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, 1999

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

        For the transition period from ______________ to _______________.

                           Commission File No. 0-23900

                             IDM ENVIRONMENTAL CORP.
                ------------------------------------------------
                (Name of registrant as specified in its charter)

          New Jersey                                   22-2194790
--------------------------------         ---------------------------------------
 (State or other jurisdiction of         (I.R.S. Employer Identification Number)
incorporation or organization)


               396 Whitehead Avenue, South River, New Jersey 08882
               ---------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Include Area Code:  (732) 390-9550

Securities Registered Pursuant to Section 12(b) of the Act:

       Title of Each Class            Name of Each Exchange on Which Registered
       -------------------            -----------------------------------------
               None                                     None

Securities Registered Pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
                                Class A Warrants
                          -----------------------------
                                (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 ninety (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. [X]

     3,808,886  shares of common stock of the Registrant were  outstanding as of
March 27, 2000. As of such date,  the  aggregate  market value of the voting and
non-voting common equity held by  non-affiliates,  based on the closing price on
the Nasdaq SmallCap Market, was approximately $40,700,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

     None

<PAGE>

                                TABLE OF CONTENTS

                                                                           Page
                                                                          ------

PART I

         ITEM 1.  BUSINESS................................................   1
         ITEM 2.  PROPERTIES..............................................  17
         ITEM 3.  LEGAL PROCEEDINGS ......................................  18
         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE
                  OF SECURITY HOLDERS.....................................  19

PART II

         ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY
                  AND RELATED STOCKHOLDER MATTERS.........................  19
         ITEM 6.  SELECTED FINANCIAL DATA.................................  20
         ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS
                  OF FINANCIAL CONDITION AND RESULTS
                  OF OPERATIONS...........................................  21
         ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
                  ABOUT MARKET RISK.......................................  29
         ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............  30
         ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH
                  ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE....................................  30

PART III

         ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
                  REGISTRANT..............................................  30
         ITEM 11. EXECUTIVE
                  COMPENSATION............................................  32
         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT...................................  38
         ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
                  TRANSACTIONS............................................  39
         ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                  REPORTS ON FORM 8-K.....................................  40

SIGNATURES
<PAGE>

                                     PART I

     This Form 10-K contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The Company's actual results could differ  materially from
those set forth in the  forward-looking  statements.  Certain factors that might
cause such a difference are discussed in the section  entitled  "Certain Factors
Affecting Future Operating Results" beginning on page 29 of this Form 10-K.

ITEM 1.  BUSINESS

     IDM Environmental  Corp. (the "Company" or "IDM") is a global,  diversified
services  and  project  development  company  offering a broad  range of design,
engineering, construction, project development and management, and environmental
services and technologies to government and private industry clients. We utilize
those same  capabilities  to build,  own or lease,  and  operate  energy,  waste
treatment  and  similar  facilities.  Through  our  domestic  and  international
affiliates and subsidiaries, we offer services and technologies, and operate, in
three  principal  areas:  Energy and Waste Project  Development  and Management,
Environmental Remediation and Plant Relocation.

     Environmental remediation services, our historical core business, encompass
a broad array of environmental consulting,  engineering and remediation services
with an emphasis on the physical  execution  ("hands-on")  phases of remediation
projects.  We are a provider of full-service turnkey  environmental  remediation
and plant decommissioning services and have established a track record of safety
and excellence in the performance of projects within the private sector,  public
utility and  governmental  marketplace.  We have  focused our core  expertise in
decommissioning and dismantlement services in environmentally sensitive settings
to establish a position in the forefront of nuclear power plant decommissioning,
radiological   decommissioning  within  the  weapons  complex,  industrial  site
remediation and reindustrialization market.

     Plant  relocation  services  encompass  a broad  array  of  non-traditional
engineering  projects,  with an emphasis on plant dismantlement,  relocation and
reerection.  We  have  established  the  company  as a  world  leader  in  plant
relocation   services   employing  a   proprietary,   integrated   matchmarking,
engineering,  dismantling and  documentation  program that provides clients with
significant cost and schedule benefits when compared to traditional alternatives
for commencing plant operations.

     Our energy and waste treatment project  development and management services
are provided through IDM Energy Corporation and local project  subsidiaries.  We
actively  entered the Energy and Waste  Services  market in 1996  following  our
acquisition  of the rights to utilize and deploy the  proprietary  "Kocee" solid
waste  gasification  technology and rights under an accompanying  power purchase
agreement to deploy that technology in the construction and operation of a 30 MW
waste-to-energy  project  in El  Salvador.  Since our entry  into the Energy and
Waste Services market, we have aggressively pursued  opportunities to build, own
and operate  conventional  and other energy and waste treatment  facilities.  We
completed  the  acquisition  of our first  operating  energy  facility,  a 42 MW
hydroelectric  plant, in the Republic of Georgia,  in the first quarter of 1999.
Because  of  difficulties  incurred  in El  Salvador,  we have  entered  into an
agreement  to sell our assets in El  Salvador  which sale is  expected  to close
during  the  first  half of 2000.  We have also  entered  into a  memorandum  of
understanding  pursuant to which construction and operation of a waste treatment
facility  in Taiwan is  expected  to  commence  during  2000.  Additionally,  we
continue to pursue  additional energy and waste treatment  facility "build,  own
and operate"  opportunities in Asia, Eastern Europe,  Central and South America.
In addition to our current and planned  ownership  and  operation  of energy and
waste  facilities,  we offer a broad  range of  Energy  and  Waste  Services  to
government  and  private  industry   clients,   including   project  design  and
development,  engineering,  and operation and  management for  conventional  and
other  energy  and waste  treatment  projects.  See  "Energy  and Waste  Project
Development and Management Services."

     IDM is a New Jersey  corporation  formed in 1978. Our principal offices are
located at 396 Whitehead Avenue, South River, New Jersey 08882, telephone number
(732) 390-9550.

                                       1
<PAGE>

Business Strategy

     Our business has evolved,  and continues to evolve, to capitalize on market
opportunities.  We have added strategic  capabilities and resources  through the
years to move the  business  from its roots as a demolition  and  deconstruction
company  to a  full  service  environmental  remediation  and  plant  relocation
services  company and,  now, an energy and waste  treatment  project  developer,
manager, owner and operator. Supplementing our strengths and capabilities in our
core businesses, we have added strategic investments in technologies,  with both
industrial and consumer applications, and real estate holdings.

     In 1997,  we began to  implement  a  strategic  plan to  capitalize  on our
strengths and market opportunities to position our company as a global leader in
providing  services and  technologies  in selected  high growth  markets with an
emphasis on  developing  recurring  revenue  streams.  The core  elements of our
strategic  plan are (1) aggressive  entry into the global energy  production and
waste treatment development and plant management market, (2) narrowing the focus
of our environmental  remediation services to emphasize specialized services and
technologies in high growth, high margin niche markets,  and (3) emphasizing our
multi-disciplinary  expertise and relationships to generate growth in demand for
plant  relocation   services.   We  believe  that  our  ability  to  respond  to
opportunities  in the  market  and  deploy  a broad  array of  technologies  and
expertise in a rapid and cost effective manner provides a competitive  advantage
in efforts to achieve the elements of our strategic plan.

     Central to our strategy is a commitment to generating  long-term  recurring
revenue  streams as a  foundation  for our other  project  specific  activities.
International energy production and waste treatment projects are the core of our
planned  recurring  revenue  streams.  Our entry into the energy  production and
waste treatment markets began with the acquisition,  in 1996, of the proprietary
"Kocee" waste  gasification  technology and rights under an  accompanying  power
purchase  agreement to deploy that technology in the  construction and operation
of a 30  MW  waste-to-energy  project  in  El  Salvador.  Privatization  of  the
Salvadorean distribution company,  combined with a decision to modify the nature
of the project to a more traditional energy production facility and increase the
capacity  of  the  plant,   has  resulted  in  delays  in  the  commencement  of
construction of the facility and the  anticipated  commencement of operations of
the plant. We anticipate that  arrangements  for the sale of the project will be
finalized by the first half of 2000.

     We completed the acquisition of our first operating energy  facility,  a 42
MW  hydroelectric  plant,  in the Republic of Georgia,  in the first  quarter of
1999. We believe that one or more of the current energy and waste projects under
discussion  will  come to  fruition  during  2000 and that the  commencement  of
operations  in the  Republic  of  Georgia  will add to our  profile as an energy
project  developer,  owner  and  operator  allowing  us to  aggressively  pursue
additional  opportunities  to  add  to  our  recurring  revenue  base  from  the
development  and operation of energy and waste treatment  projects.  See "Energy
and Waste Project Development and Management Services."

     Within our historical  environmental  remediation  services offerings,  our
strategy  is to  concentrate  our  efforts on highly  specialized  environmental
projects where competition is less intense,  profit margins are generally higher
and proprietary  technology and  engineering  expertise are valued at a premium.
With the growth and  evolution of the  environmental  remediation  market in the
1990's,  various  segments of the remediation  market have reached  maturity and
have become  characterized by intense competition and minimal operating margins.
While we  continue  to be active in the  environmental  remediation  market,  we
expect that  bidding or  negotiating  of future  remediation  contracts  will be
limited to special  situations  in which higher  margins can be generated by the
deployment  of  proprietary  technologies  and the  utilization  of  specialized
engineering services. In particular,  we are aggressively pursuing opportunities
involving the  decommissioning and remediation of large commercial nuclear power
facilities, which market we believe to be in an early growth stage.

     In the plant  relocation  services  area, we will continue to emphasize our
ever broadening expertise in an array of project engineering disciplines and the
establishment of strong relationships to drive demand for our services. With our
record of sourcing,  dismantling,  relocating and re-erecting process plants and
other facilities as a timely and cost effective  alternative to the construction
of new facilities, we believe that the demand for such services, particularly in
growing economies outside of the United States and western Europe, will continue
to grow and that we will be a leading provider of those services worldwide.

                                       2
<PAGE>

     Supplementing our core business  operations,  we have  historically  sought
out, and will continue to seek out,  opportunities which are compatible with our
existing  expertise and  capabilities to enhance our recurring and  nonrecurring
revenues.  Illustrative  of such  opportunities  are (1) our  investment in Life
International  Products ("Life"),  (2) our formation of Seven Star International
Holdings,  Inc.  ("Seven  Star") to distribute  Life water products in southeast
Asia and to pursue other  opportunities  in southeast  Asia, (3)  acquisition by
Seven Star of a license  covering the bottling  rights and  distribution  of the
Life  superoxygenation  process in southeast Asia, and (4) our acquisition of an
interest in Kortmann  Polonia,  a Polish  company with  substantial  real estate
holdings. See "Other Services, Products and Investments."

Recent Developments - Fusion Networks Merger

     In light of continued  uncertainty  effecting our  operations  during 1999,
management  evaluated  various options outside of its traditional  businesses to
return the company to profitability and to increase shareholder value.  Pursuant
to those efforts,  on August 18, 1999, we entered into a Plan of  Reorganization
and  Merger  and an  Agreement  and Plan of Merger  (collectively,  the "Plan of
Reorganization") with Fusion Networks, Inc. ("Fusion Networks"). Pursuant to the
terms of the Plan of  Reorganization,  we agreed to form a new  holding  company
(the "Holding  Company").  We agreed to merge with a wholly-owned  subsidiary of
the Holding  Company with the  shareholders of IDM receiving one share of common
stock  of the  Holding  Company  for  each  share  of  common  stock of IDM held
immediately  prior to the  reorganization.  Fusion Networks agreed to merge into
another wholly-owned  subsidiary of the Holding Company with the shareholders of
Fusion  Networks  receiving one share of common stock of the Holding Company for
each share of common  stock of Fusion  Networks  held  immediately  prior to the
reorganization.  Following  the  reorganization,  the  shareholders  of IDM were
expected to own  approximately  10% of the common  stock of the Holding  Company
with the shareholders of Fusion Networks owning  approximately 90% of the common
stock of the Holding Company.

     Fusion Networks is a newly formed company,  based in Miami, Florida,  which
is in the process of building a portal-type web site with an initial emphasis on
Latin  America and the Hispanic  market in the United  States.  Fusion  Networks
launched its initial site, on a pilot basis,  in Bogota,  Colombia,  in October,
1999  followed  by a formal  launch  of the  site in  Bogota  and in Miami  with
additional site launches planned in Latin America,  the United States, Spain and
Portugal during 2000.

     The proposed  reorganization  was approved by the  shareholders  of IDM and
Fusion Networks in March 2000 and the reorganization is expected to be completed
in April, 2000. As a result of the reorganization,  IDM and Fusion Networks will
become wholly-owned  subsidiaries of Fusion Networks Holdings, Inc. Both IDM and
Fusion Networks plan to continue their historical operations for the foreseeable
future.

Industry Background

     Environmental  Services Industry.  The environmental  remediation industry,
for all intents and  purposes,  emerged in the 1970s from the  enactment  of the
"Superfund" legislation in 1976 and, subsequently, the Resource Conservation and
Recovery Act  ("RCRA")  legislation  in 1984.  These  landmark and  far-reaching
pieces of legislation made owners  responsible and liable for the  environmental
damage  caused by the  present  and past  operations  and  established  a strict
framework to regulate certain materials,  designated as hazardous by regulation,
from cradle to grave.

     Virtually  overnight,  many  corporations  faced  billions  of  dollars  in
potential liabilities that were nearly impossible to quantify. In addition, many
owners faced significant capital and operational cost increases to bring current
operations  into  full  compliance  with  the new  regulations,  or  face  large
penalties,  even  potential  shutdowns.  The  impact  of  these  factors  to the
corporate  "bottom line" forced owners to undertake  immediate  action to assess
the extent of the problem and quickly move to quantify these liabilities.

                                       3
<PAGE>

     Federal  regulations  mandated a prescriptive and bureaucratic  process for
the   performance   of   site   cleanups.   This   process   consisted   of   an
investigative/assessment  phase,  followed by a detailed  engineering and design
phase,  finally  culminating in the "hands-on"  implementation  phase. The first
phase  consisted  of the  following  major tasks:  Preliminary  Assessments/Site
Investigations,   Remedial   Investigations/Feasibility   Studies,   Engineering
Evaluations/Cost  Analysis and lengthy,  often  contentious  and  controversial,
public hearings that would ultimately lead to the formal selection of a specific
Remedial  Action  Alternative  that  would be  legally  set forth in a Record of
Decision document  following  approvals by Federal,  State and local regulators.
The implementation of the selected Remedial Action Alternative would involve two
major phases,  the Remedial Design phase and the Remedial Action phase.  Each of
these  phases  would be performed by a different  company.  The  combination  of
undefined  liabilities  and  the  threat  of a  growing  regulatory  enforcement
environment, quickly created a market for environmental services in the billions
of dollars annually, that grew at double digit rates.

     Throughout the 1980s,  the government  continued to impose new  regulations
and expand the National  Priority List of  "Superfund"  sites to more than 1,200
sites. With a seemingly unbounded demand for these services,  the industry saw a
quantum  increase in the number of companies  providing these  services.  During
this  period,  billions  of  dollars  were spent for  environmental  remediation
services, but very few actual cleanups were completed.

     As the 1980s drew to a close,  the unbridled growth of the industry came to
an abrupt halt as a result of several major factors,  including (1)  questioning
by government  administrators  and owners of the validity of a process that cost
so much money and yielded  virtually no tangible  results,  (2) recognition that
the cost associated with achieving  regulatory-imposed  cleanup standards,  that
would require that all sites be restored to "pristine"  conditions regardless of
location or future use, would be impossible to bear, even by the government, and
(3)  technological and operational  advances,  including the completion of plant
modifications  to reduce or eliminate the  generation of hazardous  wastes,  the
implementation of large scale waste  minimization  programs,  the application of
advanced treatment technologies and the advancements in computer technology that
allow for the  cost-effective  application  of analytical  risk  assessments  to
preclude the need for further cleanup actions.

     As the industry has been  transformed  in the 1990s,  in recent years,  the
environmental  remediation  industry  has been  characterized  by an  increasing
number  of  well-capitalized  competitors,  reduced  government  enforcement  of
environmental  regulations  and  regulatory  uncertainty.  This has  resulted in
reduced  commercial  spending  on  environmental  cleanup  and  intense  pricing
competition  for hazardous waste cleanup  projects.  Lower demand in the private
sector has been offset to some extent by new major project  opportunities in the
public sector,  primarily  comprehensive  cleanup projects at U.S. Department of
Defense and Department of Energy  installations,  which require a broad range of
project management and field execution skills,  limiting the number of potential
bidders.  With the shift in the  environmental  remediation  industry during the
1990s,  successful  industry  participants  must  possess  (1)  the  ability  to
undertake complex cleanup actions involving  multiple  contaminants and multiple
contaminated media under a single integrated contract, (2) the ability to deploy
advanced  cleanup  technologies  to reduce the cost and  schedule of the cleanup
action as well as eliminate future potential liability for a site owner, and (3)
the ability to  incorporate  assessment  and  analytical  tools into the cleanup
project  as a way to reduce  costs,  ensure  full  compliance  with the laws and
regulations,  ensure safety and maintain the project focused towards completion.
Ultimately,  consumers of environmental services in the present environment look
for completion of site cleanups quickly, safely and at the lowest cost.

     With the expanded  focus on cleanup of DOD and DOE  installations,  DOD and
DOE have become the largest customers for environmental  remediation services in
the U.S.  during  the  1990s and are  expected  to  continue  to be such for the
foreseeable  future.  DOE is responsible for managing a program charged with the
cleanup  of the vast U.S.  nuclear  weapons  complex.  DOD and the Army Corps of
Engineers are  responsible  for managing a program  charged with the cleanup and
downsizing of the vast complex of military bases, command centers,  research and
development  facilities and defense  production plants under the jurisdiction of
the DOD.  Both the DOE and DOD cleanup  efforts  have evolved in recent years to
place  a  growing  emphasis  on  completion  of  "hands-on"   cleanup  work  and
implementation    of    innovative    privatization,     investment    recovery,
reindustrialization  and other measures designed to complete cleanup projects in
the minimum amount of time and at the lowest net cost to the agencies.

                                       4
<PAGE>

     In addition  to DOD and DOE  cleanup  projects,  which  represent  the most
concentrated   market  segments  within  the  United  States  for  environmental
remediation services, state and local government managed and funded cleanups and
private  sector  owned and  financed  cleanups  represent  distinct  markets for
environmental services in the U.S.

     Outside of the U.S., the enactment of stringent  environmental  regulations
in the  industrialized  nations  of  Europe  and  in  industrialized  and  newly
industrialized  Pacific Rim  nations  has  created a new and growing  market for
environmental remediation services.

     Plant Relocation  Services  Industry.  The plant  relocation  industry is a
highly  specialized  niche market business.  Large scale plant  relocations came
into  popularity  in the 1970s.  The  relocation  of process  plants as a viable
option to  acquisition  or  on-site  construction  of new  facilities  has grown
rapidly in recent years with the industrialization of underdeveloped  countries,
particularly  in  Eastern  Europe,  Asia  and  South  America.  It has  been our
experience that the  acquisition and relocation of existing  facilities can cost
one-half or less of the cost of acquiring new facilities.  Additionally, as most
large plants and facilities  require  substantial  lead time to manufacture  and
deliver,  facilities  can typically be brought  operational  in a  significantly
shorter  time period  where a suitable  plant can be  identified,  acquired  and
relocated as compared to the time required to manufacture new facilities.

     While  information  as to  the  worldwide  scope  and  size  of  the  plant
relocation  industry is not readily  available,  we believe  that a  substantial
majority  of the demand for such  services is outside of the United  States.  We
believe that demand for plant  relocation  services in Asia has been temporarily
curtailed as a result of the currency  crisis  experienced in that region during
the second  half of 1997 and into 1998.  However,  we believe  that the cost and
time benefits  associated with plant relocations will result in strong growth in
demand for those services over the next decade.

     The plant  relocation  market is served  by a variety  of  engineering  and
construction  firms  which  typically  offer  plant  relocation  services  as an
additional  service  to  customers.  We  believe  that  we are  one  of the  few
competitors  in the plant  relocation  industry  offering  those  services  as a
primary service as opposed to an additional service.

     Energy and Waste Treatment  Services  Industry.  Worldwide,  the energy and
waste treatment industries are diverse and growing increasingly competitive.  We
believe that economic  development in the previously  underdeveloped  nations of
Eastern  Europe,  Asia and South  and  Central  America  has  created,  and will
continue to produce,  growing demand for electrical  power in those markets.  In
the waste  treatment  market,  a wide variety of factors have  contributed  to a
growing  worldwide  demand for innovative  and  cost-effective  long-term  waste
treatment  and disposal  alternatives.  The driving  forces behind the growth in
demand for such alternatives include: (1) identification of solid waste disposal
as a top priority of the U.S. Environmental Protection Agency, (2) the enactment
of tax credits and disposal  taxes in the U.S. as a means of  discouraging  land
filling   in  favor  of   "clean"   technologies,   (3)  the  advent  of  proven
waste-to-energy  technologies,  (4) the enactment of  international  legislation
restricting the export of industrial  wastes from "rich" nations for disposal in
lesser developed nations,  and (5) the increase in waste produced as a result of
the explosive growth in urban areas in developing nations.

     While many of the  developing  nations'  energy needs are served by various
independent  energy producers,  distributors and state,  municipal and privately
owned utilities, it is our belief that the energy needs of many of those nations
are not  currently  met.  Likewise,  while we believe that waste  treatment is a
growing concern globally,  economic development in the previously underdeveloped
nations of Eastern Europe,  Asia and South and Central America has created,  and
is expected to continue to produce,  the  greatest  growth in demand for proven,
safe and cost-effective  waste treatment solutions in those markets.  While many
of the  developing  nations'  waste  treatment and disposal  needs are served by
landfilling and various alternatives offered by municipal and private operators,
it is our belief that the waste treatment needs of many of those nations are not
currently met.

     In an effort to capitalize on the perceived growth in demand for electrical
power  and  waste  treatment  alternatives  in  developing  nations,  as well as
opportunities to deploy our proprietary waste-to-energy technology and inventory
of generators,  we have actively entered the energy and waste treatment markets.
We have  acquired  our  first  energy  facility,  a  hydroelectric  plant in the
Republic of Georgia,  and have formed alliances and entered into agreements with
various  strategic and  financing  partners and  industrial  consumers and local
governments  to  construct,  own and operate  energy  production  facilities  in
Eastern European and Central American markets and waste treatment  facilities in
Taiwan.  While other energy producers may currently serve those markets or enter
into those markets, we have entered into, or expect to enter into power purchase
agreements  ("PPAs") in each of those markets whereby industrial or governmental
concerns  will  guarantee  the purchase of all or a  substantial  portion of the
energy produced by such facilities.  We believe that the successful commencement
of energy  production and waste treatment  operations in Georgia and Taiwan will
make  additional  opportunities  to  construct  and  operate  energy  and  waste
treatment  facilities  available  as  the  industrialization  of  underdeveloped
countries  progresses.  See "Energy and Waste Project Development and Management
Services."

                                       5
<PAGE>

     While we see  substantial  opportunities  in the  international  energy and
waste treatment  markets,  those markets are subject,  and will continue for the
foreseeable future to be subject,  to a variety of risks and uncertainties.  The
energy market and waste treatment market are niche markets which are served by a
relatively small number of large  competitors  operating in multiple markets and
having  substantially  greater  resources than do we and by many local producers
and  operators  having   established   relationships  with  local  industry  and
government.  In addition to competitive risks, the operation of energy and waste
treatment facilities and the entry into new markets is subject to local economic
and  political  risks which may severely  effect the demand for energy and waste
treatment  services  and the  ability  to  finance  projects  and pay for energy
production  and  waste  treatment  services  in  underdeveloped   nations.   See
"Competition - Energy Services" and "- Waste Treatment Services."

Environmental Remediation Services

     General. We offer a variety of specialized  environmental  services with an
emphasis on plant  decontamination  and  decommissioning.  Many of the  projects
which we undertake  are  "cross-disciplinary"  in nature,  involving one or more
elements of dismantling, hazardous waste remediation,  radiological remediation,
asbestos  abatement,  plant relocation and other related services.  Our services
are generally offered on a "lump sum" basis wherein we bid to perform a complete
job for a  predetermined  price or on a "time and material" basis wherein we are
paid certain  predetermined  hourly or per day rates for services  plus a charge
for materials used. We also provide services on a "cost plus" basis where we are
paid for all costs  incurred plus a  predetermined  fee or profit margin without
regard to the time  required  to  perform  the job.  While the  majority  of our
projects  are priced on a "lump sum" basis,  we  generally  will not bid on such
projects without an in-depth understanding of the scope of such projects.

     Many  contracts  awarded to us require a surety bond. Our ability to obtain
bonding  and the  amount of bonding  required  is  determined  by our net worth,
annual revenues and liquid working capital and the number and size of jobs being
performed.  The larger the  project  and/or  the more  projects  in which we are
engaged,  the  greater  our  bonding,  net  worth  and  liquid  working  capital
requirements. The bonding requirements which we must satisfy vary depending upon
the  nature  of the  job to be  performed.  We  generally  pay a fee to  bonding
companies which  typically  averages three percent of the amount of the contract
to be  performed  with the  percentage  decreasing  as our net worth  increases.
Because  such fees are  generally  payable at the  beginning  of a job,  we must
maintain  sufficient  working capital reserves to permit us to pay such fees and
secure  bonding prior to  commencing  work on a project.  Additionally,  bonding
companies will require us to provide as security for the bonding  company liquid
working capital, consisting of cash and accounts receivable, in amounts based on
the size of the contract in question.

     Where we have adequate  bonding  capacity to perform a job, an  experienced
member of our management  team will analyze the project and develop  preliminary
plans,  schedules  and cost  estimates in order to prepare a bid. If we obtain a
contract to perform the job being bid on, the management team,  working from the
preliminary  plans,  schedules and cost  estimates,  will develop  detailed work
plans,  schedules  and cost  estimates to perform the job.  Such  planning  will
include  securing  proper  equipment  and  materials  and staffing the jobs with
properly  trained  and  experienced  personnel  to  perform  the  job in a safe,
efficient, competent and timely manner.

     Actual  on-site  services are  supervised by our employees  pursuant to the
detailed plans developed by management.  Work is  subcontracted to third parties
based upon a large number of factors  including safety,  efficiency,  competency
and scheduling.

     In order to assure the safety,  quality and  timeliness of our projects and
to assure our ability to perform projects,  we provide extensive training to our
entire  full-time  workforce  and go to great  efforts  to  retain  our  trained
workforce,  many of whom have been with us since  inception.  By  maintaining an
experienced workforce and cross-training our dismantlers,  riggers, ironworkers,
equipment  operators,  laborers,  superintendents  and foremen in OSHA  1910.120
hazardous waste procedures,  asbestos  abatement,  radiological  remediation and
other related skills,  our workforce can address virtually every situation which
may arise in a  remediation  project.  We  believe  this level of  training  and
expertise in each of the major areas of remediation is unique to our company.

                                       6
<PAGE>

     In addition to stringent  safety and  performance  standards and procedures
implemented to assure safety, quality and timeliness, we have established strict
guidelines  for  the  handling  and  disposal  of  hazardous   materials.   Such
guidelines,  which are intended to protect our company from potential  liability
as a generator or transporter of hazardous  materials,  include strict  policies
that we contract  only as an agent for  generators to remediate  sites,  that we
avoid  signing any waste  manifest if possible  and that all  transportation  of
hazardous  materials  from  remediation  sites  be  subcontracted  to  qualified
transportation companies with extensive insurance coverage. See "Regulation."

     Our environmental services are primarily provided on a project basis in the
areas of plant  dismantling and  decommissioning,  hazardous waste  remediation,
radiological remediation and asbestos abatement.

     Plant    Dismantling   and    Decommissioning.    Plant   dismantling   and
decommissioning  is the  historical  core  of our  operations  and  serves  as a
foundation for each of our other specialty  services.  Since inception,  we have
provided  deconstruction  services for numerous  Fortune 500 companies  with the
bulk of such services being provided in connection  with the closure of chemical
process  plants.  Where  facilities  have been closed or  abandoned  due to age,
safety conditions or other factors, we have been called upon to disassemble such
facilities  on a piece by piece basis.  Unlike the  traditional  destruction  of
buildings  using wrecking balls and explosives,  the potential  release of toxic
chemicals or other hazardous  substances  produced or present in such facilities
requires  custom  dismantling  services  in order to assure  safety  and  proper
identification  and disposal of contaminated  materials as well as the safety of
the laborers involved.  Only skilled craftsmen can safely dismantle contaminated
tanks and structures in government  mandated and regulated  personal  protective
equipment. The scope and nature of deconstruction services provided is carefully
planned based on the nature of the subject  facility and the contents thereof as
well as the  desires  of the owner of the  facility.  Such  services  range from
dismantling single buildings and small unenclosed chemical process facilities to
the complete deconstruction of large manufacturing facilities including multiple
buildings and all equipment and machinery within such buildings or on the site.

     We  typically   perform   dismantling  and   decommissioning   services  in
conjunction with other environmental  and/or related services performed by us or
by a team of  providers.

     Hazardous Waste  Remediation.  Hazardous waste remediation  encompasses the
clean  up  of  a  broad  range  of  hazardous   materials.   The   Comprehensive
Environmental  Response,  Compensation  and  Liability Act  ("CERCLA")  and RCRA
broadly define "hazardous  substances" which, if released, may trigger reporting
and clean up obligations.  The list of "hazardous  substances"  covered by these
laws is extensive and includes a large number of chemicals,  metals, pesticides,
radiological  materials,  biological  agents,  explosives,  toxic pollutants and
other  materials  which  may  produce  health  concerns  if  released  into  the
environment.  Both CERCLA and RCRA impose  stringent  reporting,  liability  and
clean up obligations on owners and operators  (including,  in some cases, former
owners and operators) of sites where  specified  levels of hazardous  substances
have been  released.  The most  serious of these sites have been  designated  as
"superfund sites" under CERCLA.

     Under CERCLA,  the owners and operators of superfund sites at the time of a
release into the environment,  and the transporters of hazardous substances, may
be designated as Potential Responsible Parties ("PRP"), many of whom are Fortune
500 companies,  and, as such, may be liable for all or part of the clean up cost
at such site without regard to fault or the legality of the PRP's actions. While
PRP's may undertake clean up activities at superfund sites  voluntarily or under
government  compulsion,  the federal  government  and the EPA may  undertake the
clean up of some sites on its own and  subsequently  seek to identify and impose
liability for the cost of such clean up on PRP's. Additionally, most states have
environmental  regulations  comparable  to, or  supplementing,  EPA  regulations
wherein  private  parties can be  compelled to clean up hazards or the state can
undertake  the clean up of such  hazards  and seek  reimbursement  from  private
parties.

                                       7
<PAGE>

     We have extensive experience working with PRP's,  including  Allied-Signal,
Exide,  NL Industries,  Johnson  Controls,  AT&T and others,  in the clean up of
hazardous waste sites,  including  superfund  sites.  Our services at such sites
have  entailed  a  combination  of the  dismantling  of  facilities  and  actual
implementation  of remediation  techniques to the subject  hazards.  Many of the
projects which we have undertaken at such sites are specialty jobs wherein major
architectural  engineering firms contract to have us perform complex dismantling
and deconstruction jobs and to perform actual remediation of hazardous materials
in  conjunction  with  the  dismantling  process.  While  we  maintain  existing
relations with numerous private sector  industrial PRP's and have performed site
assessment and actual remediation at various sites, we have established, and are
seeking to strengthen,  relations with the major architectural engineering firms
which control a significant portion of the larger government projects, including
many superfund sites. Because of the general lack of expertise and experience in
dismantling and  deconstruction  at most of the major  engineering  firms, and a
growing  reputation  with  such  firms,  we have  been  called  on to  serve  on
remediation teams and have handled all aspects of dismantling and deconstruction
at hazardous waste remediation sites.

     In  1996,  we  further  expanded  our  hazardous  waste  services  with the
acquisition  of a license  from Life  pursuant to which we acquired an exclusive
license to market and employ Life's  patented  superoxygenation  technology  for
long term  bioremediation  of  contaminated  groundwater  in the United  States,
Canada  and  Mexico.  Life's  superoxygenation  process is  designed  to enhance
bioremediation of contaminated  groundwater by increasing the oxygen content and
the time such oxygen will remain in water as compared to traditional  methods of
oxygen  injection.  Our  license  runs for a period  of twelve  months  from the
delivery by Life of a commercially viable unit subject to renewal for successive
terms provided that we meet certain minimum revenue requirements.

     Radiological   Remediation.   Radiological   remediation  services  consist
primarily of the  decontamination  and  dismantling  of facilities  employing or
producing  radioactive  materials  and the removal and  disposal of  radioactive
materials.  Typically,  such  services are utilized by utility  companies  which
operate nuclear plants, universities and other research facilities which utilize
radioactive  isotopes  in a variety of  research  projects,  and the DOE and DOD
which oversee nuclear weapons production.

     Utility  companies have now operated nuclear plants for more than 30 years.
Because of a combination of intervention of activists, worldwide competition for
electricity  customers  brought about by a growing  deregulated  market,  strict
government   oversight  and  high  operating  costs,  many  nuclear   generating
facilities have been prematurely closed. As other nuclear facilities continue to
age and public  skepticism  as to the safety of such  facilities  remains  high,
additional  plants are expected to close. Due to the nature of these facilities,
utility  companies are expected to seek experienced  dismantling and remediation
specialists to decontaminate,  dismantle and decommission such facilities and to
properly handle and dispose of radioactive waste.

     Universities  and other research  facilities also operate nuclear  reactors
and utilize radioactive isotopes in research and teaching. With a decline in the
enrollment in nuclear engineering departments in recent years the utilization of
nuclear  reactors  and related  materials  in teaching has declined to the point
that some  programs  have been dropped or  significantly  curtailed.  Even where
research is continuing at universities and in industry, the use of isotopes over
extended  periods has created,  and is expected to continue to create,  a market
for the disposal of radioactive materials and the decontamination of facilities.
In order to safely deal with inactive  reactors and  radioactive  contamination,
industry and  universities,  sometimes under government  direction,  are seeking
experienced  specialists  to remove,  decontaminate  and/or dispose of abandoned
facilities  and  contaminated  materials in and around  abandoned or functioning
facilities.

     Finally, the DOD and DOE oversee the operations and are responsible for the
clean  up of  weapons  facilities  across  the  country.  Extensive  remediation
activities  are  underway and are expected to be required for many years to come
as these  facilities are closed as a result of sharply  reduced  nuclear weapons
production following the end of the Cold War. As with other owners and operators
of facilities having radioactive waste and contamination, the federal government
has sought,  and is expected to  continue to seek,  experienced  specialists  to
decontaminate  and  dismantle  such  facilities  and to remediate and dispose of
radioactive waste in a safe manner. We have skilled personnel with the necessary
experience and training to dismantle these  structures in a safe,  efficient and
regulatory compliant manner.

                                       8
<PAGE>
     We believe that radiological  remediation is the greatest  potential growth
area within the environmental  services  industry.  While the asbestos abatement
and general  hazardous  remediation  markets  have  matured  resulting in slower
growth in demand for those services,  we believe that the greatest growth in the
radiological remediation market lies ahead. The DOD and DOE in recent years have
pressed site managers for clear progress in actually cleaning up these sites vis
a vis  studying  the problem.  Additionally,  a major  market  exists at nuclear
facilities in other countries, including former Soviet-bloc countries and states
in which nuclear facilities were the prevalent sources of power.

     During 1999 and into 2000,  we continued our  negotiations  with the German
government and Duke Energy to provide radiological and decommissioning  services
in connection with the  decommissioning of six VVER 440 nuclear power plants and
one small reactor plant in Germany.  Under the terms of the project,  the German
government  proposed to transfer to the Duke led team  control of a  state-owned
corporation,   Energiewerke   Nord   ("EWN"),   established   to  undertake  the
decommissioning and waste management of the facilities.  As a result of a series
of delays in finalizing  definitive  agreements to privatize the EWN project, as
of the end of the first  quarter of 2000,  the German  government  indicated its
intent to forego  privatization  of EWN and to move  forward on the EWN  project
under  government  control.  While the German  government  and Duke  continue to
negotiate  with respect to the  performance  of services on the  project,  it is
presently  anticipated that each of the phases of the project will be contracted
to third parties.  We expect to submit  proposals to perform services on each of
the phases of the project  which we would  otherwise  have  performed  under the
contemplated privatization plan.

