Exhibit (1)


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES




                          INDEX TO FINANCIAL STATEMENTS

                                                                        PAGE

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                              F-2

CONSOLIDATED:
     BALANCE SHEETS
         DECEMBER 31, 1999 AND 1998                                   F-3

     STATEMENTS OF OPERATIONS
         YEARS ENDED DECEMBER 31, 1999 AND 1998                       F-4

     STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
         YEARS ENDED DECEMBER 31, 1999 AND 1998                       F-5

     STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
         YEARS ENDED DECEMBER 31, 1999 AND 1998                       F-6

     STATEMENTS OF CASH FLOWS
         YEARS ENDED DECEMBER 31, 1999 AND 1998                       F-7

     NOTES TO FINANCIAL STATEMENTS                                    F-8/21



                                      * * *

                                      F-1
<PAGE>










                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders
Menlo Acquisition Corporation and Subsidiaries


We  have  audited  the  accompanying   consolidated   balance  sheets  of  MENLO
ACQUISITION  CORPORATION AND  SUBSIDIARIES as of December 31, 1999 and 1998, and
the related consolidated statements of operations,  comprehensive income (loss),
changes in stockholders'  equity, and cash flows for the years then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of Menlo
Acquisition  Corporation and  Subsidiaries as of December 31, 1999 and 1998, and
their consolidated results of operations and cash flows for the years then ended
in conformity with generally accepted accounting principles.


                                                   /s/ J.H. Cohn, LLP


Roseland, New Jersey
February 11, 2000

                                      F-2
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998

                      ASSETS                           1999               1998
                      ------                           ----               ----
Current assets:
    Cash and cash equivalents                      $1,182,079       $    24,722
    Investments in marketable securities              722,400
    Accounts receivable:
       Trade, net of allowance for doubtful
          accounts of $614,315 and $565,855         3,879,474         4,832,722
       Unbilled receivables                            65,269           107,276
       Affiliates                                     109,545           284,963
    Prepaid expenses and other current assets          99,855            82,193
    Due from affiliate                                                   27,001
    Deferred tax assets                                34,276
                                                  -----------       -----------
              Total current assets                  6,092,898         5,358,877
Equipment and furnishings, net of accumulated
   depreciation of $964,903 and $550,220            1,087,663         1,019,842
Other assets                                           66,989            37,886
                                                  -----------       -----------

              Totals                               $7,247,550        $6,416,605
                                                   ==========        ==========

   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Notes payable - bank                                             $  400,000
    Current portion of long-term debt             $   106,248           106,248
    Accounts payable                                  942,071           610,201
    Customer deposits                                 444,685           522,725
    Accrued expenses and other liabilities            443,401           236,077
    Due stockholder                                                      54,825
    Deferred tax liabilities                                              7,300
                                                  -----------       -----------
              Total current liabilities             1,936,405         1,937,376
Long-term debt, noncurrent portion                    168,231           274,480
                                                  -----------       -----------
              Total liabilities                     2,104,636         2,211,856
                                                  -----------       -----------

Commitments and contingencies

Stockholders' equity:
    Preferred stock, $.0001 par value;
       2,000,000 shares authorized; none issued         -                  -
    Common stock, $.0001 par value; 40,000,000
       shares authorized; 5,263,348 and
       5,000,000 shares issued and outstanding            526               500
    Additional paid-in capital                      4,312,662         4,262,688
    Retained earnings (deficit)                       803,291           (58,439)
    Accumulated other comprehensive income
      - investment valuation allowance                 26,435
                                                  -----------        -----------
              Total stockholders' equity            5,142,914         4,204,749
                                                  -----------        -----------

              Totals                               $7,247,550        $6,416,605
                                                   ==========        ===========

See Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998




                                                     1999               1998
                                                     ----               ----

Gross revenue                                    $13,594,524        $12,848,430
Direct project costs and other costs of
  operations                                       5,242,744          5,856,090
                                                ------------       ------------

Net revenue                                        8,351,780          6,992,340
                                               -------------       ------------

Expenses:
     Labor and related expenses                    1,854,753          1,869,015
     Selling, general and administrative           5,166,039          4,859,712
                                                ------------       ------------
              Totals                               7,020,792          6,728,727
                                                ------------       ------------

