Exhibit (1)


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES




                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------
                                                                      PAGE
                                                                      ----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                              F-2

CONSOLIDATED:
     BALANCE SHEETS
         DECEMBER 31, 2000 AND 1999                                   F-3

     STATEMENTS OF INCOME
         YEARS ENDED DECEMBER 31, 2000 AND 1999                       F-4

     STATEMENTS OF COMPREHENSIVE INCOME
         YEARS ENDED DECEMBER 31, 20000 AND 1999                      F-5

     STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
         YEARS ENDED DECEMBER 31, 2000 AND 1999                       F-6

     STATEMENTS OF CASH FLOWS
         YEARS ENDED DECEMBER 31, 2000 AND 1999                       F-7

     NOTES TO FINANCIAL STATEMENTS                                    F-8/21



                                      * * *

                                      F-1
<PAGE>










                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------

To the Stockholders
Menlo Acquisition Corporation and Subsidiaries


We  have  audited  the  accompanying   consolidated   balance  sheets  of  MENLO
ACQUISITION  CORPORATION AND  SUBSIDIARIES as of December 31, 2000 and 1999, and
the related consolidated statements of income,  comprehensive income, changes in
stockholders'  equity,  and cash flows for the years then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of Menlo
Acquisition  Corporation and  Subsidiaries as of December 31, 2000 and 1999, and
their  consolidated  results  of  operations  and cash  flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.

                                                   /s/ J.H. Cohn, LLP


Roseland, New Jersey
February 9, 2001

                                      F-2
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999

                      ASSETS                           2000               1999
                      ------                           ----               ----
Current assets:
    Cash and cash equivalents                      $2,195,494        $1,182,079
    Investments in marketable securities              246,563           722,400
    Accounts receivable:
       Trade, net of allowance for doubtful
          accounts of $618,329 and $614,315         3,218,867         3,879,474
       Unbilled receivables                            57,770            65,269
       Affiliates                                                       109,545
    Deferred tax assets, net                           25,651            34,276
    Prepaid expenses and other current assets         116,175            99,855
                                                  -----------       -----------
              Total current assets                  5,860,520         6,092,898
Property, equipment and furnishings, net of
   accumulated depreciation of $1,426,737 and
   $964,903                                         3,217,649         1,087,663
Other assets                                           80,119            66,989
                                                  -----------       -----------

              Totals                               $9,158,288        $7,247,550
                                                   ==========        ==========

   LIABILITIES AND STOCKHOLDERS' EQUITY
   ------------------------------------
Current liabilities:
    Current portion of long-term debt              $   24,028        $  106,248
    Accounts payable                                  741,213           942,071
    Customer deposits                                 440,137           444,685
    Accrued expenses and other liabilities            524,991           443,401
                                                  -----------       -----------
              Total current liabilities             1,730,369         1,936,405
Long-term debt, noncurrent portion                  1,166,572           168,231
                                                  -----------       -----------
              Total liabilities                     2,896,941         2,104,636
                                                  -----------       -----------

Commitments and contingencies

Stockholders' equity:
    Preferred stock, $.0001 par value;
       2,000,000 shares authorized; none issued         -                  -
    Common stock, $.0001 par value; 40,000,000
       shares authorized; 5,263,348 shares
       issued and outstanding                             526               526
    Additional paid-in capital                      4,312,662         4,312,662
    Retained earnings                               1,908,786           803,291
    Accumulated other comprehensive income -
       unrealized holdings gain on marketable
       securities, net of income taxes of
       $26,249 and $17,624                             39,373            26,435
                                                  -----------        -----------
              Total stockholders' equity            6,261,347         5,142,914
                                                  -----------        -----------

              Totals                               $9,158,288        $7,247,550
                                                   ==========        ===========

See Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2000 AND 1999




                                                     2000               1999
                                                     ----               ----
Gross revenue:
   Consulting                                     $9,661,984         $9,287,714
   Laboratory testing                              5,514,859          4,306,810
                                                ------------         ----------
     Totals                                       15,176,843         13,594,524

Costs of Revenue:
   Consultant compensation and related
     expenses                                      2,190,429          1,854,753
   Other costs of consulting revenue               3,007,530          2,831,414
   Laboratory testing compensation and related
     expenses                                      1,479,275          1,277,697
  Other laboratory testing costs                   1,259,145          1,133,633
                                                ------------       ------------
     Totals                                        7,936,379          7,097,497
                                                ------------       ------------
     Net revenue                                   7,240,464          6,497,027
                                               -------------       ------------
Selling, general and administrative expenses       5,660,678          5,166,039
                                                ------------       ------------
Income from operations                             1,579,786          1,330,988
                                                ------------       ------------
Other income (expense):
   Interest                                           (7,687)           (33,695)
   Administrative fee income                          36,000             42,000
   Sundry, principally investment income             200,648             86,281
                                                ------------       ------------

              Totals                                 228,961             94,586
                                                ------------       ------------

Income before provision for income taxes           1,808,747          1,425,574

Provision for income taxes                           703,252            563,844
                                                ------------       ------------

Net income                                       $ 1,105,495         $  861,730
                                                ============       ============

Basic earnings per share                               $.21               $.16
                                                       ====              =====

Basic weighted average common shares
   outstanding                                     5,263,348          5,263,348
                                                   =========          =========













See Notes to Consolidated Financial Statements.