     In addition to decommissioning  and clean-up  activities,  the original EWN
privatization  plan called for us to revitalize and  re-industrialize  the sites
with the  objective  of  creating a minimum of 1,500 new jobs at the site and in
the   Greifswald   and   Mecklenburg    Vorpommern   regions.   Work   involving
reindustrialization of the site commenced in 1998 with an initial agreement with
Magellan  Biotechnology to construct an aquaculture  complex at the EWN site and
the formation of a consortium with IVO  Energienlagen  GmbH to construct a power
plant at the EWN site. As a result of uncertainty regarding the privatization of
the EWN site,  there is  uncertainty as to whether the  aquaculture  complex and
power plant will be constructed.

     Asbestos  Abatement.  The EPA, and most, if not all,  states,  have enacted
rules and  regulations  governing the emission of asbestos during the renovation
or demolition of facilities as well as during  manufacturing  and waste disposal
operations.  These regulations have effectively  required  inspection for and/or
abatement  of  asbestos  prior  to or in  conjunction  with  the  renovation  or
demolition  of  buildings.  Requirements  imposed  by real  estate  lenders  and
practical  considerations  as well as  disclosure  laws  relating to real estate
transactions  have  effectively  resulted  in  asbestos  inspection  and,  where
appropriate, abatement as a condition of most conveyances of real estate.

     We provide site  assessment,  planning and asbestos  abatement  services to
property  owners  desiring  to  remodel  or sell  properties  or abate  existing
asbestos on site for health and liability reasons. Because the handling and risk
associated with the presence of asbestos  varies  depending upon the use, volume
and nature of the asbestos  present,  we will evaluate the appropriate  means of
abatement  and develop a detailed plan based on such  evaluation or  subcontract
out such work.  The abatement  process may range from  encapsulation  of exposed
asbestos to the actual physical removal and disposal of the asbestos  containing
materials on the site.  Such materials may include  thermal  insulation  used on
boilers,  tanks,  hot and cold water  systems and heating,  ventilation  and air
conditioning  systems,  surfacing  materials used for acoustical,  decorative or
fireproofing  purposes  (asbestos  sprayed  or  trawled  on walls,  ceiling  and
structural  members) and other  materials  such as floor tiles,  ceiling  tiles,
roofing felt, concrete pipe, outdoor siding and fabrics.

     Upon development of a plan of abatement in compliance with applicable state
and federal regulations,  our work crew, wearing protective clothing,  head gear
and breathing apparatuses,  will physically remove asbestos-containing materials
from the building. The building areas in which abatement work is being performed
are sealed off and  blowers or  ventilation  equipment  are  utilized  to create
negative  pressure in the  building  to prevent the escape of airborne  asbestos
from the  building.  Upon  completion  of the  abatement  process,  the asbestos
removed  is  disposed  of  in  accordance   with   applicable   regulations   by
transportation and disposal companies.

                                       9
<PAGE>

Plant Relocation Services

     In addition to our historical  dismantling and  decommission  services,  we
have developed as a primary  service  offering the relocation and re-assembly of
plants.  Plant relocation and re-erection projects are typically bid on, planned
and  engineered  in a manner  similar  to our  dismantling  and  decommissioning
services  taking into account the special demands  associated with  transporting
and re-erecting such facilities.  We have developed  proprietary  techniques and
extensive  expertise  for  dismantling,  matchmarking,  relocation  engineering,
packaging,  documentation and re-erection of entire plants.  See  "Environmental
Services - General."

     With the growth in the  economies  of numerous  third-world  countries  and
other  countries  which  were   historically   non-industrialized,   we  believe
significant  opportunities  are available in the worldwide plant  relocation and
re-assembly  market.  Because  of the  time  and cost  savings  associated  with
relocating existing plants as compared to purchasing and starting-up new plants,
we believe  that  growing  industrial  concerns  in South and  Central  America,
Pacific  Rim and  Eastern  European  countries  will  view the  acquisition  and
relocation of existing plants as the preferred  method of expanding  operations.
Typical of such opportunities was our completion during 1996 of the acquisition,
relocation  and  refurbishing  of a  1,400-ton-per-day  ammonia  plant from Lake
Charles,  Louisiana  to  Karachi,  Pakistan,  a site of the  largest  fertilizer
producer in Pakistan.

Energy and Waste Treatment Project Development and Management Services

     In 1996,  we laid the  groundwork  for  entry  into the  energy  and  waste
treatment markets.  In evaluating the potential markets for our power generation
equipment  inventory and  opportunities  for future growth and  establishment of
recurring revenue streams, management identified the demand for energy and waste
treatment in emerging  markets as a business  opportunity  with the potential to
meet each of our criteria in those regards.

     After  evaluating  various  options  for entry into the  energy  production
market, we acquired a license from Enviropower Industries, Inc. (fka Continental
Waste Conversion,  Inc.)("CWC")  pursuant to which we were granted the exclusive
worldwide rights (excluding Canada) to CWC's proprietary gasification technology
that can convert  municipal solid waste into electrical  energy.  As a result of
the bankruptcy of CWC, in 1998 we acquired full and exclusive worldwide title to
the CWC  technology.  Through  that  investment,  we now offer  state-of-the-art
solutions to municipal waste and energy concerns worldwide. We believe that this
gasification  technology offers a number of significant advantages over existing
waste-to-energy or other gasification technologies,  including the production of
substantially  reduced  volumes of secondary  waste ash and compliance  with the
most stringent international clean air standards.

     With the  acquisition  of the  rights  to  deploy  the CWC  waste-to-energy
process and a strategic  inventory of surplus  generators,  we began to actively
pursue  energy  production  and  waste  treatment   opportunities   through  the
establishment of strategic  alliances and discussions  with industrial  concerns
and governmental entities in Central America, Eastern Europe and Asia.

     Our  international  energy  production and waste  treatment  operations and
development  activities are anticipated to principally  involve the development,
acquisition,  financing, promotion, and management of energy and waste treatment
projects in emerging  markets.  Our  objective is to develop,  finance,  own and
manage  integrated  energy and waste treatment  projects  worldwide  through the
utilization of our portfolio of products and services.

     Our initial international  activities are expected to include management of
direct and indirect  ownership  interests in and/or operation of an energy plant
in the Republic of Georgia and a waste treatment  facility in Taiwan.  As of the
first quarter of 1999, we had completed the  acquisition of our first  operating
energy facility in the Republic of Georgia and were involved in energy and waste
treatment projects in early stages of development,  financing or construction in
numerous other countries. The following is a brief description of our energy and
waste treatment  projects which are in varying stages of development,  financing
or construction;  thus the information set forth below is subject to change.  In
addition,  these  projects  are,  to varying  degrees,  subject to all the risks
associated  with  project  development,  construction  and  financing in foreign
countries,  including without  limitation,  the receipt of permits and consents,
the  availability of project  financing on acceptable  terms,  expropriation  of
assets,  renegotiation  of contracts  with  foreign  governments  and  political
instability,  as well as changes in laws and policies  governing  operations  of
foreign-based  businesses generally.  Other than as noted below, there can be no
assurances that these projects will commence commercial operations.

                                       10
<PAGE>

     Georgia Energy Projects.  In November of 1998, we, through our wholly-owned
subsidiary,  IDM Energy  Corporation,  signed a Protocol of  Intention  with the
Ministry for Fuel and Energy of the former Soviet state of Georgia,  replacing a
previously executed POI, under which we will have the right to acquire,  design,
construct, own and operate electric power facilities in the region.

     Our  initial  efforts in the  Republic  of  Georgia  have  resulted  in the
acquisition,  during the first  quarter of 1999,  of an interest in Zages,  Ltd.
Zages  operates a 42 MW  hydroelectric  power plant  pursuant to a lease of that
facility  from the Georgian  government.  Zages has entered into an  Electricity
Sale and Purchase Agreement with Telasi, the electricity distribution company of
Tblisi, Georgia,  pursuant to which Zages will sell and Telasi will purchase all
electricity  generated by the plant for a period of six years effective April 1,
1999.  Pursuant to the terms of our  acquisition of Zages, we made an investment
in Zages and have  undertaken to perform a technical  examination  of the plant.
Zages will,  in turn attempt to  negotiate an extended  lease on the plant in an
effort to extend  the  existing  five year  roll-over  lease  into a fixed  term
twenty-five  year lease.  Depending on the outcome of our technical  examination
and  Zages'  efforts  to  extend  the  lease on the  plant,  IDM  Foreign  Power
Incorporated,  our  indirect  majority-owned  subsidiary,  may invest,  over the
operating  life  of  the  plant,  up to  $9  million  of  additional  funds  for
rehabilitation and repair of the plant.

     Telasi,  which is 75%  owned by AES  Corporation,  a leading  global  power
company,  serves  approximately  370,000 industrial,  commercial and residential
customers, or roughly half of the total power needs of Georgia.

     El Salvador Energy Project.  In conjunction  with our 1996 acquisition of a
license to exploit CWC's proprietary  gasification  technology,  we acquired the
rights of CWC under a December 1995 Power  Purchase  Agreement (the "El Salvador
PPA") with  Compania  de  Alumbrado  Electrico  de San  Salvador,  S.A.  de C.V.
("CAESS") as part of a planned 30 MW  waste-to-energy  project in San  Salvador,
the capital of El Salvador.

     As a  result  of  delays  in  financing  and  developing  the  project,  we
determined to divest our interest in the El Salvador  Power Project during 1999.
As of December 1999, we had agreed to the principal  terms of a revised PPA with
CAESS and had entered into a Memorandum of  Understanding  with Centrans  Energy
Services  to sell our PPA.  We were also  engaged in  discussions  with  various
parties to sell the land and permits  relating to the El Salvador Power Project.
The sale of these assets is expected to be  concluded  by the second  quarter of
2000.

     Taiwan Waste Treatment Project. We have entered into a joint venture with a
leading Taiwanese waste management  company to jointly develop a waste treatment
facility in Taipei, Taiwan.

     The   Taiwan   Waste   Treatment   Plant  was   originally   planned  as  a
100-tons-per-day  industrial  waste processing and energy  production  facility.
Plans for the Taiwan Waste  Treatment  Plant were altered during 1998 to develop
the  facility  in multiple  phases,  to  increase  the  capacity of the plant to
200-tons-per-day  and to convert the nature of the plant from a  waste-to-energy
facility to an industrial waste treatment  facility.  The cost of developing the
Taiwan Waste Treatment Plant, estimated at $27 million, is expected to be funded
through  conventional  project  financing.  Several leading Taiwanese  financial
institutions  have  expressed a strong  interest in financing  the project.  The
venture would be among the first  privately  owned  industrial  waste  treatment
facilities in Taiwan.

     We are working with our joint venture  partner to prepare a detailed  plant
design.   The  project  is  expected  to  utilize  a  unique,   proprietary  and
commercially  proven  technology  for the  treatment  of a wide  range  of waste
streams.  Necessary  steps  have  been  initiated  to secure  environmental  and
regulatory permits. We are presently working through our joint venture parter to
secure project  financing and to establish a timetbable for the construction and
development of the project. There can be no assurance that we will be successful
in securing  financing  for the project or that the project  will,  in fact,  be
completed as anticipated.
                                       11
<PAGE>

     Other Energy and Waste Treatment Projects.  During 1998, we entered into an
agreement with respect to the proposed joint  development of energy  projects in
Bolivia.  Our original plans called for the  construction and operation of an 82
MW  plant in  Bolivia.  As of the end of the  first  quarter  of  2000,  we were
exploring, as alternatives to developing the project ourselves,  various options
to sell all or a  substantial  interest in the Bolivia power project in order to
minimize our costs and capital  expenditures.  We expect to conclude our efforts
with respect to the Bolivia project during 2000.

     During 1998, we also entered into a series of agreements  pursuant to which
we are acting as developer of various energy facilities in Germany and Poland in
which we  expect to  generate  development  fees,  retained  interests  and/or a
combination  of fees  and  retained  interests.  Included  in  such  development
activities  were our  efforts  in  Germany  pursuant  to which IVO has agreed to
construct a power plant at the EWN site. See "Energy and Waste Treatment Project
Development  and  Management  Services."  We also  entered  into three  separate
agreements  pursuant to which we obtained  development  rights and,  potentially
equity  interests,  in  multiple  power  plants,  an electric  transmission  and
distribution  grid and a district heating loop in Poland.  We intend to bring in
major European utility companies as controlling equity partners in each of these
projects  while  retaining  a minority  interest in the  projects  or  receiving
development fees for our efforts.

     Risk  Factors.  Our  proposed  non-domestic  operations  are subject to the
jurisdiction  of  numerous  governmental  agencies  in the  countries  in  which
projects  are expected to be located  with  respect to  environmental  and other
regulatory  matters.  Generally,  many of the countries in which we expect to do
business  have  recently  developed  or are in the  process  of  developing  new
regulatory  and  legal  structures  to  accommodate  private  and  foreign-owned
businesses.  These regulatory and legal structures and their  interpretation and
application by administrative agencies are relatively new and sometimes limited.
Many detailed rules and procedures are yet to be issued.  The  interpretation of
existing  rules can also be expected  to evolve  over time.  Although we believe
that our  operations  are, and will be, in compliance  in all material  respects
with all applicable environmental laws and regulations in the applicable foreign
jurisdictions,  we also believe  that the  operations  of our proposed  projects
eventually  may be  required  to meet  standards  that  are  comparable  in many
respects  to those in effect in the United  States and in  countries  within the
European  Community.  In addition,  as we acquire additional projects in various
countries,  we  will be  affected  by the  environmental  and  other  regulatory
restrictions of such countries.

Other Specialty Project Engineering Services.

     In addition to our  principal  services,  we  routinely  evaluate  projects
requiring specialized engineering services of a multi-disciplinary nature. Where
projects  require the  extension  of  specialized  engineering  services  across
disciplines  and where we possess  the  disciplines  required  to perform  those
services,  we will  attempt to  negotiate  to  provide a package of  specialized
services.  We typically  seek  opportunities  to perform  specialty  engineering
services  on projects  where the need to deploy  expertise  in  multiple  fields
provides favorable margins.

     While our specialty project engineering  services are not generally subject
to being  categorized  based  on their  non-recurring  nature,  typical  service
offerings have included providing drilling and grouting services on the East Dam
reservoir project in California.

Other Services, Products and Investments

     We have entered into selected  strategic  investments  and  undertakings in
conjunction with, and which supplement,  our core operations.  Those investments
and  undertakings,  as of the  fourth  quarter  of 1999,  include  (1) an equity
investment in Life,  (2) our  formation of Seven Star to  distribute  Life water
products in southeast Asia and to pursue other  opportunities in southeast Asia,
(3)  acquisition  by Seven Star of a license  covering the  bottling  rights and
distribution of the Life superoxygenation process in southeast Asia, and (4) our
acquisition  of  an  interest  in  Kortmann  Polonia,   a  Polish  company  with
substantial real estate holdings.

     Life International Products, Inc. At the time of our initial acquisition of
a  license  from Life to  utilize  it's  patented  superoxygenation  process  in
bioremediation, we also acquired a 10% equity interest in Life for $1.3 million.
In 1997,  we invested an  additional  $375,000 in Life and, in 1998, we acquired
additional shares of Life from Joel Freedman,  our President and Chief Executive
Officer, for $178,125.


                                       12
<PAGE>

     Seven Star  International  Holding,  Inc.  During  1997,  we acquired a 50%
interest in Seven Star, a BVI company. We contributed $300,000 to the capital of
Seven Star and Jin Xin (Holding), Inc. contributed $300,000 to Seven Star. Seven
Star was  formed to  exploit  opportunities  to  deliver  western  products  and
technologies in Asia.

     In December of 1997,  Seven Star entered into its initial venture  agreeing
to acquire the  exclusive  rights to  distribute  beverages  incorporating,  and
otherwise exploit, Life's superoxygenation  process in a territory consisting of
the People's  Republic of China  (including  Hong Kong),  Taiwan,  Indonesia and
Singapore.  Pursuant  to the  terms of the  license,  Seven  Star paid a minimum
guarantee  payment  in the  amount  of  $400,000  to Life and  will pay  ongoing
royalties based on a percentage of revenues  realized from licensing of the Life
process, subject to certain minimum royalty requirements.  Seven Star intends to
distribute Life products directly in selected  territories and to sublicense the
Life process in other  territories.  Sublicensing  arrangements  are expected to
generate initial  sublicensing fees and ongoing minimum royalties from potential
sublicensees  in amounts  sufficient  to recoup at least the  minimum  guarantee
payment paid by Seven Star as well as the minimum ongoing royalties.

     In  December  of  1997,  Seven  Star  entered  into an  initial  sublicense
agreement with Zheng Zhou Wo Li Beverage Limited covering a territory consisting
of Zheng Zhou,  Henan,  in the People's  Republic of China and  providing  for a
minimum guarantee payment of $600,000 and minimum royalty requirements in excess
of those under Seven Star's license with Life. Zheng Zhou Beverage has begun the
development  of a  bottling  plant in Henan and  expects to begin  bottling  and
distribution operations during the second half of 2000.

     Seven  Star's  ability to  successfully  exploit the Life process and other
opportunities in Asia is subject to the numerous risks associated with operation
in Asia,  including  the recent  currency  crisis  which has impaired the growth
prospects in the region, as well as the risks and uncertainties  associated with
identifying,  doing  business  with,  and enforcing  contracts with Seven Star's
prospective local partners and sublicensees.

     Kortmann  Polonia.  In  conjunction  with our  ongoing  efforts  to develop
waste-to-energy  and other  energy  projects  in Poland,  during  1998,  we were
presented  with an  opportunity  to acquire a  controlling  interest in Kortmann
Polonia.  Kortmann  Polonia is a Polish  corporation  with  valuable real estate
holdings.  In November of 1998,  we entered  into an  agreement to acquire a 75%
interest in Kortmann  Polonia for $600,000.  Shares  evidencing 49% ownership of
Kortmann  Polonia were  transferred in November of 1998.  Transfer of additional
shares  bringing  our  interest  in Kortmann  Polonia to 75% is  awaiting  final
governmental approval.

     Kortmann  Polonia's real estate holdings  consist of three separate tracts,
covering an aggregate of approximately 75 hectares,  known as the "Medjew Site",
the "Koblaskowa Site" and the "Stepnjca Site".

     The Medjew Site  consists  of  approximately  30  hectares  located on Lake
Medjew,  near Szczecin,  Poland.  The Stepnjca Site consists of approximately 15
hectare located on the River Oder. Our present plans are to sell the Medjew Site
and the Stepnjca Site to developers.

     The Koblashowa Site consists of approximately 33 hectares located 5 km from
downtown  Szczecin,  Poland.  The  site  is  located  directly  on the  Autobahn
connecting  Szczecin  to  Berlin,  Germany  immediately  past the  Polish-German
border.  We are evaluating the development of a mall at the Koblashowa Site with
a view to retaining a minority  interest in the mall and,  possibly,  generating
development fees, or the sale of the property.

     We expect  that from time to time in the future we will have  opportunities
to invest or  participate  in ventures  outside of, but  connected  to, our core
businesses.  We will  evaluate  any such  opportunities  and,  where we deem the
potential of such  opportunities to merit  participation  or investment,  we may
enter into additional ventures outside of our core businesses.

                                       13
<PAGE>

Marketing

     In  marketing  our  services,  we rely  principally  on the  efforts of our
operating and  executive  management  team who regularly  call upon existing and
prospective  customers.   Through  the  efforts  of  our  management,   we  have
established working  relationships with numerous Fortune 500 industrial concerns
as well as major national  architectural  engineering firms, the DOD and the DOE
and many smaller and medium size industrial and engineering firms worldwide.  We
supplement the efforts of our management by advertising in  international  trade
publications,  direct mailings to selected industrial and engineering firms, and
participation in industry conferences and trade shows.

Regulation

     Environmental Regulations.  We and, in particular, our clients, are subject
to extensive and evolving  environmental  laws and  regulations.  These laws and
regulations are directly related to the demand for many of the services we offer
and often subject us to stringent regulation in the conduct of our operations.

     The various environmental regulations affect estimating, scheduling, health
and safety,  and field operations.  Asbestos,  polychlorinated  biphenyl,  lead,
hazardous  waste,  and nuclear  waste are all regulated and some or all of these
components  are found on nearly every project.  Estimators  and schedulers  must
account for these  regulations in estimating  the cost and time for  completion.
Every project must have a person who ensures health and safety  regulations  are
adhered to and superintendents and foremen must be aware of these regulations to
ensure they are adhered to during the work. Almost all of IDM's personnel attend
continuing education classes relating to the various areas of regulation.

     The  principal  environmental  legislation  affecting  our business and our
clients is described below.

     -- Resource  Conservation  and Recovery  Act of 1976.  RCRA  regulates  the
treatment,  storage  and  disposal  of  hazardous  and solid  wastes.  RCRA has,
therefore,  created  a need  generally  for  some of the  types of  services  we
provide. The 1984 Hazardous and Solid Waste Amendments to RCRA ("HSWA") expanded
RCRA's scope by providing  for the listing of additional  wastes as  "hazardous"
and lowering the quantity  threshold of wastes subject to regulation.  HSWA also
imposes  restrictions  on land  disposal  of  certain  wastes,  prescribes  more
stringent   management  standards  for  hazardous  waste  disposal  sites,  sets
standards for  underground  storage tanks and provides for  "corrective"  action
procedures. Under RCRA, liability and stringent management standards are imposed
on a person who is an RCRA permit holder, namely, a "generator" or "transporter"
of hazardous waste, or an "owner" or "operator" of a waste treatment, storage or
disposal  facility.  Both the EPA and states  with  authorized  hazardous  waste
programs can bring several types of  enforcement  actions under RCRA,  including
administrative  orders and actions  seeking civil and criminal  penalties.  RCRA
also provides for private causes of action as an additional enforcement tool.

     -- Comprehensive Environmental Response,  Compensation and Liability Act of
1980.  CERCLA , also known as the Superfund Act,  addresses  cleanup of sites at
which  there  has been or may be a  release  of  hazardous  substances  into the
environment. CERCLA assigns liability for costs of cleanup and damage to natural
resources to any person who, currently or at the time of disposal of a hazardous
substance,  owned or operated any facility at which  hazardous  substances  were
deposited,  to any person who by agreement or otherwise arranged for disposal or
treatment,  or arranged with a transporter for transport of hazardous substances
owned or possessed by such person for disposal or  treatment,  and to any person
who  accepted  hazardous  substances  for  transport  to disposal  or  treatment
facilities  or sites from  which  there is a release  or  threatened  release of
hazardous  substances.  CERCLA authorizes the Federal government either to clean
up these sites itself or to order  persons  responsible  for the situation to do
so.  CERCLA  created a fund to be used by the Federal  government to pay for the
cleanup  efforts.  Where the  Federal  government  expends  money  for  remedial
activities, it must seek reimbursement from the potentially responsible parties.
Where the EPA performs remedial work with superfund dollars,  it frequently sues
potentially  responsible  parties for  reimbursement  under the "cost  recovery"
authority  of Section  107 of CERCLA.  The EPA may also issue an  administrative
order seeking to compel potentially responsible parties to perform remedial work
with their own funds under the  "abatement"  authority of Section 106 of CERCLA.
In lieu of instigating such actions,  the EPA may also seek through negotiations
to  persuade  such  parties  to  perform  and/or  pay for any and all  stages of
remedial action at a site in discharge of their liabilities under CERCLA.

                                       14
<PAGE>

     CERCLA provides that transporters and persons arranging for the disposal of
hazardous  waste may be jointly and  severally  liable for the costs of remedial
action at the site to which the  hazardous  waste is taken.  While we attempt to
minimize  such  exposure by  contracting  only with  qualified  hazardous  waste
transporters  meeting certain minimum  insurance  requirements and by having the
generator select the disposal site and method there can be no assurances that we
will be  successful in so limiting such  exposure.  Under Section  101(20)(B) of
CERCLA,  when a common or contract carrier  delivers a hazardous  substance to a
site  selected by the shipper,  the carrier is not  considered to have caused or
contributed   to  any  release  at  such  disposal   facility   resulting   from
circumstances or conditions beyond its control.

     The Superfund  Amendments and  Reauthorization  Act ("SARA") was enacted in
1986 and authorized  increased  Federal  expenditure  and imposes more stringent
cleanup  standards and  accelerated  timetables.  SARA also contains  provisions
which expand the enforcement powers of the EPA.

     While there can be no assurance,  management believes that, even apart from
funding authorized by RCRA and CERCLA,  industry and governmental  entities will
continue to try to resolve  hazardous waste problems due to their need to comply
with other statutory  requirements and to avoid  liabilities to private parties.
Although  the  liabilities  imposed by CERCLA are more  directly  related to our
clients, they could under certain circumstances apply to some of our activities,
including failure to properly design or implement a cleanup, removal or remedial
action plan or to achieve required cleanup  standards and activities  related to
the  transport and disposal of hazardous  substances.  Such  liabilities  can be
joint and several where other parties are involved.

     -- Clean Air Act and 1990 Amendments  (the "Clean Air Act").  The Clean Air
Act requires  compliance with ambient air quality standards and empowers the EPA
to  establish  and enforce  limits on the  emission of various  pollutants  from
specific types of facilities.  The 1990 amendments modify the Clean Air Act in a
number of  significant  areas.  Among other  things,  they  establish  emissions
allowances  for  sulfur  and  nitrogen  oxides,  establish  strict  requirements
applicable to ozone emissions and other air toxics,  establish a national permit
program  for  all  major  sources  of  pollutants  and  create  significant  new
penalties, both civil and criminal, for violations of the Clean Air Act.

     Included  within the scope of the Clean Air Act are rules issued by the EPA
known as National Emissions  Standards for Hazardous Air Pollutants  ("NESHAP").
NESHAP specifically  regulates the emission of asbestos during manufacturing and
waste  disposal   operations  and  the  renovation  and  demolition  of  certain
facilities.  Authority  to  implement  and  enforce  NESHAP  standards  has been
delegated to the various states which have implemented  licensing  requirements,
notice  requirements and procedures with respect to asbestos abatement and other
rules governing the handling and disposal of asbestos.

     -- Clean Water Act of 1972 ("CWA"). Originally enacted as the Federal Water
Pollution Control Act, but renamed as the Clean Water Act in 1977, CWA regulates
the discharge of pollutants  into the surface waters of the United  States.  CWA
established   a  system  of  minimum   national   efficiency   standards  on  an
industry-by-industry  basis,  water quality  standards,  and a discharge  permit
program.   It  also  contains  special  provisions   addressing   accidental  or
unintentional spills of oil and hazardous substances into waterways.

     -- Other Federal and State Environmental Regulations. Our services are also
used by clients in complying with, among others, the following Federal laws: the
Toxic  Substances  Control  Act,  the Safe  Drinking  Water Act,  the  Hazardous
Materials  Transportation  Act and the Oil  Pollution  Act of 1990. In addition,
many states have passed  superfund-type  legislation  and other  regulations and
policies to cover more  detailed  aspects of  environmental  impairment  and the
remediation  thereof.  This legislation  addresses such topics as air pollution,
underground  storage tanks,  water quality,  solid waste,  hazardous  materials,
surface impoundments,  site cleanup and wastewater  discharge.  Most states also
regulate the  transportation  of hazardous wastes and certain  flammable liquids
within their borders by requiring that special permits be obtained in advance of
such transportation.

     Other   Regulations.   In  addition  to  a  broad  array  of  environmental
regulations relating to our environmental  service activities,  our business and
proposed businesses, are subject to a variety of non-environmental  regulations.
Included  in  the  regulations   which  may  effect  our  current  business  are
regulations  governing  occupational safety and health, wage, overtime and other
employment matters and dealings with governmental agencies.

                                       15
<PAGE>

     Our   proposed   operations   relating   to   the   licensing   of   Life's
superoxygenation  process for beverages may be subject to potential  regulations
governing such matters as food and beverage safety and processes,  packaging and
marketing,  among  other  matters.  Additionally,  our  commencement  of  energy
production  operations may be subject to various  regulations  governing  rates,
safety of operations,  and financing,  among other matters.  While we anticipate
that our licensing  activities related to the Life process and energy production
activities  will be conducted  outside of the United States in lesser  developed
countries  where  extensive  regulation  may  currently  be  lacking,  it can be
expected that some of those countries will adopt extensive  regulation governing
those activities similar to the United States.

Competition

     Environmental  Services.  The  environmental  services  industry  is highly
competitive and fragmented. Because of the diverse nature of the industry, there
are many  competitors,  both large and small.  Many  segments  of the  industry,
including a  significant  portion of  Superfund  and other large  projects,  are
dominated by large  national  architectural  engineering  firms such as Bechtel,
Flour, Westinghouse,  Foster Wheeler and ICF Kaiser. Additionally,  many smaller
engineering  firms,  construction  firms,  consulting  firms and other specialty
firms have  entered the  industry in recent  years and  additional  firms can be
expected to enter the industry in the future. Many of the firms competing in the
environmental  services industry have significantly  greater financial resources
and more established market positions.

     While  many  firms  are  active  in  the  environmental  services  industry
providing site assessment,  consulting and engineering services, we believe that
the  number  of  firms  having   expertise   in,  and   offering,   dismantling,
decommissioning  and deconstruction  services within the environmental  services
industry is limited.  We maintain a highly  trained and qualified  workforce and
have  extensive  experience  in planning and  implementing  decontamination  and
decommissioning  projects in a safe manner.  Such  expertise and  experience has
allowed us to successfully  compete within the industry and to secure  contracts
from  industrial  firms as well as  engineering  firms which lack  experience in
environmental  decontamination  and  deconstruction.  Because  we,  unlike  most
engineering     firms,     are    staffed    by    experienced    and    skilled
decontamination/deconstruction  personnel,  the involvement of engineering firms
is often  limited to project  management  with actual  hands-on  services  being
provided by our personnel. Because of the need for certain permits and licenses,
specialized  equipment,  OSHA-trained employees and the need to be knowledgeable
of and to comply with federal,  state and local environmental laws,  regulations
and  requirements,  we believe there are significant  barriers to entry into the
environmental  dismantling,  decommissioning and deconstruction  business. There
can be no assurance,  however, that other firms, including the major engineering
firms which control a significant portion of Superfund and government contracts,
will not expand into or develop  expertise in the areas in which we  specialize,
decreasing any  competitive  advantage  which we may enjoy.  We believe that our
expertise  and  ability  to  provide  full  service,   turnkey  remediation  and
decommissioning  services and our  utilization of  state-of-the-art  remediation
techniques will continue to allow us to compete effectively in the environmental
services  industry  and to  capitalize  on the  expected  growth in  demand  for
services in the nuclear facilities arena.

     Plant Relocation  Services.  Plant relocation services are a niche business
and competition within the segment is limited. We believe that we are one of the
dominant firms within such industry.  While  demolition  and  dismantling  firms
offer similar  services,  the primary  competition  within the plant  relocation
industry is from various  large  engineering  firms which offer  services in the
form of construction  management as consultants to owners.  However,  most firms
which  offer  relocation  services do so as an  additional  service and not as a
primary  service.  We advertise and market our relocation  services as a primary
service.  Competition  with  respect  to  other  specialty  project  engineering
services is believed to be limited to large  engineering  firms. We believe that
our  ability  to  provide  highly  specialized   cross-disciplinary  engineering
services will allow us to compete successfully in this market.

     Energy Services.  Due to the substantial  barriers to entry into the market
and the prevalence of power purchase  agreements,  competition within the energy
market is limited in most developing  countries,  including the markets in which
we expect to  operate.  While a variety  of  independent  energy  producers  and
private and government owned utilities may provide energy in some of the markets
in which we  expect  to  operate,  it is  anticipated  that we will  have  power
purchase  agreements  in place in most markets  which will  provide  contractual
commitments  to  purchase  a  significant  portion,  if not all,  of the  energy
produced  from  our  planned  facilities.  Further,  while  we  are  focused  on
establishing a niche  position in the individual  project 100 MW or less market,
we  believe  that  the  primary  competitors  in  the  energy  market  generally
concentrate on large projects of 200 MW or greater. Accordingly, competition for
the sale of energy is not expected to be significant for the foreseeable  future
in  our  target  markets.   However,  should  those  markets  grow  and  undergo
deregulation  similar  to  that  experienced  in the  United  States,  it can be
expected that new competitors  will enter those markets  increasing  pricing and
competitive  pressures.  Further, while established energy production operations
in developing  markets are expected to be isolated from  competition in the near
term,  competition for contracts to provide energy in markets may be intense. In
light of the opening of the United States utility markets to  competition,  many
participants with substantially greater resources have actively begun efforts to
establish energy operations in developing countries around the world.

                                       16
<PAGE>

     Waste Treatment Services. Due to the substantial barriers to entry into the
market and the prevalence of agreements,  competition within the waste treatment
market is limited in most developing  countries,  including the markets in which
we expect to operate.  While a variety of independent  operators and private and
government  owned entities may provide waste treatment in some of the markets in
which we expect to operate,  it is anticipated  that we will have  agreements in
place in most markets which will provide contractual  commitments to utilize our
facilities.  Accordingly,  competition  for  waste  treatment  revenues  is  not
expected to be significant  for the  foreseeable  future in our target  markets.
However, should those markets grow, it can be expected that new competitors will
enter those markets increasing pricing and competitive pressures. Further, while
established waste treatment  operations in developing markets are expected to be
isolated from competition in the near term, competition for contracts to provide
waste treatment services in markets may be intense.

Employees

     At December 31, 1999, we employed approximately 58 full-time employees,  24
of whom were management and administrative  personnel,  10 of whom were clerical
personnel and 24 of whom were field personnel.  We also employ  additional field
personnel on a temporary basis when needed to adequately staff projects.  All of
our permanent field personnel are skilled  craftsmen with an average of over ten
years service with our company,  they are  OSHA-trained  and asbestos trained to
perform  their  respective  duties.  We regularly  hire  temporary  employees on
location  to staff  jobs  performed  away  from the  immediate  vicinity  of our
headquarters.  We  carefully  review  the  training  and  qualifications  of all
temporary  workers to assure that all such workers are  qualified to perform the
work in question. In all such instances,  our supervisors and foremen will plan,
supervise and oversee all aspects of work performed by such temporary workers.

     We believe that we enjoy good relations with all of our employees.  None of
our  permanent  full-time  employees  are  unionized  or subject  to  collective
bargaining agreements and we have experienced no work stoppages or strikes. Some
of the  temporary  personnel  we hire  may be  union  members  where  the job in
question and local conditions as a practical matter require such personnel.

ITEM 2.  PROPERTIES

     Our  principal  offices  are  located  on a 7.5 acre site at 396  Whitehead
Avenue,  South  River,  New  Jersey,  in a 6,925  square  foot two story  office
building and an adjoining  7,600  square foot two story  office  building.  Also
located on such site is a 4,248  square foot one story  storage/work  area and a
5,700  square  foot  warehouse  facility.  Such  facilities  are leased from L&G
Associates,  an affiliate controlled by Joel Freedman and Frank Falco,  pursuant
to a fifteen year lease  expiring May 31, 2011 and providing for monthly  rental
installments  of $22,500,  subject to annual  adjustments  based on the Consumer
Price Index, plus insurance, taxes and maintenance costs.

     Our various subsidiaries also own real estate in Poland and El Salvador and
maintain  offices  in  various  locations  to  support   international   project
activities.

     We  believe  our  properties  are  adequate  to  support  our  current  and
anticipated operations.

                                       17
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     On August 15, 1996, the U.S.  Department of Labor,  Occupational Safety and
Health  Administration  issued willful citations and notifications of penalty in
the amount of $147,000  against us in connection with the accidental  death of a
subcontractor's  employee  on the United  Illuminating  Steel  Point  Project in
Bridgeport,  Connecticut in February,  1996. A complaint was filed against us by
the Secretary of Labor, United States Department of Labor on September 30, 1996.
We denied all of the  allegations in the  complaint.  A hearing was conducted in
April,  1997  and,  subsequently,  OSHA's  Review  Commission  issued a  written
decision vacating the first alleged willful  citation,  but affirming the second
and third willful citations, and imposing a penalty in the amount of $70,000 for
each  citation.  A timely  Notice  of  Appeal  was  filed  with the OSHA  Review
Commission for Discretionary Review, which body has accepted jurisdiction of the
matter on administrative appeal. We intend to continue to vigorously contest the
alleged  violations  and will pursue any and all remedies  available,  including
appellate proceedings at the U.S. Circuit Court of Appeals, in order to overturn
the decision.