Income from operations                             1,330,988            263,613
                                                ------------       ------------

Other income (expense):
     Write-off of amounts due from affiliates                          (306,375)
     Interest                                        (33,695)           (90,355)
     Administrative fee income                        42,000             48,000
     Sundry, principally investment income            86,281             14,432
                                                ------------       ------------
              Totals                                  94,586           (334,298)
                                                ------------       ------------

Income (loss) before income taxes                  1,425,574            (70,685)

Provision (credit) for income taxes                  563,844            (12,246)
                                                ------------       ------------

Net income (loss)                              $     861,730     $      (58,439)
                                               =============     ==============

Unaudited:
     Historical income (loss) before income
       taxes                                    $  1,425,574     $      (70,685)
     Pro forma for 1998 comparative purposes:
         Provision (credit) for income taxes         563,844            (28,000)
                                                ------------     --------------

         Net income (loss)                      $    861,730     $      (42,685)
                                                ============     ==============

         Basic earnings (loss) per share              $.16            $(.01)
                                                      ====            =====

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





See Notes to Consolidated Financial Statements.


                                      F-4

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998




                                                         1999            1998
                                                         ----            ----

Net income (loss)                                       $861,730       $(58,439)

Other comprehensive income - unrealized holding gain,
     net of income taxes of $17,624                       26,435
                                                       ---------       --------

Comprehensive income (loss)                             $888,165       $(58,439)
                                                        ========       ========


































See Notes to Consolidated Financial Statements.

                                      F-5


<PAGE>

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1999 AND 1998


                                                            Unrealized
                                                             Holding
                       Common Stock   Additional             Gain on
                       ------------     Paid-in   Retained  Marketable
                     Shares   Amount    Capital   Earnings  Securities   Total
                     ------   -----     -------   --------  ----------   -----
Balance
 January 1, 1998    5,000,000  $500  $4,262,688                      $4,263,188

Net loss                                         $ (58,439)             (58,439)
                    ---------  ----  ----------  ---------            ----------

Balance,
 December 31, 1998   5,000,000   500  4,262,688    (58,439)           4,204,749

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

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

Net income                                         861,730              861,730
                    ---------  ----  ----------  ---------  -------   ----------

Balance, December
 31, 1999           5,263,348  $526  $4,312,662   $803,291  $26,435  $5,142,914
                    =========  ====  ==========   ========  =======  ===========









See Notes to Consolidated Financial Statements.






                                      F-6


<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

                                                          1999           1998
                                                          ----           ----

Operating activities:
  Net income (loss)                                     $861,730   $  (58,439)
Adjustments to reconcile net income
  (loss) to net cash
     provided by operating activities:
     Depreciation and amortization                       414,683       377,020
     Bad debts                                           130,000       529,945
     Write-off of amounts due from affiliates                          306,375
     Deferred income taxes                               (59,200)      (10,700)
     Changes in operating assets and liabilities:
        Accounts receivable - trade                      823,248    (1,250,930)
        Unbilled receivables                              42,007       303,978
        Accounts receivable - affiliates                 175,418        31,273
        Prepaid expenses and other current assets        (17,662)      (22,637)
        Other assets                                      20,897       (23,182)
        Accounts payable                                 331,870        25,516
        Customer deposits                                (78,040)      180,469
        Accrued expenses and other liabilities           207,324       121,708
                                                         --------  ------------
           Net cash provided by operating activities   2,852,275       510,396
                                                      -----------  ------------
Investing activities:
   Purchase of equipment and furnishings                (482,504)     (483,507)
   Repayments from (advances to) affiliate                27,001      (211,376)
   Purchase of marketable securities                    (678,341)
   Repayments from stockholder                                         784,351
                                                      -----------  ------------
           Net cash provided by (used in)
              investing activities                    (1,133,844)       89,468
                                                      -----------  ------------

Financing activities:
   Repayment of note payable - bank and
      long-term debt                                    (506,249)     (694,272)
   Proceeds of note payable - bank                                     115,000
   Repayment of advances from stockholder                (54,825)
                                                      -----------  ------------
           Net cash used in financing activities        (561,074)     (579,272)
                                                      -----------  ------------

Net increase in cash and cash equivalents               1,157,357       20,592
Cash and cash equivalents, beginning of year               24,722        4,130
                                                      -----------  -------------

Cash and cash equivalents, end of year                 $1,182,079   $    24,722
                                                       ==========   ===========

Supplemental disclosure of cash flow data:
     Interest paid                                     $   33,695   $    90,355
                                                       ==========   ===========

     Income taxes paid                                 $  571,763   $    60,800
                                                       ==========   ===========



See Notes to Consolidated Financial Statements.