                                      F-4

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                     YEARS ENDED DECEMBER 31, 2000 AND 1999




                                                         2000            1999
                                                         ----            ----

Net income                                            $1,105,495       $861,730

Other comprehensive income - unrealized holding gain
on marketable securities, net of income taxes of
$8,625 and $17,624                                        12,938         26,435
                                                       ---------       --------

Comprehensive income                                  $1,118,433       $888,165
                                                      ==========       ========


































See Notes to Consolidated Financial Statements.

                                      F-5


<PAGE>

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2000 AND 1999


                                                            Unrealized
                                                             Holding
                       Common Stock   Additional             Gain on
                       ------------     Paid-in   Retained  Marketable
                     Shares   Amount    Capital   Earnings  Securities   Total
                     ------   -----     -------   --------  ----------   -----
Balance
 January 1, 1999    5,000,000  $500  $4,262,688  $ (58,439)          $4,204,749

Effect of reverse
 acquisition          263,348    26      49,974                          50,000

Unrealized holding
 gain, net of income
 taxes of $17,624                                           $26,435      26,435

Net income                                         861,730              861,730
                    ---------  ----  ----------  ---------  -------   ----------
Balance
 December 31, 1999  5,263,348   526   4,312,662    803,291   26,435   5,142,914

Unrealized holding
 gain, net of income
 taxes of $8,625                                            $12,938      12,938

Net income                                       1,105,495            1,105,495
                    ---------  ----  ----------  ---------  -------   ----------

Balance, December
 31, 2000           5,263,348  $526  $4,312,662 $1,908,786  $39,373  $6,261,347
                    =========  ====  ==========  =========  =======  ===========

















See Notes to Consolidated Financial Statements.






                                      F-6


<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                         2000           1999
                                                         ----           ----

Operating activities:
  Net income                                          $1,105,495      $861,730
  Adjustments to reconcile net income
     to net cash provided by operating activities:
     Depreciation and amortization                       478,029       414,683
     Bad debts                                           115,000       130,000
     Loss on sale of equipment                             1,104
     Deferred income taxes                                             (59,200)
     Changes in operating assets and liabilities:
        Accounts receivable:
           Trade                                         545,607       823,248
           Unbilled receivables                            7,499        42,007
           Affiliates                                    109,545       175,418
        Prepaid expenses and other current assets        (16,320)      (17,662)
        Other assets                                     (22,297)       20,897
        Accounts payable                                (200,858)      331,870
        Customer deposits                                 (4,548)      (78,040)
        Accrued expenses and other liabilities            81,590       207,324
                                                      ----------   -----------
           Net cash provided by operating activities   2,199,846     2,852,275
                                                      ----------   -----------
Investing activities:
   Purchase of property, equipment and furnishings    (1,400,952)     (482,504)
   Proceeds from sale of equipment                         1,000
   Repayments of advances to affiliate                                  27,001
   Redemption (purchase) of marketable securities        497,400      (678,341)
                                                     -----------   -----------
           Net cash used in investing activities        (902,552)   (1,133,844)
                                                     -----------   -----------

Financing activities:
   Repayment of note payable - bank and
      long-term debt                                    (283,879)     (506,249)
   Repayment of advances from stockholder                              (54,825)
                                                     -----------   -----------
           Net cash used in financing activities        (283,879)     (561,074)
                                                     -----------   -----------

Net increase in cash and cash equivalents              1,013,415     1,157,357
Cash and cash equivalents, beginning of year           1,182,079        24,722
                                                     -----------  ------------

Cash and cash equivalents, end of year                $2,195,494    $1,182,079
                                                      ==========    ==========

Supplemental disclosure of cash flow data:
     Interest paid                                    $    7,687    $   33,695
                                                      ==========    ==========

     Income taxes paid                                $  786,777    $  571,763
                                                      ==========    ==========



See Notes to Consolidated Financial Statements.


                                      F-7
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1  -  Business activities and reverse acquisition:
               Business activities:
                  Menlo Acquisition  Corporation  ("Menlo") is a publicly-traded
                  Delaware corporation formerly doing business as Focus Surgery,
                  Inc. ("Focus").  Menlo has become a holding company engaged in
                  acquiring   other   operating   businesses.   Prior   to   the
                  consummation of the Second Amended Plan of  Reorganization  in
                  March  1999,   which  is  further   described   below,   Focus
                  specialized in the research and  development of techniques and
                  equipment used in noninvasive surgeries.  On February 9, 1996,
                  Focus  filed a  petition  for relief  under  Chapter 11 of the
                  Bankruptcy  Code. In August 1996,  while in bankruptcy,  Focus
                  sold  substantially all of its assets to an unrelated company.
                  As part of the  sale,  Focus  transferred  all  rights  to the
                  "Focus  Surgery,  Inc."  name to the  buyer  and  amended  its
                  Articles  of   Incorporation  to  change  its  name  to  Menlo
                  Acquisition Corporation.

                  Environmental Waste Management  Associates,  LLC, a New Jersey
                  limited  liability  company ("EWMA,  LLC"), and  Environmental
                  Waste Management  Associates,  Inc., a New Jersey  corporation
                  ("EWMA, Inc."), are environmental consulting firms providing a
                  broad  range  of   environmental   services   related  to  the
                  investigation and remediation of hazardous waste sites.  EWMA,
                  LLC and EWMA,  Inc.  are referred to  collectively  as "EWMA."
                  EWMA has offices in Parsippany  and West  Windsor,  New Jersey
                  and Englewood, Colorado.

