman of the Board of Directors, for an aggregate
purchase price of $500,000. The Series C Preferred Stock shall rank: (i) prior
to all of the Company's common stock; (ii) prior to any class or series of
capital stock of the Company hereafter created specifically ranking by its terms
junior to any Series C Preferred Stock of whatever subdivision, and (iii) junior
to the Company's Series B Preferred Stock, in each case as to distributions of
assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary.

         The holders of the Series C Preferred Stock shall be entitled to
receive cumulative cash dividends, payable quarterly in arrears, at the rate per
share of 13% per annum. Dividends on the Series C Preferred Stock shall accrue
from the date of issuance or thereafter, from the most recent date on which
dividends were payable, and shall be payable quarterly each year. The Series C
Preferred Stock may be redeemed, in whole or in part, at the option of the
Company at any time prior to October 31, 2001 at $10,000 per share, plus accrued
and unpaid dividends, if any, to the date of redemption. Any and all outstanding
shares of Series C Preferred Stock shall be redeemed by the Company no later
than October 31, 2001.

Private Placement

         In February 1998, the Company sold an aggregate of 1,299,098 shares of
its common stock for $2.70 per share in a private placement in which it received
net proceeds of approximately $3,200,000. In connection with this placement, the
Company issued the placement agent five-year warrants to purchase 129,910 shares
of the Company's common stock, which warrants are exercisable at $2.70, the
sales price per share of common stock in the placement.

Stock Options

         During 1998, the Company's Board of Directors and shareholders adopted
the 1998 Stock Option Plan (the "1998 Plan"), which authorizes the grant of
options and stock awards to purchase 1,000,000 shares of common stock and was
increased to 2,000,000 shares during 1999. The Company's Stock Option Plans and
Directors Stock Option Plans authorize the issuance of an aggregate of 2,000,000
and 150,000 shares of common stock options, respectively. During 1998, the Board
of Directors authorized the termination of the 1996 Stock Option Plan, although
options granted thereunder may still be exercisable by the holders.

         During 1996, the Company's Board of Directors and shareholders adopted
the 1996 Stock Option Plan (the "1996 Plan") and the 1996 Directors Stock Option
Plan (the "1996 Directors Plan") (collectively the "1996 Plans"), which
authorize the grant of options to purchase 1,000,000 and 150,000 shares of
common stock, respectively. The Company's Stock Option Plan (the "1993 Plan")
and Directors Stock Option Plan (the "1993 Directors Plan") (collectively, with
the 1996 Plans, the "Plans"), authorize the issuance of 500,000 and 50,000
shares of common stock options, respectively. The Plans are designed to serve as
incentives for retaining qualified and competent

                                      F-16
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

employees and directors. During 1996, the Board of Directors authorized the
termination of the 1993 Directors Plan, although options granted thereunder may
still be exercisable by the holders.

         The Company's Board of Directors administers and interprets the 1998
Plan, the 1996 Plan and the 1993 Plan and is authorized to grant options
thereunder to all eligible employees of the Company, including officers and
directors of the Company. Options may be granted under the 1998 Plan, the 1996
Plan and the 1993 Plan on such terms and at such prices as determined by the
Board, except that the per share exercise price of options will not be less than
the fair market value of the common stock on the date of grant, and in the case
of an incentive stock option granted to a 10% shareholder, the per share
exercise price will not be less than 110% of such fair market value. Employees'
stock options typically vest twenty percent annually over a five year period and
the majority of directors' stock options vest immediately.

         The 1996 Directors Plan provides for an automatic grant of an option to
purchase 20,000 shares of common stock upon a person's election as a director of
the Company and an automatic grant of an option to purchase 1,000 shares of
common stock upon such person's re-election as a director of the Company.

         On November 12, 1998, the Board of Directors approved the repricing of
all stock options issued under the 1996 Plan to $2.50 per share. The following
table reflects the Plans' option activity for the years ended December 31:

<TABLE>
<CAPTION>
                                                       Weighted                   Weighted                   Weighted
                                                         Avg.                       Avg.                       Avg.
                                                       Exercise                   Exercise                   Exercise
                                           2000         Price          1999         Price         1998         Price
                                        ---------      --------     ---------     --------     ---------     --------
<S>                                     <C>              <C>        <C>              <C>       <C>              <C>
Options outstanding at beginning
   of year.......................       2,452,131        $ 2.76     1,497,606        $2.78     1,452,106        $4.06
Granted (exercise price = FMV at
   date of grant)................         702,100          1.03       960,525         2.41        98,500         2.57
Exercised........................              --            --            --           --            --           --
Cancelled........................         202,691          2.51         6,000         2.50        53,000           --
                                        ---------       -------      --------      -------     ---------      -------
Options outstanding at end of year      2,951,540        $ 2.18     2,452,131        $2.76     1,497,606        $2.78
                                        =========        ======     =========        =====     =========        =====
Options exercisable at end of year      2,050,917        $ 2.53     1,871,464        $2.84       648,364        $4.44
                                        =========        ======     =========        =====       =======        =====
Price range of options
   outstanding at end of year....     $1.02-$9.75                 $2.50-$9.75                $2.50-$9.75
Options available for future
   grants at end of year.........         398,900                     982,475                    449,394
                                          =======                     =======                    =======
Weighted avg. fair value of
   options granted...............         702,100         $0.88       960,525        $1.16        98,500        $2.50
                                          =======         =====       =======        =====        ======        =====
</TABLE>

                                      F-17
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

         The following table summarizes information about the Company's stock
options outstanding at December 31, 2000.
<TABLE>
<CAPTION>
                                          Options Outstanding                            Options Exercisable
                           -----------------------------------------------          --------------------------------
                                            Weighted
                                             Average
                                            Remaining         Weighted                                  Weighted
Range of Exercise            Number        Contractual         Average                  Number           Average
   Prices                  Outstanding     Life (Years)     Exercise Price           Exercisable      Exercise Price
-----------------          -----------     ------------     --------------           -----------      --------------
<S>                         <C>                  <C>               <C>                <C>                  <C>
$1.02 -- $2.50              2,866,600            7.3               $2.12              1,969,711            $2.42
$3.25 -- $7.00                 65,967            4.4               $5.07                 62,233            $5.14
$8.25 -- $9.75                 18,973            4.7               $9.13                 18,973            $9.13
                            ---------            ---               -----              ---------            -----
                            2,951,540            7.9               $2.18              2,050,917            $2.53
                            =========            ===               =====              =========            =====
</TABLE>

         The Company has determined not to recognize compensation expense for
grants of stock options issued to employees with exercise prices at or above the
market price at the time of grant. The compensation expense, if recognized,
would have resulted in the pro forma amounts indicated below for the years ended
December 31 (amounts in thousands):
<TABLE>
<CAPTION>

                                                           2000            1999           1998
                                                        --------          ------         ------
<S>                                                     <C>               <C>            <C>
Net income (loss) - as reported......................   $(22,884)         $2,482         $3,003
Net income (loss) - pro forma........................    (23,099)          1,332          2,139
Net income (loss) per common share - as reported:
     Basic...........................................      (1.49)           0.18           0.30
     Diluted.........................................      (1.49)           0.17           0.27
Net loss per common share - pro forma:
     Basic...........................................      (1.51)           0.09           0.20
     Diluted.........................................      (1.51)           0.09           0.19
</TABLE>

         The fair value of each option grant was estimated as of the date of
grant using the Black Scholes Option Pricing Model with certain weighted average
assumptions. The assumptions used in fiscal year 2000 were: no expected
dividends; expected volatility of 80%; risk-free interest rate ranging from
6.29% to 6.40%; and expected life of ten years. The assumptions used in fiscal
year 1999 were: no expected dividends; expected volatility of 25%; risk-free
interest rate ranging from 4.66% to 6.24%; and expected life of ten years. The
assumptions used in fiscal year 1998 were: no expected dividends; expected
volatility of 25%; risk-free interest rate ranging from 4.54% to 6.25%; and
expected life of ten years.

11.   DEFINED CONTRIBUTION PLANS

         The Company sponsors section 401(k) defined contribution plans which
permit employees to invest up to 15% of their compensation (subject to
limitation by Internal Revenue Service regulations) on a pretax basis in certain
self-directed investments programs. The Company may, at the discretion of the
Board of Directors, make contributions to the plans. The Company did not make
any contributions to the plans in 2000, 1999 and 1998, respectively.

12.   EMPLOYMENT AGREEMENTS

         The Company is obligated for compensation and bonus arrangements
aggregating approximately $2,400,000 paid over a period ranging from 1 to 4
years.

                                      F-18
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

13.   FINANCIAL INSTRUMENTS

Concentrations of Credit Risk

         Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents, and
accounts receivable. The Company maintains its cash in bank deposit accounts,
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts. Concentrations of credit risk with
respect to accounts receivable are limited due to the large number of customers
comprising the Company's customer base.