     On  February  11,  1997,  we were  served  with a lawsuit  naming  IDM as a
co-defendant  in a wrongful  death cause of action arising out of the accidental
death of an employee of its subcontractor,  American Wrecking.  The suit, styled
The Estate of Percy L. Richard,  and Percy D. Richard, a minor by next of friend
Patricia  Cunningham  v.  American  Wrecking  Corp.  and  its  successors,   IDM
Environmental Corp., and its successors, SECO Corp. and it successors, all joint
and individually,  and all unknown persons, Case No. 2:97CV filed in the Federal
District  Court for the Northern  District  Court for the  Northern  District of
Indiana,  arises  out  of  the  same  facts  alleged  in  the  above  referenced
administrative  proceeding  instituted by OSHA.  Plaintiff  seeks damages of $45
million.  We believe  that the suit,  as it relates to us, is without  merit and
continue to vigorously contest the cause of action.  Pursuant to our subcontract
with  American  Wrecking,  we are now  being  defended  and  indemnified  by the
insurance carrier for American Wrecking.

     In July of 1998,  we, our  subsidiary,  Global  Waste & Energy and  certain
affiliates and officers, were named as co-defendants in a cause of action styled
Kasterka  Vertriebs GmbH v. IDM Environmental  Corp., et al., filed in the Court
of Queen's  Bench of  Alberta,  Judicial  District of  Calgary.  The  plaintiff,
Kasterka,  has alleged that we and our affiliates breached a marketing agreement
that had been  entered  between  Kasterka and  Enviropower.  The  plaintiff  has
alleged that the defendants  failed to supply material  information  relating to
the gasification  technology  originally developed by Enviropower and that, as a
result,  Kasterka was unable to manufacture and market gasification units in the
territories  designated  in the  marketing  agreement.  Kasterka  has asserted a
variety  of claims for  damages in the  aggregate  amount of  approximately  $42
million.  We believe the suit is without merit and intend to vigorously  contest
the cause of action.

     In  September  of 1998,  we were named as a defendant  in a cause of action
styled Balerna Concrete Corporation,  et al. v. IDM Environmental Corp., et al.,
filed in United States District Court of Massachusetts  (Case No.  98CV11883ML).
The plaintiffs  alleged that we, and others,  engaged in a pattern of conduct to
divert funds from the plaintiffs  through the operation of a concrete  finishing
business.  The plaintiffs  asserted various claims under RICO, common law fraud,
conversion and breach of contract,  and sought unspecified damages. The case was
dismissed in February 2000.

     In November of 1997, we commenced an action styled IDM Environmental  Corp.
v.  Kvaerner  Metals,  et al. in the  Superior  Court of New Jersey.  The action
against  Kvaerner Metals,  formerly known as Davy  International  ("Davy"),  and
American Home Assurance Co. concerned a completed environmental clean-up project
at American Home  Products in Bound Brook,  New Jersey for which we and Davy had
entered into a teaming partnership  agreement providing for, among other things,
an equal sharing of all direct costs and any losses sustained on the project. We
alleged that we were  entitled to the sum of at least  $700,000.00  representing
the  share  of the  project  losses  owed to us by Davy,  as well as  additional
unliquidated  damages for Davy's breach of fiduciary  duties owed to the teaming
partnership,  and its failure to submit  change order  claims to recover  losses
incurred by the partnership  for disruption of work and for its negligence.  The
case was settled in January 2000 with the defendant agreeing to pay $550,000.

     In addition to the foregoing,  we are periodically  subject to lawsuits and
administrative   proceedings   arising  in  the  ordinary  course  of  business.
Management believes that the outcome of such lawsuits and other proceedings will
not  individually  or in the  aggregate  have a material  adverse  affect on our
financial condition, operations or cash flows.

                                       18
<PAGE>

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

          None

                                     PART II

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

Market Information

     The Company's  common stock has traded on the Nasdaq  SmallCap Market under
the symbol  "IDMC"  since May 11,  1999.  Prior to that date IDM's  common stock
traded on the Nasdaq National Market under the same symbol.  The following table
sets  forth the high and low sales  price as  reported  by the  Nasdaq  SmallCap
Market and the Nasdaq  National  Market for the IDM common stock for the periods
indicated.  All prices are  adjusted to reflect a 1-for-10  reverse  stock split
effective April 16, 1999.

                                                High              Low
                                               ------            -----
Calendar Year 1999

         Fourth Quarter......................  $17.63            $ 4.81
         Third Quarter.......................    6.38              1.00
         Second Quarter......................    3.13              1.00
         First Quarter.......................    5.63              2.50

Calendar Year 1998

         Fourth Quarter......................    9.22              3.44
         Third Quarter.......................   27.19              5.00
         Second Quarter......................   40.00             25.63
         First Quarter.......................   75.63             36.25

     The  quotations  reflect   inter-dealer   prices  without  retail  mark-up,
mark-down or commission and may not represent actual transactions.

     At March 30, 2000, the bid price of the Common Stock was $8.9375.

Holders

     As of March 30, 2000,  there were  approximately  150 holders of record and
3,500 beneficial owners of the Common Stock of the Company.

Dividends

     The  Company  has never  declared  or paid any cash  dividend on its Common
Stock and does not expect to declare or pay any such dividend in the foreseeable
future.

Sales of Unregistered Securities

     (a) Pursuant to a reserve of 350,000 shares  established on August 18, 1999
for  issuance  to various  vendors in payment for  services  provided to IDM, at
various dates during the quarter ended December 31, 1999, we issued an aggregate
of 77,014 shares of common stock.

     (b) The securities  were issued,  without an  underwriter,  to a total of 8
vendors and 1 surety of IDM.

                                       19
<PAGE>

     (c) The securities  were issued in  satisfaction of amounts owed to vendors
of the  Company  totaling  $147,000,  as  collateral  to sureties of the Company
totaling $200,000 and as security for payments owed to vendors totaling $91,000.
No commissions were paid in connection with the issuance of the securities

     (d) The securities were issued pursuant to the exemption from  registration
set  forth  in  Section  4(2) of the  Securities  Act of  1933.  The  securities
issuances were privately negotiated pursuant to settlement efforts with selected
vendors without any general  solicitation  or  advertising.  The securities bear
legends restricting the resale thereof.

ITEM 6. SELECTED FINANCIAL DATA

     The Company's historical figures as of and for the years ended December 31,
1995,  1996,  1997,  1998 and  1999  have  been  derived  from its  consolidated
financial  statements and related notes. The historical  figures that follow are
qualified by reference to the financial  statements of IDM and the related notes
thereto set forth herein.
<TABLE>

                                                                  Years ended December 31,
                                               1995          1996           1997         1998          1999
                                              ------        ------         ------       ------        ------
<S>                                          <C>           <C>            <C>          <C>           <C>

Income Statement Data:
Operating revenues:
  Contract revenues.....................     $ 33,866       $20,808        $17,826      $20,019      $13,581
  Other.................................            -             -              -            -            -
  Equipment and scrap revenues..........        5,537           834             96            -            -
                                              --------     ---------      ---------    ----------   ---------
    Total operating revenues............       39,403        21,642         17,922       20,019       13,581
Cost of sales:
  Direct job costs......................       30,433        21,492         17,002       20,258       13,366
  Unusual job costs.....................        3,300             -              -            -            -
  Cost of equipment.....................        2,977           943            647            -            -
  Write-down of inventory...............            -             -              -            -          583
                                              --------     ---------      ---------    ----------   ---------
Gross profit (loss)................ . .         2,693          (793)           273         (239)        (367)
Operating expenses:
  General and administrative............        7,637         9,567         10,538       12,871        7,054
  Depreciation and amortization.........          653           668            723          627          334
  Write-down on investment in
    unconsolidated affiliates...........            -             -              -            -          177
  Equity in net loss of
    unconsolidated partnerships.........            -             -              -          194          105
                                              --------     ---------      ---------    ----------   ---------
Income (loss) from operations...........       (5,597)      (11,028)       (10,988)     (13,932)      (8,039)
Other income (expense), net.............            -             -              -            -         (140)
Interest income (expense), net..........          200            30           (513)      (4,322)        (173)
                                              --------     ---------      ---------    ----------   ---------
Income (loss) before income taxes.......       (5,397)      (10,998)       (11,501)     (18,253)      (8,351)
Provision (credit) for income taxes.....       (1,530)       (1,850)        (1,561)       4,170       (1,200)
                                              --------     ---------      ---------    ----------   ---------
Net income (loss).......................    $  (3,867)     $ (9,148)      $ (9,940)    $(22,423)    $ (7,151)
                                              ========     =========      =========    ==========   =========
Net income (loss) on common stock.......    $  (3,867)     $ (9,148)      $(11,224)    $(26,442)    $ (7,162)
                                              ========     =========      =========    ==========   =========
Net income (loss) per share (1).........    $   (6.70)     $ (11.30)      $ (10.01)    $ (13.31)    $  (2.21)
                                              ========     =========      =========    ==========   =========
Weighted average shares
   outstanding (1)......................      581,556       808,947      1,121,269    1,987,264    3,243,493
                                              ========     =========     ==========   ===========  ==========

Balance Sheet Data:
Working capital.........................     $ 10,293       $ 6,122     $ ( 1,149)    $ (  487)    $ (3,162)
Total assets............................       22,028        22,203         27,151       15,151       12,551
Long-term liabilities...................        4,004           164            259           65           17
Minority interest.......................            -         1,034              -            -            -
Shareholders' equity....................       10,940        13,461         18,079        7,885        2,537
</TABLE>
----------------

(1)  Adjusted  to give  retroactive  effect to a 1-for-10  reverse  stock  split
     effective April 16, 1999.

                                       20
<PAGE>

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

     This Form 10-K contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The Company's actual results could differ  materially from
those set forth in the  forward-looking  statements.  Certain factors that might
cause such a difference are discussed in the section  entitled  "Certain Factors
Affecting Future Operating  Results" beginning on page 29 of this Form 10-K. All
per share amounts,  including shares issued or issuable  pursuant to convertible
securities,  are adjusted to give retroactive affect to a 1-for-10 reverse split
effective April 16, 1999.

Overview

     Our business has evolved,  and continues to evolve, to capitalize on market
opportunities.  We have added strategic  capabilities and resources  through the
years to move our  business  from its roots as a demolition  and  deconstruction
company to a full service environmental remediation company and plant relocation
services company and, now, an energy project developer and manager. Our revenues
were  historically  derived  primarily  from (1)  contract  decontamination  and
decommissioning  services in a broad  range of  industrial  and  environmentally
sensitive  settings,  including,  but not limited to,  plant  dismantlement  and
relocation   services,   asbestos   abatement   services,   and  remediation  of
contaminated  soil and  groundwater;  and (2)  equipment  and scrap  sales.  Our
operations  have been  characterized  by  fluctuations in revenues and operating
profits as projects begin and end. With the  implementation of a strategic shift
in our  business  in 1997,  we expect to  generate a growing  base of  recurring
revenues  and  operating  profits from energy and waste  treatment  projects and
long-term  nuclear  facilities  decommissioning  and remediation  projects while
supplementing  such  revenues and profits  with  revenues  from our  traditional
environmental services and plant relocation services projects.

Recent Developments

     Due to continued difficult conditions in the environmental services markets
and  limited  resources,  we  have  experienced  a  decline  in  the  number  of
traditional  environmental  service  projects on which we have bid and performed
services during 1999. In response to those conditions,  we have concentrated our
efforts on  securing  specialty  contracts,  efforts to  participate  in nuclear
remediation projects and efforts to finalize  arrangements and commence services
on our EWN  project  in  Germany.  At  December  31,  1999,  we had a backlog of
approximately $5.0 million of signed services contracts as compared to a backlog
of  approximately  $8 million at December 31, 1998.  The largest  project in our
backlog at December 31,  1999,  was the Bound Brook  project,  with an estimated
value for the balance of services to be performed of $5 million. The Bound Brook
project  began in August 1999 and is  scheduled  to be  completed  during  2002.
However,  the  elapsed  time from the award of a  contract  to  commencement  of
services, and completion of performance, may be two or more years.

     In addition to existing contracts,  we are presently bidding on, or propose
to bid on,  numerous  projects in order to replace  revenues from projects which
will be  completed  during  1999 and to  increase  the  total  dollar  volume of
projects  under  contract.  We anticipate  that efforts to bid on and secure new
contracts will focus on projects which can be readily serviced from the regional
offices as well as certain large  international  plant  relocation  projects and
nuclear  decommissioning  projects  which we  intend  to  pursue.  Our  regional
offices,  particularly  the Oak  Ridge,  Tennessee  offices,  are  strategically
located in areas having a high  concentration  of prospective  governmental  and
private  remediation  sites.  While bidding to perform services at such sites is
expected to be highly  competitive,  we believe  that our  existing  presence on
adjacent projects combined with our proven expertise and resources will allow us
to successfully bid on and perform substantial  additional projects based out of
our regional offices.

     In addition to remediation  and plant  relocation  projects on which we are
presently  bidding or  negotiating,  during  1997 and 1998 we entered the energy
production and waste treatment  services market.  We began energy production and
sales at our Georgia Power Project  during the second quarter of 1999 and expect
to begin  operations at, and to receive  revenues from waste treatment  projects
and nuclear decommissioning projects at various sites by as early as mid-2000.

                                       21
<PAGE>

     While we anticipate that entry into the energy production,  waste treatment
and  nuclear  facilities  decommissioning  and site  revitalization  market will
provide  significant  opportunities for sustainable  growth in both revenues and
operating  profits,  entry  into  those  markets  requires  substantial  capital
commitments and involves certain risks.  Undertaking  energy  production,  waste
treatment  and  nuclear  decommissioning  projects  can be  expected  to require
capital  expenditures  of as little as several  million  dollars to  hundreds of
millions of dollars per project.  We do not currently have the necessary capital
resources  to  undertake  such  ventures  without  third-party   financing.   We
anticipate  that we will take on  equity  partners  and seek  third  party  debt
financing to finance  substantial  portions of the  projects  which we expect to
undertake.

     There is  substantial  uncertainty as to our ability to continue to operate
as a result of continuing losses and a lack of currently  available resources to
fund  future  operations.  In an  effort  to deal with  these  concerns,  we are
presently  evaluating the sale or other  liquidation of various long-term assets
which we believe can provide adequate funding to support future  operations.  In
March of 1999,  we agreed  to accept  $300,000  in full  settlement  of our note
receivable  from UPE  relating to the sale of our surplus  equipment  inventory.
$150,000  was paid at closing with the balance  payable in monthly  installments
over eight months. We are presently  evaluating the sale of properties in Poland
as  sources of  additional  funds.  We believe  that  adequate  funding  will be
provided  from  the  efforts   described  to  support  our  operations  for  the
foreseeable future.  However, in the absence of receipt of adequate funding from
those,  or other,  sources,  our  ability to  continue to operate at the current
level is in doubt.

     In light of continued  uncertainty  effecting our  operations  during 1999,
management  evaluated  various options outside of its traditional  businesses to
return the company to profitability and to increase shareholder value.  Pursuant
to those efforts,  on August 18, 1999, we entered into a Plan of  Reorganization
and  Merger  and an  Agreement  and Plan of Merger  (collectively,  the "Plan of
Reorganization") with Fusion Networks, Inc. ("Fusion Networks"). Pursuant to the
terms of the Plan of  Reorganization,  we agreed to form a new  holding  company
(the "Holding  Company").  We agreed to merge with a wholly-owned  subsidiary of
the Holding  Company with the  shareholders of IDM receiving one share of common
stock  of the  Holding  Company  for  each  share  of  common  stock of IDM held
immediately  prior to the  reorganization.  Fusion Networks agreed to merge into
another wholly-owned  subsidiary of the Holding Company with the shareholders of
Fusion  Networks  receiving one share of common stock of the Holding Company for
each share of common  stock of Fusion  Networks  held  immediately  prior to the
reorganization.  Following  the  reorganization,  the  shareholders  of IDM were
expected to own  approximately  10% of the common  stock of the Holding  Company
with the shareholders of Fusion Networks owning  approximately 90% of the common
stock of the Holding Company.

     Fusion Networks is a newly formed company,  based in Miami, Florida,  which
is in the process of building a portal-type web site with an initial emphasis on
Latin  America and the Hispanic  market in the United  States.  Fusion  Networks
launched its initial site, on a pilot basis,  in Bogota,  Colombia,  in October,
1999  followed  by a formal  launch  of the  site in  Bogota  and in Miami  with
additional site launches planned in Latin America,  the United States, Spain and
Portugal during 2000.

     The proposed  reorganization  was approved by the  shareholders  of IDM and
Fusion Networks in March 2000 and the reorganization is expected to be completed
in April 2000. As a result of the  reorganization,  IDM and Fusion Networks will
become wholly-owned  subsidiaries of Fusion Networks Holdings, Inc. Both IDM and
Fusion Networks plan to continue their historical operations for the foreseeable
future.

     During 1999, our principal  contract services related to, and substantially
all of our  revenues  were  derived  from,  our East Dam  Project  and Oak Ridge
Project and a number of smaller projects. The Oak Ridge Project is a DOE managed
site and was our most significant  remediation  project during 1999.  During the
second  quarter of 1999, we completed work on the phase of the Oak Ridge Project
which was begun  during 1998.  Commencement  of  additional  services at the Oak
Ridge  Project has been delayed and future  services are in doubt as a result of
disputes  relating to two  contracts  at the Oak Ridge site.  The first  dispute
relates to an asset recovery contract, where the value of the equipment salvaged
pays for our cost of dismantling  and removing the equipment.  During the second
quarter of 1999, we became aware of several previously undisclosed problems that
reduced the value of the equipment and increased the costs to decontaminate  and
remove  the  equipment.  During  September  1999,  we were  terminated  from the
contract by the  contractor.  We have filed a request for  arbitration  which if
successful would probably be determined in the third quarter of 2000. The second
dispute relates to our determination  during the second quarter of 1999 that the
waste we were required to dispose of had to be buried in a mixed waste cell at a
higher cost than the  low-level  waste cell it was supposed to go to because the
waste had undisclosed PCB's. Also, we were planning on decontaminating the steel
and  selling  it for  scrap  which  would  avoid  disposal  costs.  Because  the
contractor  said we had to remove all the paint from the steel before they would
release it, it became more cost effective to dispose of the steel in a low-level
waste  facility.  During March 2000, we reached a settlement with the contractor
as a result of mediation.  The settlement  agreement provided for the contractor
to make  payment to the Company in the amount of $3.1  million in full and final
settlement.  This  amount was  recorded  in 1999 and  resulted  in the  contract
approximately  breaking  even.  Because of these  disputes and because our asset
contract  was  terminated,  our  revenues  at the Oak  Ridge  Project  have been
curtailed and we have incurred losses on that project.

                                       22
<PAGE>

     Revenues  recognized and jobs costs  attributable to our contract  services
during 1998 were adversely  affected by  unforeseeable  developments at the East
Dam Project and on our project at the Boston State  Hospital  (the "Boston State
Hospital Project").  On the East Dam Project, the scope of our services, and our
bid, was based on preliminary project specifications  established by the project
owner.  The amount  payable  with  respect to our  services on that  project was
subject to adjustment,  up or down, based on the actual conditions  encountered.
As a result of the  conditions  encountered,  the  actual  drill  footage of the
project  was  substantially  less than the  footage  initially  bid based on the
specifications  provided by the  project  owner.  At the same time,  we provided
substantial  additional services,  as called for by the contract, as a result of
change orders.  Pursuant to the contract,  compensation  payable with respect to
additional  services  resulting from change orders was subject to  documentation
and  negotiation  at the end of the  project.  The  reduction  in drill  footage
resulted in a decrease  in  estimated  project  revenues  (not giving  effect to
amounts owing respect to change orders).  As a result,  estimated revenues to be
recognized from the East Dam Project were reduced from approximately $20 million
to $15 million. While total project revenues and 1998 revenues from the East Dam
Project  were  less  than  anticipated  as a result  of the  reduction  in drill
footage,   job  costs  attributable   thereto  were  substantially  higher  than
originally  anticipated as a result of the  performance  of additional  services
related to change orders. We submitted a claim for  approximately  $10.8 million
as additional compensation and cost reimbursement attributable to change orders.
Pending  payment  for  services  related  to  change  orders,  during  1998,  we
recognized,  as additional job costs, all costs  attributable to the performance
of those  services but did not  recognize  any revenues  which might be realized
from those  services.  We will  recognize as  additional  revenues,  without any
corresponding  job costs, all amounts  received,  if any, with respect to change
orders at such time as such amount is  actually  received.  In July of 1999,  we
assigned  our claim with respect to the East Dam Project to our  contractor  for
$650,000.  The contractor will pursue the claim,  paying all direct claim costs,
including  costs of experts.  In the event the claim results in a payment to the
contractor,  the payment will be distributed 70% to the contractor and 30% to us
after deducting  direct claim costs and the $650,000 paid by the contractor.  In
February  2000,  the  contractor  settled  the claim for  $750,000  and paid the
Company  $50,000,  or  one  half  of the  $100,000  excess  notwithstanding  the
contractual obligation to pay only $30,000.

     On the Boston State Hospital Project, we subcontracted  certain portions of
the project to Dockside Dismantling Corporation ("Dockside"). Dockside defaulted
on its  subcontract  and  abandoned  the work for which it was  responsible.  In
addition,  we were notified of certain work deficiencies for which Dockside and,
derivatively,  IDM were allegedly responsible. We estimated the additional costs
to complete  and correct  the work of  Dockside  at $1.2  million and  reflected
additional job costs in that amount.  We made a claim against the bond ($500,000
performance and $500,000  payment)  provided by Dockside's  surety company.  The
surety  company  disclaimed  coverage and  litigation to collect on the bond was
initiated.  In January of 1999, we settled our claim against  Dockside's  surety
company for  $375,000  for the  performance  bond of which we received  $300,000
after legal fees.  The  $500,000  payment bond was paid  directly to  Dockside's
vendors  and we  received  no funds from the  payment  bond.  The results of the
settlement were reflected in fourth quarter 1998 results.

     In the recurring revenue project arena, during 1998, we continued to invest
substantial resources in our efforts to acquire and/or build,  start-up, own and
operate  energy,  waste  treatment  and  other  similar  projects.  We  incurred
approximately  $4 million in direct  costs  during 1998 in  connection  with our
efforts to enter those markets. At December 31, 1998, we were in advanced levels
of  discussions  with  respect  to more  than a dozen  potential  energy,  waste
treatment  and similar  projects  and in February of 1999 we acquired  our first
operating energy facility,  a 42 MW hydroelectric power plant in the Republic of
Georgia.  We expect to begin recognizing  revenue from the Georgia Power Project
by the third  quarter  of 2000.  Additionally,  we  continue  in our  efforts to
complete development of, and to begin realizing revenues from, one or more other
energy  and/or  waste   treatment   facilities.   However,   given  the  capital
requirements and time required to bring energy projects operational, at December
31, 1999 we were  exploring  various  options to minimize  our costs in pursuing
those projects,  including  selling  substantial  equity positions in our energy
projects  while  retaining  smaller  minority  positions or, where  appropriate,
selling our positions  outright in exchange for recovery of our investments plus
a development fee.

                                       23
<PAGE>

     In the fourth quarter of 1999, we were  contracted by URS Greiner  Woodward
Clyde  Federal  Services  and the U.S.  Air Force to  relocate a Plastics  Media
Aircraft Stripping Booth from Sacramento,  California to Ogden, Utah. At the end
of 1999, the dismantling and transportation  phases of the project were complete
and the reerection was in progress in Utah. The project was completed during the
first quarter of 2000. Total revenues from the relocation  project were $353,000
in 1999. We had no revenues from plant relocation operations in 1998.

     In addition to our core operations, we have entered into selected strategic
investments and undertakings. Those investments and undertakings, as of December
31  1999,  include  (1) an  equity  investment  in Life  International,  (2) our
formation of Seven Star to distribute  Life water products in southeast Asia and
to pursue other  opportunities  in southeast Asia, (3) acquisition by Seven Star
of a  license  covering  the  bottling  rights  and  distribution  of  the  Life
superoxygenation  process  in  southeast  Asia,  and (4) our  acquisition  of an
interest in Kortmann Polonia.  We invested  approximately  $1.1 million in these
ventures  during 1998. We did not  recognize  any revenues  from those  ventures
during  1998 or 1999 but  expect  to begin  realizing  revenues  from the  water
distribution  operations  of Seven Star and from the sale of certain real estate
holdings of Kortmann Polonia during 2000.

Results of Operations

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

     Revenues.  Total revenues  decreased by approximately  32% from $20 million
for the year  ended  December  31,  1998 to  $13.6  million  for the year  ended
December 31, 1999. The decrease was attributable to  approximately  $4.4 million
and $1.0  million  in 1998  revenues  from the East Dam  Project  and our Boston
office, respectively, compared to no revenues in 1999 from either source.

     Revenues for 1999  included $1 million  associated  with the DOE project in
Los Alamos, New Mexico which was completed in 1997 and $ 650,000 associated with
the East Dam project which was completed in 1998. The payment for the Los Alamos
DOE project was for full settlement of our change order claim in the approximate
amount of $ 2.8 million.  The payment for the East Dam project was consideration
for  assignment  to the  contractor  on the project of our claim for  additional
compensation  associated  with change  orders in the  approximate  amount of $10
million.  The contractor  will pursue the claim,  paying all direct claim costs,
including  costs of experts.  In the event the claim results in a payment to the
contractor, the payment will be distributed 70% to the contractor and 30 % to us
after deduction direct claim costs and the $ 650,000 paid by the contractor.

     Cost of sales. Cost of sales, which includes direct job costs and the third
quarter  write down of our surplus  generator  inventory,  decreased  from $20.3
million for 1998 to $13.9  million for 1999.  Direct job costs  decreased by 34%
during 1999, approximately the same percentage as the decrease in revenues, from
$ 20.3 million for 1998 to $13.4 million for 1999. The primary  elements of such
decrease  in  job  costs  were   materials  and   supplies,   job  salaries  and
subcontracting expense.

     The decrease in job costs was primarily  attributable to completion  during
1998 of the  East  Dam  project  ,  which  reduction  was  partially  offset  by
additional job cost charges  associated  with the two disputed  contracts in our
Oak Ridge, Tennessee office and settlement of the Boston State Hospital project.
As a result of the unforseen problems, we recorded a negative $1.1 million gross
margin on the Oak Ridge asset  recovery  contract  during the second  quarter of
1999.  Because we have been terminated from the job and have not been allowed to
salvage  certain wire, we recorded  additional  direct costs $300,000 during the
third  quarter  of 1999.  Because  of  price  increases  from our  subcontractor
associated  with the waste  disposal,  we  recorded  additional  direct  cost of
$400,000 during the third quarter of 1999. As a result of the settlement reached
in March 2000 and recorded in 1999, we  recognized  $650,000 in gross margin for
this contract in the fourth quarter.  We intend to aggressively  pursue contract
change orders.  Any revenue received from the change order will be recorded when
realized.  Additionally,  we  settled  disputes  relating  to our  Boston  State
Hospital project. As a result of that settlement,  we recorded additional direct
costs of $300,000  during the third quarter of 1999.  We recorded  negative $1.2
million of gross  margin on the Oak Ridge  waste  disposal  contract  during the
second quarter of 1999.

                                       24
<PAGE>

     In addition to direct job costs,  during 1999,  our cost of sales  included
the write down of our generator  inventory in the amount of $583,000.  The write
down of that inventory  resulted from continued  delays in the  commencement  of
active energy  projects on which we planned to deploy the  generator  inventory,
coupled with continued losses and limited resources to pursue those projects.

     Write down on investment in unconsolidated  affiliate.  We own 80% of Zages
Ltd., based in Tblisi, Republic of Georgia, which operates a 42-MW hydroelectric
power plant in that country,  pursuant to a contract  signed on January 31, 1999
with an effective  date of April 1, 1999.  According to the Georgian  version of
the  contract,  the  company's  legal  counsel in that  country has informed the
company that it cannot make changes to the  management of Zages Ltd.,  including
the  removal of the sole  director  who  directs  and manages the affairs of the
company,  without  their  consent.  We have  been  unable  to  obtain  financial
information  on  the  operations  of  Zages  Ltd.,  and  as a  result  have  not
consolidated the Zages Ltd.  operation in our financial  statements.  Because of
the  contractual  uncertainty  described  above,  we wrote off our investment in
Zages of approximately $0.2 million.

     General and administrative  expenses.  General and  administrative  expense
decreased by 45% from $12.9 million in 1998 to $7.1 million in 1999. Included in
1998  expenses was a $1.9 million  expense for options  granted to  consultants.
Without  this  expense the 1998  expenses  of $11.0  million are 55% of revenues
compared to 52.2% for 1999.

     Depreciation  and  amortization.   Depreciation  and  amortization  expense
decreased  by  approximately  50% from $0.6  million in 1998 to $0.3  million in
1999. The decrease was primarily attributable to the decrease in amortization of
deferred issuance costs.

     Loss from operations.  Loss from operations  decreased to $8 million during
1999 from $13.9 during 1998. As a percentage of revenues,  loss from  operations
deceased from 69.5% in 1998 to 58.8% in 1999.

     Interest  income and expense.  Net  interest  expense  decreased  from $4.3
million in 1998 to $0.2 million in 1999.  The decreased in interest  expense was
primarily  attributable  to  $4.2  million  of  amortization  of the  beneficial
conversion feature of the convertible notes and warrants issued during 1998.

     Income Taxes.  The  provision for income taxes totaled $4.2 million  during
1998 as  compared  to a credit for  income  taxes of $1.2  million in 1999.  The
income tax expense for 1998 was  attributable  to the  write-off of our deferred
tax asset in the amount of $4.2 million during 1998. The credit for income taxes
of $1.2 million  dollars was recorded in the third  quarter of 1999.  The credit
for income taxes is attributable  to the tax benefit  relating to our New Jersey
net operation loss ("NJ NOL").  We applied for  participation  in the Technology
Certificate  Transfer Program  sponsored by the New Jersey Economic  Development
Authority and were notified  during the third quarter that our  application  had
been  approved.  During  December  1999 the Company  received  $550,000 from the
proceeds of the sale of part of our NJ NOL. We anticipate  receiving the balance
in the third quarter of the year 2000.

     Miscellaneous. During fiscal years 1998 and 1999, no provision was made for
post retirement benefits subject to FAS 106.

     Net Loss. As a result of the  foregoing,  we reported a loss after taxes of
$7.2 million for 1999 as compared to a net loss of $22.4 million for 1998.

     Net Loss  attributable to common stock. The net loss attributable to common
stock was increased by the preferred stock dividend totaling $11,000 in 1999 and
$189,000 in 1998,  and an accounting  "deemed  dividend" of $3.8 million in 1998
arising  from the  amortization  of the  beneficial  conversion  feature  of our
Preferred  Stock  Series RR and Series C  Preferred  Stock.  We are  calculating
earning per share to comply with SEC staff position on accounting for securities
issued with beneficial  conversion  features.  This accounting  required that we
reflect  the  difference  between the market  price of our common  stock and the
applicable  conversion rate on the convertible  preferred stock as a dividend at
the issue  date (the  beneficial  conversion  feature  totaled  $3,330,000  with
respect to the Series C Preferred Stock and $ 500,000 with respect to the Series
RR Preferred  Stock in 1998) and  amortized the dividend from the issue date for
the  Series  C  Preferred,  February  13,  1998 to June 22,  1998,  the date the
Registration  Statement of the underlying stock was declared  effective and from
the issue date of the Series RR Preferred Stock, August 11, 1998 to November 12,
1998, the date the  Registration  Statement of the underlying stock was declared
effective.

                                       25
<PAGE>

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Revenues.  Total  revenues  increased  by  approximately  11.2%  from $17.9
million for the year ended  December  31, 1997 to $20 million for the year ended
December 31, 1998.  Contract  service  income  increased for the period by 12.3%
from $17.8  million in 1997 to $20  million in 1998.  The  increase  in contract
service income was  attributable to increased  project volume from our Oak Ridge
office (up $6.6  million)  which was  partially  offset by a decrease in project
volume  from our  Boston  office  (down  $4.7  million).  The  East Dam  Project
accounted for approximately  $4.4 million,  22%, of revenues in 1998 and the Oak
Ridge Project  accounted  for  approximately  $3.6 million,  18%, of revenues in
1998.  The  environmental  remediation  business  has been marked by  increasing
competition and pressure on job margins. In light of such operating environment,
during 1998,  as in 1997,  we opted to only pursue  specialized  niche  projects
where project risks could be limited and higher margins attained.  1998 contract
service revenues exclude approximately $12.1 million of additional  compensation
claimed as being owing with respect to services  performed  under change orders,
including $10.8 million  attributable  to the East Dam Project.  Such additional
compensation  will be  recognized  as revenues at such time as such  amounts are
paid, if ever.

     Surplus equipment and scrap sales decreased from $96,000 for the year ended
December  31,  1997  to $0 in  1998  due  primarily  to  the  sale  in  1996  of
substantially all of our surplus equipment, other than generators.

     Cost of sales.  Cost of sales,  which  includes  direct job costs,  cost of
equipment sales, and write-down of our surplus generator inventory, increased by
approximately  15.3%  from $17.6  million  for 1997 to $20.3  million  for 1998.
Direct job costs  increased  by 19.4%  during 1998 and  increased  from 95.4% to
101.5% of contract  income.  The primary  elements of such increase in job costs
were materials and supplies, job salaries,  subcontracting and disposal expense.
The  decrease  in gross  margins  during  1998  was  attributable  primarily  to
unforeseeable  costs  incurred  on  several  contracts,  including  the East Dam
Project and Boston State Hospital,  where we, at December 31, 1998, were seeking
to recover an aggregate of $8.4 million of additional costs incurred as a result
of change  orders  from  clients.  The  change  order  related  job  costs  were
recognized  in full  during  1998 but no revenue  attributable  to those  change
orders was  recognized.  As a result,  the East Dam  Project  and  Boston  State
Hospital Project incurred negative gross margins during 1998.

     As a result of the lack of sales of surplus  equipment during 1998, cost of
equipment sales were $0 as compared to $47,000 during 1997.

     In addition to the routine changes  discussed above, cost of sales reflects
a write-down of the Company's surplus generator inventory of $600,000 in 1997.

     General and administrative  expense.  General and  administrative  expenses
increased by 22.9% from $10.5 million (58.8% of gross revenues) in 1997 to $12.9
million  (64.5%  of gross  revenues)  in  1998.  The  increase  in  general  and
administrative expenses was primarily attributable to (1) a $1.9 million expense
for options granted to consultants to purchase 122,000 shares of common stock at
the  market  price  on the  date  of  grant,  (2) a  $0.3  million  increase  in
professional fees (principally attributable to professional services relating to
efforts to commence energy and waste treatment  markets in foreign countries and
increased litigation expenses) in 1998 as compared to 1997, (3) increased salary
expense,  office  expense  and  travel  and  entertainment  expenses  related to
increased  activity  in foreign  projects,  and (4) a $154,000  audit  refund of
workers compensation  insurance which reduced general and administrative expense
during  1997.  Included in general and  administrative  expense was a $1 million
write-down  during  1998  and a  $1.2  million  write-down  during  1997  of the
Company's note  receivable  from UPE.  Direct costs  associated  with efforts to
acquire and/or build,  start-up,  own and operate  energy,  waste  treatment and
other  similar  projects  totaled  approximately  $4 million  during 1998 and $2
million during 1997.

     Write-down of the UPE note resulted from unsatisfactory  performance of the
note.  The  note  related  to the  sale  in 1995 of  certain  surplus  equipment
inventory to UPE with IDM to receive one-third of the net sale proceeds realized
by UPE from the resale of the equipment  with total  proceeds to IDM to be in an
amount  not less than $4  million.  After an  initial  downpayment  on the note,
resales of the  equipment  were less than  projected  and  payments  to IDM were
minimal,   totaling  $76,000  in  1998.  UPE  claimed  the  equipment   required
unexpectedly  high costs to make the equipment  saleable.  Because payments were
insufficient  to  cover  the  interest  accruing  on the  note  and  because  of
difficulties in reselling the equipment, IDM stopped accruing interest income on
the note  during 1997 and  wrote-down  the note in part during 1997 and again in
1998. During 1999, IDM agreed to accept $300,000 in full settlement of the note.

                                       26
<PAGE>

     Depreciation  and  amortization.   Depreciation  and  amortization  expense
decreased  by  approximately  14.3% from $0.7 million in 1997 to $0.6 million in
1998.  The  decrease in  depreciation  and  amortization  expense was  primarily
attributable to a decrease in amortization of deferred issuance costs.

     Loss from  operations.  Loss from  operations  increased  to $13.9  million
during 1998 from $11 million during 1997. As a percentage of revenues, loss from
operations increased from 61.3% in 1997 to 69.5% in 1998.