                                      F-7
<PAGE>

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

                  EWMA,  Inc. and IAL, Inc. were  organized  under the laws of
                  the State of New Jersey in 1987 and each sold  primarily all
                  of their respective assets,  except accounts receivable,  to
                  the  aforementioned  limited  liability  companies  in April
                  1997. EWMA, Inc. and IAL, Inc.  currently have no operations
                  but  exist   primarily   for  the   purpose  of   collecting
                  outstanding receivables.

                  EWMA,  LLC, EWMA,  Inc., IAL, LLC, and IAL, Inc. are further
                  defined,  collectively,  as the "Acquired Entities" and were
                  related by common ownership.

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

                                      F-8
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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

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

                  The accompanying  consolidated statement of operations for the
                  years ended  December 31, 1999 and 1998 reflect the results of
                  operations of the Acquired Entities. Prior to the Acquisition,
                  Menlo was in bankruptcy and had limited operating  activities;
                  therefore,   no  activity  from  the  effective  date  of  the
                  Acquisition  for  Menlo  is  reflected  in  the   accompanying
                  consolidated financial statements.


Note 2 - Summary  of  significant  accounting  policies:
           Basis of presentation:
                  The accompanying consolidated financial statements include the
                  accounts of Menlo and the Acquired  Entities.  All significant
                  intercompany accounts and transactions have been eliminated in
                  consolidation.  As used herein,  the "Company" refers to Menlo
                  and the Acquired Entities, collectively.

           Use of estimates:
                  The  preparation  of financial  statements in conformity with
                  generally  accepted  accounting  principles  requires
                  management to make estimates and  assumptions  that affect
                  certain  reported  amounts and  disclosures.  Accordingly,
                  actual results could differ from those estimates.

           Revenue recognition:
             Revenue is recognized as services are provided.

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

                                      F-9

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

           Concentrations of credit risk:
                  Financial instruments which potentially subject the Company to
                  concentrations  of credit risk  consist  primarily of cash and
                  cash equivalents and accounts  receivable.  The Company places
                  its  cash  and  cash  equivalents  with  high  credit  quality
                  financial institutions.  At times, the Company's cash and cash
                  equivalents  exceed  the  current  insured  amount  under  the
                  Federal Deposit Insurance Corporation of $100,000. At December
                  31, 1999,  the Company had cash and cash  equivalent  balances
                  that  exceed   Federally   insured  limits  by   approximately
                  $993,000.  Concentrations  of  credit  risk  with  respect  to
                  accounts   receivable  are  limited  as  the  Company  closely
                  monitors  the  extension  of  credit  to its  customers  while
                  maintaining allowances for potential credit losses. Management
                  does not  believe  that  significant  credit  risk  exists  at
                  December 31, 1999.

           Investments in marketable securities:
                  Investments   in   marketable   debt  and  equity   securities
                  classified as "available for sale" are recorded at fair value.
                  Unrealized  gains and losses are  reported  annually  as other
                  comprehensive   income  in  the   consolidated   statement  of
                  comprehensive  income  and  accumulated  within  stockholders'
                  equity.

           Equipment and furnishings:
                  Equipment  and   furnishings   are  stated  at  cost,  net  of
                  accumulated  depreciation.   Depreciation  is  provided  using
                  prescribed  methods  over the  estimated  useful  lives of the
                  assets.

                  Routine maintenance and repair costs are charged to expense as
                  incurred and renewals and improvements  that extend the useful
                  life of the assets are  capitalized.  Upon sale or retirement,
                  the cost and related  accumulated  depreciation are eliminated
                  from the respective accounts and any resulting gain or loss is
                  reported as income or expense.