         Although the Company has expanded its operations into other states and
Canada, approximately 27% of equipment sales to date have been to customers
located in Florida. In addition, for the year ended December 31, 2000, one
customer accounted for approximately 12% of the Company's total revenues, and
the top ten customers accounted for approximately 33% of the Company's total
revenues.

Fair Value of Financial Instruments

         The carrying amounts of cash, cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximate fair value due to the short
maturity of these items. The carrying amounts of long-term debt approximate fair
value because the interest rates on these instruments change with market
interest rates, except for the $9,000,000 promissory note and the $5,500,000
term loan, which carry fixed interest rates. Their fair values also approximate
carrying amounts since they were classified as current at December 31, 2000.

14.   SEGMENTS OF THE BUSINESS

         The Company operates in the United States and Canada in two primary
industry segments: (1) Architectural Specified Services which involves complete
handling of hi-rise systems, compactors and chutes primarily in high-rise
buildings and (2) Solid Waste Division which involves the construction, repair
and maintenance of waste handling equipment, trucks and transfer stations. The
following is a summary of selected financial data for these business segments
(amounts in thousands):
<TABLE>
<CAPTION>
                                               Architectural
                                                 Specified      Solid Waste      Consolidated
                                                  Services        Division          Total
                                               -------------    -----------      -------------
<S>                                               <C>             <C>             <C>
2000
   Revenues..................................     $ 11,669        $ 51,630        $ 63,299
   Income (loss) before income taxes.........       (6,995)        (16,439)        (23,434)
   Total assets..............................       24,811          60,247          85,058
1999
   Revenues..................................     $ 14,192        $ 45,542        $ 59,734
   Income (loss) before income taxes.........       (1,424)          5,030           3,606
   Total assets..............................       30,096          64,618          94,714
1998
   Revenues..................................     $ 12,709        $ 18,471        $ 31,180
   Income (loss) before income taxes.........          989           2,089           3,078
   Total assets..............................       36,493          17,321          53,814

</TABLE>

         For the year ended December 31, 2000, one customer accounted for
approximately 14% of the Solid Waste Division's revenues, and no customer
accounted for more than 3% of the Architectural Specified Services' revenues.

15.   OTHER EVENTS

         General and administrative expenses for the years ended December 31,
2000 and 1999 include approximately $175,000 and $278,000, respectively,
primarily consisting of severance and shutdown costs related to the closing of
plant facilities and $650,000 and $240,000, respectively, consisting of
professional fees and travel expenses related to acquisitions that were not
consummated. In addition, for the year ended December 31, 1999, general and
administrative expenses included $155,000 in bonuses related to acquisitions
that were completed.

16.   LEGAL MATTERS

         As a result of operations conducted in the ordinary course of business,
from time to time the Company may be, and currently is, subject to product
liability and/or warranty claims and litigation. The Company believes, though


                                      F-19
<PAGE>


                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED

no absolute assurance can be given to that effect, that the current levels of
coverage provided by the Company's product liability insurance policy are
adequate and that any such claims will not have a material adverse effect on the
Company's financial condition or results of operations.

         On March 28, 2001, Acosta Family Limited Partnership, lessor of Hesco's
office and manufacturing facilities and the Company's principal executive
office, filed a lawsuit in the Circuit Court of the Eleventh Judicial Circuit in
and for Miami-Dade County, Florida against Hesco. The complaint filed in this
action sought undisclosed damages alleging breach of the Acosta Lease through
the alleged failure on the part of Hesco to maintain the property, alleged
noncompliance with environmental laws and alleged failure of Hesco to provide
insurance to lessor insuring against loss of rent. The Company has not yet filed
a response but intends to vigorously defend against all allegations made in the
complaint.

         On March 30, 2001, Edelsy Marcano, a former employee of Hesco, filed a
lawsuit in the Circuit Court of the Eleventh Judicial Circuit in and for
Miami-Dade County, Florida against Hesco. The complaint filed in this action
sought undisclosed damages alleging breach of the Employment Agreement, dated
February 20, 1998, between Marcano and Hesco, resulting from Hesco's decision to
terminate Marcano's employment for cause. The Company has not yet filed a
response but intends to vigorously defend against all allegations made in the
complaint.