     Interest  income and expense.  Net  interest  expense  increased  from $0.5
million in 1997 to $4.3 million in 1998.  The  increase in interest  expense was
primarily  attributable  to  $4.2  million  of  amortization  of the  beneficial
conversion feature of the convertible notes and warrants issued during 1998.

     Income taxes.  The  provision for income taxes totaled $4.2 million  during
1998 as  compared  to a credit for  income  taxes of $1.6  million in 1997.  The
increase in the income tax expense for 1998 was attributable to the write-off of
the Company's deferred tax asset in the amount of $4.2 million during 1998.

     Miscellaneous. During fiscal years 1997 and 1998, no provision was made for
post retirement benefits subject to FAS 106.

     Net loss and net loss  attributable  to  common  stock.  As a result of the
foregoing,  we reported a loss before  taxes of $18.3  million and a net loss of
$22.4 million for 1998 as compared to a loss before taxes of $11.5 million and a
net loss of $9.9 million for 1997. The net loss attributable to common stock was
increased by the  preferred  stock  dividends  ($189,000 in 1998 and $174,000 in
1997) and an accounting "deemed dividend" ($3.8 million in 1998 and $1.1 million
in 1997) arising from the amortization of the beneficial  conversion  feature of
preferred  stock.  Earnings  per share has been  calculated  to comply  with the
recent SEC staff position on accounting for  securities  issued with  beneficial
conversion  features.  This  accounting  requires that we reflect the difference
between the market price of the common stock and the applicable  conversion rate
on the  convertible  preferred  stock as a dividend at the issue date  amortized
over a period from that date until the date on which the preferred stock becomes
convertible.

Liquidity and Capital Resources

     At December 31, 1999,  we had a working  capital  deficit of  approximately
$3.2  million  and a cash  balance of  $512,000.  This  compares to a deficit in
working  capital of $0.5  million and a cash balance of $0.4 million at December
31, 1998. The changes in working capital and cash were primarily attributable to
a  combination  of (1) the loss  incurred  during  1999,  (2) the  effects of an
increase in accounts  payable of $2.3 million and (3) an adverse change in costs
and  estimated  expenses  in excess of  billings  of $1.9  million,  which  were
partially  offset by (1) the effects of an increase  in accounts  receivable  of
$2.0  million , (2) the  issuance of stock to pay  certain  vendors and to pay a
deposit  in  lieu  of a bond  in the  aggregate  amount  of  $490,000  and (3) a
$1,200,000 credit for New Jersey income tax.

     Unbilled  costs and  estimated  earnings at December  31, 1998 totaled $1.9
million. Billings in excess of costs and estimated earnings totaled $0.9 million
at December  31, 1999 as compared  to $0 at December  31,  1998.  The change was
primarily  attributable  to settling one of, and  completing  the second of, two
contracts  at the Oak  Ridge  Project.  The  liability  is  attributable  to our
Boundbrook Project.

     At December 31, 1999, we had approximately  $36.5 million of operating loss
carry-forwards  that may be applied against future taxable income.  $2.3 million
of such  losses  expire in the year 2010;  $9.1  million in the year 2011;  $8.6
million in the year 2012;  $10.6 million in the year 2013; and the balance ($5.9
million) the  following  year.  Based on our  continuing  operating  losses,  we
wrote-off  our deferred tax asset during 1998.  During the third quarter of 1999
we  recorded a  $1,200,000  tax  benefit  from the New  Jersey NOL .We  received
$550,000 in December  1999 and expect to realize the balance from our New Jersey
tax credit in the third quarter of the year 2000.

                                       27
<PAGE>

     We require  substantial  working capital to support our ongoing operations.
As is  common in the  environmental  services  industry,  payment  for  services
rendered  are  generally  received  pursuant to specific  draw  schedules  after
services  are  rendered.  Thus,  pending the receipt of  payments  for  services
rendered,   we  must  typically  fund  substantial   project  costs,   including
significant  labor and bonding costs,  from financing sources within and outside
of the  Company.  Certain  contracts,  in  particular  those with United  States
governmental  agencies,  may provide for payment  terms of up to 90 days or more
and may require the posting of substantial performance bonds which are generally
not released until completion of a project.

     Operations were historically funded through a combination of operating cash
flow, term notes and bank lines of credit.  Since April of 1994, we have carried
no bank debt and have funded operations  principally  through the sale of equity
securities and securities  convertible into equity  securities.  At December 31,
1999,  we had no bank debt and no  significant  long-term  debt and were funding
operations  entirely  through  cash on hand and  operating  cash flow  which was
supplemented by various borrowings and issuances of stock.

     In order to meet working  capital needs during 1999, we have borrowed funds
from various parties,  including  officers,  and have issued stock in payment of
certain  trade  payables.  At  December  31,  1999,  we owed a total of $217,000
primarily  to our two  principal  officers  for  funds  advanced.  There  are no
definitive  repayment terms on such amounts.  In June 1999, we borrowed $400,000
from existing stockholders. That loan was repayable in August 1999 with interest
at 6.5%. As inducement  for making that loan, we issued 125,000 shares of common
stock to the lenders.  The loan had been repaid at December 31, 1999. During the
year ended  December  31,  1999,  we issued  100,073  shares of common  stock in
settlement of $470,000 of accounts  payable and issued  102,000 shares of common
stock as  collateral  to our surety in lieu of a $400,000  performance  bond and
16,070 shares to two vendors to secure amounts owed.

     Other than funds provided by operations and the potential  receipt of funds
from the  exercise of  outstanding  warrants,  we  presently  have no sources of
financing or commitments to provide financing.  A total of approximately  34,000
Class A Warrants (after giving effect to the April 1999 reverse split) issued in
connection with our initial public offering were  outstanding and exercisable at
December  31, 1999.  Such  warrants  are  exercisable  to purchase two shares of
common stock each for a price of $90.00,  or $45.00 per share. The warrants were
originally  exercisable until April of 1999 unless earlier called. We declared a
1-for-10 reverse split of our Common Stock and Class A Warrants  effective April
16,  1999  and  extended  the  term of the  Class A  Warrants  to April of 2000.
Exercise of the warrants  would provide  gross  proceeds of  approximately  $3.1
million and result in the issuance of  approximately  70,000 shares after giving
effect to the reverse  split.  However,  given the  current  price of our Common
Stock,  it is not  expected  that the Class A Warrants  will be exercised in the
near future.

     In November of 1998,  we paid $600,000 to acquire a 49% interest in Kortman
Polonia,  a Polish  company  with  substantial  real estate  holdings.  Kortmann
Polonia has initiated  discussions with various real estate developers and major
U.S.  retailers  with respect to the sale of various real estate  tracts and the
development and leasing of the remaining tracts.

     In addition to funding requirements to support ongoing operations,  we have
committed  substantial  capital  resources to  implementation  of the  strategic
initiative known as "Vision 2000." The focus of Vision 2000 is to position us as
a leading participant in the global energy and waste treatment market and in the
nuclear facility decommissioning and site revitalization market. The development
and initial  implementation of Vision 2000 initiatives have required substantial
capital  expenditures  and can be expected  to  continue to require  substantial
capital  expenditures in the future.  Direct investments in potential energy and
waste treatment projects undertaken under the Vision 2000 initiative,  excluding
corporate  overhead  allocable  to such  initiative,  totaled  approximately  $9
million at December 31, 1999.  Capital  expenditures  and other outlays to bring
proposed  projects  to an  operational  state are  expected  to far  exceed  the
investment to date. Consequently,  we have entered into discussions with several
potential  equity  investors in, and have signed a Memorandum  of  Understanding
with a potential  purchaser of, the El Salvador  Power  Project.  Similarly,  in
connection with our  acquisition of a controlling  interest in the Georgia Power
Project,  we agreed to  perform a  technical  evaluation  on the  facility  and,
depending on the results of that evaluation, to invest up to $9 million over the
life of the facility for repairs and rehabilitation. The ability to successfully
bring projects on line, carry out any required repairs and rehabilitation on the
Georgia  Power  Project  and  implement   other  Vision  2000   initiatives   is
substantially  dependent upon our ability to secure project  financing and other
financing.  While we believe that we will be able to attract adequate  financing
to develop anticipated  projects,  we have no definitive  commitments to provide
financing for those  projects and there is no assurance that such financing will
be available.  Other than funding Vision 2000  initiatives and bonding and other
job costs,  we do not  anticipate  any  substantial  demands on our liquidity or
capital resources during the following twelve months.

                                       28
<PAGE>

     In March of 1999,  our  management  appeared  before a Nasdaq hearing panel
regarding the possible  de-listing of our common stock for failure to maintain a
minimum  bid price of at least  $1.00.  In order to address  the  deficiency  in
minimum bid price, we proposed and have approved a 1-for-10 reverse split of our
common stock and warrants to be effective April 16, 1999. On May 7, 1999, NASDAQ
informed  us of their  decision  that  because of our failure to comply with the
minimum  $5,000,000  market  value of public float  requirement  for the past 37
consecutive  trading  days as of that  date,  that  effective  with  the open of
business of May 11, 1999,  our  securities  were  transferred  from the National
Market to the Small Cap Market, pursuant to the maintenance criteria.

     We believe that our working capital,  combined with the expected receipt of
funds from the resolution of certain change orders and litigation, is sufficient
to meet  our  anticipated  needs,  other  than  project  financing  requirements
discussed  above,  for at least  the  following  twelve  months,  including  the
performance of all existing  contracts.  However, as there is no assurance as to
the timing or amount of the receipt of funds from change  orders,  litigation or
other  sources,  we may be  required  to seek new bank  lines of credit or other
financing  in  order  to  facilitate  the  performance  of  jobs.  While  we are
conducting  ongoing  discussions with various  potential  lenders with a view to
establishing available credit facilities,  we presently have no commitments from
any  bank or  other  lender  to  provide  financing  if such  financing  becomes
necessary to support operations.

Year 2000 Issue

     We  experienced  no material  failures  and  incurred no material  costs or
losses as a result of the Year 2000 Issue.

Impact of Inflation

     Inflation  has not been a major  factor in our  business  since  inception.
There can be no assurances that this will continue.  However,  it is anticipated
that any  increases in costs can be passed on to customers in the form of higher
prices.

Certain Factors Affecting Future Operating Results

     This Form 10-K contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The Company's actual results could differ  materially from
those set forth in the  forward-looking  statements.  Certain factors that might
cause such a difference  include the  following:  possible  fluctuations  in the
growth  and  demand  for  energy in  markets  in which the  Company  may seek to
establish energy production operations; intense competition for establishment of
energy production operations in growing economies; currency, economic, financing
and other risks inherent in establishing  energy  operations in foreign markets;
uncertainty  regarding the rate of growth in demand for nuclear  decommissioning
and site  revitalization  services;  continued delays in awarding and commencing
contracts;   delays  in  payment  on  contracts   occasioned  by  dealings  with
governmental and foreign entities;  changes in accepted remediation technologies
and  techniques;  fluctuations  in operating  costs  associated  with changes in
project specifications and general economic conditions; substantial fluctuations
in revenues resulting from completion and replacement of contracts and delays in
contracts; economic conditions affecting the ability of prospective customers to
finance projects; and other factors generally affecting the timing and financing
of projects.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable

                                       29
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  consolidated  financial  statements of the Company,  together with the
independent  auditors'  report  thereon  of Samuel  Klein and  Company,  appears
beginning on page F-1 of this report. See Index to Financial  Statements on page
44 of this report.

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

     Not applicable

                                    PART III

ITEM 10.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL  PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Information Regarding Executive Officers and Directors

     The following  table sets forth the names,  ages and offices of the present
executive  officers and directors of the Company.  The periods during which such
persons  have served in such  capacities  are  indicated in the  description  of
business experience of such persons below.

         Name          Age            Position
        ------        -----          ----------
  Joel A. Freedman      64   President, Chief Executive Officer and Director
  Frank A. Falco        66   Executive Vice President, Chief Operating Officer
                             and Chairman
  Michael B. Killeen    54   Treasurer, Chief Financial Officer and Director
  Frank Pasalano        47   Vice President of Operations
  John M. Tuohy         54   Vice President of Nuclear Services
  John Klosek           52   Vice President of Engineering
  Joe Dias              45   Vice President of Sales and Purchasing
  Birger Munck          55   President - IDM Energy
  Robert McGuinness     48   Director
  Frank Patti           71   Director
  Richard Keller        50   Director
  Mark Franceschini     62   Director

     Other than officers who are subject to employment agreements,  each officer
serves at the discretion of the Board of Directors.  See "Employment  Contracts,
Termination of Employment and Change in Control Arrangements."

     Mr.  Falco is the  uncle of Mr.  Pasalano.  Otherwise,  there are no family
relationships among any of the directors or officers of the Company.

     Joel A.  Freedman.  Mr.  Freedman  has served as a director  of the Company
since 1978. Mr. Freedman has served as President and Chief Executive  Officer of
the Company since  co-founding the Company in 1978 and served as Chairman of the
Board from 1978 until June of 1993.

     Frank A. Falco.  Mr.  Falco has served as a director  of the Company  since
1978.  Mr. Falco has served as Executive  Vice  President  and  Secretary of the
Company since  co-founding the Company in 1978 and has served as Chairman of the
Board and Chief Operating Officer of the Company since June of 1993.

                                       30
<PAGE>
     Michael B. Killeen. Mr. Killeen has served as Treasurer and Chief Financial
Officer of the Company since  September of 1991, and as a director since June of
1998. Mr. Killeen  previously served as a Director of the Company from September
of 1991 until May of 1996.  Prior to joining the Company,  Mr. Killeen served as
controller of Burnham  Corporation,  a multiple  plant  manufacturer  of heating
equipment, from 1978 to 1991.

     Frank  Pasalano has served as Vice  President of  Operations of the Company
since 1985. Previously, Mr. Pasalano served as a project manager for the Company
from 1978 to 1985.

     John M.  Tuohy has served as Vice  President  of  Nuclear  Services  of the
Company since 1990.  Previously,  Mr. Tuohy served as Director of Burns & Roe, a
national engineering firm, from 1970 to 1990.

     John  Klosek has served as Vice  President  of  Engineering  of the Company
since 1989.  Previously,  Mr.  Klosek  served as  Associate  Director of Colgate
Palmolive,  a conglomerate  engaged in the worldwide production and marketing of
consumer goods, from 1969 to 1989.

     Joe Dias has  served  as Vice  President  of Sales  and  Purchasing  of the
Company since 1979.

     Birger  Munck has served as  President  of IDM Energy since August of 1996.
Previously, Mr. Munck served as President of Continental Waste Conversion, Inc.,
a  waste-to-energy  project  company  from 1994 to 1996.  Previously,  Mr. Munck
served as a management  consultant  from 1990 to 1993 and as President of Nordex
Petroleum from 1987 to 1990.

     Frank Patti.  Mr. Patti has served as a director of the Company since 1994.
Mr.  Patti has been a Project  Engineer at the  Brookhaven  National  Laboratory
since October of 1994.  From March of 1994 through  September of 1994, Mr. Patti
was a self-employed  nuclear  engineering  consultant.  For more than five years
prior to March of 1994, Mr. Patti was Chief Nuclear  Engineer for Burns & Roe, a
major  engineering  firm.  Mr.  Patti  serves  on  the  Company's   Compensation
Committee.

     Mark Franceschini. Mr. Franceschini has served as a director of the Company
since June of 1998. Mr. Franceschini  retired in 1993 after serving ten years as
the  Superintendent of Schools for the Wall Township Public Schools in Wall, New
Jersey.   From  1967  to  1983,  Mr.   Franceschini  served  as  a  teacher  and
administrator.  Prior to entering the education  field,  Mr.  Franceschini was a
vice president and  co-founder of IRT  Electronics,  a manufacturer  of pressure
transducers.  Mr.  Franceschini  serves on the  Company's  Audit  Committee  and
Compensation Committee.

     Richard  Keller.  Mr.  Keller has served as a director of the Company since
August  1997.  Mr.  Keller  retired  in 1997 from his  position  as Senior  Vice
President/Manager of Garvin GuyButler Corporation, a money brokerage firm, where
he managed the trading  desk.  Mr.  Keller  serves as Chairman of the  Company's
Compensation Committee and as a member of the Audit Committee.

     Robert  McGuinness.  Mr. McGuinness has served as a director of the Company
since 1994. Since January of 1995, Mr. McGuinness has served as a partner in the
certified  public  accounting firm of McGuinness,  Corley & Hodavance.  For more
than five years prior to January of 1995,  Mr.  McGuinness was Vice President of
Essroc Corp., a cement  manufacturer.  Mr.  McGuinness serves as Chairman of the
Company's Audit Committee.

Compliance With Section 16(a) of Exchange Act

     Under the securities  laws of the United States,  the Company's  directors,
its  executive  officers,  and any persons  holding more than ten percent of the
Company's  Common Stock are required to report  their  initial  ownership of the
Company's  Common  Stock and any  subsequent  changes in that  ownership  to the
Securities  and Exchange  Commission.  Specific due dates for these reports have
been established and the Company is required to disclose in this Proxy Statement
any failure to file by these dates during 1999.  All of the filing  requirements
were  satisfied on a timely  basis in 1999.  In making  these  disclosures,  the
Company has relied  solely on written  statements  of its  directors,  executive
officers  and  shareholders  and copies of the reports  that they filed with the
Commission.

                                       31
<PAGE>

Committees and Attendance of the Board of Directors

     In order to facilitate the various functions of the Board of Directors, the
Board  has  created a  standing  Audit  Committee  and a  standing  Compensation
Committee.

     The functions of the Company's  Audit Committee are to review the Company's
financial statements with the Company's  independent  auditors; to determine the
effectiveness  of the audit effort through  regular  periodic  meetings with the
Company's  independent  auditors;  to  determine  through  discussion  with  the
Company's independent auditors that no unreasonable  restrictions were placed on
the  scope  or  implementation  of  their  examinations;  to  inquire  into  the
effectiveness of the Company's  financial and accounting  functions and internal
controls  through  discussions  with  the  Company's  independent  auditors  and
officers  of the  Company;  to  recommend  to the full  Board of  Directors  the
engagement or discharge of the  Company's  independent  auditors;  and to review
with the independent  auditors the plans and results of the auditing engagement.
The  members  of  the  Audit  Committee  are  Mr.  McGuinness,   Chairman,   Mr.
Franceschini and Mr. Keller.

     The functions of the Company's Compensation Committee include reviewing the
existing  compensation  arrangements  with officers and employees,  periodically
reviewing the overall  compensation  program of the Company and  recommending to
the Board modifications of such program which, in the view of the development of
the  Company  and  its  business,   the  Committee   believes  are  appropriate,
recommending to the full Board of Directors the  compensation  arrangements  for
senior management and directors, and recommending to the full Board of Directors
the adoption of compensation  plans in which officers and directors are eligible
to participate  and granting  options or other  benefits  under such plans.  The
members of the Compensation Committee are Mr. Keller, Chairman, Mr. Franceschini
and Mr. Patti.

     The Board of Directors does not have a standing  nominating  committee or a
committee performing similar functions.

     During the year ended  December 31, 1999, the Board of Directors held eight
formal meetings,  including  telephonic  meetings,  and acted through  unanimous
written consent on other occasions, the Audit Committee held one meeting and the
Compensation  Committee held two meetings.  Each director  (during the period in
which each such director  served)  attended at least 75% of the aggregate of (i)
the total  number of  meetings  of the Board of  Directors,  plus (ii) the total
number of meetings held by all committees of the Board of Directors on which the
director served.

ITEM 11. EXECUTIVE COMPENSATION

     The following  table sets forth  information  concerning  cash and non-cash
compensation  paid or accrued for services in all  capacities  to IDM during the
three years ended December 31, 1999 of each of the five most highly  compensated
executive officers of IDM.

                                       32
<PAGE>
<TABLE>

                                                                                                   Long Term
                                                           Annual Compensation                   Compensation
                                            -----------------------------------------------   -----------------
                                                                           Other Annual             Stock
Name and Principal Position          Year     Salary ($)     Bonus ($)    Compensation ($)       Options (#)(2)
---------------------------         ------   ------------   -----------   -----------------   -----------------
<S>                                 <C>        <C>          <C>            <C>                <C>

Joel A. Freedman...................  1999      480,000           -0-           (1)                400,000
  President and                      1998      480,000           -0-           (1)                225,000
  Chief Executive Officer            1997      480,000           -0-           (1)                 10,000
Frank A. Falco.....................  1999      480,000           -0-           (1)                400,000
  Executive Vice President and       1998      480,000           -0-           (1)                225,000
  Chief Operating Officer            1997      480,000           -0-           (1)                 10,000
Birger Munck.......................  1999      175,000           -0-           (1)                 12,000
  President - IDM Energy             1998      175,000           -0-           (1)                     -0-
                                     1997      175,000           -0-           (1)                     -0-
Michael B. Killeen.................  1999      128,500           -0-           (1)                 19,500
  Treasurer and Chief                1998      128,500           -0-           (1)                  2,500
  Financial Officer                  1997      123,084           -0-           (1)                    500
John M. Tuohy......................  1999      123,000           -0-           (1)                 14,000
  Vice President of                  1998      117,382           -0-           (1)                  1,000
  Nuclear Services                   1997      111,764           -0-           (1)                      0
</TABLE>

(1)  Although the officers  receive certain  perquisites such as auto allowances
     and company provided life insurance,  the value of such perquisites did not
     exceed the lesser of $50,000 or 10% of the officer's salary and bonus.
(2)  Reflects,  retroactively,  the  effects of a 1-for-10  reverse  stock split
     effective April 16, 1999.

Compensation of Directors

     Each non-employee  director of the Company is paid a fee of $1,000 for each
Board of  Directors  meeting or  committee  meeting  attended.  The Company also
reimburses each director for all expenses of attending such meetings.

     Pursuant to the IDM Environmental Corp. 1998 Comprehensive Stock Option and
Award  Plan,  commencing  in 1998 and upon each  subsequent  reelection  of each
non-employee director,  options will be granted to each non-employee director to
purchase  5,000  shares  of  Common  Stock  multiplied  by the  number  of years
remaining  in each  non-employee  director's  term.  All  such  options  will be
exercisable  at the fair market value of the Company's  Common Stock on the date
of grant.  Such  options will vest and become  exercisable  at the rate of 5,000
shares upon  election as a  non-employee  director  and 5,000 shares per year on
each subsequent  anniversary of election provided that the non-employee director
continues to serve in such capacity.

     No additional compensation of any nature is paid to employee directors.

Stock Option Plans

     IDM adopted stock option plans in 1993,  1995 and 1998.  The purpose of the
IDM Plans is to assist IDM and its subsidiaries in retaining the services of and
motivating  employees by providing the opportunity for such personnel to acquire
a proprietary  interest in IDM and thus share in its growth and success. A total
of 188,494 shares are reserved for issuance  under the IDM Plans,  consisting of
41,212 shares  reserved  under the 1993 Plan,  47,282 shares  reserved under the
1995 Plan and 100,000 shares reserved under the 1998 Plan. The IDM Plans provide
for the granting of  non-qualified  stock options and "incentive  stock options"
within the meaning of Section 422 of the  Internal  Revenue  Code of 1986 to any
employee, officer, director or consultant of IDM and its subsidiaries.  The 1998
Plan also permits the grant of restricted  stock,  stock awards and  performance
shares. The Compensation  Committee of IDM's board of directors administers each
of the IDM Plans. Members of that committee are eligible to receive awards under
the IDM Plans. The Committee designates optionees, the exercise price of options
(which may not be less than fair market value on the date of grant), the date of
the grant and the period of the option (which may not exceed ten years).

                                       33
<PAGE>

     At December 31, 1999, a total of 1,030,272  options were outstanding  under
the IDM Plans including options issued subject to shareholder approval.

Stock Option Grants

     The following  table sets forth  information  concerning the grant of stock
options  made  during 1999 to each of the Chief  Executive  Officer and the next
four highest paid officers of IDM:
<TABLE>

                                                  Percent of                               Potential Realizable Value
                                                Total Options                               at Assumed Annual Rates
                                                  Granted to                              of Stock Price Appreciation
                                      Options    Employees in     Price        Expiration      For Option Term
          Name                       Granted (1) Fiscal Year   Per Share (1)     Date          5%           10%
        ---------                   ------------ ------------  -------------   ----------    ------       -------
<S>                                  <C>         <C>           <C>            <C>          <C>          <C>

Joel A. Freedman................      400,000       41.0         1.156         07/18/09    10,369,600   16,785,600
Frank A. Falco..................      400,000       41.0         1.156         07/18/09    10,369,600   16,785,600
Michael B. Killeen..............       18,000        1.8         1.156         07/18/09       466,632      755,352
                                        1,500        0.1          6.75         02/10/09        30,495       54,555
Birger Munck....................       12,000        1.2         1.156         07/18/09       311,088      503,568
John M. Tuohy...................       13,000        1.3         1.156         07/18/09       337,012      545,532
                                        1,000        0.1          6.75         02/10/09        20,330       36,370
</TABLE>

(1)  Includes  option  grants  under the 1998 Plan  subject to  approval  by the
     shareholders  of IDM of any  amendment  to the 1998  Plan to  increase  the
     number of shares reserved under the 1998 Plan.

Stock Option Exercises

     The following table sets forth information concerning the exercise of stock
options  during  1999 by each of the Chief  Executive  Officer and the next four
highest  paid  officers of IDM and the number and value of  unexercised  options
held by the named officers at the end of 1999:
<TABLE>

                                                              Number of Unexercised      Value of Unexercised
                               Shares                              Options at           In-the Money Options
                           Acquired on        Value             at FY-End (#)(1)           at FY-End ($)(2)
         Name              Exercise (#)    Realized ($)   Exercisable  Unexercisable  Exercisable  Unexercisable
       --------           --------------  --------------  -----------  -------------  -----------  -------------
<S>                       <C>             <C>             <C>           <C>           <C>           <C>

Joel A. Freedman............     0             0            242,500      400,000       2,394,688      6,187,600
Frank A. Falco..............     0             0            242,500      400,000       2,394,688      6,187,600
Michael B. Killeen..........     0             0             17,504        9,000         223,198        139,221
Birger Munck................ 6,000        23,064                  0        6,000               0         92,814
John M. Tuohy...............     0             0             11,505        6,500         149,973        100,549
</TABLE>

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

(1)  Includes  option  grants  under the 1998 Plan  subject to  approval  by the
     shareholders  of IDM of any  amendment  to the 1998  Plan to  increase  the
     number of shares  reserved under the 1998 Plan. See "Proposed  Amendment to
     IDM's 1998 Comprehensive Stock Option and Award Plan.
(2)  Based on the fair market  value per share of the Common  Stock at year end,
     minus the exercise price of "in-the-money"  options.  The closing price for
     IDM's Common Stock on December 31, 1999 on the Nasdaq  SmallCap  Market was
     $16.625.

Employment   Contracts,   Termination   of  Employment  and  Change  in  Control
Arrangements

     Effective January 1, 1996, Joel A. Freedman and Frank A. Falco each entered
into employment agreements,  superseding their prior employment agreements, with
IDM on  substantially  identical terms.  Subsequently,  on September 1, 1997 and
February 18, 1998, the employment agreements of Messrs.  Freedman and Falco were
amended.

                                       34
<PAGE>
     Pursuant to such agreements,  effective September 1, 1997, Mr. Freedman and
Mr.  Falco  each  receive  (i) a base  salary  of  $480,000  per year plus 2% of
operating profits;  (ii) bonuses as determined by the Board of Directors;  (iii)
participation  in any employee  benefit  plans and fringe  benefit  arrangements
generally  available  to  IDM's  employees;  and (iv) an  entertainment  expense
allowance of $45,000 per year.  For purposes of computing  the salary of Messrs.
Freedman and Falco,  operating profits are defined as net income from operations
before   deduction  of  interest   expense,   income  taxes,   depreciation  and
amortization and other non-cash charges to income.  Pursuant to the February 18,
1998 amendment to their employment agreements,  Messrs.  Freedman and Falco were
each granted 225,000 stock options  exercisable at $37.19 per share and expiring
February  17,  2003  (reflects  the  effects of a 1-for-10  reverse  stock split
effective April 16, 1999).

     Pursuant  to  the  September  1997  and  February  1998  amendments  to the
employment  agreements of Messrs.  Freedman and Falco,  the previously  existing
draw schedule and stock bonus  provisions  were  eliminated  from the employment
agreements of Messrs. Freedman and Falco.

     The  employment  agreements  prohibit  Mr.  Freedman  and  Mr.  Falco  from
competing,  directly or indirectly,  with IDM or disclosing confidential matters
with respect to IDM for two years after termination of employment.  Each of such
agreements  expires  on  December  31,  2005  and are  thereafter  automatically
extended  for one-year  periods  unless  there is a notice of  termination  from
either IDM or the employee.

     In the event of their disability,  Messrs.  Freedman and Falco are entitled
to continue to receive their full salary at the date of disability  for a period
of one year after which time IDM may terminate  the  employment of such disabled
employee without further compensation.  In the event of death during the term of
employment,  the estate of Mr. Freedman or Mr. Falco,  as appropriate,  shall be
entitled to three months salary. In the event of the termination of Mr. Freedman
or Mr. Falco's employment within one year of the occurrence of various change in
control  events,  or in the event of termination of their  employment by IDM for
any  reason  other  than  death or  disability,  IDM must pay or  provide to Mr.
Freedman and/or Mr. Falco, as appropriate,  (i) a lump sum payment equal to 2.99
times his average  annual  gross  income from IDM for the five  tax-year  period
ending  before the date of such  termination;  (ii) a lump sum payment  equal to
three times the value of all  "in-the-money"  stock options held by such persons
at the date of termination;  and (iii) continued  participation  in all employee
benefit  plans or  programs  for a  period  of three  years,  provided  that the
employee  may, at his  election,  receive a lump sum cash  payment  equal to the
value of such benefits in lieu of continued participation in such benefit plans.
As used in the employment agreements of Messrs. Freedman and Falco, a "change in
control" is defined to be (i) the acquisition of 15% of IDM's common stock; (ii)
a change in the majority  composition  of the board of directors  within any two
year period;  or (iii) a failure to elect either of such  employees to the board
when such employee is standing for election; provided, however, that such events
shall  not  constitute  a change  in  control  if a  majority  of the  directors
immediately  prior to such "change in control"  approve the transaction or event
otherwise constituting a "change of control."

     IDM  has  no  other  employment  agreements  with  any  other  officers  or
employees.  IDM has,  however,  entered  into  agreements  with  certain  of its
employees  pursuant  to  which  such  employees  have  agreed  to  maintain  the
confidentiality  of certain  information and have agreed to not compete with IDM
within 250 miles of IDM's  principal  places of  business  for a period of three
years  following  the   termination  of  such  persons'   employment  with  IDM.
Additionally,  IDM has entered into  agreements  with  certain of its  executive
officers,  other than Messrs.  Freedman and Falco,  which  provide  that, in the
event of termination within one year of a change in control, such officers shall
be  entitled to (i) a lump sum  payment  equal to 2.99 times his average  annual
gross income from IDM for the three  tax-year  period  ending before the date of
such termination;  (ii) a lump sum payment equal to three times the value of all
"in-the-money"  stock  options held by such persons at the date of  termination;
and (iii) continued  participation in all employee benefit plans or programs for
a period of three  years,  provided  that the  employee  may,  at his  election,
receive a lump sum cash payment  equal to the value of such  benefits in lieu of
continued  participation in such benefit plans. For purposes of such agreements,
a  change  in  control  is  defined  in the  same  manner  as in the  employment
agreements  of Messrs.  Freedman  and Falco,  except that  failure of either Mr.
Freedman or Falco to be elected when  standing for election as a director  shall
not constitute a "change in control" for purposes thereof.

     In addition to the foregoing employment and change of control arrangements,
IDM's 1993 Plan,  1995 Plan and 1998 Plan provide that all  outstanding  options
shall become fully vested and  exercisable  in the event of a change in control.


                                       35
<PAGE>

Retirement Savings Plan

     In July of 1992,  IDM amended an existing  profit  sharing  plan to convert
such plan to a  retirement  savings  plan under  Section  401(k) of the Internal
Revenue  Code.  The 401(k) Plan  generally  covers all employees of IDM who have
completed two years of service with IDM.  Employees  may elect to defer,  in the
form  of   contributions  to  the  401(k)  Plan,  up  to  15%  of  their  annual
compensation,  subject  to the  federal  maximum  limit.  IDM  may,  at its  own
discretion,  contribute to the plan. IDM made no contribution to the 401(k) Plan
during the fiscal year ended December 31, 1998.

Compensation Committee Report

     General. The Compensation  Committee of the Board of Directors  establishes
the general compensation  policies of the Company and the compensation plans and
specific compensation levels for executive officers.

     The Compensation  Committee consists of non-employee  Directors who are not
eligible to  participate  in any of the  compensation  plans or programs that it
administers,  other than the receipt of formula grants under the Company's Stock
Option  Plans.  The  Committee  believes  that the  Company is best  served by a
program that is designed to motivate,  reward and retain the management  team to
achieve the objectives of the Company.  To this end, the Committee has adopted a
program  designed to focus on the  Company's  long-term  goals.  Accordingly,  a
significant  portion of the senior  executive  compensation  is  dependent  upon
achieving these long-term goals.

     The philosophical basis of the Committee is to compensate  executives based
on  performance  and on the level of  responsibility  of the  executive.  Salary
ranges are  established  based on such criteria.  Salaries of key executives are
set by measuring performances against the benchmark and by determining the value
of the  executive's  contribution  towards the  Company's  long-term  goals.  In
addition,  consideration  is  given  to the  individual's  experience  and  past
performance  because the Committee also believes that any program must recognize
performance and encourage initiative.

     The Committee also reviews  management's  response to the changing business
environment in which the Company  operates.  A timely and effective  response by
management  to changing  business  conditions  while  continuing to focus on the
long-term  objectives is considered  essential by the  Committee.  Management is
also  evaluated  on its ability to evaluate  and adjust the  long-term  goals in
response to the evolving business climate.

     Base Salary. For fiscal 1999, the base salary of executive officers,  other
than the Chief Executive Officer and Chairman whose base salaries are determined
by  employment  agreements,  were set based upon the results of the  executive's
performance  review.  Each executive is reviewed annually by the Chief Executive
Officer and Chairman and given specific objectives,  with the objectives varying
based  upon the  executive's  position  and  responsibilities  and the  specific
objectives for that position. At the next annual review, the performance of each
executive is reviewed  versus the objectives  established for each executive and
the Company's overall  performance.  The results of the review are then reported
to the Committee along with senior management's compensation recommendation. The
Committee  then  determines  whether the base salary  should be adjusted for the
coming year.

     Long-Term Incentive Compensation. Each executive officer of the Company was
granted  options at the time of the  initial  adoption  of the  Company's  stock
option plans or at the time the officer joined the Company.  The Committee makes
option grants to executive  officers on a case-  by-case  basis  relative to the
annual performance reviews and the recommendations of senior management.  Grants
of options are designed to align the interests of executive  officers with those
of stockholders.  The size of these grants is generally set at a level which the
Committee  feels  is in  proportion  with the  role  and  responsibility  of the
executive,   as  well  as  his  or  her  opportunity  to  effect  the  Company's
performance,  while  also being  sufficient  to  attract  and  retain  qualified
executives.

     Chief  Executive  Officer and  Chairman  Compensation.  With respect to the
compensation of the Chief Executive  Officer and the Chairman of the Board,  the
Committee  believes  that the Company  continues to respond well to the changing
business  environment  in  which  it  operates.  The  "Vision  2000"  initiative
developed by the Chairman and CEO has proven to be a catalyst for expansion into
new and  potentially  lucrative  markets.  Both the  Chairman  and CEO have been
instrumental in creating new opportunities for the Company,  which the Committee
believes will lead to strong growth in revenues,  a return to profitability  and
increased shareholder value. The Committee believes that the foresight of senior
management  in  setting  the goals  and  direction  of  "Vision  2000",  and the
opportunities  uncovered  by senior  management  during  1998 have  allowed  the
Company to weather  difficult  industry  conditions  and to position the Company
favorably  while moving  forward.  Based on the  foregoing  considerations,  the
Committee has agreed,  to maintain the Chief  Executive  Officer and  Chairman's
base salaries at $480,000 each plus an annual expense  allowance of $45,000.  At
the present time, the Committee believes that any movement away from the current
compensation plan or the above mentioned  philosophies,  would be detrimental to
the  Company's  ability to attract  and retain  key  management  personnel  and,
ultimately, the Company's capabilities for future success.