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

           Advertising:
                  The Company expenses the cost of advertising and promotions as
                  incurred.  Advertising costs charged to operations amounted to
                  $136,548 and $188,932 in 1999 and 1998, respectively.

                                      F-10

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

           Income taxes:
                  Prior to the  Acquisition  on March 10, 1999,  EWMA,  Inc. and
                  IAL, Inc., with the consent of their stockholder,  had elected
                  to  be  treated  as  "S"  Corporations  under  the  applicable
                  sections of the Internal  Revenue Code.  Under these sections,
                  corporate  income or loss, prior to that date was allocated to
                  the  stockholder  for  inclusion  in his  personal  income tax
                  returns.  Accordingly,  there  was no  provision  for  Federal
                  income tax in the  accompanying  1998  consolidated  financial
                  statements.

                  EWMA, Inc. and IAL, Inc. had also elected to be treated as "S"
                  Corporations   for  New  Jersey  state  income  tax  purposes.
                  However,  the  State of New  Jersey  does  impose a tax on "S"
                  Corporation  income at a  reduced  rate  and,  accordingly,  a
                  provision for such tax has been  provided in the  accompanying
                  1998 consolidated financial statements for income attributable
                  to EWMA, Inc. and IAL, Inc.

                  In addition, prior to the Acquisition on March 10, 1999, EWMA,
                  LLC and IAL, LLC were New Jersey limited  liability  companies
                  and, as such,  were  treated as  partnerships  for Federal and
                  state income tax purposes.  A partnership  is not a tax paying
                  entity for  Federal or state  income tax  purposes.  Income or
                  loss  of a  limited  liability  company  is  reported  in  the
                  individual  member's income tax returns and,  accordingly,  no
                  provision for income tax has been recorded in the accompanying
                  1998 consolidated financial statements for income attributable
                  to EWMA, LLC and IAL, LLC.

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

                                      F-11
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary of significant accounting policies (continued):
           Stock based compensation:
                  In accordance  with the  provisions  of Accounting  Principles
                  Board  Opinion  No.  25,   "Accounting  for  Stock  Issued  to
                  Employees", the Company will recognize compensation costs as a
                  result of the issuance of stock options to employees  based on
                  the excess,  if any, of the fair value of the underlying stock
                  at the date of grant or award (or at an appropriate subsequent
                  measurement  date) over the exercise  price.  The Company will
                  also make pro forma  disclosures,  as required by Statement of
                  Financial   Accounting  Standards  No.  123,  "Accounting  for
                  Stock-Based  Compensation" ("SFAS 123"), of net income or loss
                  using the Black-Scholes  option pricing method if such amounts
                  differ materially from the historical amounts.

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

           Earnings (loss) per share:
                  The Company  presents  "basic" and, if  applicable,  "diluted"
                  earnings (loss) per common share pursuant to the provisions of
                  Statement of Financial Accounting Standards No. 128, "Earnings
                  Per Share" ("SFAS 128").

                  Basic  earnings  (loss)  per  common  share is  calculated  by
                  dividing net income or loss by the weighted  average number of
                  common shares  outstanding  during the period. The calculation
                  of diluted earnings (loss) per common share is similar to that
                  of basic  earnings  (loss) per common  share,  except that the
                  denominator  is increased to include the number of  additional
                  common  shares  that  would  have  been   outstanding  if  all
                  potentially dilutive common shares, principally those issuable
                  upon the  exercise of stock  options,  were issued  during the
                  period. For the year ended December 31, 1999, diluted earnings
                  per  share  have  not been  presented  because  there  were no
                  additional  shares derived from the assumed  exercise of stock
                  options and the application of the treasury stock method. Such
                  potentially  diluted securities,  however,  could dilute basic
                  earnings per share in the future.  For the year ended December
                  31,  1998,  the Company  had no  potentially  dilutive  common
                  shares.

                  Since EWMA,  Inc. and IAL, Inc. had elected to be taxed as "S"
                  Corporations  and EWMA, LLC and IAL, LLC were taxed as limited
                  liability  corporations  prior to the date of the Acquisition,
                  unaudited pro forma earnings  (loss) per common share assuming
                  the  Acquired  Entities  had been subject to Federal and state
                  income taxes have been  presented for the year ended  December
                  31, 1998.