         On or about July 31, 2000, the Commissioner of Environmental Protection
for the State of Connecticut (the "Plaintiff") brought an action in Superior
Court, Judicial District of Hartford, State of Connecticut, against DeVivo
Industries, Inc. ("DeVivo"), a wholly-owned subsidiary of the Company, alleging
that DeVivo violated several provisions of Connecticut law by its failure to
obtain permits relating to its construction, installation and operation in 1986
and 1994 of paint spray booths used in its manufacturing processes. The
Plaintiff is seeking civil penalties not to exceed $25,000 per day for each day
of violation on or after October 1, 1990 and civil penalties not to exceed
$1,000 per day for each day of violation prior to October 1, 1990. The Company
believes that it is entitled to be indemnified for substantially all liability
for this action by the former shareholders of DeVivo pursuant to the terms and
conditions of the Stock Purchase Agreement dated as of February 23, 1999, by and
among the Company, DII Acquisition Corp., DeVivo, Ecological Technologies and
the shareholders of DeVivo. However there can be no assurance that those
shareholders will satisfy their indemnification obligations.

         The parties to the suit have since reached a settlement in principle
and, pending final approval by the Attorney General's Office, Mario DeVivo will
pay a civil penalty in the amount of $200,000 and all counts of the complaint
filed by the Plaintiff will be dismissed. DeVivo has submitted applications for
the necessary permits.

         During 2000, various corporations filed lawsuits against the Company.
In general, these lawsuits alleged that the Company owed monies for materials
purchased. The cases were dismissed with no additional liability beyond the
original amount owed.

                                      F-20
<PAGE>

                         HI-RISE RECYCLING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                                    CONTINUED


17.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

         The following table presents unaudited supplemental quarterly financial
information for the years ended December 31, 2000 and December 31, 1999 (in
thousands, except per share data):
<TABLE>
<CAPTION>

                                                                       Quarter Ended
                                          -----------------------------------------------------------------------
                                           March 31,         June 30,         September 30,          December 31,
                                             2000              2000               2000                   2000
                                           ---------         --------         -------------          ------------
<S>                                        <C>                <C>             <C>                    <C>
Total revenues                             $15,845            $18,342         $17,019                $12,093
Operating income (loss)                        255              1,440          (6,713)               (11,905)
Income (loss) before income taxes             (987)                36          (8,280)               (14,203)
Net income (loss)                             (612)                21          (8,090)               (14,203)

Basic net income (loss) per
   common share                             $(0.05)             $0.00          $(0.52)                $(0.89)
Diluted net income (loss) per
   common share                             $(0.05)             $0.00          $(0.52)                $(0.89)
</TABLE>

<TABLE>
<CAPTION>
                                                                       Quarter Ended
                                          -----------------------------------------------------------------------
                                           March 31,         June 30,         September 30,          December 31,
                                             1999              1999               1999                   1999
                                           ---------         --------         -------------          ------------
<S>                                        <C>                <C>             <C>                    <C>
Total revenues                             $12,267            $16,850         $15,471                $15,146
Operating income (loss)                      1,292              2,263           2,192                    642
Income (loss) before income taxes              976              1,532           1,704                   (606)
Net income (loss)                              976              1,132           1,000                   (626)

Basic net income (loss) per
   common share                              $0.08              $0.09           $0.07                 $(0.06)
Diluted net income (loss) per
   common share                              $0.07              $0.08           $0.07                 $(0.06)
</TABLE>

         Quarterly basic and diluted net income or loss per common share were
computed independently for each quarter and do not necessarily total to the year
to date basic and diluted net income (loss) per common share.

                                      F-21
<PAGE>

                                  EXHIBIT INDEX


  Exhibits                             Description
-------------  -----------------------------------------------------------------
     3.1       Amended and Restated Articles of Incorporation of the Company
     4.4       Stock Purchase Warrant, dated December 4, 2000.
    10.59      Third Amendment to Credit Agreement and Composite Amendment
               Agreement, dated October 19, 2000.
    10.60      Fourth Amendment to Credit Agreement and Composite Amendment
               Agreement, dated December 4, 2000.
    10.61      Securities Purchase Agreement, dated as of December 4, 2000,
               between GECC and the Company.
    10.62      Registration Rights Agreement, dated as of December 4, 2000,
               between GECC and the Company.
    10.63      Fifth Amendment to Credit Agreement and Composite Amendment
               Agreement, dated December 9, 2000.
    10.64      First Amendment, dated August 3, 2000, to the Employment
               Agreement between the Company and Donald Engel.
    21.1       Subsidiaries of the Company.
    23.1       Consent of Independent Certified Public Accountants
               PricewaterhouseCoopers LLP, dated April 17, 2001.