                                       36
<PAGE>

     The Committee believes these executive  compensation  policies and programs
serve the interests of stockholders and the Company effectively. The various pay
vehicles offered are appropriately  balanced to provide increased motivation for
senior executives to contribute to the Company's overall future success, thereby
enhancing the value of the Company for the stockholder's benefit.

                                                 The Compensation Committee

                                                 RICHARD KELLER, Chairman
                                                 MARK FRANCESCHINI
                                                 FRANK PATTI

Company Performance

     The following  graph compares the cumulative  total investor  return on the
Company's  Common Stock for the five year period ended December 31, 1999 with an
index  consisting of returns from a peer group of  companies,  consisting of the
Nasdaq  Non-Financial Index (the "Nasdaq  Non-Financial  Index"), and The Nasdaq
Stock Market Composite Index (the "Nasdaq Composite Index").

     The graph  displayed  below is presented in accordance  with Securities and
Exchange Commission requirements. Shareholders are cautioned against drawing any
conclusions from the data contained  herein, as past results are not necessarily
indicative  of future  performance.  This graph in no way reflects the Company's
forecast of future financial performance.




   (graph appears at this location depicting the following stock performance)

<TABLE>

                             Base Period      December    December    December    December   December
                            December 31 1994  31 1995     31 1996     31 1997     31 1998    31 1999
                            ----------------  ---------   ---------   ---------   ---------  ---------
<S>                         <C>               <C>         <C>         <C>         <C>        <C>

IDM Environmental Corp.           100          84.27        67.13      160.00       10.72     38.00
Nasdaq Composite Index            100         141.33       173.89      213.07      300.25    542.43
Nasdaq Non-Financial Index        100         139.26       169.16      198.09      290.32    559.35
</TABLE>


                                       37
<PAGE>

TEM  12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  is  furnished  as of March  27,  2000,  to  indicate
beneficial  ownership  of  shares  of the  Company's  Common  Stock  by (1) each
shareholder of the Company who is known by the Company to be a beneficial  owner
of more than 5% of the Company's  Common  Stock,  (2) each  director,  and Named
Officer of the Company,  individually, and (3) all officers and directors of the
Company as a group.  The information in the following table was provided by such
persons.
<TABLE>

     Name and Address                    Amount and Nature of
    of Beneficial Owner               Beneficial Ownership (1)(2)   Percent of Class (2)
    ----------------------            ---------------------------   --------------------
<S>                                         <C>                       <C>
Joel A. Freedman (3)...................      813,750 (4)                   17.6%
Frank A. Falco (3).....................      860,854 (5)                   18.4%
Michael B. Killeen.....................       26,504 (6)                      *
Birger Munck...........................        6,000 (7)                      *
Frank Patti............................       12,750 (8)                      *
Robert McGuinness......................       13,255 (9)                      *
Richard Keller.........................       12,000 (10)                     *
Mark Franceschini......................       11,000 (11)                     *
All executive officers and directors
 as a group (12 persons)...............    1,802,562 (12)                  32.1%
</TABLE>

*    Less than 1%.

(1)  The persons named in the table have sole voting and  investment  power with
     respect to all shares of Common Stock shown as beneficially  owned by them,
     subject to community  property laws, where applicable,  and the information
     contained in the footnotes to the table.

(2)  Includes shares of Common Stock not  outstanding,  but which are subject to
     options exercisable within 60 days of the date of the information set forth
     in this  table,  which are  deemed to be  outstanding  for the  purpose  of
     computing the shares held and percentage of  outstanding  Common Stock with
     respect to the holder of such options. Such shares are not, however, deemed
     to be outstanding  for the purpose of computing the percentage of any other
     person.

(3)  Address is 396 Whitehead Avenue, South River, New Jersey 08882.

(4)  Includes  813,750 shares  issuable upon exercise of incentive stock options
     and non-qualified stock options held by Mr. Freedman.  Excludes shares held
     by the  adult  children  of  Joel  Freedman.  Mr.  Freedman  disclaims  any
     beneficial ownership interest in such shares.

(5)  Includes  813,750 shares  issuable upon exercise of incentive stock options
     and non-qualified stock options held by Mr. Falco.  Excludes shares held by
     Margaret  Mullin,  the adult  daughter of Frank Falco,  and the children of
     Mrs. Mullin. Mr. Falco disclaims any beneficial  ownership interest in such
     shares.

(6)  Includes  26,504 shares  issuable upon exercise of incentive  stock options
     held by Mr. Killeen.

(7)  Includes  6,000 shares  issuable upon  exercise of incentive  stock options
     held by Mr. Munck.

(8)  Includes  12,750  shares  issuable  upon  exercise of  non-qualified  stock
     options held by Mr. Patti.

(9)  Includes  13,250  shares  issuable  upon  exercise of  non-qualified  stock
     options  held by Mr.  McGuinness.  Also  includes 5 shares  held by a minor
     child  of  Mr.  McGuinness,  as  to  which  Mr.  McGuinness  disclaims  any
     beneficial interest.

(10) Includes  12,000  shares  issuable  upon  exercise of  non-qualified  stock
     options held by Mr. Keller.

(11) Includes  11,000  shares  issuable  upon  exercise of  non-qualified  stock
     options held by Mr. Franceschini.

(12) Includes  1,755,453 shares of Common Stock subject to stock options held by
     the officers and directors and exercisable within 60 days.

Change in Control Following Fusion Networks Merger

     In April  2000,  it is  expected  that  control of IDM will be  transferred
pursuant to the terms of the reorganization and merger whereby IDM will become a
wholly-owned subsidiary of Fusion Networks Holdings, Inc.

                                       38
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Since July of 1988,  the Company has leased its executive  offices and yard
storage  facilities  from  L&G  Associates,  a  partnership  controlled  by Joel
Freedman  and Frank  Falco,  the  Company's  founders  and senior  officers  and
directors.  On March 1, 1993, the Company  entered into a new five year lease on
such  property,   including  two  additional   parcels  with  storage  buildings
previously  leased to a third  party.  Pursuant to such lease,  the Company pays
base  rent of  $270,000  annually  subject  to annual  adjustments  based on the
Consumer Price Index, plus all costs of maintenance, insurance and taxes.

     In 1994,  the Company  and L&G  entered  into an  agreement  regarding  the
construction  and/or renovation of expanded facilities on the premises leased by
the Company from L&G and the  renovation  and leasing of an adjoining  property.
The  expanded   facilities  were  needed  to  support  current   operations  and
anticipated future growth. The Board of Directors formed a Building Committee to
review the terms and fairness of such proposed  expansion.  In November of 1994,
the  parties  agreed in  principal  with  respect  to the terms of the  proposed
expansion  and the Building  Committee  determined  that such  expansion met the
Company's  needs and was on terms which were fair to the Company.  Based on such
agreement  and  determination,   the  Company  in  November  of  1994  commenced
renovation and  construction  on such sites of which one facility,  office space
(7,600 square feet),  was  completed  during the third quarter of 1995,  and the
second  facility,  warehouse space (5,700 square feet), was completed during the
third  quarter of 1996.  Renovation  of such  office  space by the Company at an
approximate cost of $303,000 constitutes payment in full of rent for the initial
term of the lease of such office space. The Company, however, is responsible for
all taxes,  utilities,  insurance  and other costs of occupying the office space
during the initial term.  Construction of such warehouse space by the Company at
an  estimated  cost of  $145,000  constitutes  payment  in full of rent  for the
initial term of the lease of such  warehouse  space.  The Company,  however,  is
responsible for all taxes, utilities, insurance and other costs of occupying the
warehouse  space during the initial term. The total cost of the  renovations was
to be amortized over the initial terms of the lease.  On May 16, 1996 the leases
were  amended and  extended  fifteen  years to May 31,  2011.  The  amortization
associated with the cost of the renovation was extended through the terms of the
modified lease.  Amortization expense related to these costs for the years ended
December 31, 1999 and 1998 was $93,320 and $93,320,  respectively. For the years
ended December 31, 1999 and 1998,  the rent paid totaled  $315,130 and $308,948,
respectively.

     The  Company  believes  that its  existing  lease with L&G  Associates,  as
modified,  is on terms no less  favorable  to the  Company  than could have been
obtained from unaffiliated third parties.

     Prior to the September 1997 amendment, the employment agreements of Messrs.
Freedman and Falco provided that Messrs. Freedman and Falco would receive a draw
of salary and bonus based on projected  earnings.  Because actual  earnings were
below  projected  earnings,  Messrs.  Freedman  and Falco were  indebted  to the
Company  for excess  draws at  December  31,  1996 and at prior  years  end.  In
addition to amounts owed to the Company  relating to excess  draws,  the Company
has periodically paid certain personal  expenses of Messrs.  Freedman and Falco.
At December 31, 1998, the Company's  receivables from Mr. Freedman and Mr. Falco
had been repaid in full. At December 31, 1997, the Company's receivable from Mr.
Freedman  totaled  $7,965 and the  Company's  receivable  from Mr. Falco totaled
$361,576.  All amounts  owed to the Company by Messrs.  Freedman  and Falco were
repayable on demand with interest accruing at 7%.

     During  1998,  the Company  purchased  8,250 shares of common stock of Life
International  Products,  Inc. from Joel Freedman for $178,125,  Mr.  Freedman's
cost basis in those shares.

     During 1999, the Company's two principal officers,  Joel Freedman and Frank
Falco  advanced funds to the Company from time to time. At December 31, 1999, we
owed a total of $159,376 to Mr. Freedman and $58,027 to Mr. Falco.  There are no
definitive repayment terms on such amounts.

                                       39
<PAGE>
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  The following documents are filed as a part of this Report:

     (1)  Consolidated  Financial Statements:  See Index to Financial Statements
          on page44 of this report for financial  statements  and  supplementary
          data filed as part of this report.

     (2)  Financial Statement Schedules

          None

     (3)  Exhibits

   Exhibit
   Number                                   Description of Exhibit
  ---------                               ---------------------------

     2.1  Plan of Reorganization  and Merger dated as of August 18, 1999, by and
          among  the  Registrant,   IDM  Environmental   Corp.  and  IDM  Merger
          Subsidiary (9)
     2.2  Agreement and Plan of Merger dated as of August 18, 1999, by and among
          the Registrant,  Fusion Networks,  Inc., IDM  Environmental  Corp. and
          IDM/FNI Acquisition Corporation (9)
     2.3  First Amendment to Agreement and Plan of Merger dated as of August 31,
          1999, by and among the Registrant,  Fusion Networks, IDM Environmental
          Corp. and IDM/FNI Acquisition Corporation (9)
     2.4  Second Amendment to Agreement and Plan of Merger dated as of September
          21, 1999, by and among the  Registrant,  Fusion  Networks,  Inc.,  IDM
          Environmental Corp. and IDM/FNI Acquisition Corporation (9)
     2.5  Third  Amendment to Agreement  and Plan of Merger dated as of November
          2,  1999,  by  and  among  the  Registrant,   Fusion   Networks,   IDM
          Environmental Corp. and IDM/FNI Acquisition Corporation (9)
     2.6  Fourth  Amendment to Agreement and Plan of Merger dated as of December
          8,  1999,  by  and  among  the  Registrant,   Fusion   Networks,   IDM
          Environmental Corp. and IDM/FNI Acquisition Corporation (9)
     3.1  Restated Certificate of Incorporation of IDM Environmental Corp. (1)
     3.2  Bylaws, as amended, of IDM Environmental Corp. (3)
     4.1  Specimen Common Stock Certificate (1)
     4.2  Specimen Class A Warrant Certificate (1)
     4.3  Form of Warrant Agreement (1)
     4.4  Certificate   of   Designation   fixing   terms  of  Series  A  Junior
          Participating Preferred Stock (2)
     4.5  Certificate  of Designation  fixing terms of Series B Preferred  Stock
          (6)
     4.6  Certificate  of Designation  fixing terms of Series C Preferred  Stock
          (8)
     4.7  Warrant Agreement dated February 12, 1997 (6)
     10.1 Lease  Agreement   between   International   Dismantling  &  Machinery
          Corporation  and L&G Associates  dated March 1, 1993 for site in South
          River, New Jersey (1)
     10.2+ 1993 Incentive Stock Option Plan, as amended (3)
     10.3+ 1995 Incentive Stock Option Plan (3)
     10.4+ 1998 Comprehensive Stock Option and Award Plan, as amended (9)
     10.5+Employment  Agreement  between  the  Company  and  Joel  Freedman,  as
          amended, dated February 1, 1996 (3)
     10.6+Employment  Agreement between the Company and Frank Falco, as amended,
          dated February 1, 1996 (3)
     10.7+Amendment,  dated September of 1997, to Employment  Agreement  between
          the Company and Joel Freedman (8)
     10.8+Amendment,  dated September of 1997, to Employment  Agreement  between
          the Company and Frank Falco (8)

                                       40
<PAGE>

     10.9+Second  Amendment,   dated  February  1998,  to  Employment  Agreement
          between the Company and Joel Freedman (8)
     10.10+ Second  Amendment,  dated  February  1998, to  Employment  Agreement
            between the Company and Frank Falco (8)
     10.11+  Nonqualified  Stock Option  Agreement  between the Company and Joel
             Freedman (8)
     10.12+ Nonqualified  Stock Option  Agreement  between the Company and Frank
            Falco (8)
     10.13 Alexander Charles Lentes Stock Option (7)
     10.14 Bernd Muller Stock Option (7)
     10.15Stock Option  Agreement  with M.H.  Meyerson & Co., Inc. dated August,
          1997 (8)
     10.16Nonqualified  Stock  Option  Grant  between the Company and The Boston
          Group (8)
     10.17Amended and Restated Warrant  Agreement with Rochon Capital Group Ltd.
          (7)
     10.18Consulting  Agreement  dated May 23, 1997  between the Company and Ron
          Logerwell (8)
     10.19Form of Agreement regarding  confidential  information and competition
          by employees (1)
     10.20 Form of Severance Agreement (3)
     10.21 Voting Agreement (1)
     10.22 Share Rights Agreement dated April 1, 1996 (2)
     10.23License  Agreement  dated  June  30,  1996  with  Life   International
          Products (4)
     10.24Agreement dated July 19, 1996 with Continental Waste Conversion,  Inc.
          (4)
     10.25License   Agreement  dated  July  18,  1996  with  Continental   Waste
          Conversion, Inc. and Continental Waste Conversion International,  Inc.
          (4)
     10.26Promissory  Note in the amount of $160,000  (Canadian)  dated July 22,
          1996 from  Continental  Waste  Conversion,  Inc. to Continental  Waste
          Conversion International (4)
     10.27Pledge and Security Agreement dated July 19, 1996 between  Continental
          Waste Conversion, Inc. and Continental Waste Conversion International,
          Inc. (4)
     10.28 Form of 7% Convertible Note due January 31, 1999 (5)
     10.29 Form of Three Year $3.00 Warrant (5)
     10.30Protocol of Intention  dated January 20, 1998 re:  Georgia power plant
          (8)
     10.31License  Agreement dated December 15, 1997 between Life  International
          Products, Inc. and Seven Star International Holding, Inc. (8)
     10.32 Form of Lock-Up Agreement (8)
     10.33 Form of Lock-Up Warrant (8)
     10.34 Form of Four Year $5.00 Warrant (8)
     10.35 Consulting Agreement dated March 1997 with SAGA Promotions, Inc. (8)
     10.36 Stock Option Grant dated February 1998 to SAGA Promotions, Inc. (8)
     10.37 Stock Option Grant dated February 1998 to Aaron Lehman (8)
     10.38Revised  Memorandum  of  Understanding  dated  March  1998 re:  Taiwan
          waste-to-energy project (8)
     10.39Modification  to Power  Purchase  Contract  dated November 1997 re: El
          Salvador power project (8)
     21.1 List of subsidiaries (8)
     23.1* Consent of Samuel Klein and Company
     27.* Financial Data Schedule
---------------

+    Compensatory plan or management agreement.

*    Filed herewith

(1)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Registration  Statement  on Form  SB-2  (Commission  File No.
     33-66466) declared  effective by the Securities and Exchange  Commission on
     April 20, 1994
(2)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's Current Report on Form 8-K dated April 1, 1996
(3)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Annual Report on Form 10-KSB for the year ended  December 31,
     1995
(4)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Quarterly Report on Form 10-Q for the quarter ended September
     30, 1996
(5)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Quarterly  Report on Form 10-Q for the quarter ended June 30,
     1997

                                       41
<PAGE>

(6)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Annual  Report on Form 10-K for the year ended  December  31,
     1996
(7)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Registration  Statement  on Form  S-3  (Commission  File  No.
     333-28485)  declared effective by the Securities and Exchange Commission on
     January 9, 1998
(8)  Incorporated   by  reference  to  the   respective   exhibits   filed  with
     Registrant's  Annual  Report on Form 10-K for the year ended  December  31,
     1998
(9)  Incorporated  by reference to the  respective  exhibits filed with the Form
     S-4 Registration  Statement of Fusion Networks Holdings,  Inc.  (Commission
     File No.  333-92949)  declared  effective  by the  Securities  and Exchange
     Commission on February 15, 2000

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed  during the quarter  ended  December  31,
     1999.

                                       42
<PAGE>

                                   SIGNATURES

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

                                                   IDM ENVIRONMENTAL CORP.




                                                 By: /s/ Joel Freedman
                                                    -----------------------
                                                    Joel Freedman
                                                    President

Dated:   April 10, 2000

     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.


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

/s/ Joel A. Freedman
---------------------       President, Chief Executive Officer    April 10, 2000
Joel A. Freedman           (Principal Executive Officer) and
                            Director
/s/ Frank A. Falco
---------------------       Executive Vice President, Chief       April 10, 2000
Frank A. Falco              Operating Officer and Chairman
                            of the Board of Directors
/s/ Michael B. Killeen
---------------------       Treasurer (Principal Accounting       April 10, 2000
Michael B. Killeen          and Financial Officer) and Director

/s/ Richard Keller
---------------------        Director                             April 10, 2000
Richard Keller

---------------------        Director                             ________, 2000
Frank Patti

/s/ Robert McGuinness
---------------------        Director                             April 10, 2000
Robert McGuinness

---------------------        Director                             ________, 2000
Mark Franceschini


                                       43
<PAGE>

                 IDM ENVIRONMENTAL CORPORATION AND SUBSIDIARIES

                   Index to Consolidated Financial Statements


                                                                           Page
                                                                          ------
Independent Auditor's Report............................................... F-1

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

Consolidated Statements of Operations for the Years ended December
31, 1999, 1998 and 1997.................................................... F-3

Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1999, 1998 and 1997........................................... F-4

Consolidated Statements of Cash Flows for the Years ended December
31, 1999, 1998 and 1997.................................................... F-5

Notes to Consolidated Financial Statements................................. F-7


                                       44
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT




The Board of Directors and Stockholders
IDM Environmental Corp. and Subsidiaries
South River, New Jersey


We  have  audited  the   accompanying   consolidated   balance   sheets  of  IDM
Environmental  Corp. and  Subsidiaries  as of December 31, 1999 and 1998 and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for each of the three years in the period ended  December 31, 1999.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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  and   significant   estimates  made  by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of IDM Environmental
Corp.  and  Subsidiaries  as of December  31, 1999 and 1998,  and the results of
operations  and cash  flows  for each of the  three  years in the  period  ended
December 31, 1999, in conformity with generally accepted accounting principles.







                                                     SAMUEL KLEIN AND COMPANY

Newark, New Jersey
April 3, 2000

                                      F-1
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>

                                                                                         December 31,
  ASSETS                                                                          1999                 1998
-----------                                                                     --------             ---------
<S>                                                                          <C>                  <C>

Current Assets:
  Cash and cash equivalents                                               $      511,552         $   384,292
  Accounts receivable                                                          4,548,531           2,572,951
  Notes receivable - current                                                           -             367,198
  Inventory                                                                            -             582,517
  Costs and estimated earnings in excess of billings                                   -           1,900,336
  Recoverable income taxes                                                       650,242                   -
  Prepaid expenses and other current assets                                    1,124,790             906,137
                                                                             ------------        ------------
     Total Current Assets                                                      6,835,115           6,713,431

Investments in and Advances to Unconsolidated Affiliates                         979,266           2,454,521
Investment in Affiliate, at cost                                               1,853,125           1,853,125
Debt Discount and Issuance Costs                                                       -              16,124
Property, Plant and Equipment                                                  1,903,321           3,133,404
Other Assets                                                                     979,925             979,925
                                                                             ------------        ------------
                                                                          $   12,550,752         $15,150,530
                                                                             ============        ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Current portion of long-term debt                                       $      18, 701         $   622,794
  Accounts payable and accrued expenses                                        8,847,937           6,578,070
  Billings in excess of costs and estimated earnings                             912,699                   -
  Due to officers                                                                217,403                   -
                                                                             ------------        ------------
     Total Current Liabilities                                                 9,996,740            7,200,864
Long-Term Debt                                                                    16,864               64,544
                                                                             ------------        ------------
     Total Liabilities                                                        10,013,604            7,265,408
                                                                             ------------        ------------
Commitments and Contingencies

Stockholders' Equity:
  Common stock, authorized 7,500,000 shares $.01 par value, issued
   and outstanding 3,768,945 in 1999 and 2,947,298 in 1998                        37,689               29,473
  Additional paid-in capital                                                  59,236,502           57,215,536
  Convertible preferred stock, authorized 1,000,000 shares $1.00 par value
    Series B, Issued and outstanding 0 shares in 1999 and 0 shares in
      1998, stated at a conversion value of $10,000 per share                          -                    -
    Series RR, Issued and outstanding 0 shares in 1999 and 215 shares
      in 1998, stated at a conversion value of $1,000 per share                        -              215,000
  Retained earnings (deficit)                                                (56,737,043)         (49,574,887)
                                                                             ------------        ------------
                                                                               2,537,148            7,885,122
                                                                             ------------        ------------
                                                                           $  12,550,752          $15,150,530
                                                                             ============        ============
</TABLE>

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

                                      F-2
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>

                                                                          For the Years Ended December 31,

                                                                     1999             1998           1997
                                                                    ------           ------         ------
<S>                                                               <C>             <C>           <C>

Revenue:
  Contract income                                                 $13,581,298    $ 20,018,564    $ 17,825,849
  Sale of equipment                                                         -               -          96,050
                                                                  ------------    ------------    ------------
                                                                   13,581,298      20,018,564      17,921,899
                                                                  ------------    ------------    ------------
Cost of Sales:
  Direct job costs                                                 13,366,165      20,257,642      17,002,308
  Cost of equipment sales                                                   -               -          47,057
  Write-down of inventory surplus                                     582,517               -         600,000
                                                                  ------------    ------------    ------------
                                                                   13,948,682      20,257,642      17,649,365
                                                                  ------------    ------------    ------------

Gross Profit (Loss)                                                  (367,384)       (239,078)        272,534
                                                                  ------------    ------------    ------------
Operating Expenses:
  General and administrative expenses                               7,054,208      12,871,481      10,537,677
  Depreciation and amortization                                       334,617         626,766         723,415
  Equity in net loss of unconsolidated partnerships                   105,757         194,243               -
  Write-down on investment in unconsolidated affiliates               176,814               -               -
                                                                  ------------    ------------    ------------
                                                                    7,671,396      13,692,490      11,261,092
                                                                  ------------    ------------    ------------
Loss from Operations                                               (8,038,780)    (13,931,568)    (10,988,558)
                                                                  ------------    ------------    ------------
Other Income (Expense):
  Loss on disposal of property, plant and equipment                  (285,194)              -               -
  Interest income (expense)                                          (172,519)     (4,321,714)       (512,768)
  Miscellaneous income (expense)                                      145,626               -               -
                                                                  ------------    ------------    ------------
                                                                     (312,087)     (4,321,714)       (512,768)
                                                                  ------------    ------------    ------------

Loss before Provision (Credit) for Income Taxes                    (8,350,867)    (18,253,282)    (11,501,326)
Provision (Credit) for Income Taxes                                (1,200,000)      4,170,000      (1,561,000)
                                                                  ------------    ------------    ------------
Net Loss                                                           (7,150,867)    (22,423,282)     (9,940,326)
Preferred Stock Dividends including amortization of beneficial
  conversion feature of $ 0, $3,830,000, and $1,109,589 in 1999
 1998 and 1997                                                         11,289       4,018,774       1,284,097
                                                                  ------------    ------------    ------------
Net Loss on Common Stock                                         $ (7,162,156)   $(26,442,056)   $(11,224,423)
                                                                  ============    ============    ============
Loss per Share:
  Basic loss per share                                           $      (2.21)   $     (13.31)   $     (10.01)
                                                                  ============    ============    ============
  Diluted loss per share                                         $      (2.21)   $     (13.31)   $     (10.01)
                                                                  ============    ============    ============
  Basic common shares outstanding                                   3,243,493       1,987,264       1,121,269
                                                                  ============    ============    ============
  Diluted common shares outstanding                                 3,243,493       1,987,264       1,121,269
                                                                  ============    ============    ============

</TABLE>

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

                                      F-3
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>

                                                                                   Additional       Convertible     Retained
                                                              Common Stock          Paid-in         Preferred       Earnings
                                                          Shares       Amount       Capital           Stock         (Deficit)
                                                         --------     --------    -------------     ------------    ---------
<S>                                                     <C>           <C>         <C>               <C>             <C>

Balances - January 1, 1997                               960,273     $  9,603      $25,359,465       $        -    $(11,908,408)
Issuance of Convertible
   Preferred Stock February 1997                               -            -                -        3,000,000               -
Conversion of Preferred Stock
   to Common Stock                                        19,292          193          289,237         (300,000)              -
Class A Warrants Exercised                               451,703        4,517        6,166,483                -               -
Stock Option Plan Exercised                                4,539           45           62,996                -               -
Issuance of Non-Qualified Options,
  pursuant to consulting agreements                            -            -          456,340                -               -
Preferred Stock Beneficial Conversion feature                  -            -        1,109,589                -               -
Exercise of Non-Qualified Consulting Options              15,500          155          234,845                -               -
Preferred Stock Dividends                                      -            -                -                -      (1,284,097)
Discounted Conversion feature on
  Convertible Notes and Warrants                               -            -        4,818,750                -               -
Net Loss for the year ended
  December 31, 1997                                            -            -                -                -      (9,940,326)
                                                      -----------     --------     ------------      -----------    ------------
Balances - December 31, 1997                           1,451,307       14,513       38,497,705        2,700,000     (23,132,831)
Issuance of Series C Convertible
  Preferred Stock February 1998                                -            -                -        3,600,000               -
Issuance of Series RR Convertible
  Preferred Stock August 1998                                  -            -                -        1,500,000               -
Conversion of Series B Preferred
  Stock to Common Stock                                  135,944        1,360        2,752,618       (2,700,000)              -
Conversion of Series C Preferred
  Stock to Common Stock                                  640,747        6,407        3,508,564       (3,600,000)              -
Conversion of Series RR Preferred
  Stock to Common Stock                                  359,981        3,600        1,192,693       (1,285,000)              -
Warrants Exercised                                       243,731        2,437        2,620,531                -               -
Stock Option Plan Exercised                                  321            3            6,411                -               -
Conversion of Convertible Debt                           115,267        1,153        2,908,464                -               -
Preferred Stock Dividends                                      -            -                -                -      (4,018,774)
Discounted Conversion Feature
  on Preferred Stock and Warrants                              -            -        3,830,000                -               -
Issuance of Non-Qualified Options
  Pursuant to Consultants Agreements                           -            -        1,898,550                -               -
Net loss for the year ended
  December 31, 1998                                            -            -                -                -     (22,423,282)
                                                      -----------     --------     ------------      -----------    ------------
Balances - December 31, 1998                           2,947,298       29,473       57,215,536          215,000     (49,574,887)
Warrants Exercised                                       115,049        1,150          317,727                -               -
Warrants issued for Repayment of Stockholder's Loan       97,525          975          264,147                -               -
Issuance of Restricted Stock to Induce Grant of Note
  Payable                                                125,000        1,250          (1,250)                -               -
Discounted Conversion Feature on Restricted Stock              -            -         109,380                 -               -
Issuance of Restricted Stock as Deposit in Lieu of Bond  118,070        1,181         489,439                 -               -
Issuance of Restricted Stock for Debt                    100,073        1,001         468,629                 -               -
Conversion of Series RR Preferred Stock to Common
 Stock                                                   130,788        1,308         213,969          (215,000)              -
Stock Options Exercised                                   67,476          674         118,448                 -               -
Exercise of Non-Qualified Options                         67,666          677            (677)                -               -
Issuance of Non-Qualified Options Pursuant to
 Consultant Agreements                                         -            -          41,154                 -               -
Preferred Stock Dividends                                                                                               (11,289)
Net Loss for the Year Ended December 31, 1999                  -            -               -                 -      (7,150,867)
                                                      -----------     --------     ------------      -----------    ------------
Balances - December 31, 1999                           3,768,945      $37,689     $59,236,502       $         -    $(56,737,043)
                                                      ===========     ========     ============      ===========    ============

</TABLE>


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

                                      F-4
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>

                                                                                       For the Years Ended December 31,
                                                                                  1999              1998             1997
                                                                                 ------            ------           ------
<S>                                                                           <C>               <C>              <C>

Cash Flows from Operating Activities:
  Net loss on common stock                                                   $(7,162,156)      $(26,442,056)     $(11,224,423)
  Adjustments to reconcile net loss to net cash used in operating activities:
      Deferred income taxes                                                            -          4,170,000        (1,561,000)
      Depreciation and amortization                                              472,396            661,469           713,717
      Amortization of debt discount                                               16,124            169,053           118,220
      Amortization of beneficial conversion feature on convertible notes               -          4,205,886           612,864
      Amortization of beneficial conversion feature on preferred stock                 -          3,830,000         1,109,589
      Amortization of beneficial conversion feature on restricted common stock   109,380                  -                 -
      Interest expense on convertible debt converted to common stock                   -             63,621                 -
      Dividend on convertible preferred stock converted to common stock           11,289            188,774             8,517
      Compensation cost of consultant stock options                               41,154          1,898,550           456,340
      Write-down on investment in unconsolidated affiliates                      176,814                  -                 -
      Write-down of surplus inventory                                            582,517                  -           600,000
      Provision for loss on notes receivable                                           -          1,004,815         1,300,000
      Equity in net loss of unconsolidated affiliates                            105,757            194,243                 -
      Loss on disposal of assets                                                 285,194                  -                 -
      Decrease (Increase) In:
        Accounts receivable                                                   (1,975,580)         1,521,457         1,531,800
        Notes receivable                                                         367,198            125,599            49,399
        Costs and estimated earnings in excess of billings                     1,900,336         (1,444,513)        1,199,931
        Prepaid expenses and other current assets                                280,967            536,088           498,224
        Recoverable income taxes from sale of State loss carryforwards          (650,242)                 -                 -
      Increase (Decrease) In:
        Accounts payable and accrued expenses                                  2,596,753          1,660,001        (1,946,192)
        Billings in excess of costs and estimated earnings                       912,699            (86,604)              108
                                                                              -----------        -----------       -----------
          Net cash used in operating activities                               (1,929,400)        (7,743,617)       (6,532,906)
                                                                              -----------        -----------       -----------
Cash Flows from Investing Activities:
   Acquisition of property, plant and equipment                                   (2,444)          (517,757)         (305,533)
   Disposal of property and equipment                                            496,017                  -                 -
   Investment in affiliate                                                             -           (138,125)         (415,000)
   Investment in and advances from (to) unconsolidated affiliates              1,192,684            804,545        (3,453,309)
   Acquisition of other assets                                                         -            (99,179)         (567,500)
   Loans and advances (to) from officers                                         217,403            369,541          (160,865)
                                                                              -----------        -----------       -----------
          Net cash provided by (used in) investing activities                  1,903,660            419,025        (4,902,207)
                                                                              -----------        -----------       -----------

Cash Flows from Financing Activities:
  Proceeds from note payable from stockholder                                          -            265,122                 -
  Net proceeds from convertible note issuance                                          -                  -         2,780,000
  Net proceeds from convertible preferred stock issuances                              -          4,590,000         2,722,500
  Proceeds from equipment financing                                                    -            156,238                 -
  Proceeds from short-term financing                                             400,000                  -                 -
  Principal payments on short-term debt                                         (400,000)                 -                 -
  Principal payments on long-term debt                                          (268,345)          (534,101)         (676,819)
  Purchase and retirement of common stock                                              -                  -                 -
  Contribution from minority interest                                                  -                  -                 -
  Repurchase of minority interest                                                      -                  -          (258,621)
  Proceeds from exercise of stock options and warrants                           421,345          2,629,383         6,469,041
                                                                              -----------        -----------       -----------
          Net cash provided by financing activities                              153,000          7,106,642        11,036,101
                                                                              -----------        -----------       -----------

 Increase (Decrease) in Cash and Cash Equivalents                                127,260           (217,950)         (399,012)

Cash and Cash Equivalents, beginning of year                                     384,292            602,242         1,001,254
                                                                              -----------        -----------       -----------

Cash and Cash Equivalents, end of year                                       $   511,552        $   384,292      $    602,242
                                                                              ===========        ===========       ===========
</TABLE>

                                      F-5
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)


<TABLE>

                                                                                       For the Years Ended December 31,
                                                                                  1999               1998             1997
                                                                                 ------             ------           ------
<S>                                                                             <C>               <C>                <C>

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the year for:
    Interest                                                                    $ 109,065         $  106,259        $  184,631
                                                                                 =========         ==========        ==========
    Income taxes                                                                $       -         $        -        $        -
                                                                                 =========         ==========        ==========
Supplemental Disclosure of Noncash Investing and Financing Activities:
  Property, plant and equipment financing                                       $   21,080        $        -        $  961,737
                                                                                 =========         ==========        ==========
  Cancellation of stock subscription receivable                                 $        -        $        -        $  775,862
                                                                                 =========         ==========        ==========
  Conversion of preferred stock to common stock                                 $  215,000        $7,585,000        $  300,000
                                                                                 =========         ==========        ==========
  Conversion of interest payable on convertible notes to common stock           $        -        $  144,840        $        -
                                                                                 =========         ==========        ==========
  Conversion of dividends payable from convertible preferred stock to
    common stock                                                                $        -        $  349,121        $    8,517
                                                                                 =========         ==========        ==========
  Beneficial conversion feature of debt discount on convertible notes           $        -        $        -        $4,818,750
                                                                                 =========         ==========        ==========
  Repayment of stockholders note payable through issuance of common stock       $  265,122        $        -        $        -
                                                                                 =========         ==========        ==========
  Beneficial conversion feature of issuance of restricted common stock          $  109,380        $        -        $        -
                                                                                 =========         ==========        ==========
  Issuance of restricted stock for deposits in lieu of bond                     $  490,620        $        -        $        -
                                                                                 =========         ==========        ==========
  Issuance of restricted common stock for debt                                  $  469,630        $        -        $        -
                                                                                 =========         ==========        ==========
  Payment of dividend payable on preferred stock through conversion
    to common stock                                                             $   16,933        $        -        $        -
                                                                                 =========         ==========        ==========
  Exercise of Non-Qualified Options                                             $      677        $        -        $        -
                                                                                 =========         ==========        ==========

</TABLE>


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

                                      F-6

<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

IDM Environmental Corp.  (collectively with its subsidiaries  referred to herein
as the  "Company")  is a global,  diversified  services and project  development
company  offering a broad range of design,  engineering,  construction,  project
development  and  management,  and  environmental  services and  technologies to
government  and  private  industry  clients.  The  Company  utilizes  those same
capabilities to build,  own or lease,  and operate energy,  waste management and
similar  facilities.   The  Company,  through  its  domestic  and  international
affiliates and subsidiaries,  offers services and technologies,  and operates in
three  principal  areas:  Energy and Waste Project  Development  and Management,
Environmental Remediation and Plant Relocation.

Environmental  remediation  services,  the Company's  historical  core business,
encompasses  a  broad  array  of  environmental   consulting,   engineering  and
remediation  services with an emphasis on the  "hands-on"  phases of remediation
projects.  The  Company  is a provider  of  full-service  turnkey  environmental
remediation  and plant  decommissioning  services  and has  established  a track
record in the performance of projects for a wide range of private sector, public
utility  and  governmental  clients  worldwide.  The Company has melded its core
expertise  in  engineering,   decommissioning  and  dismantlement   services  in
environmentally  sensitive  settings in an effort to establish a position in the
forefront  of the nuclear  power plant  decommissioning,  site  remediation  and
re-industrialization market.