                                      F-12
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 -  Summary  of  significant  accounting  policies  (concluded):
            Comprehensive income:
                  Effective  January 1, 1999, the Company  adopted  Statement of
                  Financial    Accounting    Standards   No.   130,   "Reporting
                  Comprehensive  Income,"  ("SFAS  130") which  established  new
                  rules for the  reporting and display of  comprehensive  income
                  and its  components.  The  Company  owns  marketable  debt and
                  equity securities which are classified as  available-for-sale.
                  SFAS 130 requires unrealized gains and losses on the Company's
                  available-for-sale   securities   to  be   included  in  other
                  comprehensive income. The adoption had no impact on prior year
                  financial statements.


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


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

                    Debt securities (maturity within 1 year) $497,400   $497,400
                    Equity securities                         180,941    225,000
                                                            ---------  ---------

                         Totals                              $678,341   $722,400
                                                             ========  =========



                                      F-13
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 5 - Equipment and furnishings:
               Equipment and furnishings consist of the following:

                                        Range of
                                        Estimated
                                      Useful Lives       1999           1998
                                      ------------       ----           ----

               Equipment                  5-7 years  $1,603,202      $1,197,269
               Furniture and fixtures     7 years       164,232         139,413
               Vehicles                   5 years       130,669          95,669
               Leasehold improvements     7 years       154,463         137,711
                                                     ----------      ----------
                                                      2,052,566       1,570,062
                    Less accumulated depreciation       964,903         550,220
                                                     ----------      ----------

                         Totals                      $1,087,663      $1,019,842
                                                     ==========      ==========

               Depreciation  expense  amounted to $414,683  and $377,020 in 1999
               and 1998, respectively.


Note 6 - Notes payable - bank:
               The  Company has a committed  line of credit  agreement  with PNC
               Bank in the amount of $750,000  which  expires on April 30, 2000.
               Outstanding  borrowings bear interest at the prime rate plus .75%
               (an  effective  rate of 9.5% and 8.5% at  December  31,  1999 and
               1998,  respectively).  At December 31,  1999,  the Company had no
               outstanding borrowings on the line of credit.

               Outstanding borrowings are collateralized by substantially all of
               the  Company's   assets  and  are  guaranteed  by  the  principal
               stockholder.  The line of credit contains certain covenants,  the
               most  restrictive of which includes the  maintenance of a maximum
               capital funds ratio, as defined.


Note 7 - Long-term debt:
               The term loan is payable in monthly  installments  of $8,854 plus
               interest  at 200 basis  points  over the bank's four year cost of
               funds rate (an  effective  rate of 7.90% at December 31, 1999 and
               1998) until July 2002,  at which time the unpaid  balance is due.
               The loan is  collateralized by substantially all of the Company's
               assets and guaranteed by the principal stockholder.

               Principal  amounts due under the term loan in each of the years
               subsequent to December 31, 1999 total  $106,248 in 2000 and
               2001 and $61,983 in 2002.

                                      F-14

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 8 - Retirement plan:
               The Company  maintains a retirement plan qualifying under Section
               401(k)  of  the  Internal  Revenue  Code  which  allows  eligible
               employees   to  defer  a   portion   of  their   income   through
               contributions to the plan. The Company makes contributions to the
               plan  for  the  benefit  of  the  employees  subject  to  certain
               limitations.  The Company's contributions amounted to $78,220 and
               $73,929 in 1999 and 1998, respectively.


Note 9 - Income taxes:
               As  explained  in Note 2, prior to the  Acquisition  on March 10,
               1999, the Company did not pay any Federal income taxes;  however,
               it  was  liable  for  state  income  taxes  at  a  reduced  rate.
               Subsequent  to the date of the  Acquisition,  the Company  became
               subject  to  Federal  and state  income  taxes at full  statutory
               rates.