                  Integrated Analytical Laboratories,  LLC, a New Jersey limited
                  liability  company ("IAL,  LLC"),  and  Integrated  Analytical
                  Laboratories,  Inc., a New Jersey corporation  ("IAL,  Inc."),
                  are firms  providing  analytical  laboratory  services  to the
                  environmental and pharmaceutical industries. IAL, LLC and IAL,
                  Inc.  are  referred  collectively  as "IAL." IAL is located in
                  Randolph, New Jersey.

                  EWMA, LLC, EWMA,  Inc., IAL, LLC and IAL, Inc. are referred to
                  collectively as the "Acquired  Entities." They were related by
                  common  ownership prior to the reverse  acquisition  described
                  below.

                  Effective January 1, 2001, EWMA, Inc. and IAL, Inc., which had
                  no operations  but  primarily  provided  payroll  services for
                  other  members of the  consolidated  group,  were  merged into
                  EWMA, LLC and IAL, LLC, respectively.

               Reverse acquisition:
                  On March 10, 1999, Menlo and the Acquired Entities consummated
                  certain  transactions  pursuant to the Second  Amended Plan of
                  Reorganization  filed with the Bankruptcy  Court on August 12,
                  1998 and approved on August 26, 1998.  Menlo  converted all of
                  its  outstanding  shares of existing  common  stock to 263,348
                  shares of new  common  stock  with a par  value of $.0001  per
                  share.  Additionally,  Menlo  issued  5,000,000  shares of new
                  common stock in exchange for 99% of the equity interest in the
                  Acquired Entities (the  "Acquisition").  During the year ended
                  December 31, 2000,  Menlo  purchased the remaining 1% interest
                  in the  Acquired  Entities  from an  affiliated  party for the
                  nominal amount of $1.

                                      F-8
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Business  activities  and  reverse  acquisition  (concluded):
           Reverse acquisition (concluded):
               As a result of the Acquisition and the subsequent purchase of the
               remaining 1% interest,  the Acquired Entities became wholly-owned
               subsidiaries  of Menlo and the former  owners and  members of the
               Acquired  Entities became the owners of approximately  95% of the
               5,263,348  shares of common stock of Menlo  outstanding  upon the
               consummation of the  Acquisition.  Stockholders of Menlo prior to
               the  Acquisition  comprised  the ownership of the remaining 5% of
               outstanding   shares  at  the  date  of  the   Acquisition.   The
               transaction  was treated for  accounting  purposes as a "purchase
               business combination" and a "reverse acquisition" effective as of
               March 10,  1999 in which  Menlo was the  legal  acquirer  and the
               Acquired Entities were the accounting acquirer.  Accordingly, the
               assets and  liabilities of the accounting  acquirer (the Acquired
               Entities) were accounted for at their historical  carrying values
               as of March 10, 1999.

               As further  explained  in Note 3, the fair  value of the  263,348
               shares of Menlo common stock  ($50,000)  issued  became the total
               cost of the acquisition of Menlo.

               The accompanying  consolidated statements of income for the years
               ended   December  31,  2000  and  1999  reflect  the  results  of
               operations of the Acquired  Entities for all periods and of Menlo
               subsequent  to the  Acquisition  on March 10, 1999.  Prior to the
               Acquisition,  Menlo was in bankruptcy  and had limited  operating
               activities.

Note 2 - Summary of significant accounting policies and concentrations of credit
         risk:
           Principles of consolidation:
               The accompanying  consolidated  financial  statements include the
               accounts  of  Menlo,  the  Acquired   Entities  and  their  other
               subsidiaries   formed  after  March  10,  1999.  All  significant
               intercompany  accounts and  transactions  have been eliminated in
               consolidation. As used herein, the "Company" refers to Menlo, the
               Acquired Entities and their other subsidiaries, collectively.

           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   certain   reported   amounts   and   disclosures.
               Accordingly, actual results could differ from those estimates.

           Revenue recognition:
               Sales  are  recognized   when  revenue  is  realized  or  becomes
               realizable and has been earned. In general, revenue is recognized
               when the  earnings  process is  complete  and  collectibility  is
               assured,  which is usually when the  laboratory  testing  segment
               delivers  its report to the  customer or the  consulting  segment
               provides  its  consulting  services.  Amounts  billed  related to
               shipping and handling, which are not significant, are included in
               revenue. In addition,  amounts received from customers in advance
               as  deposits  are  deferred  until  such  time as the  report  is
               delivered or the service is provided.

           Cash equivalents:
               Cash  equivalents  include all highly liquid  investments  with a
               maturity of three months or less when acquired.

                                      F-9

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary of significant accounting policies and concentrations
         of credit risk (continued):
               Allowance for doubtful accounts:
                  The  Company   establishes  an  allowance  for   uncollectible
                  accounts receivable based on historical  collection experience
                  and management's  evaluation of  collectibility of outstanding
                  accounts receivable.

               Concentrations of credit risk:
                  Financial instruments which potentially subject the Company to
                  concentrations  of credit risk  consist  primarily of cash and
                  cash equivalents and accounts  receivable.  The Company places
                  its  cash  and  cash  equivalents  with  high  credit  quality
                  financial institutions.  At times, the Company's cash and cash
                  equivalents  exceed  the  current  insured  amount  under  the
                  Federal Deposit Insurance Corporation of $100,000. At December
                  31, 2000,  the Company had cash and cash  equivalent  balances
                  that  exceed   Federally   insured  limits  by   approximately
                  $1,512,000.  Concentrations  of credit  risk with  respect  to
                  accounts   receivable  are  limited  as  the  Company  closely
                  monitors  the  extension  of  credit  to its  customers  while
                  maintaining allowances for potential credit losses. Management
                  does not  believe  that  significant  credit  risk  exists  at
                  December 31, 2000.