Plant relocation services encompass a broad array of non-traditional engineering
projects,  with an emphasis on plant dismantlement,  relocation and re-erection.
The  Company  employs  a  proprietary,  integrated  matchmarking,   engineering,
dismantling and documentation  program in plant relocation services that provide
clients with significant cost and schedule benefits when compared to traditional
alternatives for commencing plant operations.

On August 18, 1999 the Company entered into a non-binding  merger agreement that
provided  for the  formation  of a  holding  company  known as  Fusion  Networks
Holdings,  Inc. ("FNH") by the Company and the merger of Fusion  Networks,  Inc.
("Fusion") a Florida  based  privately  held  corporation.  As a result both the
Company  and  Fusion  will  become  wholly  owned   subsidiaries   of  FNH.  The
stockholders  of Fusion will  receive one share of common  stock of FNH for each
share of Fusion's  common  stock held and the  stockholders  of the company will
receive  one share of FNH for each share of the  Company's  common  stock  held,
resulting in the current  stockholders of Fusion owning approximately 90% of FNH
common stock.

The proposed  reorganization was approved by the shareholders of the Company and
Fusion in March 2000 and the  reorganization  is  expected  to be  completed  in
April, 2000. As a result of the reorganization,  the Company and Fusion Networks
will become  wholly-owned  subsidiaries of FNH. Both the Company and Fusion plan
to continue their historical operations for the foreseeable future.

Principles of Consolidation and Basis of Presentation
-----------------------------------------------------

The  accompanying  financial  statements  consolidate the accounts of the parent
company and all of its wholly owned and majority owned subsidiaries. Investments
in  unconsolidated  affiliated  joint  ventures  in which the  ownership  of the
venture is between 20% and 50% and for which the following conditions exist: (i)
the  investees in the  ventures  have an  undivided  interest in the  venturers'
assets;  (ii) each  investee is  severally  liable for the  indebtedness  of the
venture;  and (iii)  each  investor  is only  entitled  to its pro rata share of
income  and is  responsible  to pay  only its pro rata  share of  expenses,  are
accounted  for under the equity method for balance  sheet  presentation  and the
proportionate  consolidation  method  for  revenues  and  expenses  of the joint
venture.  Investments in affiliates  representing less than 20% of the ownership
of such companies are typically accounted for under the cost method.

                                      F-7
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



1.   THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Principles of Consolidation and Basis of Presentation (Continued)
-----------------------------------------------------

The Company has not consolidated its 80% owned entity in the Republic of Georgia
of the former Soviet Union due to lack of control as provided under Statement of
Financial  Accounting  Standards No. 94,  "Consolidation  of all  Majority-Owned
Subsidiaries"  (SFAS 94) due  primarily as a result of  restrictions  imposed by
local law in this  country on the  Company's  ability to provide  direction  and
exert  influence  over  local  management.  Because of these  circumstances  the
Company was unable to obtain  financial  information  on the  operations of this
entity and as a result they have not been  consolidated  within these  financial
statements  and the  Company has written  off its  investment  of  approximately
$200,000.

Translation of Foreign Currencies
---------------------------------

Assets and liabilities of foreign  operations,  where the functional currency is
the local  currency,  are  translated  into U.S.  dollars at the fiscal year end
exchange rate. The related  translation  adjustments are required to be recorded
as cumulative  translation  adjustments,  a separate  component of shareholders'
equity.  Revenues  and  expenses are  required to be  translated  using  average
exchange rates prevailing  during the year.  Foreign currency  transaction gains
and losses,  as well as translation  adjustments  for assets and  liabilities of
foreign operations where the functional  currency is the dollar, are included in
net income (loss). Foreign currency realized and unrealized gains and losses for
the years presented were not material.

Revenue Recognition
-------------------

The  consolidated  financial  statements  have been prepared on the basis of the
percentage  of  completion  method of  accounting.  Under this  method  contract
revenue  is  determined  by  applying  to the  total  estimated  income  on each
contract, a percentage which is equal to the ratio of contract costs incurred to
date to the most recent  estimate  of total costs which will have been  incurred
upon the completion of the contract.  Costs and estimated  earnings in excess of
billings  represents  additional  earnings over billings,  based upon percentage
completed,  as  outlined  above.  Similarly,  billings  in  excess  of costs and
estimated  earnings  represent excess of amounts billed over income  recognized.
Provisions for estimated losses on uncompleted  contracts are made in the period
in which such losses are determined. Billings on long-term contracts are done on
a monthly  basis.  Unbilled  amounts  on  long-term  contracts  include  amounts
recognized in revenues under the percentage of completion  method of accounting,
but not billed to the  customer at year end. It is expected  that such  billings
will be made as contracts are completed. Unbilled amounts on long-term contracts
are not  separately  stated as they are not  material.  Retentions  on long-term
contracts  are  balances  billed but not paid by  customers  which,  pursuant to
retainage  provisions in contracts,  are due upon completion of the contract and
acceptance by the customer.  Substantially all retentions are deemed collectible
within one year.

Use of Estimates
----------------

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

Cash and Cash Equivalents
-------------------------

For financial  statement  purposes,  short-term  investments  with a maturity of
ninety  days  or  less  and  highly  liquid   investments  are  considered  cash
equivalents.

                                      F-8
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



1.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory
---------

Inventory  consists  of  used  equipment  and is  stated  at the  lower  of cost
(specific identification) or market.

Unamortized Debt Discount and Issuance Costs
--------------------------------------------

Costs  in  connection  with the  issuance  of debt and  equity  instruments  are
amortized  and charged to  operations  using the  straight  line method over the
terms of the respective  issues.  Upon  conversion,  any  unamortized  costs are
charged to additional paid in capital net of tax effect.

Property, Plant and Equipment
-----------------------------

Property  plant  and  equipment  are  recorded  at cost.  Depreciation  has been
calculated   using  the  estimated   useful  lives  of  the  assets.   Leasehold
improvements  are amortized  over the lesser of the term of the related lease or
the estimated useful lives of the assets. The depreciation  method and estimated
useful lives of the assets are generally as follows:


                                           Estimated        Method of
                Asset                     Useful Life      Depreciation
               -------                   -------------    --------------
          Office equipment                 3 - 10          Straight-line
          Furniture and fixtures           3 - 10          Straight-line
          Leasehold  improvements          5 - 31.5        Straight-line
          Transportation equipment         3 - 5           Straight-line
          Job equipment                    7 - 10          Straight-line


Costs of repairs and  maintenance  are  charged to  operations  as incurred  and
additions and  betterments  are  capitalized.  Upon retirement or disposition of
assets,  the cost and accumulated  depreciation are eliminated from the accounts
and any gain or loss is reflected in the statement of operations.

Income Taxes
------------

Income  taxes have been  provided  for based on the  provisions  of Statement of
Financial  Accounting  Standards  Board No. 109,  "Accounting  for Income Taxes"
("SFAS 109").  SFAS 109 requires the recognition of deferred tax liabilities and
assets  for the  expected  future  tax  consequences  of  events  that have been
included in the financial statements or tax returns. Under this method, deferred
tax  liabilities and assets are determined  based on the difference  between the
financial  statement  carrying  amounts and tax bases of assets and  liabilities
using  enacted  tax rates in effect  in the years in which the  differences  are
expected to reverse.  Valuation  allowances  are  established  when necessary to
reduce deferred tax assets to the amounts expected to be realized.

Accounting for Stock-Based Compensation
---------------------------------------

The Company has elected to follow  Accounting  Principles  Board  Opinion No. 25
"Accounting  for Stock Issued to  Employees"  ("APB 25") in  accounting  for its
employee  stock  options  plans.  Under APB 25, when the  exercise  price of the
Company's  employee  stock  options  equals or is above the market  price of the
underlying stock on the date of grant, no compensation expense is recognized.

                                      F-9
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


1.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting for Stock-Based Compensation (Continued)
---------------------------------------

In  accounting  for  options  granted  to  persons  other  than  employees,  the
provisions  of  Financial   Accounting   Standards   Board  Statement  No.  123,
"Accounting for Stock Based Compensation"  ("SFAS 123") were applied.  According
to SFAS 123 the fair  value of these  options  was  estimated  at the grant date
using Black-Scholes option pricing model.

Impairment of Long-Lived Assets
-------------------------------

The Company  accounts for  impairment  of long lived assets in  accordance  with
Statement of Financial Accounting Standards No. 121 (SFAS 121),  "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed
of." SFAS 121 requires that if facts and circumstances indicate that the cost of
fixed assets or other assets may be impaired,  an evaluation  of  recoverability
would be performed by comparing the estimated future  undiscounted  pre-tax cash
flows  associated with the asset to the asset's carrying value to determine if a
write-down  to market  value or  discounted  pre-tax  cash flow  value  would be
required.

Comprehensive Income
--------------------

As of December 31, 1998, the Company adopted  Statement of Financial  Accounting
Standards No. 130, "Reporting  Comprehensive  Income" (SFAS 130). This statement
establishes  rules for the reporting of comprehensive  income and its components
which  require  that  certain  items  such  as  foreign  currency   translations
adjustments,  unrealized  gains and  losses on certain  investments  in debt and
equity   securities,   minimum  pension   liability   adjustments  and  unearned
compensation  expense  related to stock  issuances  to employees be presented as
separate  components of  stockholders'  equity.  The adoption of SFAS 130 had no
material impact on total stockholders'  equity for any of the years presented in
these consolidated financial statements.

Earnings (Loss) Per Share
-------------------------

As of  December  31,  1997  the  Financial  Accounting  Standards  Board  issued
Statement No. 128 "Earnings Per Share" (SFAS 128)  replacing the  calculation of
primary and fully diluted earnings per share with Basic and Diluted earnings per
share.  Unlike primary earnings per share, basic earnings per share excludes the
dilutive  effects of  options,  warrants  and  convertible  securities.  Diluted
earnings  per share is very similar to the  previously  reported  fully  diluted
earnings per share.  Diluted earnings per share reflects the potential  dilution
that could occur if  securities  or other  agreements to issue common stock were
exercised  or  converted  into  common  stock.  Dilutive  earnings  per share is
computed  based upon the weighted  average  number of common shares and dilutive
common equivalent  shares  outstanding.  Common stock options,  which are common
stock  equivalents,  had an  anti-dilutive  effect on earnings  per share and no
effect on the weighted  average number of common shares.  All net loss per share
amounts  for all  periods  presented  have been  restated to conform to SFAS 128
requirements.

Reverse Stock Split
-------------------

On March 11,  1999,  the  Company's  Board of  Directors  authorized  a 1 for 10
reverse  stock  split  of  its  common  stock   effective  April  16,  1999  for
shareholders of record at the close of business on April 16, 1999. All share and
per-share  amounts in the accompanying  consolidated  financial  statements have
been restated to give effect to the 1 for 10 reverse stock split.

Reclassifications
-----------------

Certain  reclassifications  have been made to the prior year balances to conform
to the current year presentation.

                                      F-10
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

1.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Special Charges
---------------

During the fourth  quarters of 1998 and 1997, the Company  recorded  significant
charges of approximately $5,855,000 and $3,200,000, respectively, to operations,
primarily  related  to write  downs of  inventory,  notes  receivable  and other
assets. In addition,  the Company increased the valuation allowance for deferred
tax assets based on management's assessment of future operations.

2.  MANAGEMENT'S PLANS, FINANCIAL RESULTS AND LIQUIDITY

The Company has suffered  recurring  losses from  operations and at December 31,
1999, the Company had a working  capital deficit of  approximately  $3.2 million
and a cash  balance  of  approximately  $0.5  million.  As a result  of the loss
incurred  during  1999,  operating  activities  used $1.9  million in cash.  The
Company was provided $1.9 million in cash from investing activities (i) disposal
of property and  equipment  for $0.5  million,  (ii)  repayment of advances from
unconsolidated  affiliates of $1.2 million,  and (iii) advances from officers of
$0.2 million.  Cash flows from financing  activities totaled $0.2 million during
1999 and  consisted  principally  of $0.4 million in proceeds  received from the
exercise  of various  warrants  and  options  less $0.2  million  used to reduce
principal payments on long-term debt.

The  Company  requires  substantial  working  capital  to  support  its  ongoing
operations.  As is common in the environmental  services  industry,  payment for
services  rendered are generally  received  pursuant to specific draw  schedules
after services are rendered.  Thus, pending the receipt of payments for services
rendered,  the Company must typically fund substantial project costs,  including
significant  labor and bonding costs,  from financing sources within and outside
of the Company.  Certain contracts, in particular those within the United States
governmental  agencies,  may provide for payment  terms of up to 90 days or more
and may require the posting of substantial performance bonds which are generally
not released until completion of a project.

Operations  were  historically  funded  through a combination  of operating cash
flows, term notes and bank lines of credit. Since April of 1994, the Company has
carried no bank debt and has funded operations  principally  through the sale of
equity securities and securities convertible into equity securities. At December
31, 1999, the Company had no bank debt and no significant long term debt and was
funding operations entirely through cash on hand and operating cash flow.

At December 31, 1999, the Company had a backlog of  approximately  $5 million of
signed services  contracts as compared to a backlog of  approximately $8 million
at  December  31,  1998.  The largest  portion of  projects in their  backlog at
December 31, 1999 was  attributable  to the Bound Brook  Project  which began in
August 1999 and is scheduled to be completed  May 2001.  The backlog at December
31, 1999 does not include  services  expected to be rendered in connection  with
the Company's involvement in the revitalization of the EWN site in Germany which
anticipated  the  privatization  of the  government  owned site to a group which
included  the  Company.   Contract  negotiations  for  the  acquisition  of  the
state-owned corporation continued during 1999 and into the first quarter of 2000
at  which  time  the  Germany   Government   indicated   its  intent  to  forego
privatization  of the EWN  project  and to move  forward  on the  project  under
government  control.  The Company  will now be required to submit  proposals  to
perform  services on each of the phases of the project  which the Company  would
have otherwise performed under the contemplated  privatization plan. In addition
to existing contracts,  the Company continues bidding on, or proposes to bid on,
numerous  projects  in order to  replace  revenue  from  projects  which will be
completed  during 2000 and to increase the total dollar volume of projects under
contract.  The  Company  anticipates  that its  efforts to bid on and secure new
contracts will focus on projects which can be readily serviced from the regional
offices as well as certain large  international  plant  relocation  projects and
nuclear  decommissioning  projects  which they intend to pursue.  Their regional
offices,  particularly the Oak Ridge Tennessee office, are strategically located
in areas having a high  concentration  of prospective  governmental  and private
remediation  sites.  While bidding to perform services at such sites is expected
to be highly  competitive,  the Company believes that their existing presence on
adjacent  projects combined with their proven expertise and resources will allow
them to successfully bid on and perform  substantial  additional  projects based
out of their regional offices.

                                      F-11
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



2.  MANAGEMENT'S PLANS, FINANCIAL RESULTS AND LIQUIDITY (Continued)

While the  Company  anticipates  that entry into the  energy  production,  waste
treatment and nuclear facilities  decommissioning and site revitalization market
will provide  significant  opportunities for sustainable growth in both revenues
and operating  profits,  entry into those markets requires  substantial  capital
commitments and involves certain risks.  Undertaking  energy  production,  waste
treatment  and  nuclear  decommissioning  projects  can be  expected  to require
capital  expenditures  of as little as several  million  dollars to  hundreds of
millions  of dollars  per  project.  The  Company  does not  currently  have the
necessary  capital  resources to undertake  such  ventures  without  third party
financing. The Company anticipates that it will take on equity partners and seek
third party debt financing to finance substantial portions of the projects which
it expects to undertake.  The Company has no commitments from potential partners
and  financing  sources to provide  funding for future  projects and there is no
assurance  that such partners and financing  sources will be available,  or will
provide  financing on acceptable terms, if and when the Company commences future
projects.

In an effort to deal with these concerns,  the Company is continuing to evaluate
the sale or other  liquidation of various long-term assets which it believes can
provide adequate funding to support future  operations  including  properties in
Poland and El  Salvador,  and the  potential  compromise  of various  claims for
additional compensation. The Company believes that its working capital, combined
with the expected  receipt of funds from  exercise of stock options and warrants
estimated at $1.5 million is sufficient  to meet its  anticipated  needs,  other
than project financing  requirements discussed above, for at least the following
twelve  months,  including  the  performance  of all  existing  contracts of the
Company.  However,  as there is no  assurance  as to the timing or amount of the
receipt of funds from change orders,  litigation or other  sources,  the Company
may be required to seek new bank lines of credit or other  financing in order to
facilitate  the  performance  of jobs.  While the Company is conducting  ongoing
discussions with various potential lenders with a view to establishing available
credit  facilities,  the Company  presently has no commitments  from any bank or
other lender to provide financing if such financing becomes necessary to support
operations. Other than funds provided by operations and the potential receipt of
funds from the  exercise  of  outstanding  warrants  and  options,  the  Company
presently  has no sources of  financing  or  commitments  to provide  financing.
However,  management  believes  that the  Company  will be able to  finance  its
anticipated needs for 2000.

In  light  of the  Company's  continued  losses  sustained  during  1999 and the
continued  uncertainty  affecting  operations  at the  end of  1999,  management
evaluated  various  options  outside its  traditional  businesses  to return the
Company to profitability and to increase  shareholder  value.  Pursuant to those
efforts,  on August 18, 1999, the Company entered into a Plan of  Reorganization
and Merger and an  Agreement  and Plan of Merger  with  Fusion.  Pursuant to the
terms of the Plan of  Reorganization,  the Company  agreed to form a new holding
company. The Company agreed to merge with a wholly-owned  subsidiary of FNH with
the  shareholders of the Company  receiving one share of common stock of FNH for
each  share  of  common  stock  of the  Company  held  immediately  prior to the
reorganization.  Fusion agreed to merge into another wholly-owned  subsidiary of
FNH with the  shareholders of Fusion  receiving one share of common stock of FNH
for  each  share  of  common  stock  of  Fusion  held  immediately  prior to the
reorganization.  Following the  reorganization,  the shareholders of the Company
were  expected  to own  approximately  10% of the  common  stock of FNH with the
shareholders of Fusion owing approximately 90% of the common stock of the FNH.

Fusion  is a newly  formed  company,  based in Miami,  Florida,  which is in the
process of building a portal-type web with an initial  emphasis on Latin America
and the Hispanic market in the United States.  Fusion launched its initial site,
on a pilot basis,  in Bogota,  Columbia,  in October,  1999 followed by a formal
launch of the site in Bogota and in Miami with additional site launches  planned
in Latin America, the United States, Spain and Portugal during 2000.

The proposed  reorganization was approved by the shareholders of the Company and
Fusion in March 2000 and the reorganization is expected to be completed in April
2000.  As a result of the  reorganization,  the  Company  and Fusion will become
wholly-owned  subsidiaries  of FNH. The Company and Fusion both plan to continue
their historical operations for the foreseeable future.

                                      F-12
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



2.  MANAGEMENT'S PLANS, FINANCIAL RESULTS AND LIQUIDITY (Continued)

The  Company  believes  that its working  capital,  combined  with the  expected
receipt of funds from the  exercise of warrants  and options and  resolution  of
certain  change orders and  litigation,  is  sufficient to meet our  anticipated
needs,  other than project financing  requirements  discussed above for at least
the  following  twelve  months,   including  the  performance  of  all  existing
contracts.

3.  ACQUISITIONS AND INVESTMENTS IN AFFILIATES

Life International Products
---------------------------

On July 11, 1996,  effective June 30, 1996,  the Company,  pursuant to a license
agreement  entered  into  between the Company  and Life  International  Products
("Life"),  acquired a 10% interest  (100,000 shares) in Life for $1,300,000.  In
addition to  acquiring a 10%  interest,  the Company  entered  into an exclusive
licensing  agreement  with Life  pursuant to which the Company  shall market and
employ  Life's  patented  environmental  remediation  technology  for long  term
bioremediation  of  contaminated  ground  water  throughout  North  America.  On
November 3, 1997, the Company invested an additional $375,000 (10,000 shares) in
Life to maintain its 10% interest.  On April 21, 1998, the Company  purchased an
additional  8,250  shares for $178,125  from its chief  executive  officer.  The
Company has recorded its  investment at cost and the  investment is presented in
the balance sheet classification "Investment in Affiliate, at cost".

Pursuant to such license agreement, the Company agreed to fund the operation and
expenses  associated  with the  marketing  plan and allocate  revenues from such
agreement for (1) repayment of Life's cost in connection with  manufacturing and
(2) any actual  expenses  of both the Company  and Life  regarding  the sale and
marketing of this  technology.  The balance (the "Net Revenues") shall be shared
between  the  Company  and Life,  20% and 80%  respectively,  with a minimum net
revenue payment of $400,000 due to Life. This agreement,  as amended November 1,
1996,  provides that Life is to be paid this minimum net revenue relating to and
for the period of amendment  to October 1, 1998.  Subsequent  to such time,  the
Company and Life agree to negotiate in good faith as to future minimum  revenues
and agreement  terms.  For the years ended December 31, 1999,  1998 and 1997, no
revenues have been recognized by the investee,  nor have any payments under this
license agreement been made by the Company.

Global Waste and Energy
-----------------------

On July 19,  1996 the  Company,  through a newly  formed  90% owned  subsidiary,
Global Waste & Energy, Inc. ("Global Delaware"), a Delaware corporation, entered
into an agreement with Enviropower  Industries Inc. (formerly  Continental Waste
Conversion, Inc.) ("CWC"). Pursuant to this agreement, Global Delaware acquired,
in exchange  for a 10%  interest in Global  Delaware and a loan through a wholly
owned  subsidiary of Global  Delaware of $160,000  (Canadian)  or  approximately
$116,550  (U.S.),  the exclusive  worldwide rights  (excluding  Canada) to CWC's
proprietary  Kocee  Gas  Generator  waste  treatment  technology  that  converts
municipal solid waste, including tires and plastics,  into electrical energy. In
addition,  the  Company  committed  to loan up to  $1,350,000  over a four month
period  to  Global  Delaware  to carry on this  newly  acquired  waste-to-energy
business.

At closing the  Company  made an initial  loan of  $600,000  to Global  Delaware
repayable  upon demand with interest at 9.25%.  As of December 31, 1999 and 1998
the  Company  had  loans  and  advances  totaling   $3,428,000  and  $3,341,000,
respectively,  to Global Delaware. The consolidated financial statements include
results of  operations  of Global  Delaware and its  subsidiaries  from July 19,
1996, and therefore all intercompany loans and transactions have been eliminated
within the consolidated financial statements of the Company.

                                      F-13
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)




3.  ACQUISITIONS AND INVESTMENTS IN AFFILIATES (Continued)

Global Waste and Energy (Continued)
-----------------------

In conjunction with the July 19, 1996 agreement, Global Delaware formed a wholly
owned Alberta, Canada subsidiary, Global Waste & Energy, Inc. ("Global Alberta")
and through this company acquired from CWC through assignment the rights,  title
and interest of certain  contracts and agreements and two inactive  corporations
domiciled in El Salvador and East Asia.  These companies were acquired to market
and  develop  systems  relating  to the  disposal of  domestic,  industrial  and
agricultural waste and generation of electrical energy by means of gas generator
technology.

On October 18, 1996, Global Alberta entered into a subscription agreement with a
minority  investor,  pursuant to which the minority  investor  had  committed to
purchase  a 45%  interest  in  the El  Salvador  corporation  for  approximately
$1,000,000  U.S. As of December 31, 1996,  $258,621 had been  received  from the
minority investor.  During 1997 the Company repurchased from this investor their
45% equity interest for their initial  investment of $258,621 and a cancellation
of the stock subscription receivable.

As further  discussed  in Note 11,  CWC has filed a claim  against  the  Company
disputing the agreements. On March 20, 1998 Enviropower Industries Inc. filed an
assignment in bankruptcy.  As a result,  the Company wrote off the $116,550 loan
as of December 31, 1997.

Construction Joint Ventures
---------------------------

During 1996 and 1997, the Company entered into joint venture  agreements for the
purposes of  completing  construction  related  projects,  totaling as completed
approximately $18,717,000 through December 31, 1999, specifically for work to be
performed on the Eastside  Reservoir  Project for the Water District of Southern
California   and  building   decommissioning   and  equipment   removal  at  IBM
Microelectronics Hudson Valley Research Park, East Fishkill, N.Y.

These joint  ventures,  in which the Company  holds equity  interests of 49% and
50%,  respectively,  are accounted for using the equity method of accounting for
balance sheet presentation and are presented in the balance sheet classification
"Investments  in and  Advances to  Unconsolidated  Affiliates".  The Company has
included  their  proportionate  share of revenues and expenses  related to these
joint  ventures  within its statement of operations for the years ended December
31, 1999,  1998 and 1997.  Included in contract  income and direct job costs for
each of the years ended are approximately $650,000 and $799,000,  $5,118,000 and
$6,433,000, and $3,304,000 and $3,040,000, respectively.

Seven Star International Holdings, Inc.
---------------------------------------

In January of 1998,  the Company made a $300,000  payment  representing  its one
half share of the capital of Seven Star.  Seven Star is a joint venture  between
the Company and Jin Xin and is incorporated in the British Virgin Islands. Seven
Star has entered  into a license  agreement  with Life for the right to process,
produce,  promote  and sell  Life  products  in the  Peoples  Republic  of China
(including  Hong Kong),  Taiwan,  Indonesia  and  Singapore,  and  elsewhere  in
southeast Asia. The license agreement requires a minimum royalty fee of $400,000
for the first year which was paid upon execution of the license  agreement.  The
Company  recognized its one half share of losses  equaling its investment  under
the equity method of accounting for this investment (See Note 1) of $105,757 and
$194,243 for 1999 and 1998, at which point it converted to the cost method.

                                      F-14
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


4.  ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

                                                           December 31,
                                                     1999               1998

        Trade accounts receivable                $5,048,531          $3,072,951
        Allowance for doubtful accounts            (500,000)           (500,000)
                                                   ----------          ---------
                                                 $4,548,531          $2,572,951
                                                   ==========          =========
5.  NOTES RECEIVABLE

On September 29, 1995,  the Company  entered into two agreements for the sale of
equipment inventory with Universal Process Equipment,  Inc. and their affiliate,
Bethlehem Corporation  (collectively "UPE"), a non-public company with principal
operations in North America, and one of the world's largest marketers of new and
processed equipment.  Pursuant to the terms of such agreements, the Company sold
substantially  all of its glass lined  equipment  and process  equipment  for an
aggregate  minimum  consideration  of $4  million.  The  purchase  price of such
equipment was payable from one third of the net sales proceeds of such equipment
received by UPE. The unpaid  portion of the purchase price of such equipment was
to bear interest at the average  LIBOR base rate over the previous  twelve month
period and any amounts not previously paid under the agreement was to be payable
in full on September  29, 2000. In March of 1999,  the Company  agreed to accept
$300,000 in full settlement of the note receivable from UPE resulting in a write
down of $2,834,815  against the prior  allowance of  $2,834,815.  The settlement
called  for an  initial  installment  payment of  $150,000  at closing  with the
balance  payable in monthly  installments  over the following eight months which
were all received as of December 31, 1999.

On June 7, 1996,  the  Company  loaned  $250,000 to  Solucorp  Industries,  Ltd.
("Solucorp"), an environmental company with which the Company had entered into a
September 7, 1995 Joint Marketing and Operation  Agreement relating to the cross
marketing of Solucorp's soil remediation  process and the Company's products and
services.  The note executed June 7, 1996 (and further amended October 4, 1996),
is  secured  by  shares of  Solucorp's  common  stock.  The terms of the note as
amended required the repayment of principal with interest at 10.25% per annum in
eleven consecutive monthly payments of $22,448 commencing November 1, 1996, with
an initial  payment of $23,202 due upon the  signing of the  amended  agreement.
During  November  1998,  the Company  liquidated  the collateral and applied the
proceeds of $41,607  against the note.  The Company did not receive any payments
during 1999.

Notes receivable consists of the following:


                                                       1999              1998
                                                      ------            ------
        Note receivable                              $ 167,198     $  3,302,013
        Allowance for doubtful accounts               (167,198)      (2,934,815)
                                                      ---------      ----------
                                                     $       -     $    367,198
                                                      =========      ==========

During the years ended  December  31, 1999,  1998 and 1997 the Company  provided
$67,198,  $1,104,815  and  $1,200,000,  respectively,  as bad debt  against  the
outstanding loans.

Because of the unsatisfactory performance of these notes, the Company recognized
no interest  income on them during 1999 and 1998.  Total interest  income earned
from these notes for the years ended  December 31,  1999,  1998 and 1997 was $0,
$0, and $184,394, respectively.

                                      F-15
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



6.  COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Information  with respect to the billing status of  uncompleted  contracts is as
follows:


                                                             December 31,

                                                         1999           1998
                                                        ------         -------

        Costs incurred on uncompleted contracts      $2,087,471     $14,617,961
        Estimated earnings (loss)                       878,683        (389,867)
                                                     -----------    ------------
                                                      2,966,154      14,228,094

        Less:  Billings to date                       3,878,853      12,327,758
                                                     -----------    ------------
                                                     $ (912,699)    $ 1,900,336
                                                     ===========    ============

Included in the accompanying balance sheets under the following captions:



                                                            December 31,

                                                         1999           1998
                                                        ------         ------

   Costs and estimated earnings in excess of billings $       -     $  1,900,336

   Billings in excess of costs and estimated earnings  (912,699)               -
                                                      ----------     -----------

                                                      $(912,699)    $  1,900,336
                                                      ==========     ===========

7.  INVENTORY

Inventory consists of the following:


                                                            December 31,

                                                        1999            1998
                                                       ------          ------

        Purchased equipment ready for sale, at cost  $1,482,517     $ 1,482,517

        Allowance for write downs                    (1,482,517)       (900,000)
                                                    ------------     -----------

                                                     $        -     $   582,517
                                                    ============     ===========

During the years ended  December  31, 1999,  1998 and 1997 the Company  provided
write-downs   against  the  Company's  inventory  of  surplus  power  generating
equipment of $582,517, $ 0 and $600,000, respectively, which has been classified
as a component of cost of goods sold.  Management  believes the write-downs were
necessary  due to the lack of sales  activity and delays in the  utilization  of
this equipment within projects currently being negotiated by the Company.

                                      F-16
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

8.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:


                                                         December 31,

                                                  1999                 1998
                                                 -------              -------

        Land                                $   475,023           $   475,023
        Office equipment                        420,728               418,784
        Furniture and fixtures                  396,261               437,803
        Leasehold improvements                1,018,885             1,018,885
        Transportation equipment                792,208               823,866
        Job equipment                         3,561,131             4,898,064
        Land Improvements                       131,968               131,968
                                             -----------          ------------
                                              6,796,204             8,204,393
        Less:  Accumulated depreciation and
               amortization                   4,892,883             5,070,989
                                             -----------          ------------
                                             $1,903,321            $3,133,404
                                             ===========          ============

Depreciation  and  amortization  expense is reflected in direct job costs and in
operating expenses including general and administrative  expenses.  Depreciation
and  amortization  expense for the years ended December 31, 1999, 1998, and 1997
was $472,396, $661,469 and $713,717, respectively.

For the years ended  December 31, 1999,  1998 and 1997,  $137,779,  $156,608 and
$148,526,  respectively,  of total  depreciation  and  amortization  expense was
reflected in direct job costs.

9.  LONG-TERM DEBT

7% Convertible Notes, Due September 1997
----------------------------------------

During the quarter ended September 30, 1995, the Company  completed a $5,000,000
private  placement  offering of 7%  convertible  notes  pursuant to Regulation S
under the Securities  Act of 1933, as amended.  The notes were due September 15,
1997. The holders of the notes were entitled,  at their option, to convert on or
after November 15, 1995 one third of the original  principal amount of the notes
into shares of common stock of the Company at a conversion  price for each share
equal to the lessor of the  closing bid price of the common  stock on  September
15, 1995  ($50.00) or 82% of the market price of the common stock at the date of
conversion.  The remaining two thirds of the principal  amount of notes could be
converted  on the same terms,  one third after  December  15, 1995 and one third
after  January 15,  1996,  respectively.  In the event the notes were  converted
within one year of their  issuance,  no interest  was  payable on the  converted
portion  of such  shares.  As of  December  31,  1997,  all the  notes  had been
converted into 159,727 shares of the Company's common stock.

Due to the lack of a fixed  conversion  price or other  mechanism  to limit  the
total number of shares  exercisable  upon conversion of the debt, an inadvertent
violation of the rules  applicable  to NASDAQ  National  Market  Securities  was
determined  to have  occurred  during the first  quarter of 1996. To remedy such
problem,  the Company  imposed a cap on conversions  which could not be exceeded
unless the  shareholders of the Company first approved the issuance of shares on
conversion in an aggregate amount exceeding 20% of the outstanding shares on the
date  of the  convertible  note  issuances.  Consequently,  the  balance  of the
Convertible  Notes  outstanding at March 31, 1996  amounting to $1,750,000  were
subject to a cap on conversions imposed by the Company to assure compliance with
NASDAQ rules.  The Company  submitted a proposal to its shareholders at its 1996
annual   shareholders   meeting  to  permit  the  conversion  of  the  remaining
Convertible  Notes.  The proposal was  approved and the  remaining  Notes became
convertible  with the conversion price being reduced from 82% of the closing bid
price to 80% of such price and all interest  accrued on such  Convertible  Notes
being payable in shares of common stock.

                                      F-17
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



9.  LONG-TERM DEBT (Continued)

7% Convertible Notes, Due September 1997 (Continued)
----------------------------------------

In connection with the issuance of the convertible notes, the Company paid total
offering  costs of  approximately  $815,000.  Such  costs  were  capitalized  as
deferred  issuance costs and were  amortized over the term of the notes.  To the
extent the notes were converted,  all or an allocable portion of such costs were
charged  against  paid in capital net of tax effect.  As of December  31,  1996,
$201,775 was amortized and $613,225 of unamortized  deferred  issuance costs and
$103,668  in accrued  interest  (net of the tax effect of  $69,117)  was charged
(credited)  to  paid  in  capital  in  connection  with  the  conversion  of the
$5,000,000 of convertible notes.

7% Convertible Notes, Due January 1999
--------------------------------------

On August 13, 1997, the Company  completed a private  placement of $3,025,000 of
7% Convertible Notes (the  "Convertible  Notes") and 267,500 three year Warrants
(the "Three Year Warrants").

The  Convertible  Notes are  convertible  into common stock at the lesser of (i)
$27.50  per share or (ii) 75% of the  average  closing  bid price of the  common
stock during the five trading days prior to conversion.  The Three Year Warrants
are exercisable for a three year period at the lesser of $30.00 per share or the
lowest conversion price of the Convertible Notes.  Conversion of the Convertible
Notes and  exercise of the Three Year  Warrants was subject to the issuance of a
maximum of 199,713 shares of common stock on conversion  unless the shareholders
of the Company approved issuance beyond that level upon conversion.  Shareholder
approval of issuance  beyond  199,713  shares was  received on November 4, 1997.
Further,  the Company had the right,  upon notice to the holders,  to redeem any
Convertible  Notes submitted for conversion at a price of $27.50 or less at 125%
of the principal  amount of such Convertible  Notes.  The Convertible  Notes pay
interest at 7% payable  quarterly  and on conversion or at redemption in cash or
common  stock,  at the  Company's  option.  In  the  event  that a  registration
statement  covering the shares  underlying  the  Convertible  Notes has not been
declared  effective  within  90 days  or 180  days  after  the  issuance  of the
Convertible  Notes,  the  interest  rate  on  the  Convertible  Notes  was to be
increased to 18% and 24%, respectively, from those dates until such registration
statement became effective.  As a registration was not declared effective within
the 90 days  required  under the terms of the  agreement,  the company  incurred
$46,215 in additional interest. On January 8, 1998 the registration was declared
effective  and  during  the first  quarter  of 1998 all  outstanding  notes were
converted.

The  difference  between the market price of the  Company's  common  stock,  the
discounted  beneficial  conversion  feature  and the  fair  market  value of the
granted  warrants  totaled  $4,818,750 and is being  accounted for as additional
interest reflected in debt discount and  paid-in-capital.  The debt discount has
been  calculated as the fixed discount from the market at the date of sale based
upon the common  stock's  trading  price of $40.00 per share on August 13, 1997.
This interest is being  amortized  over the three year life of the debt.  During
1998 and 1997,  $4,205,886  and  $612,864  has been  amortized  and  recorded as
interest expense.