               Accordingly,  the  historical  provisions  and credits for income
               taxes  shown  in  the  accompanying  consolidated  statements  of
               operations  for the years ended  December  31, 1999 and 1998 were
               comprised of the following:

                                                          1999          1998
                                                      -----------    -----------
                    Federal:
                         Current                       $475,742
                         Deferred                       (40,200)
                                                       --------
                            Totals                      435,542
                                                       --------
                    State:
                         Current                        140,002     $  (1,546)
                         Deferred                       (11,700)      (10,700)
                                                       ---------     ---------
                            Totals                      128,302       (12,246)
                                                       ---------     ---------

                            Totals                     $563,844      $(12,246)
                                                       ========      =========

               Unaudited  pro forma  provisions  and  credits  for income  taxes
               assuming the  Acquisition had occurred on January 1, 1998 and the
               Company  was subject to Federal  and state  income  taxes at full
               statutory  rates for the year ended  December  31,  1998 is shown
               comparatively with 1999 as follows:
                                                                    Unaudited
                                                        Actual      Pro Forma
                                                        ------      ---------
                                                         1999          1998
                                                         ----          ----
                    Federal:
                         Current                       $475,742
                         Deferred                       (40,200)     $(21,870)
                                                     ----------      --------
                             Totals                     435,542       (21,870)
                                                      ---------     ---------

                    State:
                         Current                        140,002
                         Deferred                       (11,700)       (6,130)
                                                     ----------    ----------
                             Totals                     128,302        (6,130)
                                                      ---------    ----------

                             Totals                    $563,844      $(28,000)
                                                       ========      ========
                                      F-15

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 9 - Income taxes (concluded):
     The  provisions for income taxes in 1999 and the unaudited pro forma credit
     for income taxes in 1998 differ from the amounts computed using the Federal
     statutory rate of 34% as a result of the following:

                                                              1999 1998
                                                              ---- ----

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

       Effective tax rate                                      40% (40)%
                                                               ==  ===

     At December 31, 1999 and 1998, the net current tax assets were attributable
     to the following:
                                                       1999              1998
                                                      -------          --------
       Deferred tax assets - allowance for
         doubtful accounts                            $51,900
                                                      -------
       Deferred tax liabilities:

         Unrealized holding gains in marketable
           securities                                 (17,624)
           Other                                                        $(7,300)
                                                      --------          -------
              Totals                                  (17,624)           (7,300)
                                                      -------           -------

       Net current deferred tax assets (liabilities)  $34,276           $(7,300)
                                                      =======           =======


Note 10- Related party transactions:
               At December 31, 1998, the amounts due from  affiliate,  which are
               companies that are  wholly-owned  or  substantially  owned by the
               Company's principal  stockholder,  consist of noninterest bearing
               cash  advances that are due on demand.  During 1998,  the Company
               determined that amounts due from an affiliate  totaling  $306,375
               were uncollectible and written off.

               At December 31,  1998,  the amount due  stockholder  consisted of
               noninterest bearing, unsecured advances due on demand.

               During 1999 and 1998, the Company had the following  transactions
               with affiliated companies which are wholly-owned or substantially
               owned by the Company's principal stockholder:

                                                         1999            1998
                                                         ----            ----
                    Laboratory fees (income)         $  82,717         $101,051
                    Consulting fees (income)           126,407
                    Administrative fees (income)        42,000           48,000
                    Subcontractor fees (expense)        55,683

                                      F-16

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Related party transactions (concluded):
               At December 31, 1999 and 1998,  accounts  payable included $4,296
               and $53,439, respectively, which was owed to affiliated companies
               which are  wholly-owned or  substantially  owned by the Company's
               principal stockholder.

               At December 31, 1999, accounts receivable included $23,742, which
               was owed from  affiliated  companies,  which are  wholly-owned or
               substantially owned by the Company's principal stockholder. There
               were no such accounts receivable at December 31, 1998.

               In-Situ  Oxidative  Technologies  ("ISOTEC")  is owned 50% by Dr.
               Richard S. Greenberg, Menlo's Chief Executive Officer, and 50% by
               an  unrelated   third  party.   ISOTEC  is  in  the  business  of
               remediating  contaminated  properties using a proprietary in-situ
               treatment  program.  The services performed by ISOTEC are similar
               in nature to those  provided by the operating  segments of Menlo.
               During  1999  and  1998,  EWMA  and IAL  have  generated  revenue
               directly from ISOTEC in the amounts of approximately $183,000 and
               $36,000,  respectively.   Additionally,  the  similar  nature  of
               ISOTEC's  services  has  enabled  EWMA to  obtain  contracts  and
               generate  revenues with  unrelated  customers in the past and may
               potentially enable it to continue to do so in the future.