               Investments in marketable securities:
                  Investments   in   marketable   debt  and  equity   securities
                  classified as "available for sale" are recorded at fair value.
                  Pursuant to Statement of Financial  Accounting  Standards  No.
                  130,  "Reporting  Comprehensive  Income,"  unrealized  holding
                  gains and losses are reported annually as other  comprehensive
                  income or loss in the consolidated statements of comprehensive
                  income and cumulative unrealized holding gains and losses, net
                  of related  income tax  effects,  are  reported  as a separate
                  component of stockholders'  equity in the consolidated balance
                  sheets.

               Property, equipment and furnishings:
                  Property, equipment and furnishings are stated at cost, net of
                  accumulated  depreciation.   Depreciation  is  provided  using
                  primarily the  straight-line  method over the estimated useful
                  lives of the assets.

               Goodwill:
                  Goodwill,  which is included in other assets,  is comprised of
                  costs in excess of net assets of acquired  businesses that are
                  being amortized on a straight-line basis over estimated useful
                  lives of 10 years.

               Advertising:
                  The Company expenses the cost of advertising and promotions as
                  incurred.  Advertising costs charged to operations amounted to
                  $161,981 and $136,548 in 2000 and 1999, respectively.

                                      F-10

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary of significant accounting policies and concentrations
         of credit risk (continued):
               Impairment of long-lived assets:
                  The Company  applies the  provisions of Statement of Financial
                  Accounting  Standards No. 121,  "Accounting for the Impairment
                  of Long-Lived  Assets and for Long-Lived Assets to be Disposed
                  of",  ("SFAS 121") to its long-lived  assets.  Under SFAS 121,
                  impairment losses on long-lived  assets,  such as goodwill and
                  property,  equipment  and  furnishings,  are  recognized  when
                  events  or  changes  in   circumstances   indicate   that  the
                  undiscounted  cash flows  estimated  to be  generated  by such
                  assets are less than their  carrying  value and,  accordingly,
                  all  or  a  portion  of  such   carrying   value  may  not  be
                  recoverable.  Impairment losses are then measured by comparing
                  the fair value of assets to their carrying amounts.

               Income taxes:
                  The Company  accounts for income  taxes  pursuant to the asset
                  and liability method which requires deferred income tax assets
                  and   liabilities  to  be  computed   annually  for  temporary
                  differences  between the financial  statement and tax bases of
                  assets  and  liabilities   that  will  result  in  taxable  or
                  deductible amounts in the future based on enacted tax laws and
                  rates  applicable to the periods in which the  differences are
                  expected to affect taxable  income.  Valuation  allowances are
                  established  when  necessary to reduce  deferred tax assets to
                  the amount expected to be realized.  Income tax expense is the
                  tax  payable  or  refundable  for the year  plus or minus  the
                  change during the year in deferred tax assets and liabilities.

               Stock based compensation:
                  In accordance  with the  provisions  of Accounting  Principles
                  Board  Opinion  No.  25,   "Accounting  for  Stock  Issued  to
                  Employees", the Company will recognize compensation costs as a
                  result of the issuance of stock options to employees  based on
                  the excess,  if any, of the fair value of the underlying stock
                  at the date of grant or award (or at an appropriate subsequent
                  measurement  date) over the  exercise  price.  Therefore,  the
                  Company will not be required to recognize compensation expense
                  as a result of any  grants  of stock  options  at an  exercise
                  price that is  equivalent  to or greater than fair value.  The
                  Company will also make pro forma  disclosures,  as required by
                  Statement  of   Financial   Accounting   Standards   No.  123,
                  "Accounting for Stock-Based Compensation" ("SFAS 123"), of net
                  income or loss using the fair value based Black-Scholes option
                  pricing  method if such  amounts  differ  materially  from the
                  historical amounts.

                  Transactions in which goods or services are the  consideration
                  received for the issuance of equity  instruments are accounted
                  for based on the fair value of the  consideration  received or
                  the fair value of the equity instrument  issued,  whichever is
                  more reliably measurable.




                                      F-11

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary of significant accounting policies and concentrations
         of credit risk (concluded):
               Earnings per share:
                  The Company presents "basic" earnings per common share and, if
                  applicable,  "diluted"  earnings per common share  pursuant to
                  the provisions of Statement of Financial  Accounting Standards
                  No. 128, "Earnings Per Share" ("SFAS 128"). Basic earnings per
                  common share is  calculated  by dividing net income or loss by
                  the  weighted  average  number  of common  shares  outstanding
                  during the period.  The  calculation  of diluted  earnings per
                  common  share is similar to that of basic  earnings per common
                  share, except that the denominator is increased to include the
                  number  of  additional  common  shares  that  would  have been
                  outstanding  if  all   potentially   dilutive  common  shares,
                  principally those issuable upon the exercise of stock options,
                  were issued during the period.

                  For the  years  ended  December  31,  2000 and  1999,  diluted
                  earnings per share have not been presented  because there were
                  no  additional  shares  derived  from the assumed  exercise of
                  stock  options  and  the  application  of the  treasury  stock
                  method. Such potentially dilutive securities,  however,  could
                  dilute basic earnings per share in the future.