                                      F-18
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)
9.  LONG-TERM DEBT (continued)

Long-term debt consists of the following:
<TABLE>

                                                                                                         December 31,

                                                                                                    1999             1998
                                                                                                   ------           ------
<S>                                                                                              <C>               <C>

Note Payable:
  Demand note payable in connection with locking in an amended warrant
   exercise price, convertible into common stock                                                  $     -          $265,122

Notes Payable:

  Note, payable in monthly installments of $450 including interest at approximately
   9.9% per annum through December 2004, secured by auto                                           21,080                -

  Note, payable in monthly installments of $1,476 including interest at approximately
    8.25% per annum through September 2000, secured by equipment                                   14,485           28,971

  Note, payable in monthly installments of $1,082 including interest at approximately
    24% per annum through April, 2001, secured by equipment.  During 1999 the loan
    was assumed by a third party in exchange for the equipment.                                         -           22,673

  Note, payable in monthly installments of $793 including interest at approximately
   10.2% per annum through February 2000, secured by equipment.  During April 1999,
    the loan was paid off from proceeds received from the liquidation of the equipment
    totaling approximately $9,000.                                                                      -            9,409

Capital Lease Obligations:
  Capital lease, payable in monthly installments of $3,569 including interest at
    approximately 12.0% per annum through March 2001, secured by equipment.                             -           76,350
    As discussed in the following paragraph the balance due on this capital lease
    obligation has been reclassified as a current obligation within accounts payable
    and accrued expense.

  Capital lease, payable in monthly installments of $32,959 including interest at
    approximately 11.8% per annum through March 1999, secured by equipment.                             -          127,285
    As discussed in the following paragraph the balance due on this capital lease
    obligation has been reclassified as a current obligation within accounts payable
    and accrued expense.

  Capital lease, payable in monthly installments of $6,138 including interest at
   approximately 10.8% per annum through August 1999, secured by equipment.                             -           53,369
   As discussed in the following paragraph the balance due on this capital lease
   obligation has been reclassified as a current obligation within accounts payable
   and accrued expense.

  Capital lease, payable in monthly installments of $6,866 including interest at
   approximately 12.6% per annum through March 2000, secured by equipment                               -          104,159
   As discussed in the following paragraph the balance due on this capital lease
   obligation has been reclassified as a current obligation within accounts payable
   and accrued expense.                                                                         ---------        ---------
                                                                                                   35,565          687,338
Less:  Current portion                                                                             18,701          622,794
                                                                                                ---------        ---------
                                                                                                  $16,864        $  64,544
                                                                                                =========        =========
</TABLE>

                                      F-19
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Continued)



9.  LONG-TERM DEBT (Continued)

During 1999, the Company sold collateral  securing the capital lease obligations
reflected in the table above.  Approximately  $200,000 of proceeds from the sale
of this equipment was used to pay down the capital lease  obligations.  However,
since the Company  liquidated a  substantial  portion of the  collateral  and is
currently delinquent on the balance due on these lease obligations,  the Company
has reclassified  the remaining  balance of  approximately  $178,000  (including
interest of  approximately  $39,000  accrued  through  December  31,  1999) as a
current liability within accounts payable and accrued expenses.

At December 31, 1999,  maturities  of long-term  debt  (including  capital lease
obligations) are as follows:

                           2000                                       18,701
                           2001                                        2,935
                           2002                                        4,193
                           2003                                        4,631
                           2004                                        5,105
                                                                    --------
                                                                    $ 35,565
                                                                    ========

10.  PROVISION (CREDIT) FOR INCOME TAXES

Provision (Credit) for income taxes is as follows:

                                              Years Ended December 31,
                                      1999            1998               1997
                                     ------          ------             ------
              Deferred:
                Federal        $          -     $  3,870,000        $(1,906,000)

                State            (1,200,000)         300,000            230,000

                Foreign                   -                -            115,000
                                ------------      -----------       ------------
                                 (1,200,000)       4,170,000         (1,561,000)
                                ------------      -----------       ------------
                               $ (1,200,000)    $  4,170,000        $(1,561,000)
                                ============      ===========       ============

There was no current portion of the provision (credit) for income taxes in 1999,
1998 or 1997.

                                      F-20
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


10.  PROVISION (CREDIT) FOR INCOME TAXES (Continued)

A reconciliation  between income tax expense (benefit) shown in the statement of
operations and expected income tax expense  (benefit)  using  statutory  federal
income tax rates applicable to the Company is as follows:

<TABLE>

                                                           Years Ended December 31,
                                                       1999        1998             1997
                                                      Amount      Amount            Amount
                                                     --------    --------          --------
        <S>                                       <C>           <C>            <C>

         Taxes at Statutory rate                  $(2,839,000)  $(6,206,000)   $(3,910,000)

         State taxes net of federal tax effect       (635,000)     (607,000)      (480,500)

         Foreign tax loss carryforward                218,000       415,000        390,500

         Non-deductible items                          95,000     1,430,000        (40,300)

         Increase in valuation allowance            1,961,000     9,138,000      2,479,300
                                                   -----------   -----------   ------------
                                                  $(1,200,000)  $ 4,170,000   $ (1,561,000)
                                                   ===========   ===========   ============
</TABLE>


Certain  items of income and  expense  are  recognized  in  different  years for
financial reporting and income tax purposes.  Deferred income taxes are provided
in recognition of these temporary differences.  The components of these deferred
income tax assets are as follows:

<TABLE>

                                                                          December 31,
                                                             1999            1998                1997
                                                            ------          ------              ------
       <S>                                            <C>              <C>               <C>

         Deferred Tax Assets:

           Current:
             Accounts and notes receivable allowances  $   1,393,000    $   1,369,000      $  1,028,800
             Inventory allowance                             609,000          378,000           401,000

             Consultant expense                              875,000          860,000           110,100

             Net operating loss carryforwards             14,835,000       13,184,000         9,135,400

             Less: Valuation allowance                   (17,492,000)     (15,531,000)       (6,357,000)
                                                         ------------     ------------       -----------
                                                             220,000          260,000         4,318,300
           Non-current:
         Fixed assets                                       (220,000)        (260,000)         (148,300)
                                                         ------------     ------------       -----------
         Total deferred tax assets                     $           -   $            -      $  4,170,000
                                                         ============     ============       ===========
</TABLE>

                                      F-21
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



10.  PROVISION (CREDIT) FOR INCOME TAXES (Continued)

At  December  31,  1999 the Company had net  operating  loss  carryforwards  for
federal  income tax  purposes  of  approximately  $36,500,000  which  expires as
follows:

                    Year Ending
                    December 31,

                       2010                                $  2,300,000
                       2011                                   9,100,000
                       2012                                   8,600,000
                       2013                                  10,600,000
                       2014                                   5,900,000
                                                            -----------
                                                           $ 36,500,000
                                                            ===========

In  assessing  the  reliability  of deferred  tax assets,  management  considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will be  realized.  The  ultimate  realization  of deferred tax assets is
dependent  upon the  generation of future  taxable  income during the periods in
which temporary  differences  become deductible and the net operating losses can
be carried  forward.  In  determining  such  projected  future  taxable  income,
management has considered the Company's  historical  results of operations,  the
current  economic  environment  within the Company's core  industries and future
business  activities in which the Company has positioned itself. At December 31,
1999 and 1998, in view of the Company's substantial losses over the past several
years and uncertainties  regarding future  operations,  the Company's  valuation
allowance  is  equal  to  their  deferred  tax  assets,   net  of  deferred  tax
liabilities.  The increase in the valuation  allowance during 1998 resulted in a
tax provision of $4,170,000.

In  November  1999,  the  Company  received  approval  from  State of New Jersey
Technology Tax Certificate Transfer Program (TTCTP) of their application for the
sale of New Jersey  Corporate Net Operating  Losses  relating to the years ended
December 31, 1995 and 1996. Due to the sale of these net operating  losses,  the
Company  recorded a tax benefit of  $1,200,000  reflected  in the  statement  of
operations.  In  December,  1999 the  Company  received  approximately  $550,000
against this tax benefit with the balance of $650,000 to be received in the year
2000.


11. COMMITMENTS AND CONTINGENCIES

Employment Contracts and Agreements
-----------------------------------

On February  18, 1998 the  February 1, 1996  employment  agreements  between the
Company and Joel A. Freedman and Frank A. Falco were  amended.  Pursuant to such
amended agreements, effective September 1, 1997, Mr. Freedman and Mr. Falco each
receive (i) a base salary of $480,000 per year plus 2% of net operating profits;
(ii) bonuses as determined by the Board of Directors; (iii) participation in any
employee benefit plans and fringe benefit  arrangements  generally  available to
the Company's employees;  and (iv) an entertainment expense allowance of $45,000
per year.  For purposes of computing  the salary of Messrs.  Freedman and Falco,
operating  profits are defined as net income from operations before deduction of
interest expense, income taxes, depreciation and amortization and other non-cash
charges  to  income.  Pursuant  to the  February  18,  1998  amendment  to their
employment  agreements,  Messrs.  Freedman and Falco were each  granted  225,000
stock options exercisable at $6.75 per share, as amended,  and expiring February
17, 2003.  The Company  obtained a fairness  opinion and  valuation  report from
independent  sources  that  estimated  the fair  market  value for each of these
options to be  $7,017,750  at the date of grant  using the  Black-Scholes  value
option pricing model. Exercise of the options is not permitted until the closing
bid price of the Company's common stock equals or exceeds 120% of the applicable
option price in existence prior to December 11, 1998.

                                      F-22
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



11. COMMITMENTS AND CONTINGENCIES (Continued)

Employment Contracts and Agreements (Continued)
-----------------------------------

For the years ended December 31, 1999,  1998 and 1997 the  compensation  expense
for the two officers,  including board approved bonuses, was $480,000,  $480,000
and $480,000 each, respectively.

The employment  agreements  prohibit Mr.  Freedman and Mr. Falco from competing,
directly or indirectly, with the Company or disclosing confidential matters with
respect to the Company for two years after  termination of  employment.  Each of
such  agreements  expires  on March 31,  2005 and are  thereafter  automatically
extended  for one-year  periods  unless  there is a notice of  termination  from
either the Company or the employee.

In the event of their  disability,  Messrs.  Freedman  and Falco are entitled to
continue  their full salary at the date of  disability  for a period of one year
after which time the Company  may  terminate  the  employment  of such  disabled
employee without further compensation.  In the event of death during the term of
employment,  the estate of Mr. Freedman and Mr. Falco, as appropriate,  shall be
entitled  to  three  months  salary.  In the  event  of the  termination  of Mr.
Freedman's  or Mr.  Falco's  employment  within  one year of the  occurrence  of
various  change  in  control  events,  or in the event of  termination  of their
employment  by the Company for any reason  other than death or  disability,  the
Company must pay or provide to Mr.  Freedman  and/or Mr. Falco,  as appropriate;
(i) a lump sum payment equal to 2.99 times his average  annual gross income from
the  company  for the  five  tax  year  period  ending  before  the date of such
termination;  (ii) a lump sum  payment  equal to three  times  the  value of all
"in-the-money"  stock  options held by such persons at the date of  termination;
and (iii) continued  participation in all employee benefit programs for a period
of three years, provided that the employee may, at his election,  receive a lump
sum cash  payment  equal  to the  value of such  benefits  in lieu of  continued
participation in such benefit plans.  Additionally,  in the event of a change in
control during the term of their contracts,  Messrs.  Freedman and Falco will be
deemed to have earned in full the Stock Bonuses provided for in their employment
contracts. As used in the employment agreements of Messrs. Freedman and Falco, a
"change in control" is defined to be (i) the acquisition of 15% of the Company's
common stock;  (ii) a change in majority  composition  of the Board of Directors
within any two year period; or (iii) a failure to elect either of such employees
to the Board when such  employee is standing for  election;  provided,  however,
that such events  shall not  constitute a change in control if a majority of the
Directors  immediately prior to such "change in control" approve the transaction
or event otherwise constituting a "change of control."

On July 19, 1996, Global Alberta entered into employment agreements with the two
principal  officers of Global Alberta for terms through June 30, 1999.  Pursuant
to such  agreement,  the two  officers  each are to receive an annual  salary of
$240,000 (Canadian) through the term of the agreement. These agreements were not
renewed, but one of the officers has continued in the employment of the Company.

On February 11, 1996,  the Company  entered into  agreements  with its executive
employees  pursuant  to  which  such  employees  have  agreed  to  maintain  the
confidentiality  of certain  information and have agreed to not compete with the
Company  within 250 miles of the  Company's  principal  places of business for a
period of three years following the termination of such persons' employment with
the Company.  Additionally, the Company has entered into agreements with each of
its executive  officers,  other than Messrs.  Freedman and Falco,  which provide
that such  officers  shall be entitled  to (i) a lump sum payment  equal to 2.99
times his average  annual gross  income from the company for the three  tax-year
period ending before the date of such termination; (ii) a lump sum payment equal
to three  times  the  value of all  "in-the-money"  stock  options  held by such
persons at the date of  termination;  and (iii) continued  participation  in all
employee  benefit  plans or programs for a period of three years,  provided that
the employee may, at his election,  receive a lump sum cash payment equal to the
value of such benefits in lieu of continued participation in such benefit plans.

                                      F-23
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



11. COMMITMENTS AND CONTINGENCIES (Continued)

Employment Contracts and Agreements (Continued)
-----------------------------------

For  purposes  of such  agreements,  a change in  control is defined in the same
manner as in the  employment  agreements of Messrs.  Freedman and Falco,  except
that failure of either Mr. Freedman or Mr. Falco to be elected when standing for
election as a director  shall not  constitute a "change in control" for purposes
thereof.

In addition to the foregoing employment and change of control arrangements,  the
Company's 1993 and 1995 and 1998 Stock Option Plans provide that all outstanding
options  shall become fully vested and  exercisable  in the event of a change in
control.

On March 28, 2000 a merger was approved by the  stockholders of the Company with
FNH (See Note 17).  This  merger had been  previously  approved by a vote of the
Board of directors  and  therefore was not deemed to be a "change of control" as
defined in the employment  agreements.  Also,  pursuant to the merger  agreement
with FNH, FNH and Fusion are  guaranteeing  up to $50,000 of the salary  payable
under the employment  agreements of Messrs.  Freedman and Falco, for a period of
three years from the date of the merger.

Operating Leases
----------------

The  Company  currently  leases  its office and  warehouse  facilities  from L&G
Associates  ("L&G"),  a related  partnership owned by principal  officers of the
Company, as further discussed in Note 13, Related Parties.  The Company has also
entered into leases for other  facilities  outside of New Jersey under operating
lease agreements with terms ranging from two to five years.

A schedule of the future minimum payments under operating leases is as follows:


         Year Ending December 31,        Related Party         Other Operating

                 2000                     $   316,164              $177,018

                 2001                         316,164               123,237

                 2002                         316,164                     -

                 2003                         316,164                     -

                 2004                         316,164                     -

                 Thereafter                 1,896,984                     -
                                           ----------             ----------
                                           $3,477,804              $300,255
                                           ==========             ==========

As  further   discussed  in  Note  13,  the  Company  incurred   renovation  and
construction costs at their New Jersey facility which premises are leased from a
related party. The cost of these improvements,  totaling approximately $448,000,
by agreement  entered into in 1994 and amended May 16, 1996,  are being  charged
over fifteen (15) years,  through May 31, 2011, in lieu of lease  payments.  The
cost allocation is reflected as amortization at a rate equal to the lease terms.

                                      F-24
<PAGE>
                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



11. COMMITMENTS AND CONTINGENCIES (Continued)

Litigation
----------

The Company is periodically  subject to lawsuits and administrative  proceedings
arising in the ordinary course of business.  Management believes that no pending
lawsuits  or  administrative  proceeding  is likely to have a  material  adverse
effect on the condition or results of operations of the Company.

On August 15, 1996, the U.S. Department of Labor, Occupational Safety and Health
Administration  ("OSHA") issued wilfull citations and notification of penalty in
the amount of $147,000 on the Company in connection with the accidental death of
an employee of one of the Company's  subcontractors  on the United  Illuminating
Steel Point Project job site in Bridgeport,  Connecticut.  A complaint was filed
against the Company by the Secretary of Labor, United States Department of Labor
on September  30, 1996. A hearing was  conducted in the matter in April 1997. In
June 1998, the Company  received a copy of the written  decision filed by OSHA's
Review  Commission.  The Commission  vacated the first alleged wilfull citation,
but affirmed each of the second and third wilfull citations,  imposing a penalty
in the amount of $70,000 for each citation. The Company strongly objected to the
Commission's finding on the basis that it cannot be sustained as matters of fact
or law and filed a timely Notice of Appeal with the OSHA Review  Commission  for
Discretionary  Review,  which body has  accepted  jurisdiction  of the matter on
administrative  appeal. The Company is contesting the Citations and Notification
of Penalty.

Also in connection with this  accidental  death,  the employee's  estate filed a
complaint  for  wrongful  death  against  the  subcontractor  and the Company on
February 11, 1997.  The estate seeks  damages in the amount of $45 million.  The
Company is being defended by the  subcontractor's  insurance carrier pursuant to
the subcontractor's  obligation to defend and indemnify the Company with respect
to the actions of its  (subcontractor's)  employees and agents. The Company will
be fully indemnified for any liability,  if any, for any potential  judgement or
settlement  in this matter by the  subcontractor's  carrier and, if necessary by
its own general liability  insurance carrier and,  therefore,  the action is not
expected to have any material  effect on the  Company's  consolidated  financial
statements.

In November of 1996,  a  shareholder  filed a class action  lawsuit  against the
Company and certain  directors and officers of the Company.  The suit,  filed in
the Superior Court of New Jersey,  Middlesex County, as subsequently  amended in
June 1997, alleged that the Company  disseminated false and misleading financial
information to the investing  public between March 8, 1996 and November 18, 1996
and  sought  damages  in an  unspecified  amount  to  compensate  investors  who
purchased the Company's  securities  between the indicated dates, as well as the
disgorgement of profits allegedly received by some of the individual  defendants
from sales of common stock during that period.  A written  settlement  agreement
was executed by  plaintiff's  counsel on behalf of the class and was approved by
the court.  The matter was  settled  and  finally  resolved  with the payment of
$1,125,000  to the class.  The entire  settlement  sum was paid by the Company's
director's  and  officer's  ("D&O")  insurance  policy  carrier  pursuant to the
obligations  owed by the carrier  under the Company's  existing D&O policy.  The
settlement  covered  the  class  period  March  8,  1996 to June  5,  1997.  The
settlement, as expressly reflected in the settlement documents, has been made as
a business  accommodation  only,  and neither  the  Company,  nor any  director,
officer or employee of the Company has admitted or will admit any wrong doing of
any kind.  With the closing of the  settlement,  the action was  dismissed  with
prejudice  and the  Company and each of the  individuals  who have been named as
defendants were released from any and all claims for the entire class period.

                                      F-25
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


11. COMMITMENTS AND CONTINGENCIES (Continued)

Litigation (Continued)
----------

On April 1,  1997,  Enviropower  Industries  Inc.,  formerly  Continental  Waste
Conversion  Inc.  ("Enviropower"),  commenced  an  action  in court in  Calgary,
Alberta against IDM Environmental  Corp. and it's  subsidiaries,  Global Waste &
Energy  Inc.,  formerly  Continental  Waste  Conversion  International,  Inc., a
Delaware  Corporation  ("Global  Delaware"),  Global  Waste  and  Energy,  Inc.,
formerly Continental Waste Conversion International Inc., an Alberta Corporation
("Global   Alberta")   together  with  two  former  officers  and  directors  of
Enviropower who were then  subsequently  employed by Global Alberta.  The action
arose from the agreements  entered into between  Enviropower and IDM on or about
July 19, 1996 (the  "Agreements"),  which provided,  among other things, for the
grant to Global Alberta of  Enviropower's  right,  title and interest in certain
worldwide  marketing  and  sales  agreements  and to an  exclusive,  irrevocable
license granted to Global Delaware to market and use certain  technology outside
Canada  in  connection  with the  environmentally  safe  conversion  of  certain
domestic industrial and agricultural solid waste into energy (the "Technology").
Enviropower  sought to set aside the  Agreements  on the alleged  basis that its
shareholders did not approve the transaction.  In addition,  Enviropower claimed
damages for loss of its right to market and use the Technology outside of Canada
resulting in an alleged  estimated loss of $30 million.  Enviropower also sought
indemnification for liabilities allegedly incurred by Global Alberta in the name
of  Enviropower  in the amount of  $363,000,  a  declaration  that all  profits,
interest  and  benefits  arising  from the  Agreements  be paid to  Enviropower,
punitive  damages of $1 million,  costs and interest plus such further and other
relief as is more  particularly  set out in the  Statement of Claim.  In June of
1997, the Company filed a separate cause of action against  Enviropower  seeking
injunctive  relief against  Enviropower,  seeking to enforce the agreements with
Enviropower  and to  collect  amounts  owed to the  Company by  Enviropower.  On
September  19,  1997,  the  Company was  awarded an interim  injunction  against
Enviropower  recognizing  it's  exclusive  rights  to  the  licensed  technology
throughout  the  pendency  of the action and until  further  order of the court.
Enviropower  has since filed for  protection  under  Canadian  bankruptcy  laws,
staying all proceedings between the Company and Enviropower. On or about January
13, 1999 the Company entered into a comprehensive  settlement of the matter with
the bankruptcy  Trustee.  Among other things,  the  settlement  provided for the
entry of a  Permanent  Injunction  in favor of the  Company  which,  in essence,
recognizes the Company's  exclusive rights to the Technology and the validity of
the Agreements that were at issue in the litigation.

In July of 1998,  Kasterka  Vrtriebs GmbH  ("Kasterka")  filed a cause of action
suit against the  Company,  it's  subsidiary,  Global Waste & Energy and certain
affiliates  and  officers  in the Court of Queen's  Bench of  Alberta,  Judicial
District of Calgary.  The plaintiff alleges that the Company and it's affiliates
breached a marketing  agreement that had been entered into between  Kasterka and
Enviropower.  Kasterka  also  alleges that the  defendants  failed to supply the
required  plans  and  specifications  relating  to the  gasification  technology
originally  developed by Enviropower and that, as a result,  Kasterka was unable
to manufacture and market  gasification  units in the territories  designated in
the marketing agreement. Kasterka asserts a variety of claims for damages in the
aggregate amount of approximately $42 million.  The Company believes the suit is
without merit and intends to vigorously contest the cause of action.

In September of 1998, Balerna Concrete Corporation  ("Balerna") filed a cause of
action against the Company in the United States District Court of Massachusetts.
The  plaintiff  alleges  that the Company,  and others,  engaged in a pattern of
illegal conduct to divert funds from Balerna through the operation of a concrete
finishing  business.  Balerna has asserted various claims under RICO, common law
fraud,  conversion,  breach of contract  and other basis  seeking  damages in an
amount expected to exceed  $450,000.  The case was dismissed in February,  2000,
however, Balerna has filed an appeal of the decision.

                                      F-26
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


11. COMMITMENTS AND CONTINGENCIES (Continued)

Other
-----

The  Company  is  contingently   liable  to  sureties  under  general  indemnity
agreements.  The Company  agrees to indemnify the sureties for any payments made
on contracts of suretyship, guaranty or indemnity. The Company believes that all
contingent  liabilities  will be satisfied by their  performance on the specific
bonded contracts involved.

12.  RETIREMENT SAVINGS PLAN

In July of 1992, the Company  amended an existing profit sharing plan to convert
such plan to a retirement  savings plan (the "401(k) Plan") under section 401(k)
of the Internal  Revenue Code. The 401(k) Plan generally covers all employees of
the Company who have completed two years of service with the Company.  Employees
may elect to defer, in the form of  contributions  to the 401(k) Plan, up to 15%
of their annual compensation,  subject to the federal maximum limit. The Company
may,  at its  own  discretion,  contribute  to the  plan.  The  Company  did not
contribute to the 401(k) Plan during the years ended December 31, 1999, 1998 and
1997.

13.  RELATED PARTIES

Officer Loans and Advances
--------------------------

From  time to time  the  Company  has  made  loans  and  advances  to two of its
directors and officers of the Company.

On September 1, 1995, Joel Freedman,  the President and Chief Executive  Officer
of the Company,  surrendered  to the Company 3,662 shares of his common stock of
the  Company at $52.50 per  share,  the  average  closing  market  price for the
previous  month,  as payment in full of loans from the  Company in the amount of
$192,260. Such shares have been canceled.

At  December  31,  1995,  the  Company had a  receivable  due from Frank  Falco,
chairman of the Board of Directors and Chief  Operating  Officer of the Company,
of $552,479  including  interest at 7% per annum.  On April 1, 1996,  Mr.  Falco
surrendered  to the Company  9,221  shares of his common stock of the Company at
$72.72 per share,  the average  closing market price for the previous  month, as
payment in full of loans from the  Company in the amount of  $670,580,  the then
current balance. Such shares have been canceled.

At December 31, 1997, the company had  receivables due from Mr. Freedman and Mr.
Falco for $7,965 and $361,576, respectively, including interest at 7% per annum,
which were repaid during 1998.

During 1998, Frank Falco, Chairman of the Board of Directors and Chief Operating
Officer of the Company, paid the Company $490,000,  which represented payment in
full of all amounts due from officers to the Company.

During  1998,  the  Company  purchased  8,250  shares  of  common  stock of Life
International  Products,  Inc. from Joel Freedman for $178,125,  Mr.  Freedman's
cost basis in those shares.

                                      F-27
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


13.  RELATED PARTIES (Continued)

Officer Loans and Advances (Continued)
--------------------------

During 1999 the Company borrowed funds from various parties, including officers,
and have issued stock in payment of certain trade payables. At December 31, 1999
the Company  owed a total of $217,000  primarily to two  principal  officers for
funds advanced. There are no definitive repayment terms on such amounts. In June
1999, the Company borrowed  $400,000 from existing  stockholders.  That loan was
repayable in August 1999 with interest at 6.5%.  As  inducement  for making that
loan, the Company issued 125,000 shares of common stock to the lenders. The loan
has been repaid at December 31, 1999.

Leases
------

The  Company  leases  its  offices  and  yard  storage  facilities  from  L  & G
Associates,  a related  partnership  owned by the principal  stockholders of the
Company.

On March 1, 1993, the Company  entered into a five year lease  agreement on such
property, which includes two additional parcels of land. Pursuant to such lease,
the  Company  will  pay  base  rent  of  $270,000  annually  subject  to  annual
adjustments  based on the  consumer  price  index,  plus  costs of  maintenance,
insurance and taxes.

In 1994,  the Company  and L&G  Associates  ("L&G")  entered  into an  agreement
regarding  the  construction  and/or  renovation  of expanded  facilities on the
premises presently leased by the Company from L&G and the renovation and leasing
of an adjoining property. The expanded facilities were needed to support current
operations  and  anticipated  future growth.  The Board of Directors  formed the
Building Committee to review the terms and fairness of such proposed  expansion.
In November of 1994,  the parties  agreed in principal with respect to the terms
of the  proposed  expansion  and the  Building  Committee  determined  that such
expansion  met the  Company's  needs  and was on terms  which  were  fair to the
Company.  Based on such agreement and determination,  the Company in November of
1994 commenced  renovation and construction on such sites of which one facility,
office space (7,600  square  feet),  was  completed  during the third quarter of
1995,  and the  second  facility,  warehouse  space  (5,700  square  feet),  was
completed  during the third quarter of 1996.  Renovation of such office space by
the company at an approximate  cost of $303,000  constitutes  payment in full of
rent for the initial term of the lease of such office  space.  The Company shall
also be  responsible  for all taxes,  utilities,  insurance  and other  costs of
occupying  the  office  space  during the  initial  term.  Construction  of such
warehouse  space by the Company at an  estimated  cost of  $145,000  constitutes
payment  in full of rent for the  initial  term of the  lease of such  warehouse
space. The Company shall also be responsible for all taxes, utilities, insurance
and other costs of occupying  the warehouse  space during the initial term.  The
total cost of the  renovations was to be amortized over the initial terms of the
lease.  On May 16, 1996 the leases were amended and extended 15 years to May 31,
2011.  The  amortization  associated to the cost of the  renovation was extended
through the terms of the modified lease.  Amortization  expense related to these
costs for each of the years ended December 31, 1999,  1998 and 1997 was $93,320.
For the years ended December 31, 1999,  1998 and 1997 the Company  recorded rent
expense   associated  with  this  lease  of  $315,130,   308,948  and  $302,412,
respectively.  Future  minimum  rental  obligations  are  reflected  in Note 11,
Commitments  and  Contingencies.  As of  December  31,  1999,  the Company had a
balance due L&G of approximately $104,000.

14.  MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

The Company earned more than 10% of its revenue from each of three  customers in
1999,  each of four  customers in 1998 and two customers in 1997.  For the years
ended  December  31,  1999,  1998 and 1997  total  revenues  derived  from these
customers  were   approximately   $10,784,000,   $13,560,000   and   $8,443,000,
respectively.

                                      F-28
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


14.  MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK (Continued)

Financial  instruments which potentially subject the Company to concentration of
credit risk consist  principally  of trade  receivables,  notes  receivable  and
investments in affiliates.  Management  believes that the risk  associated  with
each of these  assets has been  adequately  provided  for in the  allowance  for
doubtful accounts and write downs of investments to fair value.

15.  STOCKHOLDERS' EQUITY

Preferred Stock
---------------

In July of 1993, the Company offered and sold ten units at $50,000 per unit, for
an  aggregate  of  $500,000.  Each  unit  consisted  of 500  shares  of Series A
Preferred  Stock,  600 shares of common stock and 500 warrants,  exercisable  to
purchase  one share of common  stock at $50 per share until July 31,  1996.  The
preferred stock had a 9% per annum cumulative dividend,  payable quarterly.  The
holders of the Series A  Preferred  Stock had the right to "put" such  shares to
the Company at a price of $100 per share after the Company  attained a net worth
of $3,000,000 or more or at any time after January 15, 1994. The Company had the
right to  redeem  the  Series A  Preferred  Stock at $100 per  share on or after
August 1, 1995. The Company had also agreed to include the shares underlying the
warrants  included  in such  units in any  registration  statement  filed by the
Company  following the Company's initial public offering at no cost to such unit
holders.  On  April  29,  1994,  the  Company  redeemed  all of the  outstanding
Preferred Stock at the request of the preferred shareholders.

On July 14, 1997,  the Company  filed an amendment  to their  corporate  charter
authorizing  it to issue up to 1,000,000  shares of Preferred  Stock,  $1.00 par
value.

Convertible Preferred Stock
---------------------------

On February  12, 1997 (the  "closing  date") the Company  entered into a private
placement  wherein  it  offered  and sold  300  shares  of  $10,000  Series  "B"
Convertible  Preferred Stock (the "preferred shares") in private transactions to
selected investors who qualify as "accredited  investors" (within the meaning of
Rule 501(a)  promulgated  under the  Securities  Act of 1933,  as amended).  The
preferred  shares were  convertible  into shares of the  Company's  common stock
beginning  on the 91st  calendar  day after the closing  date  according  to the
following:


                                             Lower of x or y
                                       x                          y
     Calendar Days               Closing Date              Conversion Date
     After Closing               Average Times              Average Times
        91 - 120                     120%                        82%
       121 - 150                     110%                        79%
       151 - 180                     100%                        76%
         - 180                       100%                        73%


                                      F-29
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


15.  STOCKHOLDERS' EQUITY (Continued)

Convertible Preferred Stock (Continued)
---------------------------

The  conversion  date  average was the  average  closing bid price of the common
stock as  calculated  over the five trading day period ending on the trading day
preceding the date on which the holder  transmits (by  telecopier) his notice to
convert.  Each preferred share was convertible  into the Company's  common stock
(the  "conversion  shares")  determined  by dividing  $10,000 by the  applicable
conversion  price. The preferred shares were due to mature on February 12, 2000,
and on that date each  preferred  share  then  outstanding  would  automatically
convert  into  conversion  shares  at the then  current  conversion  price.  The
preferred shares pay an annual 7% dividend. The dividends were payable only upon
conversion  or redemption  of the  preferred  shares and were payable  either in
shares of common stock (the  "dividend  shares") at the average  market price of
the common stock over the five trading days preceding the conversion  date or in
cash, at the option of the Company.  The difference  between the market price of
the Company's  common stock and the applicable  conversion  rate, the beneficial
conversion feature, totaled $1,109,589, and was recorded as additional dividends
amortizable  over a 180 day period from February 12, 1997, the issue date of the
convertible preferred stock. The Company agreed to register the dividend shares,
the conversion  shares and penalty shares in a registration  statement  filed by
the Company at no cost to the holders of such shares. The registration statement
was declared effective on January 9, 1998.

In  connection  with this  transaction  the Company  paid a fee of $195,000  and
$25,000 in expenses to the placement  agent.  In addition,  the Company  granted
10,000 warrants to the placement agent.  Each warrant is exercisable to purchase
one share of common  stock at $24.00 per share,  as amended by  agreement  dated
November 21, 1997,  commencing on February 12, 1998 and expiring on February 12,
2002. The Company has granted demand and piggy-back  registration  rights to the
holders of these warrants.

During  the year ended  December  31,  1997,  30 shares  with a stated  value of
$300,000 were converted into 19,292 shares of the Company's common stock. During
the first  quarter  of 1998 the  remaining  270  shares  with a stated  value of
$2,700,000 were converted into 135,944 shares of the Company's common stock.

On February  13, 1998 (the  "closing  date") the Company  entered into a private
placement  wherein it offered and sold 3,600  shares of Series C 7%  Convertible
Preferred Stock and 235,000 Four Year $50.00  Warrants  (amended on June 2, 1998
to  $37.50).  The  securities  were  issued to five  accredited  investors.  The
aggregate sales price of such securities was  $3,600,000.  Commissions  totaling
10% were paid in connection  with the  placement.  The  securities  were offered
pursuant to Regulation D. The offer was directed exclusively to a limited number
of accredited investors without general solicitation or advertising and based on
representations  from the  investors  that such  investors  were  acquiring  for
investment.  The securities bear legends  restricting  the resale  thereof.  The
Series C Preferred Stock was convertible  into Common Stock at the lesser of (i)
$45.00  (amended on June 2, 1998 to $32.50) per share or (ii) 75% of the average
closing  bid price of the Common  Stock  during the five  trading  days prior to
conversion.  The Four Year  $50.00  Warrants  were  exercisable  for a four year
period at the lesser of $37.50 per share or the lowest  conversion  price of the
Series C  Preferred  Stock.  Conversion  of the  Series C  Preferred  Stock  and
exercise  of the Four Year  $50.00  Warrants  was  subject to the  issuance of a
maximum of 328,544 shares of Common Stock on conversion  unless the shareholders
of the Company have approved  issuance beyond that level upon  conversion.  Such
approval was granted at the Company's  annual meeting of shareholders on June 2,
1998. Further,  the Company had the right, upon notice to the holders, to redeem
any Series C Preferred  Stock  submitted for  conversion at a price or $27.50 or
less at 125% of the  principal  amount of such  Series C  Preferred  Stock  plus
accrued and unpaid dividends.  The Series C Preferred Stock paid dividends at 7%
per annum payable quarterly and on conversion or at redemption in cash or Common
Stock,  at the  Company's  option.  During the year ended  December 31, 1998 all
Series C Preferred  stock was  converted  into 640,747  shares of the  Company's
common stock.

                                      F-30
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Convertible Preferred Stock (Continued)
---------------------------

On August 11,  1998 (the  "closing  date") the  Company  entered  into a private
placement  wherein it offered and sold 1,500 shares of Series RR 6%  Convertible
Preferred  Stock.  The securities  were issued to one accredited  investor.  The
aggregate sales price of such securities was  $1,500,000.  Commissions  totaling
10% were paid in connection  with the  placement.  The  securities  were offered
pursuant  to  Regulation  D. The  offer  was  directed  exclusively  to a single
accredited  investor  without  general  solicitation or advertising and based on
representation   from  the  investor   that  such  investor  was  acquiring  for
investment.  The Series RR Preferred Shares are convertible into Common Stock at
the lesser of (i) $22.50 per share or (ii) 75% of the average  closing bid price
of the common  stock  during the five  trading  days  prior to  conversion.  The
Preferred  Shares  pay an annual  dividend  of 6%  payable  semi-annually  or on
conversion or at redemption  in cash or Common Stock,  at the Company's  option.
During the year ended  December  31,  1998,  1,285 shares of Series RR Preferred
Stock were converted into 359,981 shares of the Company's  common stock.  During
1999,  demand for conversion or redemption of the remaining 215 shares of Series
RR Preferred  Stock had been  submitted and on July 26, 1999 the Company  issued
130,788  shares of its common stock in full  settlement  of the 215 Preferred RR
shares.