               On December 6, 1999,  Menlo entered into an agreement with ISOTEC
               and an unrelated third party to advance it operating capital.  As
               of the date of this agreement, the Company was owed approximately
               $195,000  for  services it had  provided on behalf of ISOTEC,  of
               which  approximately  $162,000 was outstanding as of December 31,
               1998. In consideration for Menlo entering into the aforementioned
               agreement, ISOTEC agreed to repay in full the outstanding balance
               of  approximately  $195,000.  In addition,  Menlo was granted the
               opportunity to purchase up to 50% of ISOTEC.

               The agreement  calls for Menlo to advance  operating  funds up to
               $250,000 to ISOTEC in equal amounts to that being advanced by the
               unrelated third party. In return, Menlo will receive an option to
               purchase 20% of Dr. Greenberg's ownership interest in ISOTEC (10%
               of the  Company) for each  $50,000 or portion  thereof  loaned to
               ISOTEC.  The options are  exercisable  through June 30, 2001 at a
               price of $1,000 per option.  As of February 11,  2000,  Menlo had
               loaned  $80,000  to  ISOTEC  and  therefore  has two  options  to
               purchase a total of 40% of Dr.  Greenberg's  interest (20% of the
               Company) for $2,000. Due to ISOTEC's financial condition, Menlo's
               $80,000  advance/option  investment in ISOTEC is being carried at
               $0.  Management does not intend to make any advances in excess of
               the  $250,000  total  commitment  to ISOTEC until ISOTEC shows an
               improvement in their financial condition and ability to pay.


Note 11- Commitments and contingencies:
               Lease commitments:
               The Company is obligated  under  noncancelable  leases for office
               space,  storage  space  and  laboratory   facilities  at  several
               locations in New Jersey,  one of which is a building owned by the
               principal stockholder. The leases expire at various dates through
               August 2007 and require the Company to pay minimum annual rentals
               plus its pro rata share of common area  maintenance,  real estate
               taxes,  insurance,   utilities  and  other  occupancy  costs,  as
               defined.  Rent  expense,  including  allocated  pro rata charges,
               amounted to $489,404 and $448,417 in 1999 and 1998, respectively,
               inclusive of $290,539  and  $318,762,  respectively,  paid to the
               principal  stockholder.  Future minimum lease payments subsequent
               to  December  31, 1999 for each of the next five years and in the
               aggregate are as follows:
                                      F-17

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 11- Commitments and contingencies (concluded):
            Lease commitments (concluded):

                     Year Ending   Nonrelated      Principal
                    December 31,     Parties      Stockholder           Total
                    -----------      -------      -----------           -----
                        2000        $146,900       $305,578           $452,478
                        2001          38,400        305,578            343,978
                        2002          38,400        305,578            343,978
                        2003          38,400        305,578            343,978
                        2004          38,400        305,578            343,978
                        Thereafter                  789,411            789,411
                                    --------       --------           --------

                          Totals    $300,500     $2,317,301         $2,617,801
                                    ========     ==========         ==========

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


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


Note 13- Business segments:
               The  Company  is  reporting   segment  revenue  and  income  from
               operations   in  the  same  format   reviewed  by  the  Company's
               management  (the  "management  approach").  The  Company  has two
               reportable segments: providing consulting,  remedial and disposal
               services  (consulting),  and laboratory testing of soil and water
               for environmental hazards (lab).