               Recent accounting pronouncements:
                  The Financial  Accounting  Standards  Board and the Accounting
                  Standards  Executive  Committee of the  American  Institute of
                  Certified  Public  Accountants  had issued certain  accounting
                  pronouncements  as of  December  31,  2000  that  will  become
                  effective in subsequent  periods;  however,  management of the
                  Company  does not  believe  that  any of those  pronouncements
                  would have  significantly  affected  the  Company's  financial
                  accounting measurements or disclosures had they been in effect
                  during the years ended December 31, 2000 and 1999, and it does
                  not  believe  that any of those  pronouncements  will have any
                  significant  impact on the Company's  financial  statements at
                  the time they become effective.


Note 3 - Purchase business combination:
               The  Acquisition,  as described in Note 1, has been accounted for
               as a purchase business  combination and a reverse  acquisition in
               which the  Acquired  Entities  were the  accounting  acquirer and
               Menlo was the legal acquirer.  As noted previously,  Menlo was in
               bankruptcy and had limited assets and  liabilities at the date of
               the  Acquisition.  The cost of the Acquisition  totaled  $50,000,
               inclusive  of  professional  fees,  and  pursuant to the purchase
               method of accounting,  the initial cost of acquiring Menlo, which
               exceeded  the fair value of the net assets  acquired  by $50,000,
               was  allocated to goodwill and is included in other assets in the
               accompanying consolidated balance sheets.


                                      F-12
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Investments in marketable securities:
               At  December  31, 2000 and 1999,  the  Company's  investments  in
               marketable   securities,   all  of  which  were   classified   as
               available-for-sale,   consisted   of   government   agency   debt
               securities and equity securities as follows:

                                       2000                      1999
                             -----------------------   -------------------------
                              Cost or                    Cost or
                             Amortized                  Amortized
                               Cost       Fair Value      Cost        Fair Value
                            ---------     ----------    ---------     ----------
           Debt securities
           (maturing within
           1 year)                                       $497,400       $497,400
           Equity securities  $180,941     $246,563       180,941        225,000
                              --------     --------     ---------      ---------

                      Totals  $180,941     $246,563      $678,341       $722,400
                              ========     ========      ========       ========


Note 5 - Property, equipment and furnishings:
          Property, equipment and furnishings consist of the following:

                                 Range of
                                Estimated
                               Useful Lives          2000          1999
                               ------------       ---------     ---------
          Land                                 $    158,235
          Building                40 years        1,730,008
          Equipment              5-7 years        2,227,155     $1,603,202
          Furniture and fixtures   7 years          167,683        164,232
          Vehicles                 5 years          206,842        130,669
          Leasehold improvements   7 years          154,463        154,463
                                                 ----------      ---------
                                                  4,644,386      2,052,566
          Less accumulated depreciation           1,426,737        964,903
                                                 ----------     ----------

             Totals                              $3,217,649     $1,087,663
                                                 ==========     ==========

          Depreciation  expense  amounted to $468,862  and $414,683 in 2000 and
          1999, respectively.


Note 6 - Notes payable - bank:
               The Company has a committed line of credit  agreement with Summit
               Bank in the amount of $1,000,000.  In addition, it has a $750,000
               line of credit  available for either the purchase or refinance of
               equipment. Outstanding borrowings bear interest at the prime rate
               less .5% (an  effective  rate of 9% at  December  31,  2000).  At
               December  31,  2000,  the Company had no  outstanding  borrowings
               under  either  line of  credit.  The  line of  credit  agreements
               contain certain covenants,  the most restrictive of which include
               the maintenance of a maximum debt coverage ratio, as defined.  At
               December  31,  2000,  the  Company  was in  compliance  with  all
               financial covenants  associated with the agreements.  Outstanding
               borrowings  are   collateralized  by  substantially  all  of  the
               Company's assets.

                                      F-13
<PAGE>
                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 6 - Notes payable - bank (concluded):
               The  Company had a committed  line of credit  agreement  with PNC
               Bank in the amount of $750,000  which  expired on April 30, 2000.
               Outstanding borrowings under that line bore interest at the prime
               rate plus .75% (an effective  rate of 9.5% at December 31, 1999).
               At December 31, 1999, the Company had no  outstanding  borrowings
               under this line.  Outstanding  borrowings were  collateralized by
               substantially  all of the Company's assets and were guaranteed by
               the principal stockholder.


Note 7 - Long-term debt:
               At December 31, 2000, long-term debt was comprised of obligations
               totaling  $1,190,600 that represented the remaining  balance of a
               mortgage note with an original  principal  balance of $1,200,000.
               The mortgage note was issued  during the year ended  December 31,
               2000 by Norcrown  Bank in  connection  with the purchase  from an
               unaffiliated  third  party of a  facility  used in the  Company's
               laboratory   testing   operations  for  total   consideration  of
               $1,850,000.  The  issuance  of the  mortgage  note was a  noncash
               transaction   that   is  not   reflected   in  the   accompanying
               consolidated  statement of cash flows for the year ended December
               31, 2000. The mortgage note is payable in monthly installments of
               $10,605  (based on a  20-year  amortization  schedule)  including
               interest at 8.75% until July 1, 2005 at which time the  remaining
               outstanding  balance is due. Subject to certain  conditions,  the
               mortgage  may be  extended  for an  additional  five  years at an
               interest  rate of 250 basis points  above the then Current  Index
               Rate, as defined.  Future mortgage  principal payments in each of
               the five years  subsequent  to December  31,  2000,  assuming the
               mortgage note is not extended,  are as follows:  $24,028 in 2001;
               $26,215 in 2002; $28,603 in 2003; $31,208 in 2004; and $1,080,546
               in 2005.