Common Stock
------------

On June 2, 1998,  the  Company  filed an amended  and  restated  Certificate  of
Incorporation  increasing the  authorized  shares of common stock the Company is
authorized to issue from  30,000,000  to  75,000,000  shares with a par value of
$0.001.  On March 11, 1999, the Company's Board of Directors  authorized a 1 for
10 reverse  stock  split of its common  stock and  amended  the par value of the
common stock to $0.01 and reduced the authorized  shares to 7,500,000  effective
April 16, 1999 for  shareholders of record at the close of business on April 16,
1999. All share and per-share amounts in the accompanying consolidated financial
statements  have been  restated  to give  effect to the 1 for 10  reverse  stock
split.

In January of 1994, the principal  shareholders  of the Company  surrendered for
cancellation  an aggregate of 66,667 shares of common stock.  All  references to
number of shares, except shares authorized,  and to per share information in the
financial   statements,   have  been  adjusted  to  reflect  the  surrender  and
cancellation of such shares on a retroactive basis.

The Company  completed an initial  public  offering of 345,000 units  (including
units sold pursuant to the  underwriter's  over  allotment  options) in April of
1994.  Each Unit  consisted of one share of the  Company's  common stock and one
Class A Warrant.  The  Company  received  $11,792,588  from the  proceeds of the
offering, net of the payment of all offering costs.

On September 1, 1995, Joel Freedman, a principal shareholder, director and Chief
Executive  Officer of the Company  surrendered  3,662  shares of common stock in
repayment of his officer's loan.

From November 1995 through  December 31, 1996, the Company issued 159,727 shares
of common stock in exchange for the  cancellation of $5,000,000 of the Company's
7% convertible notes.

On April 1, 1996,  Frank  Falco,  a principal  shareholder,  director  and Chief
Operating  Officer of the Company,  surrendered  9,221 shares of common stock in
repayment of his officer's loan.

                                      F-31
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock (Continued)
------------

On November  15, 1996,  the board of  directors of the Company  approved a stock
repurchase  plan whereby the Company may,  from time to time,  repurchase on the
open market  shares of its common stock in an amount up to $750,000.  During the
year ended December 31, 1996,  the Company  repurchased  for  retirement  10,000
shares at a price of $216,500.

During the year ended  December 31, 1997 $300,000 of the  Company's  Convertible
Preferred Stock were converted into 19,292 shares of the Company's common stock.

During March 1999,  97,525 of the $30 warrants were converted into 97,525 shares
of the Company's  common stock.  The exercise price of the warrants paid in full
the loan from  shareholders  of $265,122  outstanding  at December 31, 1998.  In
addition,  during 1999 holders of 115,049  Three Year Warrants  exercised  their
rights which resulted in the issuance of 115,049  shares of the Company's common
stock and the Company received proceeds of $318,877.

During June 1999,  the Company  issued  125,000 shares of its common stock as an
inducement on a $400,000 6.5% promissory note received from  stockholders of the
Company. The note which was payable in full on August 2, 1999 was repaid in full
by  November  1999.  The  shares  issued  in  conjunction  with  this  note have
registration  rights. The Company recorded  $109,380,  the estimated fair market
value of the 125,000  shares at the date of  issuance,  as  additional  interest
expense.

On July 26,  1999,  the  Company  reached  an  agreement  with the holder of the
remaining  215  shares of Series RR  Preferred  Stock to allow  conversion  into
130,788 shares of the Company's common stock in full and final settlement of the
215 Preferred RR Shares.

During 1999, the Company  issued  218,143  shares of restricted  common stock in
settlement  of accounts  payable and as  collateral  to their  surety in lieu of
performance  bonds on the Oak Ridge,  Tennessee  contract.  The total  amount of
accounts payable settlement and collateral was $960,250.

During the fourth  quarter of 1999  holders of 67,476  options  issued under the
1993,  1995 or 1998 stock  option  plans  exercised  the rights and the  Company
issued 67,476 shares of its common stock and received proceeds of $119,122.

In December of 1999,  the holder of the 112,500  $6.75 option which were granted
to a consultant  during 1998  exercised  the rights  granted under the option to
utilize the  cashless  exercise  which  resulted in the Company  issuing  67,666
shares of its common  stock and  canceled  the option for the  remaining  44,834
shares.

Common Stock Purchase Warrants and Options
------------------------------------------

The Company has  authorized  and in July of 1993,  issued  5,000  warrants  (the
"Private  Placement  Warrants") to purchase common stock. The Private  Placement
Warrants were exercisable to purchase one share of common stock per warrant at a
price of $50.00  per share  until  August  1,  1996 and are not  redeemable.  In
January of 1994,  the Company  granted to the  holders of the Private  Placement
Warrants "piggy-back"  registration rights pursuant to which the holders of such
warrants may include the shares  underlying  such  warrants in any  registration
statement  subsequently  filed by the  Company at no cost to the  holders of the
Private Placement Warrants. During the year ended December 31, 1996, 750 Private
Placement Warrants were exercised, 750 shares were issued in connection with the
exercises and resulted in net proceeds to the Company of $33,750.  The remaining
4,250 Private Placement Warrants expired and were canceled.

                                      F-32
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

The  Company's  Class A Warrants are  separately  transferrable  and entitle the
holder to purchase  two shares of common  stock at $45.00 per share  (subject to
adjustment,  which occurred). The Class A Warrants are exercisable commencing on
April 20, 1995 and expiring  April 20, 1999.  Any or all of the Class A Warrants
may be redeemed by the Company at a price of $.50 per  warrant,  upon the giving
of 30 days written  notice and provided that the closing bid price of the common
stock for a period of twenty (20)  consecutive  trading  days ending  within ten
(10) days of the notice of redemption has equaled or exceeded  $90.00 per share.
During the year ended  December 31, 1996,  1997 and 1998,  105,100,  225,851 and
9,790 Class A Warrants were exercised,  210,200,  451,703 and 19,580 shares were
issued in  connection  with these  exercises and resulted in net proceeds to the
Company of $6,956,450, $6,171,000 and $184,500.

A  total  of  approximately   34,000  Class  A  Warrants  were  outstanding  and
exercisable at December 31, 1998. As part of the 1 for 10 reverse stock split of
the  Company's  Common  Stock  and  Class A  Warrants,  the term of the  Class A
Warrants was extended to April of 2000.

In connection with the Offering, the Company sold to the Underwriter for nominal
consideration,  an option for the  purchase of up to 30,000  units (the  "option
units").  Each option unit consisted of one share of the Company's  common stock
and one Class A Warrant.  Each option unit was  exercisable at a price of $66.00
per option unit during the period  beginning April 20, 1996 and continuing until
April 20,  1999.  The option  units could be  exercised  as to all or any lesser
number of option units and contained  provisions  which required,  under certain
circumstances,  the Company to register the option units underlying such options
for sale to the public. The option units were nontransferable except to officers
of the  Underwriter,  members  of the  underwriting  group and their  respective
officers and partners.  The option unit exercise  price and the number of option
units  covered by the option were subject to  adjustment  to protect the holders
thereof  against  dilution in certain  events.  During May 1996,  all the option
units were  exercised and the company  received net proceeds of  $1,979,700  and
issued 30,000 shares of the Company's  common stock. As of December 31, 1998 all
30,000  Class A  Warrants  issued  in  connection  with the  underwriter  option
remained outstanding.

In February of 1998, the Company issued 270,000 Three Year $45.00  Warrants (the
"Lock-Up  Warrants").  The Lock-Up  Warrants were issued in conjunction with the
execution of Lock-Up  Agreements by the holders of $30.00  Warrants  whereby the
holders  of such  warrants  agreed not to resell  any  shares  underlying  those
warrants  prior to July 30, 1998.  The Lock-Up  Warrants are  exercisable  for a
three  year  period at $45.00  (amended  on  November  10,  1998 to $3.30  until
December 31, 1998 and $10.00 thereafter) per share.

In June of 1998,  the Company  issued 26,688  $60.00  Warrants and 26,688 $67.50
Warrants  (collectively the "Reload Warrants").  The Reload Warrants were issued
as an inducement for early  exercise by the holders of certain  $30.00  Warrants
and are  exercisable  to the extent of one $60.00 Warrant and one $67.50 Warrant
for each $30.00 Warrant  previously  exercised.  The $60.00  Warrants and $67.50
Warrants are  exercisable  for a period of one year  commencing  June 8, 1998 to
purchase  common  stock at $60.00 and $67.50  (amended on  November  10, 1998 to
$3.30 until December 31, 1998 and $10.00  thereafter)  per share,  respectively.
Exercise  of  the  $60.00  Warrants  and  $67.50  Warrants  is  subject  to  the
restrictions that the holders, individually, will not beneficially own in excess
of 4.99% of the Common Stock following any exercise.

During the  fourth  quarter of 1998,  the  Company  agreed to amend the terms of
certain  warrants to reduce the  exercise  price of those  warrants  for certain
warrant   holders  who  had  indicated  a  willingness  to  exercise   currently
outstanding  warrants.  Pursuant to such agreement,  the exercise price of those
warrants was reduced to $3.30 per share until  December 31, 1998, and $10.00 per
share  thereafter,  and the Company  obtained the right to call the warrants for
redemption.  In total, the exercise prices were reduced on 117,651 of the $30.00
Warrants,  67,000 of the Lock-Up Warrants, 15,750 of the $60.00 Reload Warrants,
and 15,750 of the $67.50 Reload Warrants.

                                      F-33
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

On December 11, 1998 the  Company's  common stock option  holders were offered a
repricing  of their  options  to $6.75  per  share.  With the  exception  of one
consultant the repricing excluded all Directors and consultants. Exercise of the
repriced  options is not permitted  until the closing bid price of the Company's
common stock equals or exceeds 120% of the applicable  option price in existence
prior to December 11, 1998.

On July 18, 1999,  the Board of Directors of the Company  approved a proposal to
reduce the exercise  price of the  consultants  options from $37.19 per share to
$6.75 per share for 112,500  shares.  The market price of the  Company's  common
stock at the date of this  action  was  $1.156.  In  addition,  on this date the
Company  issued 6,200 options to  consultants  and the  additional  compensation
expense recognized under SFAS 123 for these actions was $41,154.

On June 17, 1993, the Company  adopted the IDM  Environmental  Corp.  1993 Stock
Option Plan (formerly  International  Dismantling & Machinery  Corp.  1993 Stock
Option Plan) (the "Stock Option  Plan").  Pursuant to the Stock Option Plan, the
Company has reserved 47,500 shares of common stock for issuance  pursuant to the
grant of incentive stock options and nonqualified stock options.

On April 11, 1994,  the Board of Directors  granted  options under the Company's
1993 Stock Option Plan to certain  employees  and a Director to purchase  44,540
and 500 shares, respectively, of the Company's common stock at $40.00 per share,
the market price of the Company's common stock at the date of grant. The options
are incentive stock options,  except for the Director's  stock option which is a
nonqualified  stock option. The options are exercisable until April 2004. Twenty
percent of the options vest three months from the date of grant.  The balance of
the  options  vest at a rate of  twenty  percent  per  year on each of the  four
anniversary  dates  subsequent to the grant of the options.  The option exercise
price  was  reduced  to  $20.00  per share on May 22,  1997.  Holders  of 20,808
outstanding options at the date of the aforementioned repricing under this grant
accepted  the  repricing.  The balance of the  outstanding  options  remained at
$20.00.

On June 2, 1994, the Company  granted a total of 500 non qualified stock options
to two of the directors to purchase common stock at $62.50 per share, the market
price of the Company's  common stock at the date of the grant.  The options vest
at the same rate as the initial grant.  The option exercise price was reduced to
$20.00 per share on May 22, 1997.  Holders of 1,485  outstanding  options at the
date of the  aforementioned  repricing  under this grant accepted the repricing.
The balance of the outstanding options remained at $20.00.

On December  28,  1994,  the Company  granted  options to certain  employees  to
purchase  2,970 shares of the  Company's  common stock at $43.80 per share,  the
market price of the Company's  common stock at the date of the grant.  On August
9, 1995, the Company  granted an option to a new employee to purchase 500 shares
of the  Company's  common  stock at $52.50  per share,  the market  price of the
Company's  common stock at the date of grant.  The options vest at the same rate
as the first grant. The option exercise price was reduced to $20.00 per share on
May 22, 1997.

On January 8, 1996, the Company  amended the terms of its 1993 Stock Option Plan
to add provisions allowing for the cashless exercise of options issued under the
plan and providing for the  automatic  vesting of all options  granted under the
plan in the event of certain changes in control of the Company. Pursuant to such
cashless exercise provisions, holders of options may, as payment of the exercise
price,  have the Company  withhold  the number of shares of common  stock at the
then market price of the Company's common stock, less the exercise price,  which
is equal to the aggregate  exercise price of the shares of common stock issuable
upon exercise of the option.  Under such provision of the  accelerated  vesting,
notwithstanding  any  vesting  schedule  set  forth  in  any  individual  option
agreement,  all options granted under the 1993 Plan will become fully vested and
exercisable  in the event a person or group,  other than Joel  Freedman or Frank
Falco,  acquire  in excess of 15% of common  stock of the  Company  unless  such
acquisition is approved by the Board.

                                      F-34
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

On January 8, 1996, the Company's  Compensation Committee and Board of Directors
adopted  and  approved  a new  stock  option  plan  for  the  Company,  the  IDM
Environmental Corp. 1995 Stock Option Plan (the "1995 Plan"),  under which stock
option  awards  may be made  to  employees,  directors  and  consultants  of the
Company.  The 1995 Plan became effective on the date it was adopted by the Board
of Directors and it will remain  effective  until the tenth  anniversary  of the
effective date unless terminated earlier by the Board of Directors.  Pursuant to
the plan,  the Company has reserved  50,000  shares of common stock for issuance
pursuant  to the  grant of  incentive  stock  options  and non  qualified  stock
options.  On January 8, 1996, the Company granted  options to certain  employees
and consultants to purchase 6,900 shares of the Company's common stock at $29.40
per share,  the market  price of the  Company's  common stock at the date of the
grant  (4,150  have  vested).  In  addition,  on January 8,  1996,  the  Company
approved, effective November 20, 1995, the granting of 4,000 options to purchase
common stock at $37.20 per share, the market price of the Company's common stock
at the date of the grant, to certain consultants (all options were vested).  The
balance of the 6,900  options vest at a rate of twenty  percent per year on each
of the four anniversary  dates  subsequent to the grant of the options.  Also on
January 8, 1996,  the Company  granted 7,500 options each to Messrs.,  Falco and
Freedman at $32.30 per share,  110% of the market price of the Company's  common
stock at the date of grant.  The option exercise price was reduced to $20.00 per
share on May 22, 1997.  Holders of 6,900 outstanding  options at the date of the
aforementioned repricing under this grant accepted the repricing. The balance of
the outstanding options remained at $20.00.

On May 23, 1996, the Company granted vested options to the outside directors,  a
consultant  and an employee to purchase  5,000  shares at $82.50 per share,  the
market  price of the  Company's  common  stock at the date of grant.  The option
exercise price was reduced to $20.00 per share on May 22, 1997.

On June 28, 1996 the Company  adopted and  approved a new stock option plan (the
"1996  consulting  options")  under which  nonqualified  stock options have been
granted  to a  consultant  for the right to acquire  5,000  shares of its common
stock at $32.30 per share.  The options,  which are fully vested and exercisable
through June 28, 2006, were granted pursuant to a consultant agreement. The fair
market  value of these  shares at the date of grant was $74.40.  The  difference
between the exercise price and the market price of the Company's common stock at
date  of  grant  (the  "intrinsic  value")  reflects  the  compensation  for the
consulting  services.  The option exercise price was reduced to $20.00 per share
on May 22, 1997.

On May 22, 1997, the Company  granted vested options to certain of its employees
to purchase  5,295 shares at $20.00 a share,  the market price of the  Company's
common stock at the date of grant.  In addition,  the Company  agreed to reprice
all  options  granted  on or before May 22,  1997 to the same  $20.00 per share.
Holders of 3,420 outstanding options at the date of the aforementioned repricing
under this grant accepted the repricing.  The balance of the outstanding options
remained at $20.00.

On June 10, 1997,  the Company  granted  vested  options to three of its outside
directors  for each to purchase  500 shares at $25.312,  the market price of the
Company's common stock at date of grant.

On July 23, 1997, the Company granted vested options in the amount of 500 shares
for a  consultant,  and 500 shares for each of three  officers at  $25.625,  the
market price of the Company's  common stock at date of grant.  In addition,  the
Company granted a vested option to purchase 10,000 shares each to Messrs.  Falco
and  Freedman at $28.1875 per share,  110% of the market price of the  Company's
common stock at the date of grant.  Holders of 1,500 outstanding  options at the
date of the  aforementioned  repricing  under this grant accepted the repricing.
The balance of the outstanding options remained at $25.625 and $28.1875.

                                      F-35
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

On August 26, 1997, the Company granted a vested option to its proposed  nominee
for director for 500 shares at $46.875, the market price of the Company's common
stock at the date of grant.

During 1997,  4,539 options  issued under the stock option plans were  exercised
resulting in net proceeds of $63,041.

During 1997 the Company  issued to six  consultants  options to purchase  39,500
shares of the Company's  common stock at exercise  prices ranging from $12.50 to
$45.00.  In  accordance with SFAS 123 the  fair  value  of  these  options  were
estimated at the grant date using the  Black-Scholes  value option pricing model
resulting in the  recording  of $456,340 as  compensation  costs of  consultants
options.  During 1997 15,500 of these  options were  exercised  resulting in net
proceeds to the Company of $235,000.

On January 8, 1998 the Company  granted vested  options to certain  employees to
purchase  7,380 shares of the  Company's  common stock at $37.19 per share,  the
market price of the Company's  common stock at the date of grant.  These options
are exercisable until January 2008. Holders of 6,520 outstanding options, at the
date of the aforementioned  repricing,  under this grant accepted the repricing.
The balance of the outstanding options remained at $37.19.

On January 8, 1998,  the Company  adopted and  approved  the 1998  Comprehensive
Stock Option and Award Plan (the "1998 Plan"),  and reserved  100,000  shares of
its common stock for issuance under the 1998 Plan.

Under the 1998 Plan, stock options,  shares of restricted stock, stock awards or
performance  shares,  or  a  combination  of  any  such  awards   (collectively,
"Awards"),  may be granted  from time to time to Eligible  Persons  (hereinafter
defined),  all  generally in the  discretion of the  Committee  responsible  for
administering the 1998 Plan (hereinafter  described).  Each Award under the 1998
Plan will be  evidenced  by a separate  written  agreement  which sets forth the
terms and  conditions of the Award.  "Eligible  Persons"  generally  include any
employee of the Company or its  subsidiaries,  members of the Board of Directors
of the  Company and any  consultant  or other  person  whose  participation  the
Committee  determines is in the best  interest of the Company.  Grants under the
1998  Plan  to  non-employee  directors  are  limited  to an  initial  grant  of
non-qualified  stock options in an amount equal to 500 shares  multiplied by the
number of years remaining in the term of each non-employee  director  commencing
with the first annual  shareholders  meeting  following the adoption of the 1998
Plan and  additional  grants on like terms on each  subsequent  reelection  of a
non-employee director. There is no maximum number of persons eligible to receive
Awards under the 1998 Plan,  nor is there any limit on the amount of Awards that
may be granted to any such  person,  except as  described  below with respect to
incentive stock options.  The Company intends that stock options or other grants
of Awards  under the 1998 Plan to persons  subject to Section 16 of the Exchange
Act will  satisfy the  requirements  of Rule 16b-3 under the Exchange Act ("Rule
16b-3").

During  1998  the  Company  granted  under  the 1998  plan,  18,380  options  to
employees.

On February 10, 1999 the Company granted  additional 1998 plan options entitling
the holders to purchase 22,540 shares of the Company's common stock.

On July 18,  1999,  the Board of  Directors  of the Company  approved a proposal
increasing  the number of shares  issuable under the Company's 1998 Stock Option
Plan ("1998 Plan") by 1,600,000  shares,  subject to  stockholder  approval.  In
addition  the Board of  Directors  also  approved a proposal to grant  1,000,000
options  under the Plans to various  officers,  directors  and  consultants  and
400,000 options outside the 1998 Plan to a consultant.  The  consultant's  stock
option was granted with an exercise price of $1.15, the market price at the date
of grant and vest upon the  completion of the merger.  The estimated fair market
value of  $450,000  for the  consultant's  option is based on the Black  Scholes
value option pricing model and will be recorded in 2000 as a merger expense.

                                      F-36
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

On June 2, 1998 the Company granted  options to certain  officers of the Company
and one  consultant to purchase  11,000 shares of the Company's  common stock at
$35.00 per share,  the market price of the Company's common stock at the date of
grant.  The options have vesting  periods as follows:  (i) 1,500 of the officers
options  are  fully  vested  at the date of grant;  (ii)  3,500 of the  officers
options  vest 50% at the date of grant  with the  balance  vesting  on the first
anniversary  of the date of grant;  (iii) the  remaining  4,500 of the  officers
options and the 1,500  consultants  options  vest one third at the date of grant
and one third per year on each of the two  anniversary  dates  subsequent to the
date of grant.  These options are exercisable until June 2008.  Holders of 4,500
outstanding  options,  at the date of the aforementioned  repricing,  under this
grant accepted the repricing. The balance of the outstanding options remained at
$35.00.

During  the  year  ended  December  31,1998,  the  Company  granted  immediately
exercisable options to consultants to purchase 126,500 shares of common stock at
the market price of the Company's common stock at the date of the grants. During
the years ended December 31, 1998, 1997 and 1996 the Company  recorded  non-cash
compensation  expense of  $1,898,550,  $456,340  and  $63,094,  respectively  in
connection with the grants of these options.

As  referred  to in Note  1,  the  Company  has  elected  to  follow  Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related  Interpretations  in accounting  for its employee  stock options
because,  as discussed below, the alternative fair value accounting provided for
under  FASB  Statement  No.  123  ("SFAS  123"),   "Accounting  for  Stock-Based
Compensation,"  requires use of option  valuation models that were not developed
for use in valuing  employee stock  options.  Under APB 25, because the exercise
price of the Company's  employee  stock  options  equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

The Company's  1993,  1995 and 1998 Stock Option and Award Plans have authorized
the  granting  of  options  to  key  employees,  management  personnel,  Company
Directors  and  consultants  for up to 197,500  shares of the  Company's  common
stock.  Options granted pursuant to the 1993 and 1995 plans have terms between 5
and 10 years and become fully exercisable ranging from 0 to 4 years of continued
employment.  The 1998 Plan grants have terms of 5 and 10 years and become  fully
exercisable  ranging  from 0 to 2 years and are granted at no less than the fair
market value of the Company's common stock at the grant date.

Pro forma information regarding net income and earnings per share is required by
SFAS 123,  and has been  determined  as if the  Company  had  accounted  for the
employee stock options under the fair value method of that  statement.  The fair
value for these options was  estimated on the date of grant for options  granted
during 1999, 1998 and 1997 using the Black-Scholes option pricing model with the
following  weighted average  assumptions for 1999, 1998 and 1997,  respectively,
with ranges as follows:

<TABLE>

                                                                 1999           1998           1997
                                                                ------         ------         ------
         <S>                                                 <C>            <C>             <C>

         Risk-Free interest                                      5.47%      4.15 - 5.55%       5.65%
         Dividend yields                                          0%             0%             0%
         Volatility factors of the expected market price
         of the Company's Common Stock                        115 - 122%      92 - 105%         92%
         Expected life of options                              .7 - 10 years   3 - 10 years    1 - 5 years
</TABLE>

                                      F-37
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.   Because  the  Company's   stock  options  have   characteristics
significantly  different from those of traded  options,  and because  changes in
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.  In management's  opinion
existing stock option  valuation models do not provide a reliable single measure
of the fair value of employee stock options that have vesting provisions and are
not  transferable.  ( In addition,  option  pricing  models require the input of
highly subjective assumptions, including expected stock price volatility).

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options'  vesting  period.  In accordance  with
SFAS 123, only stock options  granted  during the years ended December 31, 1999,
1998 and 1997 have been  included for the  Company's  pro forma  information  as
follows:
<TABLE>

                                                     1999             1998                1997
                                                    ------           ------              ------
         <S>                                      <C>             <C>               <C>


         Pro forma net loss on common stock      $(8,355,006)     $(40,901,556)     $(11,885,575)

         Pro forma loss per share:
         Basic                                        $(2.58)          $(20.58)          $(10.60)

            Diluted                                   $(2.58)          $(20.58)          $(10.60)
</TABLE>

An additional $1,192,850,  $14,459,500 and $661,152 of compensation expense (net
of tax effect) would be recognized under implementation of SFAS 123.

                                      F-38
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

A summary of changes in common  stock  options  under the 1993 plan during 1999,
1998 and 1997 is as follows:
<TABLE>

                                                                                                Weighted
                                                       Number            Price per               Average
                                                     of Shares             Share             Exercise Price
                                                    ------------        -----------         ----------------
      <S>                                           <C>               <C>                    <C>

       Outstanding at January 1, 1997                  37,065           $20.00                 $20.00
     Granted during 1997                                9,295        $20.00 - $46.90           $20.80

         Canceled during 1997                          (2,017)           $20.00                $20.00

     Exercised during 1997                             (3,876)           $20.00                $20.00
                                                      ---------
       Outstanding at December 31, 1997                40,467        $20.00 - $46.90           $20.00
         Granted during 1998                                -            $    -                $    -
         Canceled during 1998                             (37)           $20.00                $20.00

         Exercised during 1998                           (321)           $20.00                $20.00
                                                      ---------
       Outstanding at December 31, 1998                40,109         $6.75 - $46.90           $ 9.30

         Granted during 1999                           10,775            $1.16                 $ 1.16

         Canceled during 1999                          (9,791)            $6.75                $ 6.75

         Exercised during 1999                        (10,536)        $1.16 - $6.75            $ 2.50
                                                     ----------
       Outstanding at December 31, 1999                30,557        $1.16 -$ 6.75             $ 6.24
                                                     ==========
       Options exercisable at December 31,  1999       30,557         $1.16 - $46.90           $ 6.24
                                                     ==========
       Available for Future Grant                         119
                                                     ==========
</TABLE>

At  December  31,  1999  the  remaining   outstanding  shares  weighted  average
contractual life was 5.41.

                                      F-39
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

A summary of changes in common stock options under the 1995 plan which  occurred
during 1999, 1998 and 1997 is as follows:

<TABLE>

                                                                                                   Weighted
                                                       Number              Price per                Average
                                                     of Shares               Share              Exercise Price
                                                    ------------           ---------           ----------------
      <S>                                            <C>                   <C>                    <C>

       Outstanding at January 1, 1997                   27,900               $20.00                  $ 20.00

         Granted during 1997                            20,000               $28.19                  $ 28.19

         Exercised during 1997                            (663)               $20.00                 $ 20.00

         Canceled during 1997                             (337)               $20.00                 $ 20.00
                                                       ---------
       Outstanding at December 31, 1997                 46,900            $6.75 - $28.19             $ 21.50
         Granted during 1998                                 -                $    -                 $     -

          Exercised during 1998                              -                $    -                 $     -

          Canceled during 1998                               -                $    -                 $     -
                                                       ---------
       Outstanding at December 31, 1998                 46,900            $6.75 - $28.19   $21.50

     Granted during 1999                                 3,850                $1.16                  $  1.16

         Exercised during 1999                          (3,950)           $1.16 -$ 6.75              $  1.30

         Canceled during 1999                           (3,750)               $6.75                  $  6.75
                                                       --------
       Outstanding at December 31, 1999                 43,050            $1.16 - $28.19             $ 17.94
                                                       ========
       Options Exercisable at December 31, 1999         43,050            $1.16 - $28.19             $ 17.94
                                                       ========
       Available for future grants                         282
                                                       ========
</TABLE>

At  December  31,  1999  the  remaining   outstanding  shares  weighted  average
contractual life was 2.71.

                                      F-40
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

A summary of changes in common stock options under the 1998 plan which  occurred
during 1999 and 1998 is as follows:

<TABLE>

                                                                                                    Weighted
                                                              Number         Price per               Average
                                                            of Shares          Share             Exercise Price
                                                           ------------     -----------        -------------------
      <S>                                                 <C>               <C>                  <C>

       Outstanding, January 1, 1998                              -            $   -                   $    -

         Granted during 1998                                18,380          $6.75 - $37.20            $18.20

         Exercised during 1998                                   -            $   -                   $    -
         Canceled during 1998                                  (40)           $37.20                  $37.20
                                                         ----------
       Outstanding at December 31, 1998                     18,340          $6.75 - $37.20            $18.10

         Granted during 1999                             1,007,915          $1.16 - $6.75             $1.28

         Exercised during 1999                             (52,990)         $1.16 - $6.75             $1.34

         Canceled during 1999                               16,600)           $6.75                   $6.75
                                                         ----------
       Outstanding at December 31, 1999                    956,665          $1.16 - $35.00            $1.48
                                                         ==========
       Options Exercisable at December 31, 1999            955,180          $1.16 - $35.00            $1.43
                                                         ==========
       Available for future grants                         690,345
                                                         ==========
</TABLE>

At  December  31,  1999  the  remaining   outstanding  shares  weighted  average
contractual life was 9.44.

                                      F-41
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

A summary  of changes  in common  stock  options  issued to the  consultant  for
services rendered is as follows:


<TABLE>

                                                                                               Weighted
                                                    Number             Price per               Average
                                                  of Shares              Share             Exercise Price
                                                 -----------           ---------          ----------------
        <S>                                     <C>                <C>                     <C>


       Outstanding, January 1, 1997                 5,000              $32.30                 $32.30

         Granted during 1997                       59,500          $12.50 - $45.00            $26.05

         Exercised during 1997                          -              $    -                 $    -
         Canceled during 1997                           -              $    -                 $    -
                                                 ---------
       Outstanding, December 31, 1997              64,500          $12.50 - $45.00            $26.53

         Granted during 1998                      132,000          $37.19 - $48.13            $38.18

         Exercised during 1998                    (15,500)          $12.50 - $32.00            $19.13

         Canceled during 1998                           -              $   -                  $    -
                                                 ---------
       Outstanding, December 31, 1998             181,000          $37.19 - $48.13            $35.66

         Granted during 1999                      112,500              $6.75                  $6.75

         Exercised during 1999                   (112,500)              $6.75                  $6.75

         Canceled during 1999                    (124,000)          $30.00 - $37.19            $36.52
                                                 ---------
       Outstanding, December 31, 1999              57,000          $6.75 - $48.13             $33.93
                                                 =========
       Options Exercisable at December 31, 1999    57,000          $6.75 - $48.13             $33.93
                                                 =========
</TABLE>

     At December 31, 1999 the  remaining  outstanding  shares  weighted  average
contractual life was 1.63.

                                      F-42
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


15.  STOCKHOLDERS' EQUITY (Continued)

Common Stock Purchase Warrants and Options (Continued)
------------------------------------------

The  weighted  average  fair value of  options  granted  during the years  ended
December  31,  1999,  1998 and 1997 for the 1993,  1995 and 1998  plan,  and the
various consulting options were as follows:


                                                   1999        1998         1997
                                                   ----        ----         ----
       Stock Prices Equal to Exercise Price        1.11        2.56         1.29
       Stock Prices in Excess of Exercise Price      -           -          2.53
       Stock Prices Less than Exercise Price       0.72        0.79         0.78


Shareholder's Rights Plan
-------------------------

On April 1, 1996,  the Board of Directors  adopted and  approved a  "Shareholder
Rights Plan" in order to preserve for  stockholders  the long-term  value of the
Company  in the event of a  take-over.  To put the Plan into  effect,  the Board
declared a dividend of one Right for each share of common stock  outstanding  to
stockholders  of record at the close of  business  on April 1, 1996.  Each right
represents the right to purchase one one-hundredth of a share of a new series of
preferred  stock without  voting rights par value $1.00 per share.  The exercise
price for each right is $20.00. Each right expires December 31, 2005.

The rights are not exercisable and are not transferable apart from the Company's
common  stock until the tenth day after such time as a person or group  acquires
beneficial  ownership of 15% or more of the Company's  common stock or the tenth
business day (or such later time as the board of directors may determine)  after
a person or group  announces  its intention to commence or commences a tender or
exchange offer the consummation of which would result in beneficial ownership by
a person  or  group of 15% or more of the  Company's  common  stock.  As soon as
practicable  after the rights become  exercisable,  separate right  certificates
would  be  issued  and the  rights  would  become  transferable  apart  from the
Company's  common stock. In the event a person or group were to acquire a 15% or
greater position in the Company, each right then outstanding would "flip in" and
become a right to receive  that number of shares of common  stock of the Company
which at the time of the 15%  acquisition  had a market  value of two  times the
exercise price of the rights. The acquirer who triggered the rights would become
excluded from the  "flip-in"  because his rights would become null and void upon
his triggering the acquisition. The rights are redeemable by the Company's Board
of Directors  at a price of $.01 per right at any time prior to the  acquisition
by a person or group of  beneficial  ownership  of 15% or more of the  Company's
common  stock.  The  redemption  of the rights may be effective at such time, on
such  basis,  and with such  conditions  as the board of  directors  in its sole
discretion may establish. Thus, the rights would not interfere with a negotiated
merger or a white knight transaction, even after a hostile tender offer has been
commenced.

                                      F-43
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



16.  EARNINGS PER SHARE

For the  years  reported  in  within  these  consolidated  financial  statements
weighted average shares for basic and dilutive  computations are the same due to
losses reported for each of the years.

Options and warrants to purchase 1,311,547, 804,350 and 661,367 shares of common
stock at exercise prices ranging from $2.72 to $48.13 per share were outstanding
during the years ended December 31, 1999, 1998 and 1997, respectively,  and were
not included in the computation of diluted earnings per share in accordance with
SFAS  128,  as the  potential shares  are  considered  anti-dilutive  due to the
Company's losses from continuing operations.


17. MERGER WITH FUSION NETWORKS HOLDING, INC.

On August 18, 1999 the Company entered into a non-binding  merger agreement that
provides for the formation of a holding  company known as FNH by the Company and
the merger of Fusion,  a Florida based privately held  corporation.  As a result
both the Company and Fusion will become  wholly owned  subsidiaries  of FNH. The
stockholders  of Fusion will  receive one share of common  stock of FNH for each
share of Fusion's  common  stock held and the  stockholders  of the Company will
receive  one share of FNH for each share of the  Company's  common  stock  held,
resulting in the current  stockholders of Fusion owning approximately 90% of FNH
common stock.

Fusion  is a newly  formed  company,  based in Miami,  Florida,  which is in the
process of  building a  portal-type  web site with an initial  emphasis on Latin
America  and the  Hispanic  market in the United  States.  Fusion  launched  its
initial site, on a pilot basis, in Bogota,  Colombia,  in October, 1999 followed
by a formal  launch  of the site in Bogota  and in Miami  with  additional  site
launches planned in Latin America,  the United States, Spain and Portugal during
2000.

The proposed  reorganization was approved by the shareholders of the Company and
Fusion in March 2000 and the  reorganization  is  expected  to be  completed  in
April,  2000.  As a result of the  reorganization,  the  Company and Fusion will
become  wholly-owned  subsidiaries  of FNH. The Company and Fusion Networks both
plan to continue their historical operations for the foreseeable future.

The following unaudited pro forma condensed financial  information  presents the
combined  results  of  operations  of the  Company  and  Fusion,  including  the
amortization  of  goodwill,  as if the merger had  occurred at the  beginning of
1999.

          Pro forma revenues                                   $ 13,581,298
                                                                ============
          Pro forma net loss                                   $(29,556,570)
                                                                ============
          Pro forma net loss on common stock                   $(29,567,859)
                                                                ============
          Pro forma basic and diluted net loss per share       $      (0.80)
                                                                ============
          Number of shares used in basic and diluted
            Pro forma share calculation                          36,882,345
                                                                ============

The pro forma  results  of  operations  are not  necessarily  indicative  of the
results  that would have  occurred had the merger  occurred at the  beginning of
1999, and are not intended to be indicative of future results of operations.

                                      F-44
<PAGE>

                    IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


18.  SUBSEQUENT EVENTS

During the first quarter of 2000 the Company issued an additional 149,452 shares
of its common  stock,  22,095  resulting  from the exercise of stock options and
warrants,  and 127,357  issued in  connection  with the  settlement  of accounts
payable obligations amounting to $1,585,303.


                                      F-45