                                      F-18

<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13- Business segments (continued):
           Revenue,   income  from  operations  and  other  related  segment
             information follows:


                                                       1999             1998
                                                       ----             ----
                    Gross revenue:
                         Consulting               $   9,287,714    $  9,372,764
                         Lab                          5,168,785       4,260,293
                         Inter-segment                 (861,975)       (784,627)
                                                 --------------  --------------

                             Totals               $  13,594,524    $ 12,848,430
                                                    ===========     ===========

                    Direct project costs and
                     other costs of operations:
                         Consulting               $   3,693,389    $  4,637,110
                         Lab                          2,411,330       2,003,607
                         Inter-segment                 (861,975)       (784,627)
                                                 --------------  --------------

                             Totals               $   5,242,744    $  5,856,090
                                                   ============    ============

                    Operating expenses:
                         Consulting               $   5,308,060    $  5,211,275
                         Lab                          2,272,709       1,992,137
                         Inter-segment                 (559,977)       (474,685)
                                                   ------------  --------------

                             Totals               $   7,020,792    $  6,728,727
                                                   ============    ============

                    Income (loss) from operations:
                         Consulting               $     286,265   $    (475,621)
                         Lab                            484,746         264,549
                         Inter-segment                  559,977         474,685
                                                 --------------  --------------

                             Totals               $   1,330,988   $     263,613
                                                   ============   =============

                    Other income (expense):
                         Consulting               $     636,265   $     172,193
                         Lab                             18,298         (31,806)
                         Inter-segment                 (559,977)       (474,685)
                                                 --------------  --------------

                             Totals               $      94,586   $    (334,298)
                                                 ==============   =============

                    Income (loss) before taxes:
                         Consulting               $     922,530   $    (303,428)
                         Lab                            503,044         232,743
                                                 --------------  --------------

                                 Totals           $   1,425,574   $     (70,685)
                                                   ============  ==============

                    Provision (credit) for income taxes:
                         Consulting               $     364,297   $      (9,810)
                         Lab                            199,547          (2,436)
                                                  -------------  --------------
                                 Totals           $     563,844   $     (12,246)
                                                  =============  ==============
                    Net income (loss):
                         Consulting               $     558,233   $    (293,618)
                         Lab                            303,497         235,179
                                                  --------------  -------------

                                 Totals           $     861,730  $      (58,439)
                                                  =============  ==============

                                      F-19
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 13- Business segments (concluded):

                                                      1999              1998
                                                      ----              ----
               Assets:
                  Cash and marketable securities, at market:
                    Consulting                    $  1,033,900          12,483
                    Labs                               870,579          12,239
                                                --------------   -------------
                       Totals                        1,904,479          24,722
                                                 -------------   -------------

                  Accounts receivable - net:
                    Consulting                       3,037,305       4,213,123
                    Labs                             1,036,390       1,587,540
                    Inter-segment                      (19,407)       (575,702)
                                                --------------   -------------
                       Totals                        4,054,288       5,224,961
                                                 -------------   -------------

                  Equipment and furnishings - net:
                    Consulting                         397,189         425,491
                    Labs                               690,474         594,351
                                                --------------   -------------
                       Totals                        1,087,663       1,019,842
                                                 -------------   -------------

                  Other assets:
                    Holding                             84,276
                    Consulting                         133,024         126,428
                    Labs                                18,096          20,652
                    Inter-segment                      (34,276)
                                                --------------   -------------
                       Totals                          201,120         147,080
                                                --------------   -------------

                       Total assets               $  7,247,550    $  6,416,605
                                                  ============    ============

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

               During  November 1999, the Company issued 57,500 stock options to
               key  personnel,   subject  to   ratification   by  the  Company's
               stockholders.  The  options,  all of  which  are  outstanding  at
               December 31, 1999, are exercisable through November 2009.

                                      F-20
<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 14- Stock option plan (concluded):
               The compensation cost, pro forma income and net income per common
               share for 1999  determined  using a fair  value  based  method of
               accounting for the stock options  granted in 1999, as required by
               SFAS 123,  would not  differ  materially  from the  corresponding
               historical amounts.


Note 15- Preferred stock:
                No shares of preferred stock have been issued as of December 31,
                1999. Under the Company's  Articles of Incorporation,  the Board
                of Directors,  within certain limitations and restrictions,  can
                fix or alter the  dividend  rights,  dividend  rate,  conversion
                rights,  voting rights and terms of redemption  including  price
                and liquidation preferences.  As of February 11, 2000, the Board
                of Directors has not yet fixed any terms to the preferred stock.



                                      * * *




                                      F-21