               The  terms of the  mortgage  note  require  the  Company  to meet
               certain  financial  covenants,  as  defined.  The  Company was in
               compliance with those covenants at December 31, 2000.

               At December 31, 1999, long-term debt was comprised of obligations
               totaling  $274,479 under a term loan that was originally  payable
               in monthly  installments  of $8,854  plus  interest  at 200 basis
               points over the bank's four year cost of funds rate (an effective
               rate of  7.9%)  through  July  2002.  The  remaining  outstanding
               balance was repaid in May 2000.  The loan was  collateralized  by
               substantially  all of the Company's  assets and guaranteed by the
               principal stockholder.


Note 8 - Retirement plan:
               The Company  maintains a retirement plan qualifying under Section
               401(k)  of  the  Internal  Revenue  Code  which  allows  eligible
               employees   to  defer  a   portion   of  their   income   through
               contributions to the plan. The Company makes contributions to the
               plan  for  the  benefit  of  the  employees  subject  to  certain
               limitations. The Company's contributions amounted to $115,964 and
               $78,220 in 2000 and 1999, respectively.

                                      F-14
<PAGE>

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 9 - Income taxes:
               The  historical  provisions and credits for income taxes shown in
               the accompanying  consolidated statements of income for the years
               ended December 31, 2000 and 1999 were comprised of the following:

                                                      2000          1999
                                                     -----         -----

                    Federal:
                         Current                    $552,644      $475,742
                         Deferred                                  (40,200)
                                                   ---------     ---------
                             Totals                  552,644       435,542
                                                   ---------     ---------

                    State:
                         Current                     150,608       140,002
                         Deferred                                  (11,700)
                                                   ---------     ---------
                             Totals                  150,608       128,302
                                                   ---------     ---------

                             Totals                 $703,252      $563,844
                                                    ========      ========


               The  provisions for income taxes in 2000 and 1999 differ from the
               amounts  computed  using the Federal  statutory  rate of 34% as a
               result of the following:


                                                              2000      1999
                                                              ----      ----

              Expected provision at Federal statutory rate     34%       34%
              Effect of state income taxes, net of Federal
              income tax effect                                 5         6
                                                               --        --

              Effective tax rate                               39%       40%
                                                               ==        ==

               The  Company's  pre-tax  income during the period from January 1,
               1999  to  March  10,  1999  (the  date  of the  Acquisition)  was
               generated by the  Acquired  Entities  which were either  limited
               liability  companies that were not subject to income taxes or "S"
               Corporations  that were only  subject  to state  income  tax at a
               reduced  rate.  However,  the Company's  pre-tax  income for that
               period was not  material  and,  accordingly,  the  aforementioned
               exemptions  from  income  taxes  did not  materially  change  the
               effective tax rate for the year ended December 31, 1999.

                                      F-15
<PAGE>
                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 9 - Income taxes (concluded):
               At December 31, 2000 and 1999, current deferred tax assets,  net,
               were attributable to the following:

                                                             2000         1999
                                                             ----         ----

  Deferred tax assets - allowance for doubtful accounts    $51,900      $51,900
  Deferred tax liabilities - unrealized holding gains on
       marketable securities                               (26,249)     (17,624)
                                                          --------      --------

  Current deferred tax assets, net                         $25,651      $34,276
                                                           =======      =======


Note 10- Related party transactions:
               During 2000 and 1999, the Company had the following  transactions
               with affiliated companies which are wholly-owned or substantially
               owned by the Company's principal stockholder:


                                                           2000          1999
                                                           ----          ----

                Laboratory fees (income)               $  76,954     $  82,717
                Consulting fees (income)                 174,219       126,407
                Administrative fees (income)              36,000        42,000
                Interest (income)                          6,745
                Subcontractor fees (expense)               9,099        55,683

               In-Situ  Oxidative  Technologies  ("ISOTEC")  is owned 50% by Dr.
               Richard  S.  Greenberg,  Menlo's  Chairman  and  Chief  Executive
               Officer,  and 50% by an unrelated  third party.  ISOTEC is in the
               business  of   remediating   contaminated   properties   using  a
               proprietary in-situ treatment program.  The services performed by
               ISOTEC are similar in nature to those  provided by the  operating
               segments of Menlo.  During 2000 and 1999,  EWMA and IAL generated
               revenue directly from  transactions  with ISOTEC of approximately
               $251,000 and $183,000,  respectively.  Additionally,  the similar
               nature of ISOTEC's  services has enabled EWMA to obtain contracts
               and generate  revenues with  unrelated  customers in the past and
               may potentially enable it to continue to do so in the future.





                                      F-16
<PAGE>
                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10- Related party transactions (concluded):
               On December  6, 1999,  Menlo  agreed to make  advances to provide
               ISOTEC with up to $250,000 in  operating  capital.  An  unrelated
               party also agreed to make  advances to ISOTEC in amounts equal to
               any advances  made by Menlo.  Advances to ISOTEC bear interest at
               6% and are payable on demand.  As of the date of this  agreement,
               Menlo had a receivable of approximately  $195,000 for services it
               had previously provided to ISOTEC which ISOTEC agreed to repay in
               full. In addition,  Menlo was granted the opportunity to purchase
               up to 50% of the equity  interest in ISOTEC pursuant to the terms
               set forth below. Selling,  general and administrative expenses in
               1999  include a charge of $80,000  for the  write-off  of Menlo's
               advances  to  ISOTEC  based on its then  deteriorating  financial
               condition.  Selling,  general and administrative expenses in 2000
               include  a credit  of  $80,000  as a result  of  improvements  in
               ISOTEC's  financial  condition  and  the  full  repayment  of the
               advances.  There were no outstanding  advances as of December 31,
               2000. The agreement expires on June 30, 2001.

               Under the  agreement,  Menlo is granted an option to purchase 20%
               of  Dr.  Greenberg's  ownership  interest  in  ISOTEC  (which  is
               equivalent  to a 10% equity  interest in ISOTEC) for each $50,000
               or  portion  thereof  it  advances  to ISOTEC.  The  options  are
               exercisable  through  June  30,  2001 at a price  of  $1,000  per
               option.  Since  Menlo had  advanced  a total of $80,000 to ISOTEC
               during 1999,  it holds,  as of December 31, 2000,  two options to
               purchase  a total of 40% of Dr.  Greenberg's  interest  in ISOTEC
               (which is  equivalent  to a 20% equity  interest  in ISOTEC)  for
               $2,000.


Note 11- Commitments and contingencies:
               Lease commitments:
                  The Company is obligated under noncancelable leases for office
                  space,  storage  space and  laboratory  facilities  at several
                  locations in New Jersey,  one of which is a building  owned by
                  the principal stockholder.  The leases expire at various dates
                  through  August  2007 and  require  the Company to pay minimum
                  annual  rentals  plus  its  pro  rata  share  of  common  area
                  maintenance, real estate taxes, insurance, utilities and other
                  occupancy costs, as defined. Rent expense, including allocated
                  pro rata  charges,  amounted to $496,430  and $489,404 in 2000
                  and 1999,  respectively,  inclusive of $310,772 and  $290,539,
                  respectively,   paid  to  the  principal  stockholder.  Future
                  minimum  lease  payments  in  each  of  the  next  five  years
                  subsequent  to December 31, 2000 and in the  aggregate  are as
                  follows:

                    Year Ending    Nonrelated       Principal
                   December 31,     Parties        Stockholder          Total
                   ------------    ----------      -----------          -----
                         2001       $ 70,900         $305,578        $ 376,478
                         2002         70,900          305,578          376,478
                         2003         72,200          305,578          377,778
                         2004         73,500          305,578          379,078
                         2005         35,100          305,578          340,678
                         Thereafter                   483,833          483,833
                                    --------       ----------       ----------

                             Totals $322,600       $2,011,723       $2,334,323
                                    ========       ==========       ==========

                                      F-17

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 11- Commitments and contingencies (concluded):
               Litigation:
                  In the  ordinary  course of  business,  the  Company is both a
                  plaintiff and defendant in various legal  proceedings.  In the
                  opinion  of  management,  resolution  of these  claims  is not
                  expected to have a material adverse effect on the consolidated
                  financial position or results of operations of the Company.


Note 12- Fair value of financial instruments:
                Statement   of   Financial   Accounting   Standards   No.   107,
                "Disclosures about Fair Value of Financial Instruments," defines
                the fair value of a financial  instrument as the amount at which
                the  instrument  could be  exchanged  in a  current  transaction
                between willing parties. In assessing the fair value of cash and
                cash  equivalents,  accounts  receivable  and accounts  payable,
                management  determined  that they were  carried  at values  that
                approximated their fair values because of their liquidity and/or
                their  short-term  maturities  and long-term debt was carried at
                values  that  approximated  their fair values  because  they had
                interest  rates  equivalent to those  currently  prevailing  for
                financial instruments with similar characteristics.


Note 13- Business segments:
               The  Company  is  reporting   segment  revenue  and  income  from
               operations   in  the  same  format   reviewed  by  the  Company's
               management  (the  "management  approach").  The  Company  has two
               reportable   segments.    The   "consulting"   segment   provides
               consulting,  remedial and disposal  services.  The "lab"  segment
               provides services related to laboratory testing of soil and water
               for   environmental   hazards,   as  well  as  testing   for  the
               pharmaceutical  industry.  Additionally,   revenue  and  expenses
               (primarily legal, accounting and administrative) related directly
               to the  operations  of Menlo are  reported  under the  heading of
               "Holding".

               The  accounting  policies of the  segments  are the same as those
               described in the summary of significant  accounting policies. The
               Company accounts for  intersegment  sales and transfers as if the
               sales or  transfers  were to third  parties,  that is, at current
               market prices.

               Revenue,   income  from  operations  and  other  related  segment
               information follows:

                                                    2000            1999
                                                    ----            ----
             Gross revenue:
                  Consulting - Third Party     $  9,661,984    $  9,287,714
                  Lab - Third Party               5,514,859       4,306,810
                  Lab - Inter-segment               851,402         861,975
                  Holding - Inter-segment         1,166,381         861,730
                  Inter-segment                  (2,017,783)     (1,723,705)
                                              -------------   -------------

                      Totals                    $15,176,843     $13,594,524
                                                ===========     ===========

             Cost of revenue:
                  Consulting                   $  6,049,361    $  5,548,142
                  Lab                             2,738,420       2,411,330
                  Inter-segment                    (851,402)       (861,975)
                                             --------------   -------------

                      Totals                   $  7,936,379    $  7,097,497
                                               ============    ============
                                      F-18
<PAGE>
          MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 13- Business segments (continued):


                                                    2000          1999
-                                                   ----          ----

             Expenses:
                  Consulting                   $  3,623,576    $  3,453,307
                  Lab                             2,526,943       2,272,709
                  Holding                           189,355
                  Inter-segment                    (679,196)       (559,977)
                                               ------------    ------------

                      Totals                   $  5,660,678    $  5,166,039
                                               ============    ============

             Income (loss) from operations:
                  Consulting                 $      (10,953)  $     286,265
                  Lab                             1,100,898         484,746
                  Holding                           977,026         861,730
                  Inter-segment                    (487,185)       (301,753)
                                             --------------   -------------

                          Totals               $  1,579,786    $  1,330,988
                                               ============    ============

             Other income (expense):
                  Consulting                  $     814,834   $     636,265
                  Lab                                39,918          18,298
                  Holding                            53,405
                  Inter-segment                    (679,196)       (559,977)
                                             --------------   -------------

                          Totals              $     228,961   $      94,586
                                              =============   =============

             Income (loss) before provision for income taxes:
                  Consulting                  $     803,881   $     922,530
                  Lab                             1,140,816         503,044
                  Holding                         1,030,431         861,730
                  Inter-segment                  (1,166,381)       (861,730)
                                              -------------   -------------

                          Totals               $  1,808,747    $  1,425,574
                                               ============    ============
             Provision for income taxes:
                  Consulting                   $    327,558   $     364,297
                  Lab                               450,758         199,547
                  Holding                           703,252         563,844
                  Inter-segment                    (778,316)       (563,844)
                                               ------------   -------------

                          Totals               $    703,252   $     563,844
                                               ============   =============
             Net income (loss):
                  Consulting                   $    476,323   $     558,233
                  Lab                               690,058         303,497
                  Holding                           327,179         297,886
                  Inter-segment                    (388,065)       (297,886)
                                               ------------  -------------

                          Totals                $ 1,105,495   $     861,730
                                                ===========   =============
                                      F-19

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 13- Business segments (concluded):


                                            2000                 1999
                                            ----                 ----

         Assets:
              Cash, cash equivalents and
              marketable securities:
                  Consulting             $    716,517        $  1,033,900
                  Lab                         402,955             870,579
                  Holding                   1,322,585
                                         ------------        ------------
                      Totals                2,442,057           1,904,479
                                         ------------        ------------

              Accounts receivable - net:
                  Consulting              $ 2,199,949         $ 3,037,305
                  Lab                       1,076,688           1,036,390
                  Inter-segment                                   (19,407)
                                         ------------      --------------
                      Totals                3,276,637           4,054,288
                                         ------------        ------------

              Property, equipment and funishings, net:
                  Consulting                  391,130             397,189
                  Lab                       2,826,519             690,474
                                         ------------       -------------

                      Totals                3,217,649           1,087,663
                                         ------------        ------------

              Other assets:
                  Consulting                   97,309             133,024
                  Lab                          11,260              18,096
                  Holding                     113,376              84,276
                  Inter-segment                                   (34,276)
                                         ------------      --------------
                      Totals                  221,945             201,120
                                         ------------       -------------

                      Total assets        $ 9,158,288         $ 7,247,550
                                          ===========         ===========


Note 14- Stock option plan:
               Under the  Company's  Stock Option Plan (the  "Plan"),  which was
               approved by the Company's Board of Directors on July 21, 1999 and
               subsequently  ratified by its stockholders,  up to 525,000 shares
               of the Company's  common stock may be granted to key personnel in
               the  form of  incentive  stock  options  and  nonstatutory  stock
               options,   as  defined  under  the  Internal  Revenue  Code.  Key
               personnel  eligible  for these  awards  include  all  present and
               future   employees  of  the  Company  and   individuals  who  are
               consultants  to the Company as well as  nonemployee  directors of
               the  Company.  Under  the Plan,  the  exercise  price of  options
               generally will be the fair market value of the shares on the date
               of grant.  The exercise price of incentive  stock options granted
               to a 10%  stockholder,  however,  will be 110% of the fair market
               value of the shares on the date of grant. The maximum term of any
               stock option  granted may not exceed ten years (or five years for
               a 10% stockholder) from the date of grant.

                                      F-20
<PAGE>
                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 14- Stock option plan (concluded):
               The Company  issued  options to key personnel to purchase  87,830
               and 57,600 shares in 2000 and 1999, respectively. Options for the
               purchase of 145,430 shares were  outstanding at December 31, 2000
               at exercise prices ranging from $1.00 to $1.75 per share,  with a
               weighted  average exercise price of $1.30 per share. The options
               expire at various dates through November 2010.

               The  compensation  cost,  pro  forma  net  income  and pro  forma
               earnings per common share for 2000 and 1999 determined  using the
               fair value based Black-Scholes method of accounting for the stock
               options  granted in 2000 and 1999, as required by SFAS 123, would
               not differ materially from the corresponding historical amounts.


Note 15- Preferred stock:
                No shares of preferred stock have been issued as of December 31,
                2000. Under the Company's  Articles of Incorporation,  the Board
                of Directors,  within certain limitations and restrictions,  can
                fix or alter the  dividend  rights,  dividend  rate,  conversion
                rights,  voting rights and terms of redemption  including  price
                and liquidation  preferences.  As of February 9, 2001, the Board
                of Directors has not yet fixed any terms to the preferred stock.



                                      * * *


















                                      F-21